What does it mean to be "fully paid" for your concert appearances?

In researching an upcoming article on music booking agencies, I keep running into a trend that's got me thinking about how musicians really get paid for live performance in a web-enabled music industry. When Coldplay offered concert tickets via an online auction back in 2005, I remember hearing moans from fans and from music activists who griped that concert tickets were already too expensive. The fear was that artists were becoming greedy and that only very few people would be able to actually attend shows that fit within their budgets.Flash forward to today, where I've seen all kinds of antics from parents trying to get their hands on Hannah Montana tickets:

So, it's no surprise to see Hannah Montana tickets on eBay and StubHub for $3,000 or more. Here's where the gap between perception and reality can drive a wedge between fans and artists.

Even with face value prices of $100 or $150, anybody who earns $3,000 for reselling a concert ticket may be adding value for a single fan, but adds no long term value for the artist. Miley Cyrus sees none of the spread -- $2,850, in this case.Some folks may be tempted to hit the "reply" button and scream, probably in all caps, that Miley Cyrus doesn't need the extra $2,850. And that's where I disagree. As I wrote in Grow Your Band's Audience, achieving a career where you can sell out arena gigs is not just rare, it's fleeting. Will people want to pay $3,000 to see Hannah Montana ten years from now? Maybe so, but probably not. Just ask Britney Spears, Vanilla Ice, or M.C. Hammer. If you're in the zone and capable of earning $3,000 for a seat, you should seize that moment. [1]

The frustration that fans feel when they pay exorbitant rates for tickets gets vented on the artist, and not on the ticket brokers. Fans feel like they're really paying $3,000 to Hannah Montana, even when $2,850 is going to an unrelated third party.Here's what I find bizarre. Instead of taking matters into their own hands and working with TicketMaster and eBay, music industry groups are attempting to identify ticket brokers and charge them licensing fees, much like those paid by radio stations to ASCAP and BMI. A noble idea, in spirit. However, the ludicrous reaction from ticket brokers contacted about the scheme says it all:

"Everyone in this value chain has already been fully paid for their work - this proposed tax is like BMW asking car owners for a cut every time someone resells a car."

Not true on two counts.

1. Artists are not being fully paid if they are not receiving the amount paid for by the fan, less an acceptable and legitimate service fee. 2. If my friend who sells BMWs for a living knows she has a hot model on her hands, that sale price is going up. She's not going to allow someone to buy off her lot for $30,000 and sell for $60,000 because she knows that will destroy her brand.

Music managers, venues, and artists have an unprecedented opportunity to add value for their own fans by making the ticket buying process fun and accessible. Here's how:

  • Open up a date spread. Instead of "on sale now" events that lead to frustration, offer a "register now" and "complete sale now" date.

  • On "register now" day, open a dutch auction for 75% of the seats in the arena. Offer 10% of seats (in prime locations) to fan club members at a fixed price. The fan-club pre-sale, which has a successful track record thanks to Dave Matthews and Tori Amos, will sell out in time for remaining fans to participate in the auction.

  • Offer 10% of seats at a discount price via venue box office sales only. Limit 2 or 4 per person and/or per credit card. This works well for Broadway "discount lottery" programs.

  • 5% of seats end up getting used as comps, anyway, so that's how I rounded it.

  • On "complete sale now" day, buyers can lock in the rate they agreed to. If they fail to complete the transaction, another standby fan gets the seats.

  • All tickets are bar-coded, with face value printed as the price actually paid for the tickets to avoid running afoul of local scalping laws. You can ostensibly still resell the ticket, but the artist is now "fully paid" based on market dynamics.

With a little clever integration, TicketMaster and/or eBay could make this work. And they would stand to profit the most from it by charging a percentage of higher fees. TicketMaster could especially benefit by having a tangible way to show the public how it adds value to transactions.

Footnotes:

1. When I have written on this topic in the past, I sometimes get questions from ticket brokers or their families asking why I don't want them to earn a living. Ticket brokers provide a service that is valuable only because artists, venues, and booking agencies have been unwilling to offer this kind of customer service for themselves. There will always be a secondary ticket market driven by urgency, and legitimate ticket brokers have every right to profit from adding real value for consumers. However, the "scalping" activity that further alienates fans from artists must start to wind down before permanent damage is done. Full Disclosure: Ticket Brokers and other legal secondary market agencies are frequently sponsors on this site. Like Clark Howard, I rely on independent ad sales organizations in order to keep advertising and editorial separate.