House of Commons - Culture, Media and Sport

Select Committee on Culture, Media and Sport Minutes of Evidence

Memorandum submitted by viagogo Limited

I am the Founder and CEO of viagogo, Europe's leading online secondary ticketing exchange. Prior to launching viagogo, I was the Co-founder and President of StubHub, the company that revolutionised secondary ticketing in the United States.

Before addressing some of the Committee's specific queries, I'd like to take the opportunity to give you some more context about my experiences in the secondary ticketing market at both StubHub and viagogo.

Fans have been buying and selling live event tickets for as long as there have been live events. Be it for gladiator fights in Rome or sold out Shakespeare productions, [19]there has always been a secondary market. At the same time, this has traditionally been a murky market, with fans having the frustrating experience of having to deal with unscrupulous touts.

As a long-time event fan and season ticket holder myself, I shared this common frustration with the traditional ways of buying and selling tickets. As a season ticket holder, if I couldn't attend a fixture, I had no way to get money back for my unused ticket unless I was willing to stand outside the arena to sell it. And as a fan who wanted to get in to a sold out gig or event, I had no way to get a ticket other then call a broker or deal with a street tout.

To solve this problem, I launched StubHub in late 2000. The Internet-based service allowed fans to re-sell tickets directly to other fans in safe and secure fashion. Prices were transparent, buyers could compare listings, and there was no need to deal with strangers on street corners. StubHub guaranteed all payment and delivery, effectively guaranteeing trades.

Six years later, fans traded almost half a billion dollars worth of tickets on StubHub in 2006 alone—all safe, secure and fraud free. StubHub had achieved what legislation and other prior well-meaning initiatives had failed to do—protect consumers while fostering competition that resulted in lower prices and extended greater access to live events.

In 2005, I realised that fans in Europe were facing the same frustrations. Consumers wanted to trade tickets but were frustrated by the inefficiencies of a murky market dominated by unscrupulous touts. Many touts would fail to deliver tickets, deliver different tickets, and/or simply disappear with the money. I believed that the answer was to provide fans with a safe, secure, alternative that would bring fairness and transparency to the market and I launched viagogo in 2006 to do just that. It is important to clarify that viagogo does not sell tickets. However, by handling all payment processing, logistics, and customer service, viagogo is able to protect both buyers and sellers.

The service has proven to be a popular with sports teams, music companies, and most importantly fans. viagogo is now the official secondary ticketing solution for numerous sports teams, including Chelsea FC, Manchester United, Everton FC, and the London Wasps and Leicester Tigers rugby clubs. viagogo has also signed deals to market its secondary ticketing services through such partners as Warner Music Group and lastminute.com. And most importantly, tens of thousands of fans have happily bought and sold tickets on viagogo, sending the company off to a much quicker start then even StubHub. Since viagogo launched, a great many customers have sent in unsolicited praise for our service.

Having now provided some context on my experiences and expertise in the secondary ticketing market, I will now move on to address some of the Committee's specific queries. The Committee expressed an interest in the following areas and I have addressed my remarks accordingly to these issues.

1. THE UNDERLYING CAUSES OF TICKET TOUTING, AND ITS IMPACT ON PERFORMERS, PROMOTERS AND THE PUBLIC

The underlying causes of ticket re-sale

As mentioned, secondary ticketing has existed as long as there have been live events. It is not new, but rather a basic behaviour rooted in a number of fundamental factors. The main underlying causes include:

Supply and Demand

For many live events there is simply an imbalance of supply and demand. For example when a popular artist like Justin Timberlake plays a concert at The O2 Arena, there are only 20,000 seats available but multiples of that number who would like to attend. Hence, it is not surprising that there is an aftermarket, where fans seek to purchase the tickets that other fans can't use or ultimately desire to sell.

Subscriptions and Season Tickets

Most professional sports teams sell tickets for the entire year to season ticket holders who buy subscription packages. For example, season ticket holders for many leading football clubs must purchase tickets for 19 home fixtures plus Cup matches. It is not reasonable to expect such season ticket holders to attend every fixture. Yet, with long waiting lists for season tickets, season ticket holders are understandably reluctant to give up their season ticket packages and rather seek to sell tickets for games they cannot attend to recoup costs.

This subscription dynamic also holds for multi-day events such as Wimbledon and even for multi-purpose stadia such as Wembley Stadium, where 15,000 seat licenses have been sold, compelling the holders to buy tickets for all events.

Timing of ticket sales relative to event dates

In particular in the case of concerts, many tickets are released for sale months in advance of the event itself. Fans purchase tickets as soon as they go on sale in order not to miss out, which leads to a high numbers of ticket holders who find they are unable to attend as the event gets closer. Many other fans are unable to commit to purchasing tickets many months in advance of an event or are unavailable to purchase tickets at the precise moment they go on sale, but decide they would like to attend nearer the time. This creates demand for re-sold tickets as the event approaches.

Inability to return or refund tickets

Inability to return or refund tickets means that consumers are guaranteed to lose their money if something unexpected prevents them from attending. Re-sale is the only option to prevent them from being out of pocket. It is no wonder that 91% of the public believe that if a concert promoter prevents them from re-selling their ticket, then they should be provided with the option to get a full refund. [20]Until 100% refunds are available, right up until the day of the event, consumers will recoup their money through re-sale of their un-usable tickets.

The impact of ticket touting on performers, promoters and the public

Before delving into this question, it is important that we distinguish between "touting" and "secondary ticketing/re-sale".

"Touting" is a charged term that has come to mean not simply ticket re-sale, but rather to denote the unscrupulous, shady characters who hassle fans outside arenas or run fraudulent websites on the Internet. They often traffic in fraudulent tickets or run scams to trick consumers out of their money. Further, touts are typically paid in cash, are seldom registered businesses and are unlikely to pay VAT or income tax on their ticket profits.

Thus, "ticket touting" does not represent the secondary/re-sale market, but rather represents a group of bad apples who do not follow the basic rules of honest commerce. These people and their practices obviously play no productive role, causing only trouble for performers, promoters, and the public. The public is left angry and short-changed, and the performers and promoters are often left dealing with the fallout of disappointed fans at the venue with fraudulent tickets.

Such negative effects of ticket touting stand in stark contrast to the positive impact of a safe, secure, and transparent re-sale market. A safe re-sale market eliminates touts and fraudsters and provides benefits to the public, performers, and promoters alike.

Through viagogo, the public can now buy and sell tickets in a safe, secure way. Fans who cannot use their tickets can recoup their investment, and fans who need to get tickets to an event can now attend it. Fair competition and transparent pricing bring down prices. And all of this can be done from the convenience of one's home, without any need to meet a dubious character at a random pub.

Performers and promoters also benefit. The tickets that are exchanged by people on viagogo have already been sold by the promoter, venue or artist at the price they have previously set and agreed, so they have received their expected revenue before people trade tickets though viagogo. We provide people with a way to buy and sell their tickets in a safe and guaranteed way and we take a commission from them for this service. Our business does not take any revenue away from promoters or artists. In fact the existence of safe and secure ticket re-sale marketplaces like viagogo makes it more attractive for fans to buy the tickets in the first place, as they know that they will have an opportunity to recoup their costs if they are unable to attend.

Further to this, we also ensure that seats do not go empty when original purchasers can no longer attend, thereby leading to greater concession and merchandise sales at the event. By doing so we are helping to increase revenue for promoters and artists. As every transaction is guaranteed on viagogo, we can be confident that tickets sold through our website are genuine, so by working with us the sports teams, theatres, record companies, concert promoters and artists can minimise the problem of consumers arriving at an event with invalid tickets and can protect their fans from disappointment.

It is therefore understandable that the secondary market has been embraced by the public, performers, and promoters alike.

Polls have consistently reported that the public endorses the right to buy and sell tickets in the aftermarket and that they are opposed to any attempt to take away this right. For example, in a recent poll by NME magazine 84% of gig-goers agreed that tickets were personal property and therefore they should be allowed to be bought and sold. [21]And ten of thousands of fans have embraced viagogo since its launch, happily buying and selling tickets.

Performers and promoters have embraced the re-sale market and its positive impact by launching and endorsing re-sale services of their own. Performers including The Police, Manic Street Preachers, Jimmy Carr, Girls Aloud, Ray LaMontagne, and Nine Inch Nails have all given permission for secondary ticket exchanges in their name where fans can re-sell tickets at any price. Primary ticket agent Ticketmaster runs these exchange platforms on behalf of the artists, branded "ticketexchange" in the US (http://www.ticketmaster.com/ticketexchangehome) and recently launched it in the UK (http://www.ticketmaster.co.uk/ticketexchangehome). Between February and May 2007, over 115 sports and music venues in the US signed up to this service. Indeed, Ticketmaster CEO Sean Moriarty stated that it "adds greater value to the original ticket purchase when the buyer knows he or she may re-sell the ticket if unable to attend." [22]Even Wembley Stadium has launched an exchange for its 15,000 club seats.

Finally, in addition to its arrangements with sports teams such as Manchester United and Chelsea FC, viagogo has also forged relationships with record companies such as Warner Music and artists such as Linkin Park.

2. WHETHER OR NOT RE -SALE OF A TICKET, AT FACE VALUE OR AT A HIGHER VALUE, SHOULD BE PERMITTED IN PRINCIPLE; AND WHETHER THE ACCEPTABILITY OR OTHERWISE OF RE-SALE DEPENDS ON THE CIRCUMSTANCES IN WHICH TICKETS ARE OFFERED FOR RE-SALE

As we have outlined above, we believe that the re-sale of tickets has a positive impact on the public, sports entities, artists, and promoters. Thus, from a utilitarian perspective the re-sale market is a good thing.

Beyond this, we also believe that the re-sale of tickets should be permitted as a matter of principle. Fans spend their hard-earned money purchasing tickets. Once they have bought a ticket it should rightly be theirs to do with as they wish. Just as you can re-sell your car or any other item that you have purchased, so too should you be allowed to re-sell a ticket that you can no longer use. It is this principle that accounts for why over 80% of the public in the NME poll agree that once they have bought a ticket they should have the right to re-sell it. [23]Customers justly believe that once they have bought something they should retain full ownership and therefore determination rights over their property.

viagogo does not sell tickets, we facilitate the exchange of tickets in a safe and guaranteed way. We believe that ticket holders should be free to trade their tickets with other people that want to buy them. In fact it is individual users of our site who choose to sell their tickets; the sellers set the prices and it is up to individual buyers to decide if their prices are acceptable. Again, this free market sentiment is overwhelmingly supported by the public. For example, polls conducted by viagogo have reported that 70% of people agree that "it's their right to pay whatever they consider is an appropriate price for a ticket, even if it's above face value",[24] and 67% say that "that they want to make a profit if they re-sell tickets".[25]

However, all of the above being said, no principle is absolute. Thus, viagogo does believe that in certain circumstances exceptions must be made:

— Safety and security considerations: In the cases where there are legitimate security reasons to limit and track re-sale, viagogo supports measures to control the re-sale market. For example, given the hooligan problems in football, viagogo agrees the re-sale of football tickets necessitates a strict registration system. That is why viagogo has worked with clubs such as Manchester United, Chelsea FC, and Everton FC to set up a safe and secure re-sale service for season ticket holders.

— Free events: In the case of free events, ticketholders have not paid anything for their tickets. Thus, the principle of property ownership does not apply, and therefore, it is reasonable for the event organiser to put restrictions on ticket re-sale. viagogo agrees that in the case of such "free" events the event organiser should be able to limit re-sale.

3. THE IMPACT OF THE INTERNET UPON TRADE IN TICKETS

There are countless examples of how the Internet has improved the lives of consumers, making markets more efficient and adding convenience and security. The Internet has also positively affected the secondary ticketing market, where companies such as StubHub and viagogo have been able to bring security, fairness, transparency, and efficiency.

Creating a fairer market

The Internet has increased competition in the secondary ticket market by allowing consumers to check and compare prices freely online before buying, which has driven down prices. Arizona State University economist Stephen Happel says that "What a competitive market does is drive tickets down to face value—and in some cases below", and that "the majority of tickets on the secondary market sell around face value or below".[26] Jack Christin Jr, senior regulatory counsel at eBay, has said that "4.8 million tickets were sold on eBay in 2006, half of which sold for less than face value".[27] Incidence of tickets selling on the secondary market for less that the face value can easily be found in the UK: the Daily Mail reported in August 2006 that Rolling Stones tickets were available on eBay for just 1p; [28]tickets originally costing £60 for Elton John's concert in Carlisle in June 2007 were selling on eBay for between £20 and £40 at the end of May.

Another benefit of the Internet has been to improve market access, particularly with rising levels of broadband penetration in the UK. The Internet has provided the consumer with the ability to purchase tickets when the primary market is unavailable to them.

Improving security

Whilst the barrier to entry for the online ticketing market is low, superior technology systems and operational processes are a significant barrier to success. viagogo uses cutting edge technology to improve the experience for both ticket buyers and sellers through allowing full transaction tracking and providing greater security. Visitors to the site register as a user with their credit card details. Once a buyer has found a seller with the tickets they want, a transaction is confirmed and we arrange for delivery of the tickets and payment to the seller. We take a commission of a percentage of the agreed price following a successful transaction. Some websites where ticket trading occurs have varying degrees of security, and many people have complained that they have not received tickets that they have paid for. Our security measures are superior and by managing payment and delivery we guarantee that buyers will receive their tickets and sellers will receive payment. Through proper use of technology, Internet-based platforms that facilitate ticket re-sale can help eliminate fraudulent and criminal activity. Good examples of this are viagogo's partnerships with football clubs that have helped these clubs deal with the issue of black market ticket sales.

4. WHETHER OR NOT TICKETS' TERMS AND CONDITIONS BANNING TRANSFER AND ONWARD SALE ARE FAIR OR ENFORCEABLE

As previously described, we believe that once a consumer has bought a ticket, that ticket is the consumer's to do with as he or she wishes. Thus, we feel that any terms and conditions barring transfer or re-sale are unfair. Once purchased the ticket is the consumer's property; as with other consumer goods, the vendor does not retain a degree of ownership to the extent where they can dictate the product's eventual use. This is demonstrated by the fact that 61% of people in an ICM survey for viagogo did not believe that a promoter should be able to cancel a concert ticket once it has been purchased. [29]Many hold this view for the reasons mentioned above, that they want to be able to pass or sell the ticket on if they can't attend, or buy a second hand ticket if they have missed the opportunity first time round. viagogo believes that efforts to cancel tickets would violate the rights of fans and would be of dubious legality.

Not only are such terms and conditions unfair, they are virtually unenforceable as a practical matter. Fans often buy tickets without knowing which family members or friends they are going to take to the event. Pragmatically and practically tickets always need to be transferable to accommodate this. Attempts to make tickets non-transferable have proven to be not only inconvenient and unpopular, but failures in practice. In the case of the 2006 World Cup, organisers announced that tickets would be non-transferable, requiring each ticket holder to have identification matching their name on the ticket. This proved to be impractical: the time and effort to check each person's identification would have led to endless queues, and many fans and sponsors were sharing tickets with friends and colleagues. Thus, less then a week into the tournament FIFA announced that the policy was cancelled and no more tickets would be ID checked in this way. [30]

These same principled objections and practical failures of more restrictive measures have also resulted in the state of New York recently passing a law allowing ticket re-sales at any price and expressly prohibiting teams and event organisers from writing terms and conditions that restrict re-sale. [31]The debates surrounding this regulatory change may be something that the Committee wishes to examine in more detail.

5. THE MERITS OF NEW APPROACHES BY TICKET AGENTS ATTEMPTING TO PREVENT TRANSFER OF TICKETS, INCLUDING WIDER USE OF PERSONAL ID

We believe that such efforts to prevent transfer are unfair and impractical. We believe that ticket holders should be free to trade their tickets with other people that want to buy them, provided they can be assured that transactions take place in a secure way and the process is guaranteed and transparent. Approaches to prevent the transfer of tickets inevitably lead to significant inconvenience for consumers.

For example, initiatives like the pre-registration process used for the 2007 Glastonbury Festival increase the administrative burden on consumers. They result in longer queuing times at events, higher ticket prices and an increased likelihood that a person ends up with a ticket they cannot use but which they are unable to transfer to anyone else.

We do not believe that promoters and management of events can effectively or legally refuse entry to holders of genuine tickets, or that they have the right to do so because there are no statutory restrictions on the distribution of tickets to any events other than football matches.

6. WHETHER OR NOT THE EXISTING OFFENCES OF SALE BY AN UNAUTHORISED PERSON IN A PUBLIC PLACE OF A TICKET FOR A DESIGNATED FOOTBALL MATCH, OR FOR EVENTS AT THE LONDON 2012 GAMES, SHOULD BE EXTENDED TO COVER OTHER SPORTING OR CULTURAL EVENTS

We believe that fans should be able to trade tickets for live events. The only exceptions would be in cases of security concerns (eg, football) or where an event is free (eg, BBC concert).

The motivation behind these measures relating to football tickets is to prevent crimes associated with football hooliganism. We feel that this is an issue specific to football and appreciate that restrictions are required in the interests of personal safety. We do not however see any reason for these laws to be extended to other sports or to music and theatre events on these grounds.

Provided that the secondary ticket market operates according to existing regulation, and in a secure, fair, and transparent manner, there is no threat of criminal behaviour or risk to consumers. We therefore do not agree that such offences should be extended unilaterally to cover other sporting and cultural events. Any future regulations aimed at enhancing consumer welfare should focus on promoting competition in the re-sale market and limiting nuisance behaviour on the part of re-sellers. This is supported by research from the US on the effect of anti-scalping (touting) laws online. [32]

A recent Department of Culture Media and Sport-commissioned consumer survey found that people who go to sporting and music events do not want the re-sale of tickets to be banned. They feel that this is not an issue that requires legislation. The study produced by the University of Bath, School of Management, Centre for the study of Regulated Industries (CRI) also ruled out the need for legislation, as it identified that the majority of consumers are neutral to the secondary ticket market and see it as a service that offers late availability. Their research indicated that if consumers felt strongly enough about the situation, they would inform the Government and push for intervention.

Annex

THE TICKET MARKET AND SECONDARY TICKETING: FACTS AND FIGURES

CONSUMERS WANT THE RIGHT TO BUY TICKETS ON SECONDARY TICKETING EXCHANGES

— 85% of readers have bought tickets from secondary sources such as eBay (NME Touts Summit survey, February 2007).

— 72% of people agreed that if they want to buy a concert ticket, it is up to the individual to decide how much they are willing to pay (ICM survey for viagogo, October 2006).

— Over half (54%) of consumers agreed that tickets should be worth what someone is willing to pay for them (NME Touts Summit survey, February 2007).

— 79% of Internet users would consider using an online ticket exchange where the sale, payment and delivery of tickets is guaranteed (ICM survey for viagogo, September 2006).

CONSUMERS WANT THE RIGHT TO BE ABLE TO RE -SELL THEIR TICKETS

— 84% of gig-goers agreed that tickets were personal property and therefore they should be allowed to be bought and sold (NME Touts Summit survey, February 2007).

— 76% of NME readers said they would sell a ticket on eBay (NME Touts Summit survey, February 2007).

— 61% of people did not believe that a promoter should be able to cancel a concert ticket once it has been purchased (ICM survey for viagogo, October 2006).

"Greg Bettinelli, director of the event tickets division at eBay, said a majority of the tickets sold on his site eventually go for equal to or less than face value, which he said was evidence that most sellers are regular fans, not professional scalpers".

— Caruso, David. "Operating in gray zone, Web scalpers dream of open market." Associated Press. 4 October 2006.

SECONDARY TICKETING REDUCES TICKET PRICES

"The Internet has finally proven as fact what many free marketeers have argued for years: that anti-scalping laws don't work, and that by eliminating them consumers will benefit.

Originally, scalping laws were intended to protect consumers, on the belief that allowing the re-selling of tickets would limit access to events only to the super wealthy. Much of the economics literature over the years has described the folly of anti-scalping laws. A study last year by Craig Depken, an economist at the University of Texas at Arlington, found that such laws actually result in higher prices at the box office—an average of $2 extra for a baseball ticket and $10 extra for a football ticket.

Of course not everyone gets it. Some liberal interest groups, such as the Public Interest Research Group in New York, have opposed a free market for tickets. And some teams, like the Yankees and the New England Patriots, the only team to file a lawsuit against StubHub, are against the idea of a robust secondary market.

StubHub's impressive growth illustrates that fans get it. And the good news is that now it looks like lawmakers do too."

— Arango, Tim. "StubHub sets ticket prices free." Fortune. 31 May 2007.

"Indeed, Prof. Dan Elfenbein of the University of California at Berkeley has shown in academic work that laws prohibiting "scalping" actually reduce supply and drive up prices. It is easy to see why. If you re-sell your ticket on eBay, StubHub or Craigslist, you know that you are competing against many other sellers—prices are posted. If you get greedy, you won't make the sale. Each seller knows that its competition is just one click away. And if a ticket seller attempts to commit fraud, StubHub and other re-sellers have legal recourse (and sometimes credit-card information) to make amends. The back-alley scalper, in contrast, faces limited competition on his own turf and cannot be easily held accountable."

— Smetters, Kent. "Ticketmaster vs. Ticket Buyers." Wall Street Journal. 21 October 2006.

June 2007