A Look into the Economics of the Ticketing Industry
Our friends often ask us, “why are ticket fees so high?” Considering how much people complain about ticket fees, it is amazing how few answers are available on the internet. Lack of transparency in the ticketing industry is a serious problem. Foria is committed to creating a more transparent ticketing environment, so we are eager to spill some of the industry’s darkest secrets.
Organizers’ kickbacks and the misalignment between venues and fans are the two main reasons why ticket fees are so high.
A Breakdown of Ticket Fees
Ticket fees include several different costs that are paid for by fans. Below is a breakdown of what a checkout screen might look like from a ticketing provider:
From a fan’s perspective, online ticket pricing is presented as face value, with additional fees added on during checkout. These fees are often titled Processing Fee, Facility Fee, Service Charge, or Taxes. However, fans don’t have a clear picture of what the fees represent. Below are some of the factors that make up a ticket’s price.
For every event that goes live on a ticketing platform, an organizer starts by setting the ticket face value. This price represents the organizer’s per-ticket revenue but may include some fees. Many feel that including fees in a ticket’s face value encourages organizers to lower prices.
In the United States, Organizers elect not to include fees in their tickets’ face value. Instead, they add fees during the checkout process. Many argue that this method is unethical, as it misrepresents a ticket’s final price.
Issuers charge fees that they must pay themselves when selling tickets online; processing fees are the most consistent of these fees. In online ticketing, processing fees might be included in face value, combined with another fee, or listed on its own. When presented on their own, processing fees are typically listed as such.
Organizer’s kickbacks are one of the ticketing industry’s best-kept secrets. Issuers offer organizers an opportunity to earn revenue above face value by creating an additional fee. This fee is either integrated with the issuer’s fee or presented independently as a facility fee. Thus, organizers get to advertise low face value while earning kickbacks through fees. When fans complain about these fees, they blame the issuer, but the organizer walks away scot-free.
Ticket issuing companies earn revenue by adding a charge to the original ticket price set by the organizer. This charge can be a flat, per-ticket fee, a percent of the organizer’s price, or some combination of the two.
In Europe, organizers typically choose to include the issuer’s fee in the listed face value. In the United States, organizers typically choose to add the issuer’s fee on top of face value.
Fans find this barrage of fees confusing and difficult to navigate, allowing issuers and organizers to charge higher prices inconspicuously. While complex fees open the door for expensive tickets, customer relationships and competition drive the trend.
How Misaligned Relationships With Fans Drive High Ticket Fees
The ticketing industry is unique because the end consumer–the fan–has no say regarding their ticket issuer. In many cases, a single issuer maintains a contractual monopoly over all of an organizer’s events. Furthermore, fans typically attend events for a specific performer, so they cannot turn to competitors offering the same experience. This misalignment in the industry allows issuers and organizers to exercise greater control over ticket fees.
How Competition Among Issuers Drives High Ticket Fees
The ticketing industry is incredibly competitive; many issuers fight to work with any single organizer. In most industries, more competition leads to lower prices for the consumer. However, in the ticketing industry, issuers compete to win contracts with organizers by offering financial incentives like organizer’s fees (facility fees), signing bonuses, and cash advances, each of which force the issuer to drive up the price for fans.
Ticket issuers will always make sure revenue generated from their charges offset their costs. Competition from other issuers forces issuers to offer more to organizers, thus raising the cost. Disconnection from fans has allowed ticket fees to grow unchecked. So long as fans remain disconnected from ticket issuers, tickets will remain an expensive commodity.
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