SXSW: Ticketmaster CEO on service fees, dynamic pricing

Ticketmaster CEO Sean Moriarty said the ticketing business is likely to move more and more to a dynamic pricing structure, and defended the company's service fees that are added to the cost of a ticket at a Friday afternoon panel at the South by Southwest Music Conference (SXSW) in Austin, Texas. The conversation grew heated toward the end, when Moriarty was asked to break down the distribution of service fees to Ticketmaster, the promoter and the artist, and then asked to justify why customers are charged $2 to print their own ticket at home.

The panel, moderated by Ethan Smith of the Wall Street Journal, focused heavily on the decision by concert promoter LiveNation to start its own ticketing service rather than renew its relationship with Ticketmaster. Smith estimated that Ticketmaster would be losing $120 million from the decision, and while Moriarty wouldn't confirm the number, he said Ticketmaster was indeed losing approximately 15% of its business.

Moriarty said areas of growth in North America include ticket auctions and re-sale services. As it stands, Moriarty estimated that the North American ticketing business is worth between $3 billion and $4 billion, and said the popularity of auction and re-sale sites is leading the concert business to one centered on dynamic pricing, in which the cost of a ticket could potentially change from its on-sale date to the time of the event.

"It's going to take another five years to get very fluid dynamic pricing applied to wide swaths of inventory," Moriarty said. "The technology is there ... I don't think there's any downside. The perceived risk would be that with greater transparency -- if people look at a show and a show appears to be a dog -- it reflects poorly potentially on the artist, potentially on the promoter, potentially on the venue.

"Ultimately," Moriarty continued, "when you look at what a ticket is -- a license to sit in a specific seat at a specific time -- and recognizing how much the value may fluctuate, it lends itself to a marketplace approach."

The answer raised the question of transparency, a topic that then dominated the discussion. Moriarty said the average cost of a ticket via Ticketmaster in 1996 was $36, and it carried an average of a $6 service fee at that time. In 2006, he said the numbers were $48 and $8, respectively.

During a question-and-answer session with the audience, the Chicago Sun-Times' Jim DeRogatis called on Moriarty to break down how Ticketmaster distributes its service fees, which Smith noted is split evenly between Ticketmaster and the promoter, a distinction the consumer often does not notice. DeRogatis offered the hypothetical of a $17.50 service charge per ticket at an arena concert, and pressed Moriarty to explain what makes up the charge.

Moriarty said, "I don't think it's appropriate in a world where we have 9,000 clients, Jim, to expose the particulars of any individual client deal and summarizing or making a sweeping statement is probably not something that is appropriate."

Yet the question cut to a larger issue that DeRogatis pointed out: Does Ticketmaster take the rap for the promoters and artists who receive a portion of the service charge but would prefer Ticketmaster to be perceived as greedy?

"Certainly that's part of it," Moriarty said. "If people think Ticketmaster is hanging onto every penny as pure profit they're woefully mistaken ... It's easy to be reductive and talk constantly about rising prices, but it actually takes a little more work to understand the issue in full context."

Moriarty then justified the $2 cost for consumers to print out their own ticket via the home printers as maintaining wi-fi networks in thousands of arenas in the U.S. Moriarty said the fee also ensures that consumers will be able to reprint their tickets if needed.

Moriarty said, "It's easy to be reductive and say, 'Gosh, I don't understand why this should cost anything and it should be free.' We'd all like to live in a world where everything is free, but if you peel it back and actually understand that electronic delivery has been made available by investments of millions and millions of dollars and requires constant operation, you may come to a different conclusion."

Smith countered that isn't that simply the cost of doing business, having to invest in new technology? He said: "Everyone has to upgrade their infrastructure."

"It's a question of where you charge and how you charge," Moriarty said. "Standard mail is a free option ... I guess you can debate that until the end of the day. We know there's a lot of work that can be done and we certainly are committed to providing a very good service to our consumers."

Moriarty also noted that Ticketmaster would look at wrapping the cost of a service fee within the price of the ticket. This way, the service fee would not suddenly be added to the cost of the ticket when the consumer checked out. "Inclusive pricing is something we ought to consider," Moriarty said. "People feel much better about paying $25 per ticket rather than $18 plus $7."

But Moriarty noted that Ticketmaster has no interest in expanding into the label business, a la LiveNation's mega-deal with Madonna. "There's a lot of opportunity that we see out there," he said. "I don't know if that's a model for us ... From our perspective, we very much believe in the live category, and we think there are huge changes under foot."

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Comments

[whooknew]

hmmmmmmmmmm. dynamic pricing. sounds like yoonew.com to me.