Evidence of meeting #156 for Canadian Heritage in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was market.
A recording is available from Parliament.
Liberal
The Chair Liberal Julie Dabrusin
This begins our 156th meeting of the Standing Committee on Canadian Heritage. Today we are beginning our study on the online secondary ticket sales industry.
We have with us Erin Benjamin, president and chief executive officer of the Canadian Live Music Association.
We are also welcoming Jean-François Brousseau, president of Outbox Technology Inc.
We will begin with your presentation, Ms. Benjamin.
Erin Benjamin President and Chief Executive Officer, Canadian Live Music Association
Hi, everyone. Thank you very much. My name is Erin Benjamin, and I am the president and CEO of the Canadian Live Music Association.
I'll start with a bit of an introduction. Our mission is to entrench the economic, social and cultural value and power of live music, creating the conditions for concerts to thrive in every neighbourhood, town and city in Canada. We were founded in 2014. We currently represent 225—and growing—concert promoters, venues, clubs, festivals, talent agencies, ticketing companies and suppliers, businesses and organizations who facilitate access to live music for fans as well as visitors from across the country and around the world. Our members are dedicated to ensuring that the overall fan experience is the very best it can be with each and every show.
Live music is a huge part of Canada's broader music industry. It creates tens of thousands of jobs and contributes billions to GDP. It has become the primary revenue stream for performing artists. Live performance helps artists to build fans and brands domestically and internationally. Its economic footprint extends well beyond the artist, promoter and venue, and into surrounding communities. Whether it's hotels, airlines, local restaurants, taxis or corner stores, many other businesses benefit from the economics of live music, while Canadians enjoy an enhanced quality of life thanks to the injection of the cultural and social vibrancy that live music spaces, places and people provide.
This is an amazing industry. We love our fans, and every single day we work to put them in the same room with their favourite artists, but there are times when often hundreds of thousands of people want to be at the same show at the same time, as was the case with the final Tragically Hip tour, for example. When we're talking about how we love live music, we're talking about human emotion and the rabidness of fandom. Demand can far outweigh the number of seats available. Just like any other hot product on the market, the value of those tickets naturally goes up. The commodification of concert tickets is consistent with how we as a nation desire and consume popular goods. The reality, though, is that we are not all automatically entitled to attend a concert just because we love the artist. No business or industry operates that way.
I think what is most important about the resale landscape in Canada is the reality that consumers don't always know how to “buy safe” when they're looking for tickets on the resale market, in particular these high-demand shows. There is significant obscurity in what we refer to as the “grey market”. It's ostensibly set up to dupe fans—and extract as much money from them as possible—into thinking they're safe when they may not be. The days of the dubious scalper in a trench coat outside the Gardens are pretty much gone now. At least he had a face, even if we never saw it again. Now it's the anonymous guy on Kijiji who seems nice but is selling you the 100th copy of a PDF bar code to that Taylor Swift show your daughter's been waiting to go to all year, only to arrive at the venue on the day of to be told that the ticket has already been scanned in and she is the 99th person holding the same piece of worthless paper. Let me tell you, this happens all the time.
Maybe it's the website that's skinned to look exactly like your favourite venue's box office. When you click “purchase”, though, you realize that you've been charged surplus fees in a foreign currency by a company whose exact location, let alone what country they might be in, cannot be identified. Then you look at the URL and you realize that it doesn't say, for instance, “Massey Hall box office”, the way you thought it did. Instead, it says something very close to that.
Maybe it's speculative postings, where you're urged to buy a ticket that doesn't even exist yet.
It is remarkably easy to be deceived. It happens even to the people who work in the music industry. The bottom line is that these deceitful and fraudulent practices are bad for the consumer, bad for the reputation of our members and bad for artists. They are just bad for business and no one wants that.
Thankfully, our members are actively creating solutions to build consumer trust and combat things like bots and bad guys. There are four key things they're doing to keep fans safe that I would like to underscore for the committee today. These are in addition to the fact that they are investing millions to fight the bot technology that's used to circumvent systems and scoop up mass quantities of tickets. They're also migrating towards the use of digital ticketing exclusively, in order to increase security and to help us know things like who is in the building.
The four things I mentioned are using ticket authentication technology, providing money-back guarantees, displaying all-in pricing and selling in local currency via secure online platforms, and listing the pre-sale opportunities like artist fan clubs, radio and venue promotions, etc., that exist to help fans better understand what their options are. Because not all events sell out, of course, these pre-sales can help an artist extend their marketing reach.
We need to stay one step ahead of the illicit market whose sole purpose is, again, to drive prices up and divert money to deceitful companies and away from the legitimate concert industry and away from our artists. This is a huge challenge, compounded, as I say, by a lack of public awareness about how to buy safely on the Internet.
Different jurisdictions in Canada and elsewhere have attempted or are attempting to find solutions through legislation; however, the ability to enforce and the unintentional consequences certain aspects of legislation can have on the genuine industry have proven to be highly problematic. They put Canadian businesses at a disadvantage and consumers directly in harm's way.
The answer is consumer awareness on this subject, and the Canadian Live Music Association would be very interested in working with this committee to explore options that amplify the “buy safe” message to help protect fans and audiences.
There will always be times when we want to be in the same room with our favourite artists, of course, but the reality is that not all of us can be. It's human nature. It's that rabid fandom, again, to do whatever we can sometimes to make sure that we are. That can include being prepared to invest in a live music experience of a lifetime at fair market value, no matter what.
The Canadian live music industry is here to help make every single concert experience, from ticketing to attending, as safe as possible for consumers.
I'd like to thank you very much for inviting us to speak to you on this important subject today.
Jean-Françoys Brousseau President, Outbox Technology Inc.
Good afternoon. Thank you for inviting us here.
I represent Outbox Technology, a company based in Montreal that has been operating since 2006. We develop ticketing systems for arenas and theatres.
We are used to massive on-sales for big concerts in arenas and stadiums. We also have as a client, Cirque du Soleil in its worldwide touring shows, so we are present in multiple countries, including Canada obviously. We also have a joint venture with a promoter called AEG, Anschutz Entertainment Group, in the United States. We have deployed technology in their venues in the U.S., Canada, the U.K. and Sweden.
I have been in this business for 30 years, now as president of Outbox, but earlier as a founder of Admission Network here in Canada. We have been pioneering technology to make ticketing easy, as well as to try to limit the impact of bad actors in this business.
I've also worked for Ticketmaster, as they acquired one of our companies. I was their chief technology officer for three years in the U.S.
I am here to share my experience and answer any questions you might have.
Let me start by defining a few terms, the way we use them.
The primary inventory owner, the venue or the promoter, typically contracts with a ticket agency or a ticketing vendor to sell tickets directly to the public. That primary ticket agency is usually an exclusive provider of services to that venue in North America.
Secondary selling channels are different from ticket brokers in our vocabulary. They are platforms that allow sellers to reach buyers, to post tickets and sell to buyers, while a ticket broker is an entity that acquires tickets in bulk for resale, using these secondary channels, including their own. There is a significant difference between a secondary selling channel and a ticket broker in the definition.
B2C is a business, a broker, selling to the consumer, while C2C is an individual, or a presumed individual, selling to another individual. Some of these businesses are legal. For example, in Quebec, C2C selling is legal. B2C requires certain controls. You can imagine the interest in being perceived as a C2C channel.
I looked up the definition of a “scalper”. It's a person who resells tickets at a large or quick profit. In the U.K., they call them “ticket touts”, which is the same thing.
A fraudulent buyer is different. It is someone who purchases a ticket with an illicit method of payment, which will result in a chargeback by the credit card company and a loss of the revenue to the promoter, venue or artist after the show. Sometimes we can confuse “fraudulent buyer” with “scalper”. If they pay their bill, they're a scalper. If they don't pay their bill, they're a fraudulent buyer.
I will outline two big differences in the secondary market between major league sports and concerts.
In major league sports, there is a natural supply of tickets for the secondary market from the season ticket holders and the bulk ticket buyers, the brokers. There is demand for single-game tickets and limited availability in the good seats, so there is a natural meeting of needs between the season ticket holder who doesn't want to attend the 40 games and the single-ticket buyer who would like to attend one event.
In concerts, the demand for concert tickets frequently exceeds supply, so seats are not sold at the optimal price on the primary market, resulting in an immediate sellout and listing at a much higher price on the secondary market. There is a very limited natural supply of tickets to resell on the secondary market for concerts. Real fans who buy tickets want to go to the show. During on-sales, other actors buy tickets, often breaking purchase limit rules.
Let me briefly describe the sports market. I understand you're probably more interested in the concert market, but I think it's important to differentiate the two.
As to the market size for major league sports, for a typical major league team, the best estimates are that about 30% of tickets for any given game have been resold. It might be much higher for certain teams, but this is a broad average. The average markup can be as high as 60%, but as many as 50% of the tickets sell below face value. The image of Super Bowl tickets selling at 10 times their value is real, but in reality for a regular hockey or basketball game, half the tickets will actually resell below face value.
Sellers post tickets on multiple selling platforms. There are professional sellers who buy season tickets or buy tickets in bulk directly from the teams and use advanced tools to manage these listings across dozens of selling channels, often at different prices on different channels—the same ticket at a different price on different channels. The sellers pay a fee to the platform when the sale occurs and keep the “upside”—the difference between the value they paid and the value they sold. Sales tax is sometimes, but not always, paid and remitted, depending on the quality of the seller.
Buyers select a selling platform based on their experience, or often simple search engine ads. They pay an average fee of 10% to 15% to the platform that operates the selling channel. Therefore, there is a natural, “everybody gets what they want” sort of environment in the sports resale market.
The secondary market for concerts is different. Demand for big concerts exceeds supply. This is a result of the market not being at an economic equilibrium. Seats are not sold at the optimal price on the primary market, resulting in an immediate sellout.
At the risk of oversimplification, we see this happen for concerts for several valid reasons. One, the artists do not want to charge too much and disappoint their real fans who won't be able to afford tickets. Two, the artist wants real fans in the seats. Three, artists and promoters prefer a quick sellout, securing status as a highly popular event—bragging rights. Promoters would rather sell out quickly, eliminating any financial risk and stopping further marketing expenditures on the event.
As I said, there is a limited natural supply of tickets on the concert side. This is a form of arbitrage, the simultaneous buying and selling of commodities in different markets in order to take advantage of differing prices for the same asset—the definition in the 17th century. They try to buy beyond purchase limits and accumulate inventory to resell.
One of the roles of primary ticket platforms, like ours, is to enforce the rules of the ticket limits—the purchase rules—and stop robots. During major on-sales, up to 90% of online traffic can be robots. We have to stop them from blocking seats or buying tickets.
As a quick comment on robots and their intentions, we have to realize that they are not only used to buy tickets. They are also used to block tickets. As we sell tickets or reserve arenas, or reserve theatres, we have to put seats on hold for a few minutes for the normal consumer to check out. The robots take advantage of that and block all the seats that they can to generate a false sellout situation, forcing people to search again and find their platform to buy tickets on the secondary market, even though there are still tickets, presumably, available on the primary market, but they are being blocked by their robots.
This is a quick overview of our environment. If you have any questions, please go ahead.
I thank you for inviting us here.
Liberal
The Chair Liberal Julie Dabrusin
Thank you very much.
We are now beginning our question and answer period. For the first seven-minute round, we go to Mr. Hogg.
Liberal
Gordie Hogg Liberal South Surrey—White Rock, BC
Thank you very much for your submissions. I come from British Columbia, and it has recently introduced some legislation to limit or ban automated ticket sales and the software for that.
Could you comment on whether you think that is of value, or whether there is a better strategy in terms of doing that, recognizing that there are, I think, three provinces doing that—Quebec, Ontario and British Columbia—which leaves the rest of the marketplace open or different? Can you talk about what the differences will be for those marketplaces and whether you think that's an effective strategy?
President and Chief Executive Officer, Canadian Live Music Association
Do you mean banning bot technology? I think it has to be done. I can't imagine legislation not including that, but it's extremely difficult to enforce. It's a nod, though, to the legitimate companies to continue to work on their own technology.
We've seen that go hand in hand, in other provinces, with the right of private action, where a legitimate company can sue another company that's employing bot technology. They sort of go hand in hand. The bot technology has become illegal, so they can sue. It's two different pieces of the legislation, but they work together.
I think it's essential to have it in there. Canada and every single jurisdiction in this country should be looking at that extremely thoroughly. Has anyone on the planet figured out how to effectively enforce it? No one has yet, but every day steps are taken to try to get closer to it.
President, Outbox Technology Inc.
We have such a law in Quebec now. As I mentioned as they were preparing the law, the problem was enforcement. These robots can come from anywhere in the world. We've seen them from eastern European countries. We've also seen them from within Montreal. If there's no ability to pursue them outside the province, they'll just move across the border and keep doing what they're doing.
Technology has a better chance of stopping it than the law, but of course, as Erin said, you have to have the law in place in the first place.
President and Chief Executive Officer, Canadian Live Music Association
It connects to the consumer awareness piece, too. If we, as the industry, can talk about what bots are, how they work and the fact that they're illegal, we can use that as a tool to raise awareness about how to buy safely.
Liberal
Gordie Hogg Liberal South Surrey—White Rock, BC
Do you see a role for the federal government with respect to secondary ticket sales, whether that's a coordination across Canada or whether it's looking at all types of copyright models in terms of what happens online?
President and Chief Executive Officer, Canadian Live Music Association
There's certainly a huge role for the federal government to continue to consult with the industry, and we might be able to work as effective partners with our provincial counterparts to explore existing and future legislation together.
It's a big-picture partner at this point. I can't really comment on the law, necessarily, but I think we all need to be working together. This is a global business and it's a really big one.
President, Outbox Technology Inc.
One place where there is no help on the horizon is in fighting fraud. It's a different but related subject. Lots of venues and promoters lose money, as do ticket agencies, because of our inability to do anything if we have a credit card that's no longer valid. We're not even told that the card is no longer valid. By the time we find out, the show has passed and the money is gone.
For example, banks having a responsibility to divulge that the card has been declared stolen since the purchase has happened would be a great asset. We have to do it on our own. The credit card company provides us with no support whatsoever.
Liberal
Gordie Hogg Liberal South Surrey—White Rock, BC
Do you have any sense of how much money is being screened off by secondary sales? Do you have any sense of that quantum? Do we have some sense of the magnitude of this in Canada?
President and Chief Executive Officer, Canadian Live Music Association
I do not, but I expect that some of the people you'll be speaking to through this process might. I would ask that question again to some of my colleagues who will appear.
President, Outbox Technology Inc.
I have a sense, but I think they're better informed.
President, Outbox Technology Inc.
For sports, we know that at least 30% of the tickets get resold, so it's easy to figure out. It's millions of dollars per team.
For concerts, it's a little more obscure and the numbers are more dramatic. The prices are sometimes very high, compared with the face value. Of course, the tax component comes into play, because a lot of these entities don't collect the tax on the upside, which can represent a fair amount of money.
Liberal
Gordie Hogg Liberal South Surrey—White Rock, BC
Are you aware of any other jurisdictions, countries or areas that have managed this? What types of strategies are being employed in any other part of the world?
President and Chief Executive Officer, Canadian Live Music Association
Certainly in the U.K. and parts of the U.S., they're exploring things. We know what's not working in legislation. Things such as price caps definitely have not been proven to work or to be an effective tool to combat fraud.
In terms of all-in pricing, guaranteed refunds, being able to identify the seller and where they're located, those are some really simple things we're seeing. Again, some of my colleagues who work internationally might be able to respond to that better, but there are definitely pieces we're seeing that are consistently effective.
President, Outbox Technology Inc.
Definitely, in the U.K., they've been very active in the last two years in pursuing those ways of addressing what they can address.
Liberal
Gordie Hogg Liberal South Surrey—White Rock, BC
Do they have legislation by which they're doing this?
Liberal
Liberal