Tim Chambers has more than 30 years of experience within the international ticketing and live entertainment sectors, including senior executive roles at Ticketmaster and Live Nation. Here, he sets out his thoughts on what the next five years will hold for the ticketing sector:
‘Those who cannot remember the past are condemned to repeat it.’ – George Santayana
Disclaimer: Past Performance Is No Guarantee of Future Results
Recognising the past is one thing, but identifying the future is more problematic.
Nevertheless, during the last five years the ticketing industry has seen two seemingly contrasting themes of sector consolidation and fragmentation.
Going forward there will be more-of-the-same, but the COVID-19 pandemic will deeply impact future industry sustainability, operations, and ownership structures, and therefore exaggerate these trends.
Historically, larger-scale operators have utilised a policy of vertical and horizontal integration acquiring new technologies and services and/or adding new territorial business units in their expanded international networks.
These conglomerates advertise their robust and typically reliable, if not especially innovative technologies, as a conduit for event Rights Owners to achieve incremental ticket retail, marketing, and distribution, whilst attracting volume-based fiscal incentives for ticket inventory supply.
Going forward, the big, will (mostly) carry on getting bigger.
A timely example of sector consolidation was provided during the writing of this Op-Ed with Oak View Group announcing its intention to merge operation with Spectra.
A by-product and market reaction to this sector consolidation has conversely been an array of new ticketing technology and service providers.
Some are created by executives recently deemed surplus by consolidation-derived cost-saving and synergies elsewhere in the industry, and so have started again.
Others are emerging technologies or disruptive businesses, seeking to re-order aspects of the established commercial structures and relationships e.g., Blockchain, Digitalisation, eCommerce, Mobile-First, Social Networks, Split-Payments, Yield Management etc.
And a third group are the smaller-scale traders, some owner-operators, who typically provide niche-market or genre-based solutions, competing against similar-scaled and often poorly capitalised platforms, who typically accentuate the limitless ‘love’ they lavish on clients and/or customers as a key service differentiator.
All ticketing system providers have noted that the core service offering, namely the supply of an ever-evolving technology platform encompassing General Admission, Reserved Seating/Select-A-Seat, and Timed Entry, with increasingly complex transactions (bundling, packages, season ticketing and subscriptions etc.), with sophisticated interaction to various third-party eCommerce providers and/or distribution partners has required an ever more elaborate solution.
However, whilst technical complexity with associated product development and engineering costs have risen, actual revenues per unit processed have not necessarily kept apace.
Whilst (system-processed) revenue per unit has in real-terms diminished across the ticketing industry, so incremental revenue strategies have taken an increasingly business-critical importance.
As ticketing service companies do not typically own the content but merely assist in the administration of the retail, marketing, and distribution of access to the spectacle, their revenues are for others in the event value chain costs.
For event Rights Owners (whether Artists, Attractions, Sports Franchises, Promoter/Producers and/or Venues) this means the ‘face value’ of the ticket is typically retained, whilst the incremental cost of event marketing, ticket retail and content distribution is covered by the per ticket service fees, and/or per transaction processing, and/or delivery fees – where any of the inventory suppliers may also participate with a share of the end-consumer charges.
This inelegant arrangement i.e. the industry-wide incentivisation of inventory supply (via rebates, advances, commissions, marketing contributions etc.) and its crude kissing-cousin platinum-ticketing is all built on an industry-wide lack of collective trust and transparency, coupled with the desire of individual Rights Owners to exploit any/all opportunities within the live entertainment value-chain.
This (multiple) service fee culture is effectively anti-consumerist ‘bottom-up noise’ i.e., what the industry believes it needs, what it understands within the limited inter-industry transparency, and is a fundamental disconnect with its own end-users, with year-on-year the levels of inventory supplier kickbacks growing ever higher.
Incremental Revenues: second ‘bite-of-the-cherry’
For (B2B) ticketing service providers, where the system licence fee has historically driven their main source of income, or for (B2C) ticket retailers experiencing smaller mercantile margin, incremental revenues are achieved via enabling new service features or functions and then assigning a second honorarium.
Therefore, for both B2B and B2C ticketing organisations, incremental revenues are directly related to the evolving provision of new technologies and/or products.
- Bundling – Ticket + Merchandise, where the platform receives an affiliate commission;
- Packaging – Ticket + Travel / Accommodation, where the platform receives an affiliate commission;
- Yield Management – where the platform retains a proportion of the lift in Gross Transactional Value (GTV);
- API Licence Fee – where the platform has engineered an integrated ‘middle-ware’ solution, it may also be able to attract an API license surcharge, either expressed as a flat fee and/or a proportion of the incremental GTV.
Until the pandemic the global ticketing industry had experienced a decade of growth. Recovering from the financial crisis of 2007-08 and despite the subsequent neoliberal austerity economic policies, consistently, albeit opaquely, reported ever-increasing levels of adoption, with Y-O-Y increases in ticket volumes processed, greater levels of GTV, delivered via ever-more complex systems to a worldwide audience eager to consume the spectacle of live entertainment.
Unfortunately, for the ticketing industry it is ultimately a service provider and does not control its own destiny. So, when its client-base, the event rights owners, were unable to continue to produce new experiences attracting an in-person audience, its business model collapsed.
To survive the 18 months and some of COVID-19, the live entertainment industries and its ticketing service partners have adopted various consumer-facing and internally-focused survival-mode strategies:
- Event Postponement – where ticket holders have been requested to retain their original purchase and wait, rather than request a refund
- Event Cancellation – utilised more sparingly and then ticket holders have often been requested to donate the value of their original purchase to the event Rights Owner
- Ticket Refunds – where ticket holders have matched various eligibility criteria and timelines to successfully apply for a refund, albeit typically only for the original ticket face value and not any associated service fees
- Salary Reduction – where senior company executives (temporarily) volunteered a salary reduction and/or postponement of any compensation package
- Redundancies – where company cashflow and/or lack of reserves have left few options but to gut lower level officers and employees
- Externalisation – where companies have migrated job workload from FTEs to freelancers, agencies and zero-hours contractors
- WFH – where companies have terminated unused and therefore unviable leases for empty office accommodation (*Also note the downward recalculation by companies of staff salaries based on actual WFH location as opposed to office site.)
- Furlough Support – where Governments have offered limited levels of employee retention support for qualifying companies
- Cultural Support Funds – where Governments have selectively offered loss of business revenue support and/or recovery loans
- Debt – where organisations have been able to leverage support from various financial institutions
And those that will gain from the market disorder?
In summary, after 18 months of low-to-no revenues for all ticketing service and system providers, in a highly commoditised sector historically typified by low operating margins, and with income fundamentally impacted by COVID-19, any post-pandemic sector-wide relaunch will be difficult for many especially where the additional organisational demands and expenses of any comeback may be beyond the means of many companies.
So, (crystal ball-gazing) the immediate future for the ticketing industry will see an even greater involvement by those with access to cheap money i.e., Private Equity, Sovereign Funds, and SPACS.
Or those in entertainment-adjacent industries (e.g. Banking, Media, Social, or Telecoms), or event Rights Owners themselves may opportunistically intervene.
So, for the next five years, follow-the-money.
‘Same as it ever was, same as it ever was’ – Talking Heads (‘Life During Wartime’)