Music fans generally don’t pay close attention to the concert business, aside from the occasional rant about Ticketmaster’s exorbitant service charges. But in the last few months, tickets to coveted shows by Radiohead and others have sold out in mere minutes; soon after, they appear on Ticketmaster’s recently acquired ticket-auction partner site TicketsNow. Threats of a consumer revolt against Ticketmaster are nothing new, and generally turn out to be empty, but with tickets on TicketsNow going for four and five times their face value, people are asking how such behaviour can possibly be legal.

We’re not lawyers, but if what Ticketmaster is doing isn’t technically illegal, we think it ought to be. As any economist or MBA grad will tell you, there are two main problems that define the concert ticket business:

1) Unlike with, say, cars or high-definition TVs, big rock bands price their tickets well below what an economist would call their real market value. They do this so as not to offend diehard fans who think tickets should be priced as democratically as the band’s CDs, even though when Radiohead tickets only cost $35, the demand far outstrips the supply. That $35 ticket is really worth more like $150.

2) Black market sellers are then free (or mostly free, but more on that in a second) to sell the tickets for $150 and up. Because most Radiohead fans have a much stronger loyalty to their favourite band than, say, someone who wants to buy a Sony TV has to their favourite Japanese electronics corporation, the Radiohead fan decides he’ll pay the black market price for the ticket, and assigns his hatred to the black market seller rather than the band. Thus do both the band and the scalpers flourish.
Up until now, Ticketmaster’s only role in this was to sell tickets to whomever was buying — scalpers who planned to sell tickets at inflated prices, fans, anybody. They have invested in technology to fight scalpers who had been using hacking software to buy tickets more quickly than the average Joe, but haven’t been able to stop the practice. Now that they own TicketsNow, it’s actually in their best interest to let scalping continue unfettered.

According to TicketsNow, all they do is connect the willing buyer with the willing seller (or “broker”) and guarantee a safe, reliable transaction, from which they collect a commission. If a ticket is sold on Ticketmaster to a fan who then attends the show, Ticketmaster profits once. If a ticket is resold on TicketsNow by a broker, Ticketmaster profits twice — from both the initial sale, and from the commission on the resale. If Ticketmaster were to prevent brokers from being able to buy tickets more quickly than regular fans, it would directly cut into their subsequent commissions. There’s no evidence to suggest that Ticketmaster has deliberately made it easier for brokers to acquire tickets than for normal folks, but the company have publicly acknowledged that they generally haven’t been able to prevent such hacking. And now, they have an incentive not to try.

There’s also the fact that reselling tickets for more than their face value is illegal under the Ontario Ticket Speculation Act. TicketsNow may argue that, like internet service providers and phone companies, they’re merely the “dumb pipe” that connects seller to buyer and have no control over the agreed-upon price. That’s nonsense, since TicketsNow oversees the actual exchange of currency, and could easily impose a hard cap on transactions based on the original ticket price. But again, they have no incentive to do so, because they make more money if they don’t, and Ontario’s courts have so far been unwilling to make them address the problem.

Ticketmaster’s acquisition of TicketsNow may not be technically illegal, but it certainly seems ethically questionable, as fans have been saying for ages. It’s time for Ontario regulators to start listening to more than just the music.

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