On June 3, employees of the iconic alt-rock band the Pixies gathered outside the Troxy theater in London for an experiment. Armed with five iPhones and customized barcode-scanning software, they spent two hours selling admission to nearly 3,000 fans who had learned of a surprise concert through word of mouth or email. The Pixies created the system with Topspin Media, a company that helps artists like Eminem, Metric, and OK Go market their music and wares directly to fans. "There was no surcharge, no booking fee," says Richard Jones, the Pixies' manager. "Thirty pounds is thirty pounds."
Almost anyone who goes to concerts understands why this is significant. No service charge. Zero. The Pixies and Topspin had sidestepped the seemingly inevitable fees tacked onto any ticket. They had, in other words, sidestepped Ticketmaster, the juggernaut that sells more than 130 million tickets a year for everything from Lady Gaga shows to monster-truck rallies.
Started as an experiment, Ticketmaster has since developed a near lock on the multibillion-dollar ticketing industry. And the company is only getting bigger. Last winter it merged with Live Nation, the largest concert promoter in the country, which means that in effect Ticketmaster now also controls access to acts like U2 and Jay-Z and owns many of the amphitheaters in the US, including the Irvine Meadows/Verizon Amphitheater in California and the Nikon at Jones Beach Theater in Wantagh, New York.
Among fans and artists, of course, Ticketmaster is widely despised. It extracts high service fees (known commonly as "those goddamned Ticketmaster service fees") but has offered very little innovation in ticketing over the past 30 years. The Pixies, for example, added thousands of names, complete with contact info, to their marketing database thanks to the Troxy gig—something they can't generally get when they sell tickets through Ticketmaster. And now, in the wake of the Live Nation merger, many in the concert industry are worried that Ticketmaster might be more interested in promoting its own artists and venues than in selling tickets for rival acts.
This has unleashed a new scramble for alternatives. In offices around the US, startups staffed with veteran ticketing executives and backed with millions of dollars in venture capital are working to find new ways to sell seats to fans. Among them is Veritix, which runs Flash Seats—a paperless system for music and sports events; Ticketfly, a company that recently received $3 million in venture capital and, in addition to ticket sales, helps clients market events on Twitter and Facebook; and In Ticketing, which handles Burning Man and hundreds of other events. Many in the music business hope that, with lower fees and more ingenuity, some of these companies might be able to pry business away from the behemoth. "It would be great if a more nimble, more technologically savvy company could come along and figure out how to make money with much lower service fees," says Tom Windish, agent for such cutting-edge acts as Hot Chip, the xx, and Yeasayer.
But Ticketmaster didn't come to rule an industry by suffering interlopers. Over the past 30 years, the company has killed or eaten nearly every competitor: Ticketron, TicketWeb, TicketsNow, Paciolan, and Musictoday. And a potent combination of top artists, venues, and long-term ticketing deals makes Ticketmaster one Goliath well positioned to crush a whole army of Davids.
Peter Gadwa was an IT staffer at Arizona State University when he teamed up with Albert Leffler—then working at ASU's performing arts center—to create Ticketmaster in 1976. The duo originally set out to design a ticket-selling program that would outperform a small, regional company called Select-A-Seat, which served the university's theater. They succeeded—so much so that the pair soon took aim at a loftier competitor: Ticketron, then the dominant ticket seller in the concert business.
The ASU team members were using modest Digital Equipment computers while Ticketron had hyper-expensive Control Data mainframes. So Gadwa and Leffler simply out-programmed Ticketron, creating software that would allow their limited computers to behave like the more expensive systems, letting 500 operators log in to the system at the same time.
It took more than smart code, however, to turn Ticketmaster into one of the world's most powerful entertainment companies. It took the arrival in 1982 of a new leader—Fred Rosen, a fast-talking lawyer and amateur comedian who had a profound realization: Ticketing isn't about the bands or the fans. It's about the venues.
Shortly after he was hired, Rosen systematically contacted the biggest concert halls and arenas in the country and made them all the same spectacular offer: Where Ticketron charged venues for its service (adding a minimal fee for customers—$1 per ticket), Rosen offered to actually pay the venues. He would increase service fees and split the money with whoever housed a concert or sporting event. Everybody signed up and Ticketron was quickly decimated. In 1991, it surrendered. "When Ticketron came to an end," Gadwa says, "I felt more like we had stumbled upon a beached whale that had already died than defeated a fierce enemy in battle."
This system continued for three decades. The underlying technology barely changed, however, even when it expanded in the 1990s to accommodate the Internet. Few computer systems can handle the strain of 500,000 Madonna fans all attempting to buy tickets seconds after the seats hit the market—not to mention withstand repeated attacks by bots trying to scoop up tickets for resale. But despite being the product of what even Ticketmaster executives acknowledge is 30 years of patches and workarounds, the company's system is almost supernaturally reliable.
Then, in 2007, Live Nation president and CEO Michael Rapino, a former Canadian-beer executive married to onetime Star Trek: Enterprise Vulcan Jolene Blalock, decided that his promotion company owned so many venues that it should sell tickets itself. Rapino enlisted the help of an experienced German ticket specialist called CTS Eventim to build a new system, but the plan crumbled almost immediately. When a Phish reunion tour went on sale in January 2009, the new Live Nation Ticketing couldn't manage 10 million Phishheads simultaneously vying for 250,000 tickets. The resulting press was horrible. Even worse, though, Live Nation discovered that concert fans were trained to buy tickets at ticketmaster.com—and nowhere else. Concert attendance dropped almost as soon as Ticketmaster's site stopped serving Live Nation.
In 2008, Ticketmaster had made veteran industry shark Irving Azoff—a man so cutthroat (and so short) he is known as the Poison Dwarf—its CEO. Manager of the Eagles since the mid-'70s, Azoff is famously aggressive. He once sent a gift-wrapped boa constrictor to a manager whose wife he considered snakelike, with a note that read "Now you have two!" Seeing Live Nation's troubles, Azoff recognized an opportunity. After several conversations, the two companies agreed to merge. In January, the US Department of Justice approved the formation of Live Nation Entertainment.
DOJ approval did require a few concessions, however. Perhaps the most significant of these was Ticketmaster's obligation to license its ticket-selling software for two years to Live Nation's biggest rival in the promotions game, AEG Live. The idea was that this would give AEG time to develop its own ticketing software. AEG says it is working on this but so far has little to show, making it unclear how much the DOJ's conditions will actually spur competition.
For all its clout, Ticketmaster has two major problems. Most obviously, it gouges ticket buyers. But less talked about is its lack of flexibility. With an old codebase, a huge customer roster, and a long-established way of doing things, Ticketmaster is notoriously slow to innovate. Its new CEO, Nathan Hubbard, points out that his company is starting to add features like interactive seat maps, but even he acknowledges that it "can't turn on a dime like a startup."
Virtually all the new ticketing startups aim to lower service fees to fans. But because this isn't necessarily important to venues—in fact, it may run counter to their interests—the new guys must focus on Ticketmaster's second weakness: its inability to innovate. And this is just what they are doing—to the delight of people in the industry like Mike Tomon, 32-year-old vice president of sales and service for the Cleveland Cavaliers.
In October 2009, the Cavaliers ditched Ticketmaster in favor of Veritix's Flash Seats. The service is unique in that it allows fans to buy tickets online and transfer them to anybody else via email, even reselling them in an official online marketplace designed to compete with StubHub and eBay. Every time a ticket changes hands, Flash Seats tracks the change and allows Tomon and his sales staff to monitor the pricing.
The information this generates can be useful. When they analyzed last season's Flash Seat numbers, for example, Tomon and his staff learned that fans sitting in rows one through five of the end zones were reselling their tickets for considerably more than those in rows six through 15. The Cavs' response was quick: Increase prices for the first five rows and thus beef up revenue. "The depth of the data will absolutely make your head spin," Tomon says.
Just about every new ticketing business promises such a world beyond Ticketmaster: faster and cleaner Facebook and Twitter marketing and mobile access that allows promoters and club owners to put tickets on sale while they're, say, vacationing in Cozumel. And each has its own angle: Ticketfly's strength is experience—its executives ran TicketWeb, which sold the first-ever ticket on the Internet back in 1995. Front Gate Tickets has the industry clout: It shares a co-owner with C3 Presents, which promotes the Lollapalooza and Austin City Limits festivals. And Topspin Media has the populist appeal: It lets indie artists sell their own tickets.
But Ticketmaster has two distinct advantages over these upstarts. The first is that the company long ago signed many of the biggest venues to long-term deals, making it extremely difficult for others to gain traction. The second is experience: Ticketmaster's system may be old, but it is still rock solid.
Seth Hurwitz found this out the hard way. Hurwitz is an independent concert promoter responsible for booking the Merriweather Post Pavilion in Columbia, Maryland, which competes with the Live Nation-owned Jiffy Lube Live amphitheater about 60 miles away. He's become so concerned about Live Nation's power that he's filed a suit alleging that Live Nation Entertainment constitutes an illegal monopoly in the concert industry (the case is pending). Not surprisingly after the merger, he decided to slip out of his Ticketmaster deal and find a new seat seller.1
He picked Ticketfly. "They're not mired down in previous practices and habits," Hurwitz says. The new arrangement worked pretty well for most of the summer. Ticketfly sold tens of thousands of tickets to shows featuring artists like Phish and Arcade Fire.
Then, on July 24, Ticketfly set up a website to give away tickets to the Virgin Mobile FreeFest, starring Pavement, M.I.A., and LCD Soundsystem at Merriweather. Almost immediately after seats went on sale, the 75,000 simultaneous visitors to Ticketfly's site exposed a bug in a recent tech upgrade. The entire system stalled. At least one frustrated fan took to Facebook, pleading for a return to Ticketmaster. As Andrew Dreskin, Ticketfly's CEO and cofounder, puts it, "A large-scale concert on sale is, in essence, a denial-of-service attack." And unfortunately, on July 24, service was denied.
Veritix has had similar problems. For example, when Lady Gaga tickets went on sale at the Quicken Loans Arena in Cleveland over the summer, a miscommunication caused blocks of tickets to appear and disappear randomly.
"Yes, a variety of niche competitors have emerged," says John Wentzell, president of TD Garden, the basketball arena in Boston that hosts many big concerts. "But when you flip the switch putting three U2 shows on sale at once, you need to know that the system is going to work. And that's what Ticketmaster delivers."
At this moment, Brock Jones, vice president of events at Nashville's Bridgestone Arena, home of the NHL's Predators and host to recent concerts by Paul McCartney and Justin Bieber, is weighing his options. His Ticketmaster contract expires in June 2011. Ticketmaster provides reliability, he says, but he's also considering Veritix, Tickets .com (owned by Major League Baseball), and a few others. All the Ticketmaster rivals can give Jones the ability to sell tickets while collecting data on customers who attend events at Bridgestone.
For now, Jones won't say which way he intends to go. But many in the concert business say venue owners who've arrived at the ticketing crossroad end up sticking with Ticketmaster, because the company still pays. And it can deliver on its promises. "Is it the most advanced platform? No, not in all areas," Jones says. "But Ticketmaster is kind of the bar that everybody else is measured against. The reality is they do a very good job." And this may be the key point. After all, as Rosen discovered back in the '80s, ticketing is not about the fans or the bands. It's about the venues. And for them, Ticketmaster works.
Steve Knopper (steveknopper@yahoo.com) wrote about boosting your IQ in issue 16.05.
Note 1. Correction appended [1:31 p.m./Nov. 10]: Seth Hurwitz’s lawsuit against Live Nation was not specifically about the company’s merger with Ticketmaster, as previously suggested.
