April 4, 2011 at 4:45 pm

StubHub Says Artists, Venues, Fans – Not Scalpers – Inflate Ticket Prices

StubHub claims artists, venues and promoters cause high ticket prices by withholding tickets from the public.

Ticket scalpers are widely-cited for gouging fans by scooping up tickets using advanced web bots and selling them at a premium, with none of the extra loot apparently going to artists and others involved with putting on their shows.

In an exclusive interview with Evolver.fm, however, StubHub head of communication Glenn Lehrman lent credence to the idea that artists, venues and promoters are often directly responsible for inflating prices by essentially scalping their own tickets.

We’ve heard this sort of conjecture before, which is why it’s interesting to hear the same accusation coming from someone at StubHub, which makes big profits from secondary sales by charging both buyers and sellers to use its ticket auctioning web and mobile apps, regardless of who’s doing the selling.

For those who don’t have time to read the full interview, here’s a condensed view of scalping — and who’s doing it — as seen from StubHub’s seat:

  • Much of the scalping problem is due to artists withholding tickets from the general public and selling them directly through auction sites such as StubHub.
  • Another big chunk of the scalping market, says StubHub, is due to fans buying more tickets than they need and offloading the surplus at a profit.
  • Scalpers are merely a case of the free market in action, according to the company.
  • Facebook has a place in the ticket resale market — just not as a method of preventing scalping (hardly a surprising answer, as that plan would also put StubHub out of business).
  • Charlie Sheen’s tour is the “perfect example” of demand (or lack thereof) driving ticket prices in StubHub’s secondary market.

The following interview was edited for length and clarity.

Eliot Van Buskirk, Evolver.fm: Should ticket holders only be able to sell concert tickets to people with whom they’ve been friends for 30 days on Facebook, as I recently suggested?

Glenn Lehrman, StubHub head of communications: Well, I think you know what my answer’s going to be: I would say, ‘No.’ In my mind, a ticket is a commodity like anything else, and you shouldn’t have to pick and choose who you sell it to — just like you wouldn’t have to pick and choose who you sell a stock or a hat to. I [read your earlier piece, which also appeared on Gizmodo], and I do believe there is a place for Facebook in the ticketing world. I don’t know that any of us have figured it out — and I don’t know that Facebook has allowed anyone to figure it out — but I think that the “share” function is the wave of the future in ticketing.

Evolver.fm: With scalping, it seems like on the fan side, prices just go up while bands, venues and promoters don’t see any of that extra money.

Lehrman: Well, I don’t know if I agree with that notion. There’s a transparency issue. You don’t know how many of the tickets are actually making it on sale to the public. We’ve seen reports where only 13 percent of the tickets ever went on sale to the public. There’s a vibrant business — with the promoters, venues and artists — on our website. I can tell you for a fact that I know a number of artists and promoters list substantial amounts of tickets for their tours through StubHub, because that’s probably what they want to charge for a ticket, but can’t do so publicly.

Evolver.fm: Really.

Lehrman: Yes, and this is the way of the world forever. You’ve had promoters selling tickets in back alleys, and now they have found a legitimate way to do it. People condemn us for having the brokers, resellers, scalpers or whatever you want to call them buy up all the tickets and list them on our site. But those are not necessarily the people who list them on our site. Yes, they exist, but they’re a smaller percentage than you would ever believe.

Evolver.fm: I suppose that if StubHub is a free market, that its tickets must regularly drop under the original asking price.

Lehrman: Almost 50 percent of the tickets on StubHub are at face value or below. That’s the beauty of the marketplace: People should have the right to pay a lot of money for a popular, sold-out, Lady Gaga sort of event, and people should also have the right to pay a dollar to see the Cleveland Cavaliers play the New Jersey Nets.

Evolver.fm: What about StubHub’s processing fees?

Lehrman: We have fees. Everyone has fees. We charge a 10 percent fee to buyers and a 15 percent fee to sellers, and that’s how we pay to protect tickets, and how we quite frankly make our profits. We’re a managed marketplace, so we never own any of the inventory on the site.

Evolver.fm: It seems technology has accelerated the scalper problem. It didn’t used to be possible for the first 100 people in line to be resellers. Do you think technology has the answer as well?

Lehrman: I don’t know that technology has the answer to that problem now, but I do tend to question how pervasive the use of bots is. I know Ticketmaster likes to say [as does ABCNews] that brokers with bots are buying up all the tickets, but it’s just not the trend we see with our ticket sales. We see almost 60 to 65 percent of our ticket sales as being from individuals, not from what we would deem large sellers or brokers.

It’s not necessarily brokers or scalpers buying up those tickets early on. Those tickets are just never made available, period. What you end up seeing are backdoor deals where the promoter, venue and artist either sell those tickets to brokers as a way of guaranteeing themselves some income, or they list it on the secondary market themselves.

Even with the LCD Soundsystem show [at Madison Square Garden, mentioned more extensively here], something like 75 percent of the resellers were individuals, which means people buy four and sell two or whatever it may be.

Evolver.fm: So it’s people lucking out and getting to the front of the queue, and deciding they might as well buy four instead of two because they can pay for their two with the profits?

Lehrman: That’s exactly right. We see more of that type of sale than we see somebody marking up tickets substantially because they’re a broker… [In either case], how much someone is willing to pay is the purest indicator of demand. If someone’s willing to pay $1,500, someone else has the right to charge that. Or if fan demand isn’t what the asking price is, tickets prices come down.

Charlie Sheen is the perfect example. You saw a ton of tickets [to his live show] scooped up really early, and there was this sense from everyone that tickets were sold out. They were listed high on StubHub, and then no one bought them. The prices have steadily gone down, and now they’re half of face value on StubHub.

Evolver.fm: What about the argument that it’s not fair — that if all kids want to see Miley Cyrus, why can only the rich ones go to the show?

Lehrman: This goes back to my transparency answer. There’s just not enough tickets being made available to the public. If there’s only 3,000 tickets going to the public from a 20,000 seat venue, then, of course, prices are going to be high.

Evolver.fm: To be clear, where are the other 17,000 tickets?

Lehrman: I think what’s happening is, say 20,000 tickets are available for a show. Of those, 4,000 go to a pre-sale, 2,500 go to a fan club, and then it comes time for the actual public sale, say 10am on a Saturday, and only 3,000 are on sale there.

You’ve got about 10,000 tickets that have gone on sale, and 10,000 that have been held back in some capacity. Most of those held-back tickets are funneled onto the secondary market. Enough tickets were never available in the first place, so people are able to get a premium for them.

Again, part of what Lehrman said is discredited by the fact that at least one group of “wise guys” made millions by creating bots to buy tickets then pretending to be individuals scalping the tickets. However, if what he says about artists, promoters, and venues holding back tickets in order to sell them on auction sites such as his own StubHub is true, then music fans who hate the high prices caused by ticket shortages might have another problem, in addition to bot-happy scalpers: Their biggest problem could be standing on stage.

Photo courtesy of Flickr/Christian Rowlands

  • http://twitter.com/jdrch Judah Richardson

    I’ll file the title of this post under Unlikely.

  • http://tickets.gruvr.com gruvr

    Well, nothing like a little uninformed opinion to create some controversy and generate some comments on the blog, eh?

    > “artists, venues and promoters are often directly responsible for inflating prices by essentially scalping their own tickets”

    “inflating” prices? Compared to what? Get a clue. Artists are entertainers who hire promoters to maximize profits. Artists, promoters and ticket sellers use crude but time-proven marketing tricks to enhance sales. Whenever there is an open market with volatility, you find speculators,aka scalpers, but the latter term implies they always make a profit, which is likely as true as it is for daytraders.

    Forget the question of whether artists sell tickets on an open market for a moment. Consider the obvious first, and take time to assess the facts. Few authors do, preferring to repeat hackneyed cliches.

    Consider the most recent obvious Sheen example “An Orchestra seat at Radio City can now be had for as little as $24, far, far below face value” http://www.thehollywoodgossip.com/2011/04/charlie-sheen-ticket-sales-tanking-hard/

    Now do a little arithmetic and guess how much $ was lost in aggregate by ticket ‘scalpers’.
    Sheen is an extreme example but the same thing happens to lesser degrees for many events.

    Ticket sellers know that the way to move product and maximize prices is to create a perception of scarce supply, rabid demand, and short time to act. Thus, the ‘on sale date’. Thus an artist plays only one night per city even though it’s cheaper to stay for a second. Thus ticketmaster fakes the impression that its servers can’t handle the overwhelming demand. Try buying, say, a gift certificate.. it’s for any event – you still get the ‘you’ll lose your place in line!’ and long delay while the system pretends to fight for a precious ticket. Any good DB engineer will tell you modern systems can easily handle the transaction rate of an on-sale event. There are plenty of obvious alternatives to correctly ‘pricing the house’ and making seats available to anyone.

    Consider Bruce Springsteen’s last tour. “He” made such a huge stink that his tickets were being scalped by resellers that – oh, gee – it got lots of free publicity for the Boss. Promoters know that lawsuits generate press and the impression of vast demand. The truth? Springsteen played 2 nights in Boston on that 09 tour, and tickets on resale were far below face value, starting at $11. Maybe he should have only scheduled one show.

    So, consider the obvious. Look at some numbers. My site ( http://tickets.gruvr.com ) lets you set price-drop alerts for any event, and the alert data is very revealing. But its too much for a Comment, it needs a full article – which few would read, since they’re busy consuming …well, See Above.

  • http://tickets.gruvr.com gruvr

    oh and there are plenty more of these charlie sheen posts turning up now — check out this one
    http://www.huliq.com/12079/ticket-scalpers-lose-big-charlie-sheen-torpedo-tour-gamble

    See, it’s a double-edged sword with which they scalp. And no, the pen is not mightier.

  • Anonymous

    During congressional hearings on the Ticketmaster-LiveNation merger, Ticketmaster executives said exactly what Lehrman said, artists and promoters hold back tickets to sell on the secondary ticket market.

    I hate to break it to everyone, but concerts are a luxury not a right. If you can’t afford to go a show too bad. I can’t afford to take an around-the-world cruise but you don’t hear me whining about it.

    Besides artists could end scalping tomorrow if they played more shows at a given venue and/or raised ticket prices. But that won’t do either of those things.

  • Rcntlrocks

    That’s a dumb analogy. I can AFFORD a ticket to go see the Dave Matthews Band. I can afford a front row ticket to go see DMB. What I CAN’T afford is a front row ticket to see DMB that I have to buy off of stubhub. And if it weren’t for the fan club, I wouldn’t even have a CHANCE to get a ticket–the public tickets sell out in about 5 seconds. I get that scalping is just the free market at work, but that doesn’t mean I have to like it.