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Jim DeRogatis

Welcome to Scalper Nation

While most of the focus on the changes digital technology has wrought on the music industry has been on the creation of a generation of scofflaws via filesharing/illegal downloading, the Internet has had no less an impact on the live music business, which, from time immemorial, has been where the vast majority of musicians always have made the lion’s share of their incomes.

As my Sound Opinions colleague Greg Kot reported last week from the annual Future of Music Summit (here and here), our elected officials in D.C. have no intention of reforming the absurdly outdated copyright laws to reflect New Millennial realities any time soon (and it was interesting to consider the ramifications of that while watching Ken Burn’s latest public television documentary, Prohibition, his best since The Civil War). But it seems even less likely, given legislators’ unconscionable tolerance for ticket brokers/resellers/scalpers in the past, that we’ll see any government reform of that vile trade in our lifetimes.

(Flickr/Luke X. Martin)

Is vile a harsh word? Hardly. Scalpers are scum. From quaint old-school methods such as hiring homeless people to stand in line to scoop up tickets from in-person Ticketmaster outlets back in the day, to modern scamming tools such as robotic programs that are able to besiege computerized on-sales with thousands of requests for ticket buys in less time than it takes you to meekly try to score two “best seat availables,” the professional scalpers always have been immoral, duplicitous crooks indulging in music’s answer to the reprehensible mortgage brokers and investment banker speculators prompting these long-overdue Occupy Wall Street protests.

Think of them as bullying thugs elbowing aside genuine fans to cut to the front of the line, buy tickets to your favorite show at the face price, and then peddle them back to you or some other mark at 10, 20, or 100 times the cost, with all of that profit going not to the artist or the promoter—the people doing the actual work of playing and staging the show—but straight into their greedy pockets. A pox upon their houses, now and forever. But increasingly, those full-time scalpers seem to be less of a problem than… the fans themselves.

Every few weeks, this blogger gets an email from a frustrated music lover who hit his or her computer the second tickets to a favorite artist were supposed to go on sale, only to find themselves with slim pickings at the back of the house, or nothing to buy at all. Then, a few hours later, they check StubHub and find hundreds of prime tickets to the same show readily available… now at many times over the advertised face price set by the artist and the promoter, with no regard to their efforts to keep that cost reasonable.

At the moment, StubHub is listing 420 tickets to Ryan Adams’ Dec. 11 show at the Cadillac Palace Theatre, a quick sell-out, at prices as high as $295 (original face price: $42, plus egregious Ticketmaster service fees). There are 214 tickets for Wilco at the Civic Opera House on Dec. 12 (high price $275 on a face price of $60 plus fees); 177 tickets for the Smashing Pumpkins at the Riviera Theatre on Oct. 14 ($200 vs. the original $50 plus fees), and 362 tickets to Deadmau5 at the Aragon on Saturday ($175 vs. $39.32 plus fees), to name just a few recent in-demand shows promoted by one of Chicago’s two concert giants, Jam Productions or Ticketmaster/Live Nation.

To be sure, the professional scalpers still are in the game and using all of their old dirty tricks. But StubHub is seriously cutting into their business by multiplying their competition by untold legions, making it possible for just about anybody with a computer to rival them in the scalping racket.

This is to say, many fans of a band, when logging on to buy a ticket or two to a favorite act, have routinely taken to buying the maximum number allowed, putting the cost on their credit cards, then promptly turning to StubHub to unload the seats they don’t want at two, three, ten, or more times the price that they paid. And they see nothing wrong with this.

“Dude, if I can pay for my seats and get some extra scratch on top of it, who’s getting hurt?” asked one desktop scalper easily turned up in an informal poll of a half-dozen regular concertgoers. (Well, dude, your favorite band and the poor sucker who was slightly slower on the draw than you were, to name two aggrieved parties, but that’s just for starters.)

How tough have things gotten for the pros? Last month, a guest commentary in the industry trade TicketNews bemoaned “The Death of the Ticket Broker.” Post-StubHub, “the stark reality was the ticket reseller either had to have their own inventory of tickets in a niche market to be identified within or have a comprehensive online campaign,” wrote Amir Khalighi, president and CEO of TicketPlatform.com.

 “The ticket brokers who chose to adapt and started learning about the Internet and online marketing had a learning curve. Some managed to survive and recreate themselves—those that didn't died—and the new face of the online ticket seller emerged” (that is, these myriad new amateurs).

Boo-hoo. Let’s all shed a tear for the poor professional scalpers, shall we?

As for the primary tool empowering the amateurs, StubHub was founded in San Francisco in 2000 by two former Stanford Business School students and investment bankers—one of whom, Eric Baker, proudly boasted, “I’m probably the one person from business school who decided to take his MBA and become a ticket scalper.” (Most pro resellers prefer the term "broker" to "scalper"; at least Baker admitted what he was.) The site's wattage increased immeasurably, as did its popularity, after it was purchased by eBay in 2007, in a deal reportedly worth $300 million.

Long the most greedy, devious, and despicable entity in the concert biz, Ticketmaster is eager to grab its share of the vast, easy profits that reselling tickets provides, as one executive made clear during a panel discussion at South by Southwest covered by this blog last March. But the company is walking on thin ice and enduring a lot of government oversight since the Obama administration’s controversial approval of its mega-merger with Live Nation, and many industry observers say it just can’t get into the aftermarket business right now… it has to wait until the dust settles.

Meanwhile, it’s the Wild West for scalping out there. Some bands and promoters work together to try to limit the practice on certain shows, demanding that the owner of the credit card used to purchase the tickets show up to pick them up and enter the house. But this is a costly, time-consuming, and labor-intensive fix, and it would be impossible to impose the system on every concert.

“Now wait a minute: What's wrong with any of this?” the free-market absolutist asks. “If someone wants to take a risk, buy a ticket, and either suffer a loss or turn a profit based on market demand, that’s capitalism, and capitalism is the American way!”

Setting aside for the moment the moral questions of speculating on the back of artists and at the expense of other fans, there is at least one significant legal problem: Nobody’s collecting the taxes that are owed.

Last week, in a ruling expected to have an impact nationwide, the Illinois Supreme Court decided that StubHub does not have to collect the city of Chicago’s five-percent amusement tax on tickets resold through its Website. This represents millions of dollars in lost revenue to the city as it struggles in the midst of its worst-ever budget crisis.

Reports TicketNews: “StubHub currently tells resellers of tickets for Chicago events about the tax, but the company argued, among other things, that it would be logistically difficult for the company to collect the tax for such resales because it would have to drastically alter its business to do so.” In other words, StubHub doesn't have to do anything—“We are pleased with the Court’s ruling,” its lawyer said—and the state will just trust the amateur scalpers to pay the taxes they owe on any profits from resales. Ha! As if that's ever gonna happen!

Ironically, the pro scalpers were pushing to see StubHub have to collect the tax. “The ruling puts Chicago-based ticket brokers at a disadvantage to resellers on StubHub's marketplace because brokers in the city have to pay the tax,” TicketNews notes, which means the pros took another hit. Again: Let’s shed a tear for those poor souls. Sniffle!

On the other hand, is “professional” and “amateur” really a distinction worth making anymore? Is a scalper a scalper, regardless of the volume of business? And is there a fix for this wretched problem?

Many states had enacted laws limiting the cost someone could charge over and above the face price of a ticket when reselling it in person, at a storefront or in front of the venue. Illinois never was one of them, thanks to an all-powerful lobby in Springfield representing the professional scalpers. But, as with so many other digital realities, the law hasn’t even begun to catch up with the changes in scalping thanks to the Internet. And there is no sign that it will anytime soon.

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