schneiderman ticket sales report

7/25/2019 Schneiderman Ticket Sales Report

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Obstructed View:

New York State Aorney General

Eric T. Schneiderman

From the Office of:

Whats Blocking New Yorkers from Geng Tickets

SolD oUt AgAIn|

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This report was a collaborave eort prepared by the Bureau of Internet and Technologyand the Research Department, with special thanks to Assistant Aorneys General JordanAdler, Noah Stein, Aaron Chase, and Lydia Reynolds; Director of Special Projects Vanessa Ip;Researcher John Ferrara; Director of Research and Analycs Lacey Keller; Bureau of Internet andTechnology Chief Kathleen McGee; Chief Economist Guy Ben-Ishai; Senior Enforcement Counsel

and Special Advisor Tim Wu; and Execuve Deputy Aorney General Karla G. Sanchez.


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TABLE OF CONTENTSExecuve Summary ....................................................................... 3

The History of, and Policy Behind, New Yorks Tickeng Laws ....... 7

Current Law ................................................................................... 9

Whos Who in the Tickeng Industry ........................................... 10

Findings ....................................................................................... 11

A. The General Public Loses Out on Tickets to

Insiders and Brokers .................................................................... 11

1. The Majority of Tickets for Popular Concerts Are Not Reserved

For the General Public .......................................................................... 11

2. Brokers & Bots Buy Tickets in Bulk, Further Crowding Out Fans ...... 15

a. Ticket Bots Amass Hundreds or Thousands of Tickets in an Instant ....... 15 b. Even without Bots, Brokers Use Industry Knowledge and Relaonships

to Gain an Edge Over Fans ...................................................................... 21

c. Ticket Limits Are Not Regularly Enforced ................................................ 22

d. Brokers, With and Without Bots, Buy Up Many

Tickets to New York Events ..................................................................... 23

e. Brokers Sell Tickets at Substanal Markups ............................................ 25 f. Speculave Tickets Increase Confusion and Risk for Fans ........................ 26

g. The Market Structure Is Atypical ............................................................. 27

B. High Fees for Unclear Purposes Raise Concerns ......................... 28 1. Fees are Charged by Ticket Vendors and Venues ............................. 29

2. Event Ticket Fees are Higher than Most Online Vendors ................. 31

C. Restraints of Trade in Tickeng ................................................... 32 1. Seng of Ticket Resale Price Floors ................................................. 32

2. Pracces That Impede Consumer Access toAlternave or UnocialTicket Resale Plaorms................................ 33

Recommendaons ....................................................................... 34

Appendix Methodology for NYAG Analyses ...............................38


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EXECUTIVE SUMMARYThe New York Aorney General (NYAG) regularly receives complaints from New Yorkersfrustrated by their inability to purchase ckets to concerts and other events that appear to selout within moments of the ckets release. These consumers wonder how the same cketscan then appear moments later on StubHub or another cket resale site, available for resale atsubstanal markups. In response to these complaints, NYAG has been invesgang the enreindustry and the process by which event ckets are distributed from the moment a venueis booked through the sale of ckets to the public. This Report outlines the ndings of ourinvesgaon.

More than 15 years ago, NYAG issued a landmark report on what it called New Yorks largelyunderground and unexamined cket distribuon system. The report announced that it wasa system that provides access to quality seang on the basis of bribes and corrupon at theexpense of fans.

Since that report was wrien broad changes in the technology of ckeng and an overhaul ofNew Yorks ckeng laws have completely transformed the landscape, in ways both good andbad. Following the repeal of New Yorks an-scalping laws in 2007, the once underground

cket resale economy moved parally above ground. This change has produced some benetsonline marketplaces have replaced waing in long lines, the growth of cket resale plaormshas somemes made it easier to sell unwanted ckets, and the last minute-minded can aendshows without interacng with potenally dishonest street scalpers.

Yet many of the problems described in 1999have persisted and, in some cases, have grownworse. Whereas in many areas of the economythe arrival of the Internet and online sales hasyielded lower prices and greater transparency,event ckeng is the great excepon. The

complaints NYAG receives from consumersconcerning ckeng commonly cite pricegouging, scalping, outrageous fees andimmediate sell-outs. As one cizen wrote,in a typical complaint: The average fan hasno chance to buy ckets at face value thisis a disgrace. Many performers voice similarfrustraons.1

The problem is not simply that demand for primeseats exceeds supply, especially for the most in-

demand events. Tickeng, to put it bluntly, is axed game. Consider, for example, that on December 8, 2014, when ckets rstwent on sale for a tour by the rock band U2, a single broker purchased 1,012 ckets to one showat Madison Square Garden in a single minute, despite the cket vendors claim of a 4 cket

1. See, e.g., Mark Savage, Sir Elton John: Secondary ticket prices disgraceful,BBC News (Dec. 16, 2015), available athttp://www.bbc.com/news/entertainment-arts-35091230; Patrick Doyle, Eric Church on Scalpers, Bro-Country and Blake Shelton Scandal,

Rolling Stone (June 11, 2014), available athttp://www.rollingstone.com/music/news/eric-church-on-scalpers-bro-country-and-blake-shelton-scandal-20140611.

I think its extoronate

and I think its disgraceful.

- Sir Elton John, referring to inated

secondary sales

Its a systemac problem

with music ...

- Eric Church, referring to scalpers


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limit. By the end of that day, the same broker and one other had together amassed more than15,000 ckets to U2s shows across North America.

Consider that brokers somemes resell ckets at margins that are over 1,000% of face value.Consider further that added fees on ckets regularly reach over 21% of the face price of cketsand, in some extreme cases, are actually more than the price of the cket. Even those whointend their events to be free, like Pope Francis, nd their good intent defeated by those whoresell ckets for hundreds or even thousands of dollars.

Findings

A. The General Public Loses Out on Tickets to Insiders and Brokers.

New Yorkers keep asking the same queson: why is it so hard to buy a cket at face value?

1. Holds & Pre-Sales Reduce the Number of Tickets Reserved for the General Public.

Our invesgaon found that the majority of ckets for the most popular concerts are not reserved

for the general public at least in the rst instance. Rather, before a member of the public can buya single cket for a major entertainment event, over half of the available ckets are either put onhold and reserved for a variety of industry insiders including the venues, arsts or promoters,or are reserved for pre-sale events and made available to non-public groups, such as thosewho carry parcular credit cards.

2. Brokers Use Insider Knowledge and Oen Illegal Ticket Bots to Edge Out Fans.

When ckets are released, brokers buy up as many desirable ckets as possible and resell themat a markup, oen earning individual brokerages millions of dollars per year. To ensure they getthe ckets in volume, many brokers illegally rely on special soware known as Ticket Bots to

purchase ckets at high speeds. As the New York Times reported, Ticketmaster has esmatedthat 60 percent of the most desirable ckets for some shows that are put up for sale arepurchased by Bots.2Our research conrms that at least tens of thousands of ckets per year arebeing acquired using this illegal soware.

Brokers then mark up the price of those ckets by an esmated 49% on average, but somemesby more than 1,000% yielding easy prots. In at least one circumstance, a cket was resold at7,000% of face value. Finally, some brokers sell speculave ckets, meaning they sell cketsthat they do not have but expect to be able to purchase aer locking in a buyer. Speculaveckets are a risk for consumers and also drive up prices even before ckets are released.

NYAGs invesgaon idened those brokers re-selling the most ckets for New York eventsNearly all were unlicensed, and several employed illegal Ticket Bots to buy ckets. A number ofspecic invesgaons and enforcement acons are in process.

2. Ben Sisario, Concert Industry Struggles With Bots That Siphon Off Tickets, N.Y. Times (May 26, 2013), available athttp://www.nytimes.com/2013/05/27/business/media/bots-that-siphon-off-tickets-frustrate-concert-promoters.html


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B. High Fees for Unclear Purposes Raise Concerns.

Another common complaint concerns the unclear and unreasonable service fees added to theface value of ckets, which are generally set by venue operators and cket vendors. New Yorklaw prohibits these pares from adding fees to the prices of ckets unless they are connectedto the provision of a special service and are reasonable. Our examinaon of cket feesset by 150 venues in New York raises concerns, revealing that unclear convenience charges,service fees, and processing fees somemes reach outlandish levels, either as a percentage

of the ckets face value or in absolute dollar terms. On average, New York venues and theirckeng vendors charge fees averaging 21% of face values, which exceeds what other onlinesellers charge. Moreover, we found fees as high as $42 aached to a cket to see ProfessionalBull Riding at Madison Square Garden and $28 to see Janet Jackson at Jones Beach Theater.

C. Restraints of Trade Exist.

NYAG is concerned by the growing imposion of resale price oors (i.e. no sales below listprice), along with eorts to mandate that ckets be sold on a single walled garden market, asopposed to consumers having the opon of buying ckets from dierent resale plaorms. Weare also interested in the degree to which excessive service charges may constute evidence of

abuse of monopoly power, especially as they relate to the resale of sports ckets.

Recommendaons

In 1999, NYAG found that, despite long-standing regulaon, the law has not succeeded ineliminang the abuse it was intended to address. That remains true today, and New Yorkremains in need of greater protecons for the buying public. We therefore oer severarecommendaons:

A. Ticket Resale Plaorms Must Ensure Brokers Comply With the Law.

Ticket resale plaorms are in the best posion to ensure that their broker customers follow thelaw, and they must take meaningful steps to do so. Specically, these plaorms should requirethat brokers provide their New York license numbers as a condion of using the resale plaorm,and disclose to potenal customers the face value of ckets they are oering for sale, as alreadyrequired by New York law.

B. Industry Players Must Increase Transparency Regarding

Ticket Allocaons and Limits.

The industry must provide greater transparency into the allocaon of ckets, to increaseaccountability and enable the public to make informed choices. Promoters of events, whoknow the number of seats being held, should provide that informaon to cket vendors, suchas Ticketmaster, to make available to the public. In addion, wherever cket vendors claim thatcket limits are enforced, they should enforce those limits as a maer of course on a per-personbasis. If such limits are not actually being enforced, cket vendors must make that clear.


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C. Ticket Vendors Must Address the Bot Epidemic.

Bot use is a major reason why New Yorkers cannot get ckets at face value. While the industryworks on long-term technological soluons to this problem, steps can be taken to reduce Botuse in the near-term. NYAG has contacted Ticketmaster and another major cket vendor, AXSto discuss concrete reforms, such as preempve enforcement of cket limits, analyzing purchasedata to idenfy ongoing Bot operaons for prosecuon, and invesgang resellers of largevolumes of ckets to popular shows, among others.

D. The Legislature Should Act.

While there is no reason the industry should wait for legislave acon to implement the reformsoutlined above, the Legislature should act to ensure that reform is meaningful and lasngSpecically:

i. Mandate the industry reforms outlined above.

ii. End the ban on non-transferrable paperless ckets.

A soluon that most industry parcipants agree is eecve at reducing broker acvity isthe use of non-transferrable paperless ckets. Unlike paper ckets and electronic cketsthat are freely transferrable from the buyer to another person, non-transferrable paperlessckets require an event aendee to present the credit card that was used to purchase thecket. As a result, the inial purchaser typically must be present to use the cket. Statelaw creates a de factoban on these paperless ckets, but this rule makes New York anoutlier ours is the only state that bans the pracce and this ban should be repealed.

iii. Impose criminal penales for Bot use.

Given that cket resellers are making considered business decisions when they deployBots to acquire massive amounts of ckets near-instantaneously, the prospect of criminal

prosecuon may well have a deterrent eect on this conduct.

iv. Cap permissible resale markups.

Unl 2007, New York capped the markup resellers could charge, and the State removedthat cap in hopes of beneng consumers. Unfortunately, compeon-driven savingsintended to benet fans have instead been converted to prots for a handful of savvymiddlemen using mulple employees or computers, or illegal Bots. New York shouldreinstute a reasonable limit on resale markups.


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THE HISTORY OF, AND POLICY BEHIND,NEW YORKS TICKETING LAWSNew Yorks approach to ckeng has undergone dramac changes over the last een yearsUnderstanding both the history and the policy goals of previous and current ckeng legislaois important to all that follows. 3

1920 2007: The An-Scalping Era.

The greatest evil that theatergoers in this city have to contend with is the cket speculator,wrote a New York City magistrate in 1901. They are praccally highwaymen and hold ueverybody that goes to a place of amusement.4 As the quote suggests, the resale of ckets foprot has long been considered an aggravaon in this State. In 1922, Governor Nathan Milledeclared the need for acon to combat what he called gross proteering by cket scalpers.He signed a law, widely described as an an-scalping law, that began the States regulaon ocket sales for major events. It originally regulated boxing and wrestling, relang to ckets tplaces of entertainment, and capped the price of resale ckets at two dollars above face valueThe law maintained its basic character for seventy years, broadening in scope, and adding variouprovisions to ban bribes paid to venues by brokers for ckets (known as ice). Eventually, thetwo-dollar limit became a 20% or 45% price cap (depending on the size of the venue), whicthe law required to be printed legibly on each cket.6Over the years, the legislature periodicallimposed stricter penales on those selling ckets near venues and took steps to give the Statethe power to police out-of-state actors dealing in ckets to events within New York.

Nonetheless, as NYAGs report made clear in 1999, the law was both inconsistently enforced anddicult to enforce. Underground brokers ourished, oen openly oung the law. By that yeacket brokering had grown into a large underground economy typied by law-breaking, secrecket holds, bribe paying, and a general state of corrupon at all levels.

2007 Present: A Regulated Industry.

In 2007, in a sweeping legal change, the New York legislature decriminalized all resale of cketfor prot, or scalping, and adopted an approach that sought to treat ckeng as a regulatedindustry. With the price caps lied, brokers were now free to operate openly and sell ckets awhatever prices consumers might pay. In the face of crics who warned that prices would risand brokers would reap unseemly prots, the sponsors of the Bill expressed some hope that thnew approach might, in fact, reduce cket prices on the resale markets. As Assemblyman JosepD. Morelle argued at the me, By allowing greater compeon for the resale dollar, we maactually see a decrease in secondary prices, which is ulmately best for the consumer.7

3. The governing statutory provisions are found in New York Arts and Cultural Affairs Law, Article 25 (N.Y. Arts & Cult. Aff. L.).

4. Kerry Segrave, Ticket Scalping: An American History, 1850-2005 (2006), p. 55.

5. N.Y. General Business Law 167-69k (McKinney 1922) (repealed 1983).

6. The following notice was required to be printed on tickets:If the venue to which this ticket grants admission seats 6000 or fewer persons, this ticket may not be resold for more than 20%above the price printed on the face of this ticket, whereas if the venue to which this ticket grants admission seats more than 6000

person, this ticket may not be resold for more than 45% above the price printed on the face of this ticket.

7. Office of Joseph D. Morelle, Morelle Bill Establishing Free Market for Ticket Resellers Passes Assembly (May 29, 2007), available ahttp://assembly.state.ny.us/mem/Joseph-D-Morelle/story/22938.


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The operang premise of the 2007 law was not to completely deregulate cket resale, butto legalize it pursuant to regulaon and taxaon. Pre-2007, many of the brokers operated inopen violaon of the law; the 2007 law introduced a revised licensing system supervised bythe Secretary of State. The licensing system required, among other things, various disclosuresof ckets sold, the posng of a bond to cover counterfeit ckets, and the payment of a $5,000annual fee.

Above all, the 2007 law represented

a new and experimental approachto the cket industry, made clear bythe fact that the law regularly sunsetsand is therefore subject to ongoingnkering by the legislature. The rstadjustments came in 2010, when thelaw underwent major changes, threeof which are important here. First,for the rst me, the law bannedthe use of cket-buying soware,or Bots. The New York Senate

commentated that such soware isused by unscrupulous speculators topurchase ckets at inial sale aheadof consumers intending to aend anevent, and put enforcement duesin the hands of the Aorney General.8Evident in the ban on Bots and thelegislatures commentary is the idea that cket buying, when presented to the public as a faircontest, should in fact be fair, and not subject to manipulaon by soware or similar techniques.In other words, the legislature prefers that the ability to obtain ckets be based on factors likeshowing up at the right me or simple luck of the draw, as opposed to gaining an advantage

through soware that funcons dierently than a human could.

Second, an important 2010 legal reform addressed growing service fees imposed by primarycket sellers and their cket vendor agents, such as Ticketmaster or Telecharge. It mandated, forthe rst me, that any fees charged for special services must be reasonable. 9Third, the lawbarred non-transferrable paperless ckets, as discussed in greater detail later in this Report.10

The clear tenor of the ckeng statute is to make cket brokering into a regulated industry andconnue safeguarding the public against fraud, extoron, and similar abuses. Ticket brokersare not illegal, but must obtain a license, post bonds, disclose their acvies to the Secretary ofState, and avoid using prohibited Bots. Whether the new system has operated in the interestsof New York cizens remains an open queson of public policy.

8. New York State Senate Introducers Mem., SB No. 3840-A.

9. N.Y. Arts & Cult. Aff. L. 25.29 (as amended July 2, 2010).

10. Id. 25.30.

Whats a Bot?

A Ticket Bot is soware that automatescket-buying on plaorms such ascketmaster.com.

Automaon lets the Bot (1) performeach transacon at lightning speed, and(2) perform hundreds or thousands oftransacons simultaneously.

As a result, in the rst moments aerckets to a top show go on sale, Botscrowd out human purchasers and cansnap up most of the good seats.


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CURRENT LAWNew York State law prohibits engaging in the business of reselling any ckets to a place ofentertainment within New York State without rst procuring a license.11Those who resell, oerto resell, or purchase with the intent to resell ve or more ckets without a license are guiltyof a misdemeanor and subject to penales.12

Addionally, the law requires that brokers posta $25,000 bond with their license applicaon to ensure compliance with the laws provisionsand cover damages to their customers from any misconduct.13Brokers that resell ckets onlinemust also display a hyperlink to a copy of their licenses,14and they must display the face value ofckets along with the resale prices.15

New York State law also makes it illegal for brokers to use Bots to bypass security measures onthe websites of cket vendors, such as Ticketmaster, or to maintain any interest in or control ofsuch Bots.16Anyone who violates these provisions is subject to penales and the forfeiture ofprots.17

No current federal law specically prohibits the use of Ticket Bots, but legislaon has beenproposed that would do so. The Beer On-line Ticket Sales Act of 2014 or the BOTS Act, supportedby Senator Charles Schumer, would prohibit, as an unfair and decepve act, the sale or use of

Ticket Bots. It would also provide for criminal penales for those who engage in this conduct.

11. Id. 25.13.

12. Id. 25.09(2), 25.35.

13. Id. 25.15.

14. Id. 25.19.

15. Id. 25.23.

16. Id. 25.24.

17. Id.


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WHOS WHO IN THE TICKET INDUSTRY

When it comes to concerts, the key parcipants

in the industry for ckets and their typical roles in

pu ng on shows and se ng the prices consumers pay

are as follows:

Arst

Responsible for organizing the concert tour or other event, which includes nego-

ang the performance contract with an arsts agent or manager and leasing

all the venues where performances will occur. With the arst, establishes cket

prices. Examples of promoters are AEG, Live Naon, and Bowery Presents.

Promoter

Public

Venue OperatorProvides the facility for the event and earns a share of service

charges, processing fees, or other add-ons to the cket price.Examples of venues are Madison Square Garden, Saratoga

Performing Arts Center, and the Beacon Theatre.

Ticket VendorProvides for the inial (or primary market) sale and delivery of ckets, for

example through a website or mobile app, and earns a share of service charges,

processing fees, or other add-ons to the cket price. Examples of cket vendors

are Ticketmaster (owned by Live Naon), AXS (owned by AEG), and Telecharge.

BrokerBuys ckets on the primary market and resells them at a markup on

the secondary market.

Ticket Resale PlaormProvides a website or other plaorm where ckets are resold, and

charges a fee on each sale. Examples of cket resale plaorms are

StubHub, TicketsNow (owned by Ticketmaster), and Vivid Seats.


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FINDINGS

A. The General Public Loses Out on Tickets to Insiders and

Brokers.

The majority of ckets for popular concerts are diverted away from the general public. First,various hold and pre-sale programs reduce the total number of ckets available to thegeneral public. Then, of those ckets that remain, brokers use a number of methods includingBots to seize a large poron of the remaining ckets. Brokers even sell ckets that they do notactually own, known as speculave ckets, to fund their later purchases.

1. The Majority of Tickets for Popular Concerts Are Not Reserved

For the General Public.

It may come as no surprise to fans that many concert ckets are never made available to thegeneral public, but there is lile informaon available as to where precisely those ckets actuallygo. To bring some light to this issue, NYAG has obtained and analyzed informaon regarding theallocaon and distribuon of ckets from the largest promoters, Live Naon and AEG, for thetop-grossing shows in New York for the years 2012-2015.

NYAG found that, on average, only about 46% of ckets are reserved for the public. The remaining54% of ckets are divided among two groups: holds (16%) and pre-sales (38%).18 Holds are cketsthat are reserved for industry insiders, such as arsts, agents, venues, promoters, markengdepartments, record labels, and sponsors. Pre-sales make ckets available to non-public groupsbefore they go on sale to the general public. The two most common pre-sale events are forcredit card holders and members of fan clubs, but venues, promoters, or other groups may runpre-sale events as well. Brokers, as discussed below, oen begin harvesng ckets at these pre-

sale events and later during the general on-sale.

18. The methodology for this analysis is in the Appendix.


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Figure 1. Less Than Half of Tickets Are Reserved for the General Public.Source: Live Naon/Ticketmaster (2012 2013) and AEG (2012 2015)19

Among the top grossing shows in New York, approximately 16% of all ckets were reservedthrough holds for industry insiders: arsts, venues, agents, markeng departments, sponsorspromoters, and execuves.20 Oen, venues are the biggest beneciaries of these holds. Forexample, Madison Square Garden was typically allocated more than 900 ckets per concertand Barclays Center was allocated an average of 500 ckets per concert for the highest grossingconcerts held at those venues.

For some concerts, cket holds account for well over 16% of the available ckets. For instance, aKanye West show at Barclays Center held 29% of ckets for insiders, including over 2,000 cketsfor the promoter and more than 500 ckets for the venue. In all, fourteen of the States mostpopular shows held at least 20% of available ckets for insiders, as shown in Figure 2. Holding

a large number of ckets is not necessarily a pracce among all shows the Vans Warped Tour2013 and Barry Manilow concerts, both at the Nassau Coliseum, held 5% or less of ckets.


20. It is worth noting that a hold simply represents a reservation, and that in most cases a group that has been allocated ticketsthrough a hold will not use a portion of those tickets. In these instances, the tickets are released back to the promoter, who willtypically make the tickets available for sale to the public. Because the tickets are usually not released through a publicized on-sale

event, tickets released in this manner are often purchased by brokers who are constantly searching for new tickets that are madeavailable closer to the date of the event.

Ticket Allocaon

Holds for Insiders Pre-Sale Events General Public


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Figure 2. Fourteen Popular Shows Held at Least 20% of Tickets for Insiders.Source: Live Naon/Ticketmaster (2012 2013) and AEG (2012 2015)21

Filtered for shows with 20% or more total capacity placed on hold

Approximately 38% of ckets to the most popular shows in New York were reserved for pre-

sales, advance sales to select groups of fans and cardholders of major banks and nancialinstuons.22These nancial instuons, including American Express, Cibank, and Chase, havenegoated agreements whereby their cardholders have the opportunity to purchase ckets


22. For the top shows, it is often the case that all of the tickets that are made available through the pre-sale events are sold. For

less popular shows, tickets set aside for pre-sale events can go unsold. When tickets set aside for a pre-sale event are not sold, theunsold tickets are reallocated to the initial public on-sale.

Trey SongzMadison Square Garden

(Theater) on 3/1/2012

20%

Jusn BieberMadison Square Garden on

11/29/2012

28%

Jusn BieberMadison Square Garden on

11/28/2012

28%Keith Urban

Madison Sq uare Garden on1/29/2014

20%

The VoiceBeacon Theatre on 7/9/2014

22%

Ricardo ArjonaMadison Sq uare Garden on

2/26/2012

23%

Fresh Beat BandMadison Square Garden(Theater) on 11/30/2013

24%

Fresh Beat BandMadison Square Garden(Theater) on 11/29/2013

24%

Kanye WestBarclays Center on

11/20/2013

21%

Kanye WestBarclays Center on 11/19/201329%

DrakeJones Beach on 6/16/2012

20%

Luke BryanNassau Coliseum on

2/7/2013

20%

Farm AidSaratoga Performing Arts

Center (SPAC) on 9/21/2013

22%

Fleetwood MacMadison Sq uare Garden on

4/8/2013

24%

NKOTBNassau Coliseum on 6/1/2013

24%

Promoter

LiveNaon AEG


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before the ckets are released for sale to the general public. Importantly, fans are not necessarilythe ones purchasing ckets released in pre-sale events. For popular events, brokers, realizing theadvantages of pre-sale programs, purchase heavily and oen use illegal Bots to maximize theiryield in pre-sales, as discussed in greater detail below.23 While the majority of pre-sale eventsare conducted by credit card companies, members of other groups, including fan clubs, sociamedia websites, and specialty shopping sites also receive advance opportunies to purchaseckets.

The number of ckets reserved for pre-sale events can be quite large for some concerts. Forexample, for more than 30 of New Yorks most popular concerts, at least half of the ckets wereset aside for pre-sale events. Figure 3 idenes ten shows that made more than half of theckets available through pre-sale events where none of the ckets were explicitly reserved forfan clubs.

Figure 3. Ten Popular Shows Reserved Over 50% of TicketsThrough Pre-Sales Events, None Explicitly Earmarked for Fan Clubs.

Source: Live Naon/Ticketmaster (2012 2013)24

Filtered for shows with more than 50% of total capacity sold throughpre-sale events and no ckets specically earmarked for fan clubs

23. Even setting aside the problem of brokers, cardholder pre-sales may disadvantage many fans. They reserve tickets for hold-

ers of select credit cards, who may generally be wealthier than fans who lack those cards and the benefits that come with beinga cardholder. As a result, these pre-sales give wealthier fans a better chance of getting tickets at face value, while decreasing the

supply of face-value tickets available to less wealthy fans.


Fleetwood MacMadison S quare Garden on 4/8/2013

61%

Coldplay & Jay-ZBarclays Center on 12/31/2012

70%

Coldplay &Jay-Z

Barclays Center on 12/30/2012

52%

Jay-Z & JusnTimberlake

Yankee Stadium on 7/20/2013

69%

Jay-Z & JusnTimberlake

Yankee Stadium on 7/19/2013

71%

SteelyDanBeacon Theatre on 10/8/2013

64%


65%


64%


64%


64%

PromoterLiveNaon


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Holds and pre-sales can leave few ckets for the public. Indeed, for many of the top shows, lessthan 25% of ckets were actually released to the general public in an inial public on-sale. Forexample, just over 1,600 ckets (12% of all ckets) were released to the public during the iniapublic on-sale for a July 24, 2014 Katy Perry concert at Barclays Center. Similarly, for two JusnBieber concerts at Madison Square Garden, on November 28, 2012 and November 29, 2012,fewer than 2,000 ckets (15% of all ckets) to each show were released to the public during theinial public on-sale.

2. Brokers & Bots Buy Tickets in Bulk, Further Crowding Out Fans.

The broker industry, while not the explicitly underground industry it was in the 20th century,remains dicult to learn about and oen operates in violaon of one or more State laws.

The average fan vying to purchase a cket to a popular concert has lile hope of compengagainst brokers, many of whom use illegal and unfair means to purchase ckets. Brokers areable to purchase large quanes of ckets to popular events by (a) employing illegal Bots, and/or (b) exploing their industry knowledge and relaonships to get access to ckets.

a. Ticket Bots AmassHundreds or Thousandsof Tickets in an Instant.

A Ticket Bot is a sowareprogram that automatesthe process of searchingfor and buying ckets toevents on cket vendorplaorms, such asTicketmaster. Using Bots,

a broker can automate theprocess of searching forand buying ckets so that it occurs in the blink of an eye, and conduct tens, hundreds, or eventhousands of lightning-fast transacons at the same me.

To successfully buy thousands of ckets, Bots must perform four dierent funcons. Thesefuncons may be handled by one Bot or several.

First, spinner, or drop checker, Bots constantly monitor ckeng sites to detect the release, ordrop, of ckets. Ticketmaster has stated that spinners can account for as much as 90% of thetrac to its website.25

Second, Bots automate the search for and reservaon of ckets that are up for sale. Here,brokers exploit the fact that most ckeng plaorms reserve ckets for a few minutes to givethe (human) customer me to complete the purchase. Brokers take advantage of this featureby conducng mulple near-instantaneous searches at the precise moment ckets are releasedfor sale, throwing hundreds of ckets into reserve and removing them from the pool of ckets

25. Ticketmaster L.L.C. v. RMG Technologies, Inc., 07-Civ.-2534 (C.D. Cal.) (Application for Entry of Default Judgment); Ben Sisario &Emily B. Hager et al., Fair Ticketing: Fans Before Scalpers, N.Y. Times Video (May 27, 2013), available athttp://nyti.ms/13V6sdO.

...According to Ticketmaster, bots have been used to

buy more than 60 percent of the most desirable tickets

for some shows.

Concert Industry Struggles With Bots That

Siphon Off Tickets


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available for purchase. The broker may then review the search results and choose which seto buy.26 Figure 4 shows an example of a Bot that has searched for and reserved several groof ckets, displaying the groups and the me remaining for the Bot-user to purchase each on

Figure 4. Bot Displays Time Remaining to BuyTemporarily Reserved Tickets.

Source: Ticketbots.net

Third, Bots automate the process of purchasing ckets, using dozens or hundreds of purchanames, addresses, and credit card numbers. The names of the buyers may be simply inventor they may be borrowed from real people.

Fourth, and nally, Bots must defeat the an-Bot security measures that most cket-sellplaorms employ. The most obvious of the cket vendors defensive tools that Bots must bypis the CAPTCHA test (Completely Automated Public Turing test to tell Computers and HumApart). This test usually requires that a user prove she is human by reviewing text thadistorted or obscured and entering those characters into a text box.

26. Some brokers use this interval to offer the temporarily reserved tickets for sale on secondary market platforms such as StubHub at a given markup, and only if the resale is quickly consummated do they then actually buy the reserved tickets from theprimary ticket vendor. This ability to use temporary reserve to avoid risk greatly undermines a shibboleth repeated to NYAG

during our investigation, that brokers benefit the ticket industry as a whole, including artists, promoters, and venues, by takingfinancial risk through up-front purchases of lots of tickets which they may be unable to resell.


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Figure 5. Ticket Vendors Use Dierent Types of CAPTCHA.

Unfortunately, many Bot programmers have been able to bypass these forms of CAPTCHA.Over the years, Ticketmaster has repeatedly refurbished its CAPTCHA program, using dierentversions of CAPTCHA created by third pares such as Google and Solve Media.27 While theseCAPTCHAs may have stopped some Bots, more sophiscated Bot programmers quickly adapted.In many cases, they collected thousands of the new CAPTCHAs and used them to train theirsoware to read the new CAPTCHAs through improved opcal character recognion. In otherinstances, the Bots transmit in real-me images of the CAPTCHAs they encounter on Ticketmasterand other sites to armies of typers, human workers in foreign countries where labor is lessexpensive. These typers employed by companies such as Death by CAPTCHA, Image Typerz,and DeCaptcher read the CAPTCHAs in real-me and type the security phrases into a text boxfor the Bot to use to bypass cket vendors defenses and use their sites.28

Addionally, at various points, Ticketmaster abandoned CAPTCHAs for its mobile app on theiPhone plaorm, based on the premise that it could beer verify idenes on mobile andtherefore did not need a CAPTCHA test. Our invesgaon of brokers reveals that some havetargeted the CAPTCHA-free mobile plaorm by either designing Bots to mimic mobile devicesor by using an arsenal of actual mobile devices to buy ckets.

27. Some CAPTCHAs incorporate technology that attempts to identify Bots before an image is even shown, to present an easiertest to likely humans and more difficult CAPTCHAs to suspected Bots. See, e.g., Solve Media High Security Standards, http://

solvemedia.com/security/index.html. Many sophisticated Bot developers have bypassed these additional measures.

28. Some CAPTCHAs now do away with security phrases and use other types of puzzles. See, e.g., Google Introducing No CAPT-

CHA reCAPTCHA, https://googleonlinesecurity.blogspot.com/2014/12/are-you-robot-introducing-no-captcha.html. It remains tobe seen if these new approaches will be harder to bypass, especially for Bots that use teams of human typers.


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To eecvely beat out the many fans (and other Bots) aempng to search for and reserve cketsat the start of a sale, most Bots simultaneously aempt mulple connecons to the cket vendorssystems, oen dozens or even hundreds at a me. These connecons are oen responsible forsudden massive increases in Internet requests to ckeng websites when ckets are released.To conceal that these large numbers of concurrent connecons originate from a single source,most Bot users purchase hundreds or thousands of proxy IP addresses to use for each separateconnecon aempt. Moreover, because cket vendors block or slow trac connecons from IPaddresses that appear to be used by Bots, many Bots automacally rotate through their stores of

proxy IP addresses to bypass detecon and blocking. Bot users also typically register hundredsor thousands of e-mail addresses, again to conceal that a single purchaser is responsible formany concurrent transacons and to circumvent security measures designed to prevent Botsfrom purchasing ckets.

With these capabilies, Bots can be extremely eecve for brokers. First, they can buy hundredsof ckets in moments. NYAG has idened many instances in which Bots were able to purchasehundreds of ckets within moments of the release of ckets to the general public or through apre-sale, including the examples shown in Figure 6.

Figure 6. Bots Buy Huge Numbers of Tickets Moments Aer Release.Source: NYAG Invesgave Materials

1,012tickets in 1 minuteU2 2015 TourMadison Square Garden

Bought by one bot on December 8, 2014, for a

July 19, 2015 concert.

520tickets in 3 minutesBeyoncBarclays Center

Bought by one Bot on March 4, 2013 for an

August 5, 2013 concert.

15,087 tickets in 1 dayU2 2015 TourTwenty Different Venues

Bought by two Bots on December 8, 2014 for

twenty concerts in the same tour across North

America.

522tickets in 5 minutesOne DirectionJones Beach

Bought by one Bot on April 14, 2012 for a June

28, 2013 concert.


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Addionally, by being rst in line, Bots can also purchase the most desirable seats to many showsFor example, NYAG reviewed a case study by one cket vendor showing that Bots purchasedmore than 90% of the most desirable ckets to one show. As part of its own analysis, NYAGfound that, of the 251 ckets one Bot operaon purchased to a May 5, 2014 Coldplay concertat the Beacon Theatre, 148 of those ckets were in the rst seven rows of the theater. Thisamounted to more than 60% of seats in those seven rows.

As a result of these huge advantages, Bots are able to purchase many ckets to New York events

The sources we interviewed uniformly stated that the usage of Bots has reached epidemicproporons in the ckeng industry. Indeed, NYAG found that three brokers using Ticket Botscollecvely purchased more than 140,000 ckets to events in New York over a three-year periodbetween 2012 and 2014.

Broker Profile: The One-Man Bot Broker

Revenue: $1.4 million from events in New York (2014)

Method: Bot mimicking Ticketmaster app & 1,000+ credit cards

Broker A was an illegal Bot user who represents a typical species of broker. The

company is a one-man operaon that opened when its proprietor was sll in

college. The company paid overseas programmers for sophiscated cket-buying

Bots designed to mimic the Ticketmaster iPhone app and defeat its an-Bot

defenses. To maximize its yield, and avoid cket limits, the company obtained more

than 1,000 credit cards, many of which used ficous names, each designed to

appear to Ticketmaster as a different individual.

Armed with its Bot and collecon of credit cards, the company directed legions of

purchase requests at popular shows; its acons are part of what led to the quick

sellouts. Its harvest was put up for resale on numerous plaorms, including Stub-

Hub and Vivid Seats, and its own site. While it made much of its money from New

York venues, the company is not licensed in New York.


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b. Even without Bots, Brokers Use Industry Knowledge andRelaonships to Gain an Edge Over Fans.

Brokers who do not use Bots nevertheless have several signicant advantages over the averagefan based on their knowledge of the industry and relaonships.

First, brokers in many instances take advantage of pre-sale events oered to holders of certaincredit cards. Brokers are aware of which credit cards can be used in pre-sales and open accounts

for these credit cards. Brokers also closely follow cket release schedules and are prepared topurchase ckets at pre-sales, when the compeon for ckets is oen less than during a publicon-sale.

In many instances, arsts try to get ckets into the hands of fans by oering pre-sales to ocialfan clubs, for example by issuing special codes to fan clubs that allow members to log into thepre-sale on cket vendor sites ahead of the general on-sale. Unfortunately, brokers oen signup for these fan clubs, obtain the codes, and either use them themselves or sell them to otherbrokers.

Second, Brokers have resources to aempt many concurrent connecons. Brokers understandthat it is important to try to reserve and purchase as many ckets as possible during the rst

moments of an on-sale. Many brokers therefore use mulple computers or mobile devices totry to connect to ckeng websites at the same me. NYAG spoke with one broker who owned100 mobile devices and claimed to use dozens of those at a me by himself to try to purchaseckets. Some brokers employ dozens of people simply to have many humans trying to reserveand purchase ckets at the same me.

Third, many Brokers maintain direct relaonships with venues and sports teams. In these casesbrokers are able to purchase ckets without compeng for ckets through the ckeng websiteBarclays Center, for example, has provided several brokers who own season ckets to BrooklynNets games with the opon to purchase several hundred ckets to most other events at thevenue, including all music concerts. More than 500 ckets to an Elton John concert at Barclays

Center were distributed to brokers in this manner.


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c. Ticket Limits Are Not Regularly Enforced.

The consumer may be familiar with the cket limits that are encountered on the websites ofmost cket vendors. Popular arsts and their promoters typically seek to have vendors, like

Ticketmaster or AXS, impose a limit on the number of ckets that any individual can purchasefor any event. For concerts, a typical limit is eight ckets per purchase; more popular concertsset smaller limits. The theory behind limits is intuive and obvious: by liming the number ofckets any one individual can purchase, ckets will be more fairly distributed. If cket limitswere truly eecve if it were impossible for any one person to buy more than the statednumber of ckets broker acvity would be greatly limited.

Our invesgaon suggests that in the case of some cket vendors, including Ticketmaster, cketlimits do not always have the eect the public would expect. Ticketmaster implements cketlimits by restricng the number of ckets that can be purchased in a single transacon (a per-transacon limit). It does not, however, restrict at the me of sale the number of ckets that can

be purchased by a user through mulple transacons (a per-person limit). In other words, whenan arst requests an eight-cket limit, Ticketmaster will permit a user to purchase only eightckets in a single transacon, but then will allow the same user to make addional purchases ofeight ckets each.

Broker Profile: Licensed Broker

Revenue: $25.4 million (2013)

Method: Employees buy ckets en masse

Broker C is a licensed cket broker. In operaon since the 1990s, the company has

become highly profitable under the new ckets law. The company employs approxi-

mately 25 full-me employees; each employee is paid a wage to keep his or her

own accounts and purchase, using his or her own American Express credit cards, as

many ckets as possible for shows or events decided upon by management. The

company pays its annual licensing fees to the New York Secretary of State.

Broker C is an example of the 2007 law in operaon. On the one hand, the

company pays its licensing fees, discloses its acvies, and is in apparent compli-

ance with most of the regulaons. On the other hand, the companys sizable annual

profits $4.8 million in gross profit in 2013 are direct evidence of the prices thatthe public pays on the secondary cket markets.


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Ticketmaster can aempt to idenfy violaons of the cket limit aer ckets have been soldby canceling those transacons that exceeded the limit the arst had requested. It will onlyundertake this review, however, if an arst specically requests the audit. Yet many arsts seemunaware of this fact. For example, a sophiscated representave of several top arsts playing thelargest arenas told NYAG they had been unaware that Ticketmaster required a separate audingrequest to enforce limits the arst had already requested, and had therefore never made sucha request. Thus, although some arsts are trying to make ckets available to average fans bypricing them below market value and seng cket limits, the lack of real-me enforcement per

user at the point of purchase (or thereaer) undermines their eorts.

The main beneciary of the unenforced cket limits is, of course, the broker industry. As repeatplayers, the brokers know well that the limits are rarely enforced. Our interviews with brokersand others in the industry, and our review of cket purchasing data, reveal that the limits,enforced or not, are easy to evade. The eect of these shortcomings in enforcement of cketlimits is exacerbated where brokers use Bots to speed up their purchases above the limits, tothe detriment of ordinary members of the public. As a result, brokers have an advantage ascompared to ordinary buyers, who believe the phrase cket limits means what it says.

d. Brokers, With and Without Bots, Buy Up Many Tickets to New York Events.

Evidence that brokers are responsible for the purchase of large quanes of ckets can somemesbe seen in sales data that tracks the purchasing acvies of enes holding mulple credit cardsFor example, Figure 6 below shows American Express cardholders who purchased more than$3 million in ckets through Ticketmaster for events in New York State and surrounding areasusing their American Express cards. A single broker used 149 dierent American Express cardsto make more than 38,000 purchases totaling over $12 million just from 2013-2015, while otherbrokers racked up similarly shocking volumes of purchases, somemes using just a handful ofcredit cards.


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Figure 7. Twelve Brokers Each Purchased More than $3 Million in Tickets.Source: American Express Purchases to Ticketmaster for Events

in New York & Surrounding Areas (2013-2015)29


$12,251,282 through 38,366 tran sactions and 149 cards .


$6,175,235 through 16,805 transactions and 644 cards .




$4,625,014through 11,680 transactions and 54 cards .







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e. Brokers Sell Tickets at Substanal Markups.

Brokers prot by selling ckets at a substanal markup over face value. NYAG studied six cketbrokers and found they marked up their ckets an esmated 49% on average, ranging by brokerfrom an average of 15% to 118%. Figure 8 depicts the markups charged by representave brokersfor their most protable shows.

Figure 8. Examples of Six Brokers Markups Show Large Prots.Source: Transaconal sales data for select brokers (2011-2014)30


$1,600

$815

$1,600

$350

$218

$218

$544

$443

$544

$250

$570

$693

$64

$101

$1,602

$79

$4,400

$3,650

$3,526

$1,249

$932

$925

$1,590

$1,155

$1,008

$1,306

$1,221

$999

$1,404

$1,351

$1,256

$7,244

$5,336

$4,635

$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000

Barbra Streisand @ Barclays Center

NY Rangers v. LA Kings @ Madison Square Garden


U2 @ Madison Square Garden

Stanley Cup Finals @ Madison Square Garden

Stanley Cup Finals @ Madison Square Garden

Eric Clapton @ Madison Square Garden

NHL Conf. Finals @ Madison Square Garden

Eric Clapton @ Madison Square Garden

Yusuf Islam/Cat Stevens @ Beacon Theatre



Ed Sheeran @ Madison Square Garden

Eagles @ Madison Square Garden

Pearl Jam @ Barclays Center

One Direction @ Madison Square Garden


One Direction @ Beacon Theatre

Ticket Face Value Markup Amount

Custom Bot

Broker A

Custom Bot

Broker B

Bot Broker B

Non-Bot

Broker B

Non-BotBroker A

Bot Broker A

$94

$228


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Figure 9. Brokers Charge Large Markups.31Source: Source: Transaconal sales data for select brokers (2011-2014)

Our analysis also reveals that the brokers that commanded the greatest markups in the cket resalemarket were those that used Ticket Bots, and, moreover, that the most sophiscated, custom

Ticket Bots were associated with the highest markups. This may be because the sophiscatedcustom Bots were able to purchase the most desirable seats, which could be resold for thehighest prices.

f. Speculave Tickets Increase Confusion and Risk for Fans.

In early December 2015, ckets purporng to be for Bruce Springsteens 2016 River Tourbegan appearing on secondary sites like StubHub, TicketNetwork and Vivid Seats. Some cketswere even adversed for inated prices of as much as $5,800 per cket. The catch? No suchckets had yet been released. What brokers were selling were speculave ckets, that is tosay, ckets that they planned, or hoped, to buy later.

When a speculave cket is sold, the broker then tries to purchase an actual cket, at a lowerprice, to provide to the buyer. The broker pockets the dierence between the price at which hepre-sold the cket and the price at which he later bought the cket. Speculave ckets harmboth consumers and the cket industry. In many cases, consumers are just defrauded theydo not receive the specic seats they paid for, instead receiving ckets for some other seats.In some cases, consumers receive no ckets at all. Speculave cket sales also drive up pricesfor consumers and oen cause widespread confusion and frustraon among consumers, whowonder how ckets can appear on the resale market before ckets are even released to thepublic.

In 2014, singer Eric Church expressed his frustraon with such ckeng: Theyre taking themoney, and theyre not even on sale. Theres no ckets on sale yet. They dont really have them

theyre promising the fact that they can get them. Its a damn scam is all it is. Its the maa. Inthe case of the 2016 Springsteen tour menoned above, NYAG asked StubHub, TicketNetworkand Vivid Seats to take down the speculave cket lisngs, and they all complied. This one-meenforcement acon was eecve in that instance, but the problem is recurrent.

31. The methodology of this study appears in the Appendix.

BrokerAvg.

Cost

Avg.

Resale

Price

MarkupHighest

MarkupAmount Percent

Custom Bot A $145 $317 $172 118% 7,154%Custom Bot B $104 $188 $84 81% 2,190%

Bot A $100 $137 $37 36% 637%

Bot B $105 $137 $32 30% 456%

Non-Bot Broker A $78 $101 $23 29% 1,537%

Non-Bot Broker B $111 $128 $17 15% 1,601%


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g. The Market Structure Is Atypical.

Another nal point to keep in mind concerning this industry: the typical market structure isskewed. For one, ckets are oen sold on the primary market for a face value that is belowmarket price. Although this may sound surprising, our invesgaon suggests it is commonand reects various factors. For one thing, maers of goodwill and reputaon in the sale ofckets are important to certain performers. That is clearest, for example, for events wherethe promoter has non-commercial goals like Pope Francis, who distributed free ckets for his

public appearances or at events like the New York City Centers annual Fall for Dance Fesval,which includes world-renowned performers but sells ckets for just $15, in keeping with theFesvals commitment to make dance accessible to everyone.32

Even more explicitly commercial acts somemes price their ckets below what they might chargeto make them accessible to younger fans or those of ordinary incomes. The band Fugazi, acveover the 1990s and early 2000s, for example, long kept its cket prices at $5.33 Pearl Jam, amongthe most popular bands of the 1990s, set its cket prices at or below $20 to make it possiblefor young fans to aend its concerts. As the band said in prepared tesmony before CongressAlthough, given our popularity, we could undoubtedly connue to sell out our concerts withcket prices at a premium level, we have made a conscious decision that we do not want to put

the price of our concerts out of the reach of many of our fans.34

Somemes a mixture of economic and non-economic moves is evident. A sports team, like theBrooklyn Nets or New York Mets, might not want to be accused of gouging fans, and hopingto build a loyal fan base, and so might price its ckets accordingly. Some sense of this came in2009 when the New York Yankees experimented with much higher cket prices and were subjectto widespread cricism and unaering media coverage. The New York Post described theYankees new plan as greed-driven-and-delivered and the prices as insanely and obscenelyhigh.35Eventually, in the face of both cricism and poor sales, the Yankees lowered their pricesdramacally. Somemes even a prot-maximizing performer might set prices lower than marketvalue to guarantee a sellout and a full house for markeng purposes. Some of the promoters we

spoke with argued that a public sense of high demand and cket scarcity is necessary to createstrong demand for ckets. Hence, seng cket prices at a low level, so as to drive sales, may benecessary to create the sense of a sellout tour that stokes demand to aend it.

Cheaper ckets could be very benecial to consumers, as long as they reap the benets. Theproblem with this industry is that a middleman essenally takes the benets intended for theconsumer. In other words, the cket broker or reseller, able to buy up ckets before the publicgets a chance, prots from the lower priced cket charging the consumer a much higher priceand pockeng the dierence. To further complicate the industry, the enes most able to stopthis pracce are either powerless or not economically incenvized to stop the pracce. Arstsmay want to avoid this from happening but have to rely on the venues to sell ckets. Venueshave an interest in selling out ckets and have lile incenve to put protecons in place. Ticket

32. Press Release, New York City Center Announces 2015 Fall for Dance Festival (July 29, 2015), available athttps://www.nyci-tycenter.org/content/misc/PressRelease-FFD15a.pdf.

33. John Pareles, Review/Rock; Melodies Amid Rant, Thoughts Amid Rage, N.Y. Times (Mar. 7, 1991), available athttp://www.nytimes.com/1991/03/07/arts/review-rock-melodies-amid-rant-thoughts-amid-rage.html.

34. Hearing of U.S. House Comm. on Govt Ops., Subcomm. on Info., Justice, Transp., & Ag., 103d Cong. (June 30, 1994).

35. Phil Mushnick, Pricing fans out of Stadium no good for Yankees or MLB, N.Y. Post (Apr. 27, 2014), available athttp://nypost.com/2014/04/27/pricing-fans-out-of-stadium-no-good-for-yankees-or-mlb.


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vendors also have an interest in selling as many ckets as they can; they collect a fee with eachcket that is sold, a fee that is the same regardless of whether it is paid by you or a reseller.

B. High Fees for Unclear Purposes Raise Concerns

Next to sellouts, few issues seem to aggravate consumers as much as the addion of unexplainedconvenience charges or service fees to the prices of ckets. These fees can be of considerablecost to consumers as a percentage of a ckets face value, or in absolute dollar terms. For

example, a cket to the Professional Bull Riding event at Madison Square Garden had $42 in feesaached; a cket tosee Janet Jackson atJones Beach Theatercame with a $28 fee.

In 2010, the NewYork legislatureamended the Stateslaw governing cketfees.36 The statute,

as it stands, bans theaddion of any fee to a cket by a venue operator or its cket vendor except fees that areassociated with special services for which a reasonable service charge may be levied. Thestatute states that special services include but are not limited to such services as sales away fromthe box oce, credit card sales[37]or delivery. Thus, charges added to a ckets face value violateState law if they are either (1) mandatory, general fees, unconnected to the provision of speciaservices, or alternavely, when (2) such fees reach levels that are no longer reasonable.

A ban on the charging of mandatory fees unconnected to a bona de service is a common consumerprotecon measure. New York City, for example, expressly bars restaurants from adding generasurcharges to the prices on menus.38 Relatedly, the U.S. Department of Transportaon considers

it an unfair and decepve pracce to adverse cket prices that do not include mandatory feesand taxes.39 The New York law on cket charges creates a similar rule by banning the chargingof fees unrelated to the provision of specialized services, and also regulang the fees that arecharged.

36. N.Y. Arts & Cult. Aff. L. 25.29.1. The Senate Sponsor Memorandum summarized the provision as follows: requires that servicecharges in association with tickets sold be reasonable.

37. Despite this provision, imposing a surcharge on credit card use is illegal under General Business Law 518. (No seller in anysales transaction may impose a surcharge on a holder who elects to use a credit card in lieu of payment by cash, check, or similarmeans). See Expressions Hair Design v. Schneiderman, No. 13-4533 (2d Cir. 2015), available athttp://law.justia.com/cases/fed-

eral/appellate-courts/ca2/13-4533/13-4533-2015-09-29.html.

38. New York City Rule 5-59 provides: A seller serving food or beverages for consumption on the premises may not add sur-charges to listed prices. For example, a restaurant may not state at the bottom of its menu that a 10 percent charge or a $1.00

charge will be added to all menu prices.

39. 14 CFR 399.84.

I purchased a 30 dollar cket to see A View FromA Bridge. During the transacon I saw that a tendollar fee would be added for handling. Handlingwhat? I am using my own printer to print my owncket!

- Typical consumer complaint to NYAG about fees


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1. Fees are Charged by Ticket Vendors and Venues.

Relying on publicly available informaon, NYAG conducted a broad study of the fees beingcharged in New York State by 150 dierent venues and their cket vendors.40The examinaonreveals substanal variaon in what fees are charged, but it also reveals some clear paerns.

First, it is worth nong that some outlets sell their ckets themselves; these venues are oensmaller and non-prot. Examples include the Lancaster Opera House and the New York City

Ballet. These outlets or organizaons either do not charge any mandatory fees at all, or chargea small service and/or handling fee for buying away from the cket oce that does not generallyvary with the price of the cket.

Most venues, however, sell their ckets pursuant to an exclusive contract with a cket vendorlike Ticketmaster or Tickets.com. This group includes the larger venues, such as BrooklynsBarclays Center, Albanys Times Union Center, and Bualos First Niagara Center. However,smaller venues, like the Ulster Performing Arts Center in Kingston and the Stanley Center for theArts in Uca, also use cket vendors. Generally speaking, the venue/cket vendor combinaonscharge fees and use a variety of formulas to set them, such as adding a xed charge based onthe type of cket or charging some percentage of the total price of the ckets.

While it is ckeng vendors (mainly Ticketmaster) that bear the brunt of the complaints aboutfees, some venues play a central role in seng such fees and share in the money that the cketvendors collect. Our review of long-term contracts between Ticketmaster and large venues likeBarclays Center or Madison Square Garden reveals that the pares negoate the fee amounts including convenience charges or service fees (per cket) and processing fees (per order)

that can be shared between the venue and cket vendor.41 The venue may also ban the cketvendor from levying other charges, such as delivery fees for PDFs of ckets.

Our examinaon of the fees charged in New York also allowed us to esmate the average feeamounts charged by the larger venues in combinaon with three cket vendors for eventsin this State: Ticketmaster, TicketWeb, and Tickets.com. On average, combining the fees

charged by these three vendors and their venue clients for 150 New York venues, we found anaverage surcharge of 21% of the face value of a cket, which amounts to almost $8 in fees onaverage. However, our invesgaon also revealed that in certain cases, cket fees charged weresurprisingly high in real dollar terms, even if they were not a large percentage of the face valueof the cket. The following chart shows examples of ckets for several events in which the feesexceeded $25 per cket.

40. The methodology of this study appears in the Appendix.

41. Ticket vendors often enter into multi-year contracts with venue operators to sell tickets to all events at the operators facility.

The terms of these contracts generally set forth the convenience charges and other fees that Ticketmaster must collect, and theportions of those fees and charges that it must deliver to the venue, as well as the portions that Ticketmaster can keep.

29


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Figure 10. Examples of Large Fees for Select Events and Venues.Source: Fees collected from Ticketmaster, Tickets.com & TicketWeb (2015)

Professional Bull

Riding: Built FordTough Series

Radio City

ChristmasSpectacular

Brooklyn Nets vs.

Phoenix Suns

Janet Jackson:

UnbreakableWorld Tour

Black Sabbath:

The End

$42in fees or 21%of face value






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2. Event Ticket Fees are Higher than Most Online Vendors.

Because Ticketmaster, TicketWeb, and Tickets.com all conduct a major poron of their businessonline, where costs are oen lower than for brick-and-mortar retailers, we examined other onlineplaorms that, similar to cket vendors, interact with consumers on one side and sellers on theother side, to assess whether charging consumers large services fees separate and apart fromthe ckets face value is nonetheless typical or perhaps necessary for ckeng. In this regard weexamined online vendors of ckets for airplane seats, such as Expedia and Priceline, and vendors

of ckets to lms, like Fandango and MovieTickets.com. We also examined online plaormsthat sell a broader mixture of goods, like Amazon and Etsy, to see if they charge consumer feesseparate and apart from the posted prices.

Our examinaon suggests that, among online plaorms, the vendors of event ckets appear tocharge fees to consumers that are higher than most other online vendors in fact, most of theonline plaorms we examined charge no general fees to consumers for the sale of ckets orgoods and post prices that already reect the full cost to the consumer. That is true of Amazonand Etsy, and it is also typically true even of vendors of airline ckets, like Expedia and Priceline. 42

The main excepons are the sites that sell movie ckets, because those vendors charge consumerfees that are close in magnitude to the average fees charged in live event ckeng. Fandango

for example, charges moviegoers a transacon fee between 75 cents and $2.50 per cket, anda convenience fee of $1.50 per cket.

It is unclear what services are covered by the convenience charges, service fees, andprocessing fees collected by online vendors of live event ckets, and why those services warrantcharging consumers fees that are higher than in most other online contexts. To the extent thatcket vendors and their venue operator clients collect these fees for anything other than theprovision of special services, they would be in violaon of New York law. In addion, any ofthese fees that exceed a reasonable charge are impermissible under the law.

42. Rather than collecting money through fees to the consumers, these companies collect money from sellers who use their

platforms to sell to consumers. We observed no consumer fees being charged on any of these companies websites, and indeedExpedia and Priceline state they rarely charge broker fees to consumers.


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C. Restraints of Trade in Tickeng

Up to this point, the Report has focused on the sale and brokerage of ckets, which are subject toindustry-specic regulaon under Arcle 25 of New Yorks Arts and Cultural Aairs Law. Howeverunder the Donnelly Act, the Aorney General is also tasked with enforcing the laws prohibingunreasonable restraints of trade and the unlawful monopolizaon of markets. Pursuant to thatauthority, NYAG has serious concerns about several ongoing pracces related to the sale andresale of ckets in New York. In parcular, NYAG is concerned with the seng of price oors on

cket resale, the pracces that impede consumer access to alternave cket resale plaorms,and, in parcular, the combined eect of such conduct on consumers. NYAG is involved in anongoing mul-state invesgaon of these issues.

1. Seng of Ticket Resale Price Floors.

Some cket issuers parcularly sports teams, including NFL teams and the New York Yankees have put in place price oors. Price oors are rules designed to prevent ckets from beingsold at a price below some level, usually the face value of the cket or something close to itFor example, many NFL teams encourage or even require cket holders to use TicketmastersNFL Ticket Exchange plaorm which is frequently billed as the ocial resale site and theonly safe place to buy secondary NFL ckets. However, on NFL Ticket Exchange the seller isthen prohibited from seng a price below a certain level generally the face value of the cketConsequently, if a season cket holder wants to sell his or her ckets for a lower price than heor she paid, he or she may be unable to do so, or may need to use a complex procedure to do soon another plaorm.

NYAGs concern with price oors is twofold. First, buyers of ckets on Ticket Exchange or othersites with price oors are frequently not informed that the ckets they are buying are subjectto a oor. It is therefore easy for buyers to be fooled into believing what they are paying is themarket price for a cket, when in fact the buyer is paying a price arcially inated by a priceoor. The more aggressively sports leagues and individual teams push cket buyers and sellers

to use their ocial secondary markets, the more serious this problem becomes.

More fundamentally, even when buyers are informed of price oors, the oors deprive thepublic of a chief benet of the market-driven approach taken by the 2007 law: lower prices. Inparcular, price oors may make it impossible to obtain ckets on the team-promoted TicketExchange plaorm for below face value when demand decreases. As described above, whencontemplang the legalizaon of cket resale, the sponsors of the 2007 legislature repeatedlyexpressed the hope that legalizing prot resale might lower prices for consumers. A clear sourceof such savings is lower prices when demand falls. For example, near the end of an unsuccessfubaseball season, the ckets to watch a team not desned for the playos may go down sharply,allowing fans who otherwise might not be able to aord to see a match to buy ckets for far less

money.

Overall, NYAG believes there is lile to say in favor of price oors: They tend to expose the publicto the full costs of the new cket economy, while depriving the public of the benets.


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2. Pracces That Impede Consumer Access to Alternave or Unocial

Ticket Resale Plaorms.

The problems that come with price oors are exacerbated by eorts to push consumers to theresale plaorms that maintain them and pracces that impede consumer use of plaorms thatdo not. NYAG is therefore greatly concerned with other forms of restraints imposed on the resaleof ckets, parcularly when those restraints impede or complicate consumer access to resale

cket plaorms that do not enforce price oors. Examples of such pracces include delayeddelivery of PDF versions of resold ckets, and policies that place season cket holders at risk ofcancellaon of their cket subscripons when they sell on unocial resale plaorms.

The consumer harm caused by price oors is directly related to the success of the eorts topressure consumers to use only the primary sellers (usually Ticketmasters) plaorm. That isbecause plaorms that use price oors are at a natural compeve disadvantage compared tothose that do not, and so if consumers engage in comparison shopping, they will gravitate to theplaorms with a more open market. However, to the extent that the combinaon of praccessuch as PDF-delays and cancellaon threats pressure consumers into using the plaorms thatincorporate a price oor, consumers will be harmed. This is parcularly true given the inadequate

disclosure of the existence of these price oors. Without knowing that beer prices could beavailable elsewhere, it is harder for consumers to benet from the compeve market.


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RECOMMENDATIONSThe State regards ckeng and cket resale as a maer aected with the public interest. 43

Unfortunately, if one of the purposes of the 2007 law which repealed the ban on scalping was to reduce cket prices, or make ckets more available to ordinary fans, it has not beensuccessful. While there have been some posive developments, the basic reality described in the1999 Report remains the same. If nine decades of experience have taught anything, it is that theincredible demand for desirable ckets can be exploited even in the face of determined eortsto get ckets in the hands of the public. The long history of cket scalping, the challengesinherent in enforcement, and the incenves and prots available may make some think it isimpossible to x ckeng. Nonetheless, the situaon is not hopeless.

There are several concrete steps industry parcipants can take to make the system fairer andmore transparent. In light of the ndings in this Report, we believe that the legislature shouldhold hearings on the subject of ckeng in New York to challenge key members of this industryto put forth how they might help more ckets get into the hands of ordinary fans. However,if soluons are not implemented soon, the best and cheapest ckets will connue to go to theresellers and consumers will connue to ask why they cannot get ckets.

A. Ticket Resale Plaorms Must Ensure BrokersComply With the Law.

Ticket resale plaorms such as StubHub, TicketsNow, TicketNetwork and Vivid Seats are themajor vehicles through which ckets are sold on the secondary market. They are thus in the bestposion to eect change in the industry. There are several steps these companies should take tocontribute to the success of this market.

First, each cket resale plaorm should ensure that professional resellers comply with New YorkStates licensing provisions by requiring that the resellers provide their cket reseller license

number as a condion of using the plaorm. In most cases, by examining the volume of resalebusiness a reseller conducts, resale plaorms can easily disnguish professional resellers whoengage in the business of cket resale and are required to obtain a license from fans that aresimply reselling ckets purchased for their own personal use who are not required to have alicense.

Second, each cket resale plaorm should enable professional resellers to disclose the facevalue of the ckets they resell, which is required of resellers by New York State law. 44 . It iscurrently impossible for well-meaning resellers to disclose the face value of ckets on most resaleplaorms. Secondary market plaorms have the capability, however, of adding funconality totheir websites and apps to facilitate brokers compliance with the law, for example, by enabling

resellers to provide face value informaon when posng a cket for sale. They should do so.

43. N.Y. Arts & Cult. Aff. L. 25.01.

44. Id. 25.23.


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B. Industry Players Must Increase Transparency Regarding Ticket

Allocaons and Limits.

The precise manner in which ckets are distributed to industry insiders through holds, to non-public groups through pre-sales, and to the general public through public on-sales is rarely,if ever, disclosed to the public. This informaon vacuum allows various players in the industry

to avoid their share of responsibility for the current problems the industry faces. It also breedsmistrust from consumers, who feel like the system is xed against them.

To address these issues, industry players must publicly disclose the allocaon of ckets throughholds, pre-sale events, and public on-sales. This requires that many players, including promotersand cket vendors, work together to eecvely distribute informaon to the public.

In addion, wherever cket vendors claim that cket limits are enforced, they should enforcethose limits as a maer of course on a per-person basis. If such limits are not actually beingenforced on a per-person basis, cket vendors must disclose that informaon.

C. Ticket Vendors Must Address the Bot Epidemic.Although NYAG has taken steps to stop many of the largest operaons from using Bots to purchaseckets to events in New York, we recognize that other brokers may take their place. A longer-term soluon must include improvements in Bot detecon and prevenon methods. Whilethe industry works on long-term technological soluons, steps can be taken to reduce Bot usein the near term. Towards that end, NYAG has analyzed the informaon and material gatheredthrough its invesgaon. Based on this analysis, we have compiled several recommendaonsfor enhancing Bot detecon systems.

NYAG has contacted two of the largest ckeng companies, Ticketmaster and AXS, to discussour concerns with Bots and cket limits, and suggested concrete reforms to their operaons

that, we believe, will substanally reduce the acvies of illegal brokers and make the sale ofckets fairer. Some of the suggesons included preempvely enforcing cket limits, analyzingpurchase data to idenfy ongoing Bot operaons, and invesgang resellers regularly oeringlarge numbers of ckets to popular shows, among others.

D. The Legislature Should Act.

To curb abuses in the industry and create a more equitable process for fans to obtain ckets, thelegislature should take the following acons:

i. Mandate the industry reforms outlined above.

In many cases, industry players do not have an incenve to reform. To ensure that the stepsdescribed above are implemented in a meaningful and lasng way, the legislature shouldmandate them.


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ii. End the ban on non-transferrable paperless ckets.

Paperless ckets are non-transferrable event ckets that are designed to avoid resale bybrokers. Their dening feature is their non-transferrable nature, not the fact that they areelectronic, because many events oer ckets as PDFs or in other electronic form that the buyercan sell or give to another person to use to aend the event. Non-transferrable paperlessckets bear some resemblance to airline ckets, requiring the presentaon of idencaonand the credit card used to buy the cket at the entrance to the venue. As such, it is harder

for paperless ckets to be transferred or resold, given the need to present the purchasingcredit card. Advocates of non-transferrable paperless ckets, including Ticketmaster andmany prominent performers such as Bruce Springsteen and Miley Cyrus, have argued thatthey are an important and eecve an-scalping measure because increasing the dicultyof transferring ckets makes it harder for brokers to resell ckets for prot.

In 2010, New York amended its ckeng law to bar the issuance of non-transferrablepaperless ckets unless consumers are provided with an opt-out, that is, the opon ofanother easily transferable ckeng format at no extra cost. The law is a de facto bangiven that the opon allows brokers to request resalable ckets, and therefore erodes thepurported funcon of the non-transferrable paperless cket. As such, the change was widely

reported as a ban, and appears to be understood that way, at least by some performers. Forexample, in September of 2014, popular musician Cat Stevens (now known as Yusuf Islam)canceled a show in New York City on account of the ban. I have been a longme supporterof paperless ckets to my shows worldwide and avoiding scalpers, he said. UnfortunatelyNY has a state law that requires all ckets sold for shows in NYC to be paper, enabling themto be bought and sold at inated prices.

NYAG believes that New Yorks ban on non-transferrable paperless ckets the only one inthe naon should be reconsidered and repealed. It is true that paperless ckets have metwith some resistance; they can somemes be inconvenient to consumers and venues (forexample, if the credit card is forgoen, or if someone wants to give a cket as a gi). Thatmay be why, naonwide, the use of such ckets has been limited to those acts that regularlycan expect to sell out. At the same me, paperless ckets appear to be one of the fewmeasures to have any clear eect in reducing the excessive prices charged on the secondarymarkets and increasing the odds of fans buying ckets at face value. At least one majorarsts representave and one ckeng vendor reported seeing the use of non-transferrablepaperless ckets for the most desirable seats greatly reduce resale of ckets for those seatsAllowing these types of ckets would therefore make it more dicult for brokers to connuehoarding ckets and demanding exorbitant markups from fans. Moreover, such a changewould not require arsts, promoters or venues to use paperless ckets, but would merelygive them the opon to use them.

It is true that paperless ckeng is not a completely foolproof countermeasure. Brokers

wishing to resell such ckets can do so, but must then hire people to go to the concert andphysically walk fans through the gate at a show (assuming the ID provision is unenforced),or alternavely, buy ckets with a prepaid gi credit card that is physically mailed to theconsumer. Nonetheless, our conversaons with promoters of performers who use paperlessckets and others lead us to believe that paperless ckets can eecvely limit the ability ofbrokers to resell at great mulples on secondary markets. That may explain why, despite slrepresenng a small percentage of total cket sales, a number of high-prole bands nowuse non-transferrable paperless ckeng outside of New York, including Bruce Springsteen,


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Radiohead, Iron Maiden, Cat Stevens, Paramore, Widespread Panic and Metallica.

NYAG supports repeal of the de facto paperless cket ban, but a repeal raises severaconcerns. Among the most important concerns raised against allowing non-transferrablepaperless ckets when the legislature passed the ban in 2010 was that they might serve adual purpose; they might not merely reduce broker markups, but also become a means bywhich Ticketmaster might leverage its market power over primary ckeng for given eventsinto the dominaon of secondary sales as well. This concern follows because, in some

implementaons of paperless ckeng, ckets would not be completely non-transferrableInstead, ckets would be non-transferrable unless the cket was resold through Ticketmastersown Ticket Exchange resale plaorm. When Ticketmaster is the exclusive resale plaormthe potenal for extending its market power is obvious.

Nonetheless, the potenal for abuse does not jusfy a complete ban on paperless ckets.When repealing the law, the legislature should consider safeguards that would permit non-transferrable paperless ckeng while migang compeve concerns.

iii. Impose criminal penales for Bot use.

There is consensus in the cket industry that Ticket Bots have no place in a fair and equitable

cket market. Current law prohibits the usage of Bots and imposes civil sancons forviolaons. However, the prospect of criminal prosecuon may well have a greater deterrenteect. Passage of the BOTS Act by Congress and the criminal penales that it would imposefor the use or sale of bots could also act as a deterrent.

iv. Cap permissible resale markups.

Unl 2007, ckeng laws capped the price of ckets sold on the secondary market. At rstfor certain events, it was capped at two dollars above face value. Eventually, the two-dollarlimit became a 20% or 45% price cap (depending on the size of the venue). In 2007, the capswere lied. Unfortunately, given the complexies of the market and the skewed incenves

that exist, under the current legal regime brokers will connue to use whatever means theycan, legal or illegal, to obtain ckets. New York should therefore reinstute a reasonablelimit on resale markups. Reinstang caps on markups would sll allow brokers a role in themarket but would also ensure that any price markups be reasonable.


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APPENDIX METHODOLOGY FOR NYAG ANALYSES

Holds & Pre-Sales Analysis

NYAG analyzed cket allocaon data for the highest grossing concerts in New York producedby AEG, Live Naon, and Ticketmaster. NYAGs analysis aggregated the data into four main

categories: holds, pre-sales, general on-sales, and other on-sales.

AEG

AEG produced cket allocaon data for the highest grossing concerts between January 1, 2012and April 30, 2015 for which AEG served as the promoter at the following venues: BarclaysCenter, Beacon Theatre, Madison Square Garden, Nassau Coliseum, Nikon at Jones Beach Theater,Saratoga Performing Arts Center, The Theater at Madison Square Garden, Yankee Stadium, andIcahn Stadium.

Data concerning the following concerts were excluded from the analysis due to observed data

inconsistencies: American Idol 2012 at Nassau Coliseum on August 22, 2012 Carrie Underwood Fall 2012 at Nassau Coliseum on November 30, 2012 Dane Cook at Beacon Theatre on September 14, 2013 Enrique Iglesias at Madison Square Garden on September 25, 2014 Enrique Iglesias Nassau Coliseum on September 14, 2014 Fresh Beat Band (Both Shows) at The

schneiderman ticket sales report

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