12-12-12 Scalpers

12-12-12 Concert Ticket Scalpers: The Hurricane Sandy Benefit Spoilers

Scalpers resold many of the 12-12-12 hurricane benefit tickets for a king’s ransom. Winston Ross reports.

The scalpers who scarfed up tickets to Wednesday night’s blockbuster “12-12-12” concert at Madison Square Garden are the objects of boundless vitriol—and with good reason. The “scum-sucking parasites” took a feel-good benefit for the victims of Hurricane Sandy and made it feel gross, hawking the tickets they quickly snatched from the web for tens of thousands of dollars, by some reports. How sick do you have to be to siphon money away from an event for the needy?

“It’s despicable,” producer Harvey Weinstein told The New York Times. “Don’t buy them.”

The Consumerist declared that a “new circle in hell” had opened for these “slime.” Sen. Chuck Schumer sent a strongly worded letter to StubHub, TicketExchange, TicketsNow, and TicketLiquidator, asking the sites to ban resales for the concert or arrange for the difference between the original ticket price and the resale value to go to relief efforts.

TicketMaster, which owns TicketExchange and TicketsNow, quickly responded to Schumer by blocking all posts related to the concert. Stubhub CEO Chris Tsakalakis, on the other hand, found himself grilled on CBS This Morning, explaining that “it’s perfectly legal to resell tickets in the state of New York,” and hey, a quarter of even those exorbitant sales are going to the charity—because that’s StubHub’s cut, and they’re donating everything. Besides, he added, StubHub isn’t the only place to scalp concert tickets.

“Look on Craigslist,” he told the hosts, including Charlie Rose, who later had to admit he had no idea what StubHub was. “There were 270 listings for tickets (the concert), and no one is donating their proceeds to the relief fund.”

Don’t blame us. Blame Craigslist. Better yet, added StubHub spokesman Glenn Lehrman in an interview with The Daily Beast, blame the venue, the promoter, the artist. Blame TicketMaster, adds Jon Potter, president of the Fan Freedom Project, which gets much of its funding from StubHub. But wait! Don’t blame Ticketmaster, said Ticketmaster spokeswoman Jacqueline Peterson.

Finding the true culprit for the epidemic of scalping in the digital age is a little like figuring out who killed Davey Moore. But it all boils down to capitalism. Concert tickets get sold at ridiculous prices because people are willing to pay those ridiculous prices, just like unreasonably priced homes and ugly art.

“It’s become a true marketplace,” Lehrman said. “It’s just like eBay [which owns StubHub], anything, a commodity dictated by market economics.”

That market works both ways, too. Half of the tickets StubHub sells go for less than the face value of the ticket, not more, he said.

What about ending scalping? “I certainly hope not,” he said. “Otherwise we wouldn’t have a business model.”

But doesn’t scalping ruin the beauty of a concert experience, pricing out the poor schmoes who can’t drop a grand on a single show but who are willing to wait in line or online for days to get to see Lady Gaga in the flesh? Don’t those people deserve a shot at a face-value ticket? Well, yeah, Lerhman acknowledged. But that’s not StubHub’s fault, he said. StubHub is just the middleman.

Really, a whole cast of nefarious characters conspires, willingly or not, to allow scalping to flourish. Rats exist because people leave garbage out.

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“This has been like a 30-year game of chess,” said Arthur Fogel, chairman of Global Music and CEO of Global Touring of Live Nation Entertainment. “It’s now extremely sophisticated.”

Among the culprits:

—The venues and promotors. These entities get to decide how many tickets get sold on the open market, how many get siphoned off to credit-card companies and fan clubs and other places before the scraps hit websites like Ticketmaster.

“The bigger issue is that tickets aren’t really available in the first place,” Lehrman said. “Usually it’s somewhere between 10 and 30 percent of tickets make it to the open market. The rest are held back.”

Peterson says that's inaccurate, and that no one by the artist, promotor, primary ticketed and/or venue actually knows what these numbers are, but that it's "rarely less than 80 percent of tickets are available to the general public."

Which brings us to…

—The skimmers. Those are the credit-card companies and fan clubs (and promotors and artists). Credit-card companies sell them to cardholders, who sometimes turn around and scalp them. Fan clubs sell them as rewards to fan club members, who sometimes turn around and scalp them. Promoters and artists pass them out to VIPs, who sometimes turn around and scalp them. And sometimes those promoters and artists are themselves the ones doing the turning around and scalping.

“Rather than looking at the resale market, lets look at the pre-sale market,” Potter said.

Some of that is justified, Lehrman said. If all the tickets sold for a concert at Madison Square Garden went for face value, he said, they’d never cover the cost of putting on the show.

“Just to rent Madison Square Garden is in the millions, for a night,” Lehrman said. “When you’re pricing a ticket at $50, $75, $100, you’re not even covering the rent on the building. A lot of these tickets are held back and sold on the secondary market just to make ends meet.”

Which brings us to…

—The artists, and their whiny fans. That’s right, fans. It’s your fault, too. Tickets to many a show all over the country are sold every day at below market value, and not just below market value but below what they need to be sold for in order for a venue, an artist, and a promoter to turn a profit, after paying everyone involved in entertaining you. If artists jack up their ticket prices too steeply, fans will bitch about it, blame the artist, maybe resolve not to show up at these unreasonably priced shows anymore.

“Why do the artists do it? Katy Perry, thanks to the Smoking Gun, we know she had a rider in her contract that let her take as many tickets as she wanted out of the box office and sell them on the secondary markets, anonymously,” Potter said. “Why would she do that? Because she can. It’s a way to make easy money without offending anybody. It’s not illegal. It’s just lying to your fans.”

Which leaves Justin Bieber little choice but to pretend his show costs $50, when really he knows that most of the tickets will be sold for $500 and that much of that cash will wind up back in his wallet, one way or another.

“There’s a hesitancy, a resistance to charge beyond a certain pricing structure, and yet everybody knows what happens, certainly for hot shows, is that people take those tickets and resell them for more,” Fogel said. “You have to stop sometimes and go ‘Why am I pricing them so cheap?’”

Which brings us to…

—The ticket sellers. Part of what allows professional scalpers to ace out the bona fide music lover is their use of “bots”—software that automatically gobbles up whatever number of tickets are left over after all those other entities take their cut. Peterson said Ticketmaster does all it can to battle this scourge. The company has blocked thousands of IP addresses to stop bots, and when it discovers that a single buyer has made off with dozens or hundreds of tickets, the company will cancel that transaction, take the tickets back, and resell them, she said. But because there’s money to be made scalping tickets, plenty of characters are investing money in beating the system.

Demand is also growing for “paperless tickets,” Peterson said, where the credit card used to purchase the ticket is the ticket, so it is non-transferable. But in some states, including New York, paperless tickets are outlawed.

Still, the distributors need to do more, Potter said.

“The first way to reduce the volume of scalping is to keep the tickets out of the hands of scalpers,” he said. “The folks who are most in control of ticket distribution and ticket sales are responsible for where those tickets end up.”

He added: “Ticketmaster says they’ve invested millions in [anti-bot] technology. Clearly, they’ve wasted millions.”

Which brings us to…

—OK, the scalpers. Because market forces, schmarket forces, who does that? Who designs software and then uses that software to snatch up tickets to a charity concert and then resells them at exorbitant prices, knowingly winnowing the amount that winds up going to the charitable cause? Who does that? And aren’t there other ways to make a buck?

Rats will be rats.