Seatwave, #ticketscandal and the future of live events



 A couple of weeks ago, Channel 4 ran a pretty explosive (and sensationalist) piece of programming on practices in the live event ticketing business entitled “the Great Ticket Scandal” (#ticketscandal). The program, part of the Dispatches series, was primarily fuelled by the work of undercover reporters that posed as employees at the two leading secondary ticketing companies. It garnered a ton of attention before airing because of an unsuccessful attempt in court by Viagogo to bar the content from airing (to “protect customer information from being made public“, c’mon). The program highlighted some pretty despicable business practices and made me squirm at times. It’s not pretty viewing.

I am an investor and board member in Viagogo’s main competitor, namely Seatwave, which was also portrayed in the program. We only got about 10 minutes of exposure in a one hour program and there wasn’t anything juicy, although it clearly was not that comfortable for those who found themselves on camera. It does not stop us being painted with the same tar brush as our agressive competition however.

Joe Cohen, the founder and CEO of Seatwave, which we backed right at company creation stage, felt he had nothing to hide and took to Twitter and his blog to comment transparently and in real time on the program. I don’t feel like I have anything to hide either so I thought I would try to share my thoughts on the whole matter and the business model of Seatwave.

CREED

I want to start with a vision statement (or you can read our manifesto).

We created Seatwave because we believe in the vision of a transparent and dynamic ticketing industry. We don’t see ourselves as selling tickets: we deliver a great experience around events. We want to take the stress away from buying that ticket, getting through the gates, and waiting for the lights to go down. We believe in the disruptive power of marketplaces as an economic force of transparency. We believe in the disintermediation of opaque markets and in power to the people. We recognize that it takes time: that legislation will change well after the technology and behaviour have forced it to, and we recognize that right now we are the tip of the iceberg of an industry in flux and not always pretty to watch.  Focus on the long term vision.

SEATWAVE IN A NUTSHELL

Let me take you through Seatwave in three bullet points:

1. The driver: the existence of a thriving (offline) secondary market

We started Seatwave based on the simple observation that there was a thriving business on the other side of the Atlantic called StubHub which had an amazing net promoter score from its consumers and great economics. For the business opportunity to exist we needed a large secondary market and that condition was met: we estimated at the time that there was a multi-billion pound secondary ticketing market in existence that was marred by extremely poor customer characteristics: offline (hence inefficient), ripe with fraud (hence risk for consumers), underground (sometimes forcing consumers into illegality).

2. The promise: Ticket Integrity

Our thinking was fairly simple; take this murky and inefficient market and transform it into an online marketplace that is built on a simple foundation: we will get you to the event that you want to get to and we will get you into the seat you paid for. This means doing something costly and complicated: moving the tickets from the hand of a willing seller, ensuring they’re legit, and delivering them to a willing buyer.

3. The medium: a marketplace

Seatwave is a marketplace: sellers post tickets and decide at what price they are offering the supply, and buyers buy. Seatwave’s job is to present the inventory of tickets in the best possible way (build a great website) and make sure tickets get sold (get traffic to the site and convert that traffic into sales).

We live in an age of markets. Pretty much everything can be priced dynamically based on supply and demand. Price discovery happens on tickets as it does on everything else. To get the market to be most efficient (i.e. best for the end consumers) you need rich inventory i.e. diversity and volume. At Seatwave we have always gone out of our way to get as many fans and sellers as we could, whether it’s people who cannot go or fans who decide to fund their addiction by reselling one of their tickets above face value when ticket prices have gone up.

There is an ample body of evidence that shows that marketplaces over time tend to drive optimal low pricing once they are highly efficient.

ISSUES RAISED IN THE PROGRAM

I won’t talk at all about Viagogo — you can watch the broadcast, or read this great summary from Clyde Smith at Hypebot, and draw your own conclusions. Let’s just say we always made it a policy at Seatwave not to be trading tickets, not to buy tickets for our own account except when filling in broken orders for our clients when tickets were not delivered or turned out to be fakes (which is thankfully rare). We don’t want to compete for ticket inventory, make money on tickets beyond the margins we charge, or be speculating on ticket prices.

Let’s talk about some of the key issues raised.

1. We drive the secondary market

From the program you’d think we invented secondary ticketing. The reason why our business was started is because (a) there is a need for the ability to resell tickets and (b) the secondary ticket market existed but represented a terrible and exposed experience for buyers. We took an existing market and made it visible, as well as safe.  

For that matter, I found Paul Mills at the Guardian completely misguided when he blamed the technology platforms for industry practice.  It reminds me of when the French police accused the founder of DailyMotion of spreading Jew hatred because of an offensive video on the site.  His name being Bejbaum, the whole affair was a bit surreal.

2. Secondary markets drive true fans away from events

As we know the music industry’s recorded media revenues seem to be trending to zero and hence live events are now where all the money is being made. Venue owners have become highly professionalized and look to optimize revenues.

I have a lot of sympathy with the complaint that live events are becoming increasingly expensive and end up being taken over by corporate sponsors who send employees in Siemens jackets who have no passion for the music. True fans often cannot get their hands on inventory and for heavily sold events end up paying through the nose. I have no easy solution for this. I suppose that if I was an artist I would pay close attention to the distribution of tickets and create a community of “VIP fans” around me that I could allocate tickets in priority at fair prices.

Right now tickets go through a so-called on sale process which tends to be a free for all that favors those who have developed real expertise in getting their hands on tickets, not to mention of course the pretty systematic “ticket leakage” from those actually organizing the events. I am not entirely sure how to solve this situation, but it starts with a clear plan on the part of the artist and their manager and promoter defining exactly how much money they want to make (yield optimize ticket prices versus keep the core fan base happy) and how to adequately control the distribution and allocation of tickets.

To a certain extent the discontent is also symptomatic of the fact that live events are becoming more expensive. The music industry is shifting from paid content to distributing music for free (or through subscription services) and making up the shortfall on live events. Combine this with the increasing complexity of the shows, it is logical that prices in general trend higher.

In any event you can shoot at the ticketing marketplace, but it’s just a place where people buy and sell tickets. We don’t invent the supply or set the prices.

3. It’s unfair to resell above face value!

Pricing tickets is hard. Take airline tickets as a proxy. If you are an airline, you are selling a perishable item whose supply is limited. There is a reason why airfares are backed by some of the most complex mathematical pricing algorithms in the world — it’s really hard to do. Airline ticket pricing is incredibly dynamic.

Live event tickets are simpler (one location, one event) but they share many of the same characteristics. If concert organizers set the prices too high they don’t clear inventory, but it’s very hard for them to find out what the right clearing price is for a ticket. Fans will have a perception in their minds about what fair pricing is based on history and perceived value, but sometimes that pricing is wildly off what some individuals are willing to pay for a once in a lifetime experience.

Take Michael Jackson as an example: who is to say what his final tour tickets should be worth? Suitably expensive? Priceless? How much should AEG have paid in insurance? What would happen if Michael Jackson had not died but cancelled half of his shows? What is the marginal price for the last Michael Jackson at the O2? I don’t know.

If you ask a trader to price the tickets, he will define algorithms based on a ton of data input to maximize his overall take. Only an artist and his manager can decide that they want to cap ticket prices and effectively “share the value” with the fan constituency. I think I would if I was in that position.

The point is:  face value is an arbitrary number, a construct enshrined in law a long time ago. Ticket values are dynamic, just like airline tickets. I can’t tell how hot the next Arcade Fire tour is going to be and, I believe, that if you think the tickets are too expensive you can always decide not to buy them.

Also remember prices go down as well as up. On Seatwave we regularly get asked to shift so called “distressed inventory” as promoters try to limit their losses on events that did not sell well.

4. Regulate! Cap ticket prices!

There are calls to cap ticket prices (including by Radiohead). You can always blame the marketplace that makes the price visible, but you’ll only drive the business underground again. Marketplaces are occurring everywhere — in fact we truly live in an age of markets. From airline pricing to online display ads to cars in reverse auction marketplaces, most things can be dynamically priced. Marketplaces drive transparency and fairness and push prices down because they reduce transaction costs. This has been true since the first exchanges sprung up for agricultural goods and it is still true today.

THE FUTURE OF LIVE EVENTS

The ticketing industry of the future looks like this: tickets are all fully digital, they have no face value, they cannot be faked, they are freely transferable between holders. The artists decide together with the venues where their fan base gets privileged access. There is a negotiation between the artist and the venue owner to decide to what extent they want to maximize profits and to what extent they want to offer access to fans of more limited means. Smart artist and venues recognize that true fans are the soul of the party and they go out of their way to provide access to their most loyal followers (who in turn agree not to consume pirated music, yeah right…).

Live events are also broadcast in HD or 3D. Fans who could not attend set up parties where they wall project a concert and hold a mini live event at outside premises. The venue sells access to the stream.

I cannot solve the current practices of the artist / promoter / venue / ticketing / fan industry, but I firmly believe we are part of the solution and not the problem. We want to be everywhere there is a
ticket to buy or sell and provide a transparent and secure experience to the fan, whether it be primary or secondary, premium or distressed. We will always put the customer first.

Go Seatwave.

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  • http://twitter.com/ohtellez omar h tellez

    @fdestin would love to connect w Seatwave. A bit from us http://mashable.com/2012/02/03/schedit-boston-com/ – 200K PVs in first 4 weeks

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  • guest

    All well and good i like seatwave too but how do seatwave explain having seats for radiohead on a collect tickets on the night basis, who bought these tickets…as the public are supposed to show i.d and cc on collection and everybody must enter at the same time, or has somebody got hold of tickets where this criteria doesn`t apply?

    I reiterate seatwave are a top, top company and totally trustworthy!!

    • http://www.freddestin.com Fred Destin

      Hi there is a service called Last Minute Tickets which is designed to allow sellers to sell their tickets extremely close to the date of the event.  In those cases we cannot rely on postal delivery because the timing is too tight so pickup is at a physical location close to the event, similar to the shop we have at the O2.  

      • guest

        Hi Fred,

        These concerts are not until october this year?

        There was strict criteria for buying Radiohead tickets and most of these tickets are pick up on the night only…i don`t understand how tickets can be “picked up at Greewich North” when everybody is “supposed to be there at the same time to gain access to the venue, or the tickets will not be released.

        I can only praise what Seatwave do but please look into this Fred!

        • Me

          The seller will most likely enter the venue with the buyer fulfilling the obligation for id and cc at the door, you will then be free to enjoy the gig at your leisure…

          • guest

            This must be a new policy for seatwave Fred, this has never been allowed in the past…i think if you look into this one you could be surprised?

        • freddestin

          Thank you and I will

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