Redbox concert tickets a red herring

October 4, 2012

Coinstar, the company behind those ubiquitous Redbox kiosks that have cornered the DVD rental market and driven many a Blockbuster franchisee and mom-and-pop video store to close their doors, is getting a lot of attention for a new plan to start selling tickets for a $1 fee to live events, including concerts.

According to The Wall Street Journal, the company is starting slowly with a limited number of events in one test market, Philadelphia, including a Carrie Underwood concert at the Wells Fargo Center Arena, Villanova University football games and Nascar at the Pocono Raceway.

Writes Journal reporter Ethan Smith: “The promise of just $1 in service fees is clearly a swipe at Live Nation Entertainment Inc.’s Ticketmaster, the dominant force in the industry whose fees can tack on several dollars to the price of a ticket. Those ticketing fees have long been a sore point among some fans.”

A sore point indeed, but Smith is off on the “several dollars”: In many cases, the perversely named Ticketmaster “convenience fee” can be $15, $25, $40 or more.

Don’t expect to see Redbox seriously encroaching on Live Nation/Ticketmaster’s business, here or anywhere else, however. What the company’s plan really is about is a penny-wise, pound-foolish scheme that most smart promoters loathe: papering the house.

Let’s say that, through a combination of poor market research, setting the wrong price point, booking a venue that’s too big for an artist to fill and rampant greed on the part of the promoter and artist’s management, tickets to a concert aren’t selling and the house only will be a third full or less at show time.

In the days or sometimes hours before show time, the desperate promoter sometimes will dump the unsold tickets on radio stations or anyone else willing to just give them away. The artist doesn’t see any profit from those seats, but at least they’re playing to a few more warm bodies. The promoter doesn’t get any cut of the ticket either, but it still cashes in by collecting a parking fee and perhaps selling overpriced beer and nachos to the “lucky” concertgoers.

Again, smart promoters loathe this practice because it ultimately devalues the concert experience and the worth of tickets that have been priced correctly. (How angry is the consumer who paid full price when he or she learns that the next person got in for free?) Chicago-based Jam Productions, for example, almost never papers the house. But the local office of Live Nation/Ticketmaster certainly does, especially for dud shows booked into large, unpopular and inconvenient venues such as its First Midwest Bank Amphitheater in Tinley Park and Charter One Pavilion on Northerly Island.

Live Nation/Ticketmaster declined to comment for The Wall Street Journal and other stories. But it’s not likely to partner with Coinstar/Redbox, since it likes to keep its dubious money-making schemes in-house and since, as Smith pointed out, the fact that Redbox can sell a ticket (even a worthless one) for a mere $1 fee only will raise questions and ire among consumers who deeply resent paying those ungodly steep Ticketmaster fees.

Remember, too, that Live Nation/Ticketmaster has locked most major venues like the United Center and the Allstate Arena here and in countless other markets into long-term exclusivity agreements that restrict them to selling tickets only through Ticketmaster. (Though, controversially and infamously, this was not enough of a monopolistic and unfair practice for the Obama Justice Department to block the mega-merger of those two companies.)

The test-market Underwood show in Philadelphia is taking place at a non-Live Nation/Ticketmaster venue (Comcast owns the arena), though her tour is being promoted by Live Nation/Ticketmaster’s biggest national competitor, AEG—and that company is having some serious troubles of late and may not be much of a player much longer. Knowledgeable industry observers say the Redbox plan probably never will catch on in a big way with concert tickets, though it might have legs in the theater world, a la the long-running TKTS booth in New York’s Times Square.

Theatergoers tend to be an older demographic that likes a paper ticket in hand, and theater engagements are long-term affairs, rather than one night only. Yet whatever they’re dispensing, those Redbox kiosks are a temporary and transitional technology: Everything they’re doing ultimately will migrate to the Web. It’s only a matter of time before they disappear just like video stores did, once Big Hollywood finally overcomes its reticence and fully embraces streaming video beyond the point where Netflix and On Demand have taken it.