Taylor-Made Ticket Trust Battle Looms

There will be hell to pay for screwing up ticket sales to pop phenom Taylor Swift’s first tour in four years, if Richard Blumenthal has his way.

Connecticut’s senior U.S. senator held a press conference outside New Haven’s federal courthouse Monday to push for federal action against Ticketmaster, the concert-broker colossus responsible for stranding fans online for hours, crashing a website and bungling refunds when Swift’s concert tix went on sale.

Blumenthal said he has signed on to a letter with his colleagues to the federal Department of Justice (DOJ) calling for ​“structural remedies” including a break-up of the Live Nation / Ticketmaster merger approved back in 2010.

He also said he expects the Judiciary Committee, on which he sits, to summon Ticketmaster execs to a December hearing about its ​“monopolistic practices,” including alleged price-gouging, strategic acquisitions of potential competitors, and pressure on artists and venues.

“We will have a hearing,” Blumenthal said. ​“They’re trying to blame it on Taylor Swift [for] not having enough concerts. Let them come to the United States Congress to blame Taylor Swift. I’d like to see that.”

He noted that the company signed a consent decree with DOJ promising to refrain from anti-competitive practices, then had to sign a second one after DOJ found violations of the first one. DOJ launched an investigation into Live Nation / Ticketmaster’s practices even before the Swift debacle, which focused more public attention on the matter.

Click here to read a statement the company issued affirming its commitment to antitrust laws, naming examples of what it called a healthy field of competitors, and characterizing its dominant market share as ​“a testament to the platform and those who operate it, not to any anticompetitive business practices.”

And click here to read a Nov. 16 letter written by Minnesota U.S. Sen. Amy Klobuchar, who sits on the Judiciary Committee with Blumenthal, in which she expresses her ​“serious concerns” about ​“system failures, increasing fees, and complaints of conduct that violate the consent decree Ticketmaster is under’ and that indicate that ​“Ticketmaster continues to abuse its market positions.”

Ticketmaster: Big Needs Big

In this separate extensive statement, Ticketmaster portrayed the Swift fiasco as a ​“record-breaking” challenge that demonstrated the need for a company that can operate on a large scale with extensive resources to tackle.

The system crashed because of historic demand for tickets combined with all the extra steps Ticketmaster took to foil bots and avoid price-gouging by scalpers who resell batches of tickets.

That process includes having potential customers register as ​“verified fans.” Over 3.5 million people pre-registered for Swift tickets as ​“verified fans,” according to the company. ​“The demand for tickets to Taylor’s tour broke records — and parts of our website … Historically, we’ve been able to manage huge volume coming into the site to shop for tickets, so those with Verified Fan codes have a smooth shopping process. However, this time the staggering number of bot attacks as well as fans who didn’t have codes drove unprecedented traffic on our site, resulting in 3.5 billion total system requests – 4x our previous peak. …

“It usually takes us about an hour to sell through a stadium show, but we slowed down some sales and pushed back others to stabilize the systems. The trade off was longer wait times in queue for some fans.”

In the end, Ticketmaster still managed to sell two million tickets for the Swift tour, all to ​“verified fans.” Taylor would need to perform 900 nightly shows over two and a half years in order to meet all the demand for tickets on the Ticketmaster site.

“The biggest venues and artists turn to us because we have the leading ticketing technology in the world – that doesn’t mean it’s perfect, and clearly for Taylor Swift | The Eras Tour onsale it wasn’t,” the statement read.

Antitrust Expert Skeptical

Asked about Ticketmaster’s explanation, Blumenthal Monday argued that the company’s scale actually drives up prices.

“Monopoly is good for the scalpers and resellers,” he argued. ​“They pull back tickets. That’s the reason this site crashed. They were holding back tickets. These kinds of practices promote scalpers.”

Ticketmaster’s scale explanation for the Taylor Swift fiasco also failed to convince Florian Ederer, a Yale School of Management economist who specializes in antitrust issues.

Ederer noted that with over 70 percent of the ticketing and live-event venue market, Ticketmaster faces limited consumer pressure to serve customers better.

“I am somewhat skeptical that they really need all that scale. This is usually a well run company but one that probably got a little bit too complacent in the absence of competition,” Ederer said.

He also expressed skepticism about the prospects of the government ultimately ordering a break-up of the Live Nation/Ticketmaster merger. The government rarely ends up doing that, he noted. The most prominent example is the breakup of AT&T. But in that case, there was a template for breaking up the company, into regional monopolies. It would be more complicated to try to undo a 12-year-old merged ticket-selling company.

Also, while people have raised concerns about excessive fees, the big problem in this case involves the quality of service delivered to consumers, not the prices they pay.

But the DOJ investigation and political pressure can still produce results, Ederer noted. He noted how Congressional hearings and the threat of antitrust actions have influenced decision-making by tech platforms like Apple and Google and Facebook about data privacy, fee pricing, and acquisitions. Similarly, the Swift furor could push Live Nation / Ticketmaster to up its game and make sure to avoid an encore.

Another antitrust expert, SOM economics professor Fiona M. Scott Morton, suggested that Congress might use this opportunity to examine the ​“exploitative” and ​“very profitable” practice of platforms like Ticketmaster ​“to engage in ​‘drip pricing,’ or add-on fees that come towards the end of the purchase. Congress could authorize the FTC to make rules prohibiting such fees in primary and secondary ticketing and that would at least let consumers buy in a more transparent way, even if they are buying from a monopolist.”