Additional reporting by Cherie Hu
Many people in music know the phrase “money talks” — and it couldn’t be more relevant to the ticketing business.
Ticketmaster started selling tickets online in 1996, opening the market to other tech platforms. Ironically, the sudden influx of new market competition ignited a cycle of largely non-technological tactics for staying afloat: More generous upfront signing bonuses and stricter exclusivity contracts for venues on the one hand, and higher fees for fans on the other hand. Well-entrenched platforms like Ticketmaster and AXS have driven up these financial incentives even further to maintain market share. This has led to a situation where even though the ticketing industry is driven by technology, it is arguably the players with the most inventory and the most capital to spend on exclusive deals, not necessarily those with the best software, who ultimately win out.
The COVID-19 pandemic may change this power dynamic, particularly for middle-market ticketing platforms with relatively shorter contracts. One particular competitive practice that the pandemic may be set to disrupt is the signing bonus — which, for its influence in driving competition among ticketing companies, is almost never discussed in the media.
A brief primer on signing bonuses
Before the pandemic, many ticketing platforms would fight each other to give popular music venues on the rise hundreds of thousands of dollars in upfront signing bonuses to lock in lucrative ticketing contracts. It’s not just major venue-owning platforms like Ticketmaster and AXS that adopt this practice; middle-market platforms like Eventbrite are notorious for using signing bonuses to dominate as a ticketing platform for midsized events, pricing out smaller competitors. Such bonuses and advances end up accounting for a significant portion of annual expenses for these companies — in Eventbrite’s case, 21% of their $368 million in expenses last year.
Despite their apparent extravagance, signing bonuses always had a balancing force; if a music venue performed to expectations, platforms had a clear line of sight to earn back bonuses by adding large supplemental fees at checkout, the cost of which fell on the fan. Sources tell me that the size of a given signing bonus depends on the venue’s historical financials and event logistics. For instance, a ticketing platform might give a 1,000-capacity venue with eight shows a month a $100,000 bonus upfront, in return for a one-year contract and an additional 15% fee on their tickets. In this scenario, assuming an average ticket price of $16, we can estimate that the ticketing platform will take home an additional $230,000 during the contract period. If framed as a loan with a principal equal to the bonus, that means the ticketing platform will charge about 130% interest for their signing bonus, all of which will be paid for by fans.
(To clarify, ticketing platforms are not always to blame for high fees. Mid- to large-sized venues and events often take home up to 80% of the listed service fee, with the ticketing company getting the remainder. These “kickbacks” are represented as facility charges or are hidden within the platform’s service fee, and are only presented to the consumer during the checkout process. Through this somewhat deceptive practice, ticketing platforms take the PR hit for expensive tickets, in return for more favorable contract terms. )
Widespread dependency on signing bonuses has arguably deprioritized technology, customer service and fair pricing while stagnating industry-wide advancement; no wonder people feel that ticketing hasn’t changed in decades. Eli Glad heads up Restless Nites, an event guide & ticketing platform that delivers curated, underground events to fans in Los Angeles and New York. Restless Nites has built a strong following since its founding in 2013, but struggles to compete with larger platforms. “We historically haven’t had the kind of war-chest to offer a venue a $50,000 advance, even though we offer a system with better features that our customers enjoy more,” Glad tells me.
The middle market is opening up
Over the past several months, ticketing companies have been suffering financially just like the rest of the live sector. Eventbrite suspended its advanced payout program in March and laid off a large part of their music division in April; Live Nation reported negative revenue of $87 million for its ticketing business in Q2 2020, amidst a 98% decrease in their overall concert revenue year-over-year.
Ticketing platforms may have long-standing contracts with venues, but without any events, these platforms have no hope in recuperating bonuses or advances. As contracts come to an end, ticketing platforms and venues alike are wondering what the future might bring.
For the top of the market, bonuses actually aren’t going away anytime soon. “Clients see the value in their ticketing relationships and don’t believe the immediate disruption in events has any impact on the long-term, so no one is asking to change terms if they happen to be renewing with Ticketmaster during this time,” says a senior Ticketmaster executive, speaking on condition of anonymity. “We also have not pulled back when bidding new contracts, and we expect that Ticketmaster, AXS, SeatGeek, See Tickets and others will continue being aggressive offering advances and competing for business.”
Some entrepreneurs in the sector are fearful that financial difficulties will lead to even more consolidation, squeezing out smaller players and newer entrants. Willie Litvack runs SquadUp, a ticketing platform which specializes in white label ticketing solutions. Litvack expects that the overall sector will contract by around 20% to 25%, with middle-market ticketing platforms like Eventbrite, and the independent venues they serve, taking the hardest hit. “Live Nation [which owns Ticketmaster] and AEG [which owns AXS] will grow from 60% market share to 80% market share because they’re the only people with the balance sheet to endure this,” argues Litvack.
But as 2021 approaches, middle-market platforms like Eventbrite are adopting a more risk-averse mentality, and are considering cutting out bonuses altogether. As Eventbrite writes in its most recent quarterly report: “In light of the COVID-19 pandemic, we substantially curtailed up front [sic] payments to creators entering into new or renewed ticketing arrangements with us … We do not know when, or if, we will offer up front payments to new or renewing creators in the future. We believe this lack of up front payments will put us at a competitive disadvantage to ticketing solutions that offer cash incentives to newly acquired creators.”
With Eventbrite offering only $7,000 in signing bonuses in Q2 2020 — a 99.9% drop year-over-year from $4.63 million paid in Q2 2019 — their hegemony over middle-market events may be coming to an end (see Figure 1 below).
Many founders think the pandemic might present a silver lining for innovation by opening the door for platforms that middle-market venues might not otherwise consider. “This is going to bring the [middle-market] giants down a few pegs, and bring a lot of people who can survive this pandemic — who will actually come out the other end — a fighting chance to get their voice heard,” argues Glad. “Which is great because now, we’ll all be competing against each other to make the best product for the people.”
Middle-market platforms explore different tech and financing solutions
Crucially, many smaller ticketing platforms have been able to move more nimbly around virtual livestreamed events than their more corporate counterparts. One example of such a platform is Viewcy, which is striving to differentiate itself by emphasizing the importance of community around each of their events.
Viewcy’s CEO, Ehren Hanson, started building out the platform by bringing together his own Indian classical music community in New York (which is bigger than you might expect!), allowing members to customize their personal profiles, engage with one another and share information about upcoming events. These features rolled over to Viewcy’s streaming platform, where fans can interact live with each other and with artists while working to raise money communally. Today, Viewcy works with several different creative communities, including Rebuild Beirut, which has been hosting weekly virtual concerts and fundraisers for Beirut following the explosion in August.
“There is a hunger for feeling like you’re a part of something that is more intimate and closer to home, and that’s where we’ve been able to thrive,” Hanson tells me. “Event organizers feel like Viewcy is a place, as if they are hosting at Le Poisson Rouge.” Moreover, because Viewcy does not issue any kind of signing bonus for its customers, Hanson tells me the company has not taken as much of a financial hit as other incumbent platforms. “Contracts and signing bonuses are what companies do when people are ambivalent about their product…If [a platform] is really, truly, competitive, they shouldn’t need signing bonuses,” says Hanson.
The Ticket Fairy is another ticketing platform that has grown a lot in the past few years and appears surprisingly unfazed by the pandemic. Whereas Restless Nites and Viewcy focus on creating the best experience for fans, The Ticket Fairy brings high-tech analytics and marketing solutions to event organizers; in fact, many other ticketing platforms like Restless Nites have incorporated The Ticket Fairy’s technology into their own system.
“The Ticket Fairy was, from the ground up, built as a best-practices digital marketing platform that also incorporates ticketing,” Ritesh Patel, the company’s co-founder and CEO, tells me. “It’s a flip on the previous model in that our goal is to generate as much revenue for an event as possible at the lowest marketing cost possible.” Where ticketing platforms like Eventbrite try to lock their venue customers into lengthy contracts, the Ticket Fairy trusts customers will continue coming back based on their technology. (The platform’s business model, like with most ticketing platforms, involves charging a small “booking fee” on every ticket sold.)
In Patel’s eyes, platforms can tackle problems that signing bonuses previously addressed using more “sensible and structured” methods. For example, The Ticket Fairy might provide “short-term financing just before a deposit needs to be paid for an artist.” From my research, I’ve found that many other ticketing platforms are exploring similar financial incentives. One large platform is providing monthly rent payments for a Seattle venue to ensure that the venue can stay open throughout the length of its contract. Another platform is bringing on a financial partner to underwrite the risk of forced closure — for example, due to a global pandemic — before agreeing to a signing bonus.
One Ticketmaster executive affirms to me that these kinds of diversified financial solutions have already been available in the upper market of ticketing. “Venues have different priorities and ticketing companies innovate by trying to come up with new solutions to meet those needs,” says the executive, speaking on condition of anonymity. “For many venues, cash flow is the priority, which drives the price of service fees and overall structure of ticketing contracts. Other venues might be more focused on enhancing fan experience, platform reliability and speed, or a range of other items. Ticketmaster’s goal is to be the leading provider for venues and artists, and since there’s no ‘one-size-fits-all’ we aim to provide the best solutions across the board — from letting venues set fee structure to developing new technology solutions such as digital ticketing, or contactless concession ordering.”
Venues reevaluate their options
While ticketing platforms have been forced to scale down and evaluate their businesses in the face of the pandemic, venues are faced with a far more existential threat. Around the world, venues and event organizers that are still accruing rent and liquor license costs or honoring refunds with no cash flow in tow are struggling to stay afloat.
Fortunately, a lot of organizations are working to help the ecosystem weather the next several months. Chief among these organizations is the National Independent Venue Association (NIVA), which has brought together thousands of independent venues around the US to share resources and lobby for federal and state support. Some venues, like The Midway in San Francisco, have managed to stay open for socially distanced events. However, neither government support nor limited events will keep the industry afloat forever.
In the meantime, many venues and event organizers are also reevaluating their entire approach to ticketing. Most popular venues are signed to ticketing contracts that will expire by the time events are expected to fully reopen — and many of these same venues don’t expect that ticketing platforms will offer big signing bonuses this time around.
One of my colleagues runs a promotions company responsible for operating some of the most iconic venues in New York. She asked me to keep her identity anonymous, so I will call her Jane.
Jane entered into a multi-year contract with Eventbrite a few years ago in return for a signing bonus. Though Jane’s contract doesn’t run out until mid-2021, she is already considering a replacement in the event that the platform does not offer a bonus moving forward. “If Eventbrite’s not putting money up front, if they are not going to do signing bonuses, we’d all rather go with something else,” Jane tells me, speaking on behalf of herself and the many event organizers she believes share her sentiments. “Right now I’m looking for a ticketing platform that can help finance my future projects.” For Jane, this might mean either another platform with an upfront signing bonus (if they’re still around), or a friendlier platform that will help her save on overall costs.
Despite the present hardships, not all event organizers share my anonymous colleague’s sentiments. “When we opened, a couple hundred thousand [dollars in bonuses] was a huge amount of money, but now it’s less significant,” Pete Glikshtern, principal owner of The Midway, tells me. This stance might sound ridiculous in such a financially harrowing time — but The Midway has been able to avoid total catastrophe by staying open for outdoor events. For The Midway, which isn’t in dire straits today, a ticketing platform’s product may have a more significant influence on the venue’s financial future.
Looking forward, it’s important to remember that ticketing platforms only give signing bonuses to venues if they expect to earn a hefty return by charging additional fees. By declining signing bonuses, venues can drop their ticket price or elect to retain the additional fee for themselves in the form of a kickback or “facility charge.” By lowering their net prices or accepting kickbacks, venues can make more money if they don’t accept upfront cash.
I spoke with an organizer of dance music events worldwide. He has requested to stay anonymous, so I will call him Tim. Tim argues that signing bonuses, even when they are offered, are bad investments. He turned down a signing bonus from Eventbrite a few years ago so that he could list his event on multiple platforms and earn a kickback on the ticket fees. “We would get the ticket revenue plus a kickback, which would add to the net revenue of the show,” he tells me.
(As I mentioned earlier, fees related to signing bonuses and kickbacks are designed to deceive fans into blaming ticketing platforms for expensive tickets. Understandably, organizers like Tim prefer to avoid associating with these practices. This hush-hush attitude explains why signing bonuses and kickbacks are such a well kept secret.)
In any case, with the potential disappearance of signing bonuses in the near future, event organizers are starting to assess ticketing platforms based on other characteristics. Tim, who was once happy to use Eventbrite, is considering switching: “In the past year and a half, I talked to about 50 different ticketing sites,” he tells me, citing platforms like Restless Nites, The Ticket Fairy and DICE. “I think there are some excellent choices now … that are much simpler, more user-friendly, and hipper and cooler for the younger generation to use. I like the events that they put on, and I like the fact that fans pay what they pay.”
Tim is willing to forgo financial incentives if a platform is good enough — and many other event organizers are following suit. I spoke with Oliver Diamond, who heads up programming at Matte Projects, an NYC-based creative agency renowned for their annual BLACK NYC and LA LUNA events. While Matte has utilized signing bonuses in the past, the agency is now looking to build a new relationship with the platform TIXR.
In Diamond’s view, event organizers should pick their ticketing platforms only after assessing their own distinct needs and target audiences. “The platform has to fit the experience,” he tells me. “Some events might use DICE because they are selling to the audience DICE is pushing to. If I need super-fast, high volume, live data, then that’s more the technology I’m focused on. The biggest thing I love about TIXR is their really good customer service.”
I spoke to many other independent venue owners and event organizers who confirmed the sentiments I shared above. Signing bonuses may return one day, but for now, they are playing a less consequential role in the decision-making process. Ticketing platforms must now compete for business by offering the best product, and event organizers must look for other ways to access capital.
This implies that while the 2020 coronavirus pandemic has decimated the events industry harder than any other, it may actually present a silver lining for ticketing. Yes, many venues will close for good, while others will sell their space and brand to giants like Ticketmaster and AXS. However, the immense instability of the industry has also (at least temporarily) eroded old dynamics within the middle market that resisted innovation in ticketing, giving way to a healthier competitive environment.
As ticketing platforms pull back from risky signing bonuses, venues are free to choose their partners based on the merit of their product. Instead of asking “who is going to give me the biggest check?”, venues and organizers are increasingly thinking: “Who is offering the best technology for marketing? Who promises the most hands-on customer service? Whose brand attracts fans that are most relevant to me?”
Especially amidst the rise of livestreaming and the need for better digital tools to evaluate virtual event engagement, venues that survive will turn to ticketing platforms that can best help grow their businesses both online and offline. Feeling less bound by contracts, venues and organizers will experiment with multiple platforms to learn which best fits their needs. Ticketing companies, in response to their clients’ financial needs, will offer more fiscally responsible solutions like lines of credit, or short-term loans tied to ticket sales. In some cases, ticket fees may even go down for fans (shocker!).
We’ve still got a ways to go before the events industry picks up its strength. The International Air Transport Association predicts that air travel won’t fully recover to pre-COVID levels until 2024; many believe that the events industry will follow a similar trend. Nevertheless, there’s an opportunity to make the future ahead better than our past. I, for one, am looking forward to a better world for live music. ✯
This article was originally published in Water & Music, an independent newsletter, research hub and membership experience focused on the intersection of music, technology and money. You can subscribe to the free newsletter or join 1,000+ paying members from the music and entertainment industries on Patreon.