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We look at the murky waters of ticket scalping and if new NSW legislation will provide consumers, performers and event organisers with value for their entertainment dollar.

Refresh, refresh, refresh … SOLD OUT

We’ve all logged on to a ticketing website and feverishly refreshed the page of a big event waiting for tickets to be released only to find they’re sold out in minutes. It’s quite possible the best tickets were snapped up by professional scalpers and their automated ticket-buying robots, or never put up for sale in the first place.

Those dark days may be over, or at least a little brighter, in NSW with the state government’s new anti-bots and scalping laws took effect on 1 June 2018 for all NSW events. But what are the factors behind this controversial practice? And will the new legalisation make it fairer for consumers?

To put it simply, it’s excess demand

Dr Martin O’Brien

Why does ticket scalping exist?

The practice of ticket scalping has been around for centuries. While it may have moved from the street corner to the online marketplace, its fundamental drivers haven’t changed.

“To put it simply, it’s excess demand,” says UOW’s Master of Business Administration director, Dr Martin O’Brien. “The demand for the event exceeds the supply of tickets sold.”

This sometimes-unavoidable lack of supply drives up the value of tickets and scalpers see an opportunity to make money by deliberately purchasing tickets for the sole purpose of reselling them for a profit.

Industry peak body, Live Performance Australia (LPA) released a Ticket Attendance and Revenue Survey showing 18.78 million tickets were sold to live entertainment events in 2016.

While there is no data on how many of these tickets were resold, as long as there is a gap between the face value of a ticket and how much a punter is willing to pay – and no laws against reselling for a profit – there will always be a market for scalpers.

Name your price

If tickets are continually priced below market value, many people question why artists and promoters don’t set the prices higher to deter scalpers. Dr O’Brien says finding that sweet spot between maximising profit, discouraging scalpers and ensuring an event sells out can be difficult when tickets are sold months in advance.

“To find the market value we would need both supply and demand information,” he says. “A promoter typically prices tickets well in advance of an event and at this stage they don’t always have perfect information. The promoter may also be under orders from the artist or responsible sporting body in terms of offering a certain number of low price tickets, or family tickets.”

For an event organiser, profits can go beyond ticket sales, so it makes business sense to ensure as many people are in attendance as possible to purchase food, drinks and merchandise.

From an artist’s or sporting team’s point of view, keeping ticket prices low is also understandable. They would much rather perform to a sell-out crowd, grow their fan base and increase loyalty. They also don’t want to be seen as price-gouging their fans.

Complications arise when an artist prices tickets at a level that ensures all their fans have a chance to see them perform, only to see the tickets purchased by scalpers looking to make a profit. Artists feel cheated, as they feel these scalpers aren’t contributing to the event in any positive way, yet they’re making huge profits simply because they have the power and tools to buy tickets in bulk.

Katy Perry tickets listed on a reselling website for almost five times their original purchase price.

Isn’t scalping just good business?

If a business person can legally buy tickets that are in high demand, what’s wrong with selling them for a profit? There is the argument that ticket resellers are simply ensuring the tickets get in the hands of the fans who value them the most.

In a joint response to an Australian government consultation paper on ticket reselling, website StubHub, online retailers eBay and Gumtree argue, “…there is no public policy reason as to why the sale of tickets to commercial events should be treated differently to that of the sale of any other goods and service in this regard”.

Dr O’Brien says the question of whether someone should be allowed to profit from the resale of a ticket goes beyond economic considerations.

“If the scalper is simply extracting a buyer’s maximum willingness to pay, they are not forcing anyone to do anything they don’t want to,” he says. “The real issue is equity, rather than efficiency. By purchasing products at market value and selling at much higher prices, they are pricing groups of people out of the market.”

In other industries, if a product is proving popular, more can be ordered. If a movie is selling out, more session times can be added. Artists often add shows to try and meet demand, but travel schedules can be tight and exhaustion is a factor.

In the case of one-off sporting events like the World Cup football final, the ability to increase supply to meet demand simply isn’t possible. The uniqueness of many events also means that competition – which can help keep prices low in a marketplace – is non-existent.

Dr Martin O'Brien sitting at his desk

Dr Martin O’Brien from UOW’s Faculty of Business. Photo by Paul Jones

The secondary marketplace

Once scalpers or brokers identify an event that may make them a profit, they will try and obtain tickets before they go on sale or release their automated ticket-buying software robots. These bots have a history of circumventing security features and bulk buy tickets before you’ve even selected a date from the drop-down menu. But it’s not just professionals with software bots who are doing the scalping.

Amateur scalpers are also buying tickets to make some extra money, and some fans are purchasing more tickets than they need before selling the overs at a profit to cover their expenses.

All these tickets are quickly uploaded to ticket reselling websites like eBay, Viagogo and Ticketmaster Resale, where they are often sold for many times their original value, with the website charging a service or booking fee.

Fans who missed out on tickets from the original seller have no option than to pay the asking price or miss out on the event altogether.

There’s also the risk that a ticket bought from a scalper may be cancelled by the event organiser if the promoters believe it breaches the terms and conditions of the sale – something the new NSW laws looks to address.

Importantly, not all resellers are the same and these secondary marketplaces have varying degrees of consumer protection in place. There’s always a risk the ticket isn’t genuine or doesn’t arrive at all.

In August 2017, the Australian Competition and Consumer Commission (ACCC) announced they would be taking Viagogo to the Federal Court alleging it breached the Australian Consumer Law by misleading consumers. The ACCC received more than 470 contacts about Viagogo from Australian consumers in the first eight months of 2017.

a screen shot of a Kendrick Lemar ticket for resale

This Kendrick Lamar ticket doesn’t break the new legislation as it was purchased before June 1.

What’s being done to stop ticket scalping in Australia?

While there is currently no national legislation that prohibits selling a ticket for profit or outlawing bots, in late 2017 the federal government did release a consultation paper, Ticket Reselling in Australia to gather impact statements and responses to five options aimed at reducing consumer detriment. Responses from the likes of LPA, eBay Inc. and CHOICE differed in their stance.

As it stands, state laws vary from prohibiting scalping on declared major events to no legislation beyond the Australian Consumer Law (ACL). This has led the industry to take up the fight themselves.

Around the world, events are limiting the number of tickets that can be bought at one time or placing the name or even photo of the purchaser on every ticket and matching them with ID at the gate.

Some artists are giving verified fans first access to tickets. Others are partnering with official resellers who limit the price a ticket can be resold for.

Stadiums and ticket outlets are trawling secondary marketplaces cancelling tickets that break their terms and conditions.

Ticketmaster says in 2016 it blocked nearly 6 million attempts by bots to access their sites. LPA has produced guides to educate consumers of the risks of buying tickets on resale websites.

These initiatives have all had varying degrees of success, sometimes at the expense of consumers who may have a legitimate reason for on-selling their ticket.

An aerial shot of an stadium

There is currently no national legislation that specifically addresses ticket scalping

New scalping laws for NSW

“We will stop the bots,” Matt Kean, Minister for Innovation and Better Regulation, told Parliament. “This legislation is about putting the consumer first by making sure that genuine fans can access tickets at a reasonable price.”

On 1 June 2018 the NSW government introduced the Fair Trading Amendment (Ticket Scalping and Gift Cards) Act, which has five key measures that range from capping the price of a resold ticket at 110% of the purchase cost to prohibiting the use of bots to purchase tickets.

According to eBay Inc., one of the major reasons fans have trouble accessing tickets is because a large percentage go to artists, promoters, venues and corporate partners before tickets are released to the public. These reforms aim to increase the transparency of how many tickets are available to consumers in the first place with the Minister for Innovation and Better Regulation having the power to order an event organiser to publish the number of tickets made available to the general public.

Under the reforms, the reselling websites will be as responsible as persons posting tickets for resale, which includes that they take reasonable steps to avoid prohibited advertisements going live on their sites and also removing them as soon as practicable when they become aware of any.

Will the reforms stop scalping and improve consumer protection in NSW?

UOW senior consumer law lecturer, Dr Charles Chew says while these reforms are not new ideas, and their success in Australia and overseas has been limited, they will still be a win for the NSW consumer if enforced properly.

“These reforms are better than the current Victorian legislation because they are more comprehensive. We just have to wait and see how strongly they enforced and whether there is the political will to enforce them. The trouble with a lot of legislation is that they are beautifully worded, but there is not enough action.

“Enforcement is expensive,” he says. “It means Fair Trading will have to be continually surveying resale websites to see if there are any violations.

In their submission to the national consultation paper, LPA is calling for national anti-scalping legislation that clarifies consumer protections without adding to the administrative burden on ticketing companies and event organisers.

Dr Charles Chew standing in his office

New laws are a win for the NSW consumer if enforced properly says Dr Charles Chew. Photo by Alex Pike

What are the penalties for breaking the reforms

Maximum penalties for the offence of selling a ticket at more than 10 per cent above the original cost are $11,000 for an individual, and $22,000 for an organisation.

Dr Chew worries these penalties are too small. “I don’t think they will deter the big operators,” he says. “This is a multimillion-dollar industry. If you compare these penalties to the fines for breaching the ACL, they are far too low. They will simply go to the court and pay the fine.”

Grab your ticket

The world of ticket scalping is a complex web of economic and ethical considerations with artists, promoters, resellers and politicians all having an opinion as to what is best for the consumer. As a consumer law expert, Dr Chew says the reforms are better than doing nothing to address the issues.

“The legislative reforms absolutely outlaw, not just the use of bots, but any software that allows ticket scalpers to buy in bulk. This will make it easier for fans to get their hands on them. They also prohibit ads for the resale of event tickets that go over the 10 per cent cap.  So I think the legislation is a step in the right direction and will significantly stop fraudulent activities. As to whether it will wipe these out completely – I have my doubts, ” says Dr Chew.

At least this is one show where we all get a ticket.

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