The Event Ticketing Industry is Broken and in Need of Disruption
March 19, 2017
The Event Ticketing Industry
Generally speaking, the ticketing industry can be broken down into two main segments.
The first is the primary market, where event organisers control the ticket price, revenue splits, and methods of ticket sale distribution (e.g. to select groups via third parties, with certain promoters, or through certain online hubs like TicketMaster) . Here, organisers price tickets in a variety of ways including at a fixed value, in an open auction, or using dynamic pricing per seat based on demand . The pricing dynamics in the primary market heavily affect the volume and transactional value in the secondary market. In general, it is most common to find under-priced tickets — tickets that sell on the primary market with a face value that is below their market value — so that event organisers can maximise the attendance of their target audience, ultimately increasing customer loyalty and in-event advertising and merchandise sales .
The second is the secondary market, where tickets purchased on the primary market are resold at any price  by touts and would-be attendees. Secondary markets are where the bulk of industry fraud arises, since these markets are unregulated and are ridden with counterfeits, tickets that have been already used or sold, or tickets that have been bulk-bought in primary markets and re-listed at sky-high prices in secondary markets . It should be noted that event organisers currently have no control or right to revenue in the secondary markets, and that these secondary markets extend through to black markets at the door of events where touts re-sell printed tickets to hopeful attendees.
The Current System is Broken
In the existing industry, isolation of operations and misaligned incentives mean that primary and secondary market platforms benefit from some forms of fraudulent activity, gaining at the expense of fans and event organisers .
In general, event organisers under-price tickets to maximise fan attendance, increase customer loyalty, and earn more revenue from in-event sales , and thus large economic potential exists for secondary markets to form as resellers can make a profit by pricing tickets at their real market value . Consequently, touts use software programmes known as “bots” to bulk buy tickets on primary markets, resulting in popular events selling out in minutes mostly to resellers who never intended to attend the show in the first place . Since primary market platforms such as TicketMaster earn a portion of revenue from each ticket sale and the ticket price in the primary market is fixed by the event organiser, these platforms maximise their revenue by maximising the number of tickets sold. Hence, they are dis-incentivised from stopping bulk bot-buying of tickets as according to TicketMaster, these purchases contribute to around 60% of sales to popular shows .
Once touts manage to buy up tickets from primary markets, they place them onto secondary markets within minutes  at extortionate prices, averaging 49% above face value with margins often exceeding 1000% . This blocks price-sensitive fans from attending an event and causes regular fans to pay higher-than-intended prices for tickets, causing customer dissatisfaction and bad brand publicity for event organisers . Since fees of secondary market platforms like Stubhub are a percentage of ticket resale price (typically 25–30%), such platforms have minimal incentive to stop the extortionate secondary market prices since the most unfair reseller behaviour contributes substantially to their bottom lines .
Furthermore, it should be noted that when resellers bulk buy tickets, they list the same ticket on multiple secondary market platforms . Once the ticket is sold on one platform however, the reseller often does not remove it from the other platforms and therefore ends up selling it as a counterfeit on those other outlets . In fact, the Telegraph estimates that Brits wasted over £5m on counterfeit tickets in 2015 via from false social media advertisements . Again, the secondary market platforms have a minimal economic incentive to stop this behaviour as they gain revenue from these sales.
Finally, the siloed nature of these primary and secondary ticketing companies means that an event’s tickets are usually only sold by one platform and a set of authorised promoters. This puts the responsibility of promoting an event and generating ticket sales mainly into the hands of the ticketing platform (and the size of their relevant user base for the event) and the event organisers, making it difficult for awareness about the event to spread to its full target audience. In fact, according to TicketMaster’s CEO Sean Moriarty, “nearly 35% of ticket inventory goes unsold, and if you ask fans why they didn’t go to shows, one of the most popular reasons is ‘I didn’t know about it’” .
Industry participants have tried to tackle this problem in two main ways — via technology, and legislation.
To date, there are two main types of solutions to some of these problems. The first are mechanisms that only allow resale/ticket transfer at face-value or less, used by primary markets such as Resident Advisor  or fan-to-fan transfer marketplaces like Twickets . The second are data-driven techniques for identifying touts at point of purchase, and for identifying tickets on secondary market websites . Companies using the latter include Songkick  and Dice.fm  (who incidentally also prevents resale of their tickets altogether).
Unfortunately, both of these methods fall short of solving the range of problems described above. Preventing resale altogether stops genuine fans who cannot attend from selling their tickets to other fans. Transfer at face-value or less creates incentives for black markets, where tickets are transferred at face value online along with an offline monetary transaction. Identifying touts using machine learning is an impossible problem to solve, as scalpers can create tools to learn these algorithms and change their own behaviour to avoid being caught.
Many jurisdictions have identified the injustices in touting and have banned it all together: in France and Italy, ticket reselling is illegal , and in the U.K the re-selling football tickets is illegal without the permission of the club . Unfortunately, legislation has been unsuccessful since it is very difficult to control black markets: despite some football clubs having long authorised reseller lists, tickets appear on sites outside of these sets; at sports matches and concerts globally, black market sales continue to occur outside of the venue .
Further, in recent times bot software (the bulk buying computer software used by touts) has been increasingly banned globally, with both the U.S. and the U.K putting laws forward to make their use illegal [5, 17]. However, Annabella Coldrick, CEO of the Music Managers’ Forum stated that these penalties are unlikely to make a significant difference since there are various ways to circumvent these rules, e.g. by “paying people based abroad to buy tickets, or by using multiple credit cards” .
Since the problems associated with ticket touting have not yet been solved by technology or new legislation, artists, organisers and fans have started losing hope that the market will ever change for the better . The industry overview and its problems highlighted point to a need to re-build it from the bottom up, destroying the current siloed architecture and creating a new fair, secure, and transparent economic model where fans and event organisers have more control and touts and ticketing platforms are incentivised to behave in a way that solely produces positive externalities.
Thankfully, the solution is around the corner —Aventus. More details coming very soon.