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Are Ticketmaster's New Fees Sign of a Monopoly?

This month, the concert ticket giant Ticketmaster introduced a new "dynamic pricing" fee structure whereby service fees scale with ticket prices rather than being set at a flat rate. Now, customers must pay Ticketmaster as much as 25 percent of the price of front-row concert tickets, and less when they buy cheaper ones. Furthermore, ticket prices will fluctuate during the months and weeks before concerts.
/ Source: LifesLittleMysteries.com

This month, the concert ticket giant Ticketmaster introduced a new "dynamic pricing" fee structure whereby service fees scale with ticket prices rather than being set at a flat rate. Now, customers must pay Ticketmaster as much as 25 percent of the price of front-row concert tickets, and less when they buy cheaper ones. Furthermore, ticket prices will fluctuate during the months and weeks before concerts.

These latest changes follow close on the heels of the company's limited introduction of "Fan Protected Paperless Ticketing" in late March. Paperless tickets, otherwise known as "restricted tickets," do not get sent to customers in the mail to use, resell or give away as they please; instead, each e-ticket is forever linked to its buyer, who must present the credit card used to purchase the ticket to gain admission to a show. Any reselling or transferring of paperless tickets must now happen through an online subsidiary of Ticketmaster called TicketExchange — which, of course, charges service fees.

And shortly before that major change, another one occurred: In January, Ticketmaster officially merged with a concert promotion company called Live Nation to become a branch of Live Nation Entertainment. At the time, many lawmakers, consumer advocacy groups and tens of thousands of fans argued that the merger violated antitrust laws, but the Justice Department allowed it to proceed (with minor restrictions on their sale of sports tickets).

Do the subsequent changes point to what many feared would result from the merger: a concert ticket monopoly?

Many consumer advocacy groups say yes. "We believe Ticketmaster has a monopoly in the ticketing industry," said John Breyault, vice president of Public Policy, Telecommunications and Fraud at the National Consumer's League, a Washington, D.C.-based consumer advocacy organization.

"Ticketmaster is the overwhelmingly predominant ticketer in the country," Breyault told Life's Little Mysteries, "and the barriers to entry to get into this business are very high." Ticketing, he explained, is a complex business requiring advanced cybersecurity, visibility and international reach, as well as perfect organization. When online tickets go on sale for a popular show, computer servers can't crash. When buyers input their credit card information, it must be secure. No seat can be sold twice.

Ticketmaster does all these things well, but they also do their best to keep new companies from springing up and trying their hand at it, too, Breyault said. "When Ticketmaster signs with a venue, they sign them with an exclusive contract that varies in term but usually lasts two years and up." With few strong alternatives, venues are obliged to go with Ticketmaster.

Anti-competitive fallout?

"I think you're starting to see some of the anti-competitive effects that we were afraid of [when the merger happened]," Breyault said.

No one is quite sure how the new dynamic pricing model will affect consumers, but that lack of clarity may be the problem. "We need greater transparency in the ticketing industry. With Ticketmaster's new dynamic pricing model, it is unclear how they are going to set the prices for each concert. Without transparency into how the fees are arrived at each time, it's a concern for consumers," Breyault said.

Live Nation Entertainment (Ticketmaster's parent company) issued a statement claiming that the new scaled fee structure actually increases transparency. "We have taken steps to make ticket fees as clear as possible," they said. "There are a range of costs that are built into the fee that are impacted by the face value of the ticket, such as fees related to credit cards and other factors."

This argument does not persuade many people in the opposition. "The fact that fees increase with the price of a ticket sounds worse than awful fishy," said Rep. Bill Pascrell (D-N.J.), a vocal opponent of the Ticketmaster/Live Nation merger. "It's certainly not the case that it costs more to process a more expensive ticket."

Ticketmaster also said the new model will be more efficient by allowing supply and demand to dictate ticket prices in real-time, helping more tickets to be sold. "Clients (sports teams, artists, promoters and venues) will be able to retain economic value that is normally siphoned off by brokers looking to take advantage of the system," Ticketmaster public relations spokesperson Ray Yeung wrote in an email. The company claims it will also benefit customers. "[F]ans will have more opportunities to enjoy live entertainment events because tickets will be more accessible and pricing options will broaden," Yeung wrote.

Reselling vs. scalping

As for Ticketmaster's increasing use of restricted tickets, that is causing a much more straightforward outcry, with groups like the Fan Freedom Project popping up in response.  They argue that restricted tickets are Ticketmaster's way of taking over the secondary ticket market — the ticket resale market currently led by an eBay subsidiary called StubHub. The secondary market allows fans unable to attend a show for which they have purchased a ticket to resell that ticket, but with paperless tickets, they won't be able to resell them except through Ticketmaster.

"The restricted transfer system would allow Ticketmaster to extend its near monopoly of ticketing to the secondary market. It would control the fees, prices and processes for resale of tickets," business editor Daneil Indiviglio wrote in the Atlantic. "It already controls around 80 percent of the primary ticketing market … Through prohibition of ticket transfer, it can make sure that no one can buy a ticket in the secondary market for cheaper than any remaining tickets unsold by Ticketmaster."

Ticketmaster argues that paperless ticketing cuts down on scalping, the business practice of buying tickets at face value then marking them up for resale. "We're extremely disappointed that StubHub has strayed to side with scalpers to exploit the common fan," Ticketmaster communications director Linda Bandov Pazin told Reuters in March. "StubHub and scalpers are misleading fans because they can't make as much money if tickets are reasonably priced using Fan Protected Paperless Ticketing. So they are desperately lobbying to take tickets out of the hands of kids and soccer moms and sell them back to them at multiple times face value — because that’s how StubHub and scalpers make money."

Ticketmaster and its opponents will continue to battle it out in the press. In the meantime, many lawmakers and consumer advocacy groups are urging the Justice Department to intervene.

"We're doing all we can to fight against the anti-competitive fall out from that merger," Breyault of the National Consumer's League said.

Follow Natalie Wolchover on Twitter @ nattyover.