The Ticketing Taxonomy Is Dead but the Industry Won’t Look at the Corpse

Ticketing companies now operate across categories that once defined them. State legislatures are rushing to regulate anyway, armed with outdated classifications and fee caps rooted in nothing but vibes.

by Lawrence Peryer, 23 Media Ventures

In the taxonomy of ticketing companies, I had myself convinced there were three types.

Primary ticketers, those that have direct, first-party deals with venues, promoters, and other event risk-takers to put tickets on sale. They do not participate in the ticket face value, in setting it or taking a piece of it. They earn their keep through outside fees that are not set by them, but agreed to between them and their clients. They provide an additional revenue stream to their clients beyond the ticket price by enabling them to add to the service fees. They do as many different things for their clients as there are companies doing those things. The spectrum of services they provide might include e-commerce, CRM and marketing functionality, group and season ticket tools, access control, finance and accounting tools, ad infinitum.

There are secondary ticketers, who go by and are called lots of different names (some polite, some not). They might make money by marking up tickets, by taking a percentage of a ticket sold at a discount, by charging a buyer a fee, by charging a seller a fee, or combinations thereof. In some verticals (namely sports and theatrical), they are vital, additive parts of the official ecosystem and openly acknowledged as such through direct, first-party relationships. In some verticals (namely music), they can be vital, additive parts of the official ecosystem, seldom openly acknowledged as such even when they have direct, first-party relationships. They can also be predatory, deceptive, and problematic in other ways. They are a complicated bunch.

Most taxonomies end there, but there is a third type that has emerged over the last decade or so, and that is the official exchange.

The official exchange is usually a tech platform or marketplace that, like primary ticketing companies, has direct, first-party relationships with venues and promoters. In fact, many primary ticketing companies have been adding this functionality to their own platforms over the last several years, though the smarter ones partner and integrate with purpose-built third-party platforms for this capability. The prices reflected on these exchanges are agreed to or approved by the client. At the very least, the method for arriving at the price is agreed to by the client. Revenue generated from these situations is typically shared by the parties, it is generally much lower than in the secondary market, and the system typically comes with other safeguards or benefits for fans and clients. Also like primaries, these exchanges make their money from outside fees, not the tickets. Because most event risk-takers will not offer refunds, the ability for ticket buyers to sell their unneeded tickets in a safe, non-predatory environment, without having to become amateur scalpers, is one example benefit. Another is that, like primaries, these platforms provide much-needed revenue to their clients. Because of the safeguards and benefits, these relationships are out in the open, acknowledged, often promoted outright to fans. They are often seen as a method for combatting the unaffiliated secondary.

Though the industry and consumers have not caught up to it yet, these taxonomies have broken down and become less relevant. For example:

• Primary ticketing companies often have their own secondary marketplaces or fan exchanges. Sometimes these are in conjunction with their clients as revenue participants, sometimes not

• Oftentimes secondary ticketers are getting tickets directly from the events (increasingly facilitated by technology integrations with primaries), which makes them distributors of primary tickets, not aftermarket resellers

• Most exchange platforms also have marketplaces where fans can buy and sell tickets to events beyond just the ones the platform is partnered with.

Who is what in this new world and what are we supposed to be asking for in regulation?

This legislative session, many states are finally taking up ticketing, though few of them have very good ideas about how to do so. They are regulating the old taxonomy, not the new reality. Most industry players are still thinking, talking, and pushing for regulation using the old classifications.

For example, many well-meaning people are pushing for 10% caps on resale tickets. Sounds great. But why 10%? I know some people like 5%. I know some that like 20 or 30. No one is making an evidence-backed or finance-based case for this, they just like the way it sounds. It “feels fair.” Maybe they point to other jurisdictions who have that cap, but if you go look in those places, the 10% is not rooted in anything.

Maybe well-meaning people might agree, “OK, 10% cap in the unregulated, unaffiliated secondary market” (but again, for no other reason than it feels good). But what about when the event owner is providing the tickets to the secondary? What about when the primary operates a secondary? What about when it is an exchange platform that functions more like a primary, in that it has a direct relationship with the event, but then cannot charge fees similar to what a primary and its client usually charges (often 25% or more)? What about when the client wants a piece of the fee revenue? Why are we not capping primary fees? We now have a situation where legislation is differentiating by company type (through an outdated taxonomy), not activity type (official vs. unaffiliated). Worse, someone who has no knowledge of the cost of business for these companies, is pushing to cap the revenue (often the same people who want a piece of that revenue and charge uncapped prices for water and beer). It’s not going to end well.

Runaway ticket prices, whether in primary or secondary markets, are real. Some stakeholders view this as a problem (even an existential one), others as a massive engine of growth. None are looking at first-principle causes of escalating ticket prices (dare I even say the obvious reason out loud in a public forum?). We accept some things as sacred parts of the business that cannot be challenged, and then the participants in the ecosystem who have the closest relationships day-to-day, ticket companies and their clients, who are literally inside each other’s operations, fight over capping or splitting the smallest part of the revenue. While many are friends and colleagues I think well of, I don’t think the loudest voices out there right now understand what they are agitating for or have thought through the repercussions for themselves and their partners. It’s brutal and it may be about to come to a head in select states across the country.