Why the Feds Should De-Fang the Ticketmaster Monster, and How An Insider Can Help

Printed from: https://newbostonpost.com/2017/12/09/why-the-feds-should-de-fang-the-ticketmaster-monster-and-how-an-insider-can-help/

Ken Lowson chuckles.

In January 2005, he spent $200,000 using credit cards to obtain 5,000 memberships to U2’s fan club. That allowed him to participate in the Internet presale via Ticketmaster to purchase tickets for the Vertigo Tour. Using computer programming (popularly known as “bots”) he legally bought nearly every one of the 500 available general admission tickets for shows in Los Angeles, New York, and Boston, respectively, sparking outrage and disbelief among longtime members of the band’s fan club. A month later, at the Grammy Awards, the band’s drummer apologized to fans, “due to circumstances beyond our control.”

Lowson says U2 and Ticketmaster effectively let him do it.

As proof, he did the same thing months later when tickets were sold for a third leg of that tour. (Here’s a dirty industry secret:  many bands actually use scalpers to sell their tickets; scalpers make everyone money.)

Not long ago, Lowson, the founder of now-defunct Wiseguy Tickets was the most hated and successful man in the murky and speculative ticket scalping business. It was so influential during its heyday last decade, in fact, some suggested that Wiseguy broke Ticketmaster. Lowson understood — and he ultimately exploited — weaknesses in the ticket giant’s processing applications.

By the end of last decade, Wiseguy, better and faster than anybody else, had bought and resold around 1.5 million tickets (a “franken-bot empire”). It generated profits of more than $25 million. Its visible hand churned choice tickets not only for music events but for sporting events (the Rose Bowl) as well as theatrical events (Broadway). And hundreds, if not thousands, of others.

In 2010, Lowson’s California office was raided by the Federal Bureau of Investigation. A government suit claimed his business used fraudulent techniques and fraudulent tactics. Grabbing national media attention, the case was one of the largest in the history of the ticketing business . (Which is a highly lucrative segment of the entertainment industry, though vexing and maddening to many consumers.) When he settled the case, a year later, he received two years of probation and was ordered to forfeit $1.2 million.

Lowson is more circumspect now.

He still insists on his innocence. But in a series of conversations and email exchanges for this column, he clearly understands and calls into question many of the shadowy practices that are designed to stifle competition and confuse consumers. And he knows things that industry executives know but don’t want fans and ticket buyers to know. He also understands what the feds don’t. And don’t want to.

In many respects, Lowson now resembles the reformed Frank Abagnale, as featured in Steven Spielberg’s 2002 film Catch Me If You Can. He says the industry needs to be reformed, and tixfan.com, his new company, aims to lead such efforts. He is, ironically, a consumer advocate now.

The Federal Trade Commission and Justice Department should listen to Lowson.

Today, he would make a formidable expert witness for the federal government should it ever commence antitrust proceedings in what could be a landmark marquee event:  The United States v. Live Nation/Ticketmaster. 

Of course, he would need front-row seating. Just one ticket.

He laments the “lack of transparency and accountability” in the byzantine, purposely opaque, and largely unregulated ticketing business. He is also concerned about “fan education”; he believes fans are not well served. The market reminds him of Aldous Huxley’s Brave New World Revisited, where consumers are victims of “unconscious manipulation,” and where they accept a world they would normally reject.

For instance, Lowson believes the public has a right to know the following:  Of the approximately 67,000 tickets at Foxborough’s Gillette Stadium on sale now for Taylor Swift’s 2018 stadium tour, he figures only 30,000, or roughly 45 percent, will be made available to the public through pre-sales and general sales. Don’t fans have a right to know that a majority of tickets are held from them for, Lowson says, promoters, advertisers, radio stations, corporate sponsors, VIP packages, and the venues themselves? In his experience, blocs of tickets are “sold directly to scalpers by the venues themselves.”

Unbeknownst to the general public, this is standard industry practice. (Read Katy Perry’s 2011 Tour Rider.) Scalpers and bots can’t be blamed for all that ails the industry. (Read “Obstructed View: What’s Blocking New Yorkers From Getting Tickets.”)

Lowson says fans are driven by anxiety (to get tickets) whereas ticket sellers are driven by greed (to make money). Those two worlds do not live in peaceful harmony. Swift is using a new ticketing system on Ticketmaster’s Verified Fan called “boosting,” where fan commotion (buying merchandise, posting social media, and the like) theoretically can be measured for an opportunity to get access to the best tickets. This is a “dangerous game,” Lowson says. For example, ticket buyers will never be told their place in a dystopian virtual Ticketmaster line. Many Ticketmaster tactics cause him concern.

He reasons it’s all about “capturing fan data.” Certainly not disclosing that fact, though. Indeed, a fan joins fan-club to get better tickets; Ticketmaster controls fan-clubs to digitize fan engagement. That is the future of the business. Every ticket buyer should ask, therefore, what happens to all this personal data?

As ably chronicled in Ticket Masters: The Rise of the Concert Industry and How the Public Got Scalped, the ticketing business has come a long way since the days of shabby mall ticket windows and intrepid high school scalpers like the fictional Mike Damone portrayed in the 1981 film Fast Times at Ridgemont High. It is a multi-billion dollar industry, but operates as if it were navigating the dark web. Throughout our online conversations, Lowson spoke of an industry marred by “pre-scalping,” “boosting activities,” “monetizing pre-sales,” “blended marketplaces,” “price flooring,” “spec-ing.” And “arbitrage.”

This is not fan-friendly. But it is big business.  

The market has shifted dramatically. In the old days — pre-digital days — musicians went on tour to promote and support an album, which was the money maker. Nowadays, it’s reverse. Recorded music is a commodity (U2 downloaded its 2014 album into 500 million iTunes libraries for free) and albums promote the tour, a live “experience.” So, in the modern day, live music is where the action and dollars gravitate. A “live nation.”

In 2010, the same year Lowson was defending himself, Live Nation merged with Ticketmaster, creating a corporate colossus called Live Nation Entertainment. It’s a public company where, notably, shareholders are its primary concern, not fans or musicians. It’s also a company where size matters. And scale.

The numbers are staggering for a company divided into just three primary business lines. For live entertainment:  the largest producer of concerts — 85 million fans, 29,000 concerts, 3,200 artists, spread over 40 countries. For ticketing:  the world’s leading ticketing enterprise — 484,000,000 tickets, 12,000 clients in 29 countries. For sponsorship and advertising:  with “unparalleled scale and access” — 1,000 brands, 80 million unique monthly visitors, 145 million names in its consumer database, 40 million mobile app downloads. In the United States this year alone, more than 20 million people attended a live music event, with each user spending an average of nearly $153 per event.

But Live Nation — along with its principal subsidiary, Ticketmaster — is unquestionably a monopoly in 2017. Many would say hegemony.

Even before the merger, it was suspected that Ticketmaster enjoyed an 80 percent market share. Today it enjoys “near-monopolistic” control of primary ticketing. Lowson confidently asserts that the company also owns half the scalping business, too, known as secondary ticketing. Verified Fan is a way to control resale.

Nor are music fan clubs what they seem. Long gone are the days when teeny-boppers banded together to follow and venerate their favorite musicians. These days, in a number of instances, Live Nation’s sweeping management contract with certain artists (such as Madonna and U2) involves retaining the rights to “their” fan clubs, too.

“You have to understand something,” Lowson said in an email message. “Ticketmaster doesn’t want any independent fan club business in play. They operate with the premise ‘we are the fan club’.”

Like Wall Street bankers, Live Nation executives champion the “synergies” of its combined operations. It quietly demands a 360-degree relationship within all aspects of the profit chain:  ticketing, promotion, venue ownership, and management. The company boasts a “dual strategy,” where it effectively controls consumers (fans) and producers (venues, promoters, and talent). Arguably, the massive contracts it has with the likes of Madonna, U2, and Jay-Z ($200 million) could be construed as a form of artistic monopoly, too.

The system is broken and in need of disruption. Consumers have few, if any, choices. Somewhere in the process is a Live Nation company assaulting common sense and competition with 1,000 decibels. Consumers are powerless participants in a marketplace claiming to serve them. Where’s the outrage?

The merger announced in 2009 passed scrutiny of the U.S. Justice Department, remarkably enough, after a review of antitrust concerns. But nearly a decade later, given the holding company’s absolute power (and new developments not fully understood in 2010, like data collection), the Federal Trade Commission (FTC) and state attorneys general should reconsider Live Nation’s existence. After all, the FTC’s objective is “to protect the process of competition for the benefit of consumers.”

It’s hard to imagine that Live Nation doesn’t violate both the spirit and letter of the Big Three antitrust laws.  

The Sherman Antitrust Act of 1890 aimed at “preserving free and unfettered competition.” The Federal Trade Commission Act of 1914 outlawed “unfair methods of competition” and “unfair or deceptive acts or practices in or affecting commerce …” (Think “boosting activities.”) And the Clayton Act of 1914 outlawed mergers and acquisitions when the “effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly.”

Live Nation, entertainment’s AT&T and Standard Oil, should be broken up today. It would be a healthy training exercise for the federal government before frying bigger fish like Facebook, Google, and Amazon. Ken Lowson will gladly help. Just get him a good ticket.

James P. Freeman is a New England-based writer and former columnist with The Cape Cod Times. His work has also appeared in The Providence Journalnewenglanddiary.com and nationalreview.com.