An Inconvenient Fee: The Legacy of Pearl Jam Vs. Ticketmaster

This is a post by associate editor Blake Madden

Pearl Jam's Jeff Ament and Stone Gossard testify before Congress

Pearl Jam’s Jeff Ament and Stone Gossard testify before Congress

Two weeks ago, Pearl Jam released Lightning Bolt, their tenth studio album in a career that has spanned more than 20 years. A predictable wave of retrospectives from rock critics followed. Always mentioned – but only in passing – is what many of them dismiss as one of the band’s few missteps: ‘That whole Ticketmaster thing’.

History may end up viewing Pearl Jam’s 1994 fight against the ticketing giant with some of the same empathy accorded to the Hollywood writers’ strike, but until then, we’re left to question whether they had a legitimate gripe, or if the band was just resorting to some uncharacteristic rock star posturing.

The answer may depend on just how much of your hard-earned cash you are comfortable throwing down for a concert ticket.

The Unstoppable Force and the Immovable Object

Early 1994 saw Pearl Jam at the peak of its powers. Their 1991 debut Ten made them super-duper stars, and their 1993 follow-up, Vs., held the record for most copies sold in its first week (950,000) for five years. After quickly becoming the world’s biggest rock band, it would make sense for them to hook-up with the world’s biggest ticketing agent, Ticketmaster, in order to accommodate arenas full of fans.

In 1991, Ticketmaster had bought out its biggest competitor, Ticketron, on its way to essentially cornering the ticket sales market. Whether they had technically monopolized the market or not, and just what that market consisted of, was at the heart of Pearl Jam’s May 1994 filing with the Justice Department.

In their argument, the band alleged that Ticketmaster was in fact a monopoly, thus allowing the ticketing agent to set ticket “service fees” at any amount it desired without any fear of meaningful competition.

The dispute was ultimately a matter of money even more than principle. Pearl Jam, the earnest rockers dragged kicking and screaming to fame, wanted to charge less for their concerts. Ticketmaster, the ever-growing mega-corporation, wanted to make more.

In the end, Ticketmaster won – or at least, they didn’t lose. While the Justice Department initially took Pearl Jam’s filing quite seriously (band members Jeff Ament and Stone Gossard testified before Congress), the investigation was eventually dropped , and the band – which had skipped a summer tour in 1994 due to the battle – went back to Ticketmaster with its tail between its legs to book parts of its 1995 tour.

Ticketmaster certainly saw this as a victory, and turned the knife by publicly suggesting that Pearl Jam’s inability to find safe, comprehensive venues and ticketing alternatives proved that Ticketmaster’s services warranted their service fees: “Recent events also validate several issues we have stressed all along, namely that ticketing is a demanding, competitive business that requires a great deal of hard work,” said Ticketmaster spokesman Larry Solters in a statement released after Pearl Jam’s surrender.

What does the ticketing landscape look like today, almost 20 years after Pearl Jam went to war with Ticketmaster?

In theory, the Internet has created more competition, but in practice, Ticketmaster is bigger than ever, having merged with event promoter Live Nation in 2010 to become Live Nation Entertainment.

A 2010 Washington Post article by music critic Chris Richards compared ticket prices and fees to various concerts throughout the city of D.C. Tickets sold by Ticketmaster still carried the highest fees by far (and the company still works with most of the biggest talent at many of the largest venues). An Erykah Badu ticket with a face value of $66 carried a fee of $11, a Rihanna ticket for $106 had a fee of $17. These fees aren’t even at the extreme end, and services charges and convenience fees often run at 15% – 30% of the face value of the ticket. In rare cases, Ticketmaster’s fees can be equal to the price of the ticket itself.

The extra fees that Pearl Jam so vehemently argued against in 1994? $3.50 – $7.50 per ticket, or about 20% to 42% of the $18 they charged for the face value of the ticket.

Was Pearl Jam Right, and If They Were, Why Did They Lose?

“The people filing these lawsuits are seriously misinformed. Service companies, by their very nature, do not fit the definition of a monopoly. We do not control the price of the product–which in this case is the ticket. We provide a service, and the fee we charge for that service is set by those who own the building where the event takes place.”

-Fred Rosen, Ticketmaster CEO in 1994

 

“What Pearl Jam is doing is precedent setting,” said Garth Brooks manager, Pam Lewis, to Chuck Phillips of the LA Times in support of the band.

Central to the dispute were the questions of control and PR: Who would ultimately decide how much tickets could cost? How could that cost be determined and then represented to the customer?

Ticketmaster’s 1991 acquisition of Ticketron required both companies to file notice with the federal government under the Hart-Scott-Rodino Act in order to qualify for anti-trust exemption. The governing body that oversaw and eventually approved the acquisition? The United States Justice Department. (In hindsight, it seems unlikely that the Government would have told Ticketmaster “You’re not a monopoly” and then done an about-face just three years later because some famous rock band said otherwise.)

But even as Ticketmaster was nimbly brushing Pearl Jam aside with one hand, it was using the other to pay off multi-million dollar settlements in similar cases. The aforementioned Chuck Philips had been covering the L.A.- based company’s legal misadventures since before the release of Pearl Jam’s Vs., and would continue to do so long after the band cried uncle.

In 1992, Philips reported on two $100-million class action lawsuits against Ticketmaster that originated out of California and alleged anti-competitive practices and the fixing of ‘convenience fees’ at astronomical rates made possible by exclusive partnerships with so many key venues. In May of 1994, just as Pearl Jam’s fight was getting started, that suit was being settled out of a court, and another class-action anti-trust suit was being filed by consumers from six different states.

Ticketmaster’s history is littered with settlements like these. In 2003, the band String Cheese Incident sued Ticketmaster over claims that the company had purposely tried to cut off direct ticket sales to the band’s fans. Ticketmaster denied any wrongdoing – and then settled. In 2009, irate Bruce Springsteen fans filed suit when a Ticketmaster “site error” mistakenly redirected them to Ticketmaster’s resale site, TicketsNow, where after-market passes to The Boss’s concert were being sold at two and three times actual face value. Ticketmaster again denied any wrongdoing, and then settled for $16.5 million.

Pearl Jam and String Cheese Incident would call these unethical decisions, made possible by monopolistic practices. Fred Rosen, Ticketmaster CEO and heavyweight opponent of Pearl Jam in 1994, cast it as the American dream in action: “These suits are a sad commentary on what is happening to America. The minute you become successful at what you do, you immediately become a target.”

Rosen is credited by his peers with not only building Ticketmaster into the superpower it has become, but also ushering in a sea change for the ticketing industry at large.

Chuck Philips’ 1995 profile of Rosen, while not exactly “scathing”, paints Rosen as a shrewd and often ruthless businessman: Rosen aggressively bought out competitors in smaller markets. He secured exclusive contracts with venues by offering raised revenues for all involved, which is the kind of thing that exclusivity allows a company to do.

Those who didn’t play along – according to Pearl Jam and several others along the way – were effectively threatened or strong-armed. Tim Collins, former Aerosmith manager, testified to Congress that Rosen had once offered to pay Aerosmith $1 per ticket if the band would include Ticketmaster’s service fees in the face value of tickets so it would look better to the public.

Pearl Jam’s problem, on the other hand, seems to be that they were asking for less money, rather than more. If the band was looking for a dollar figure that would make them whole for their trouble, history suggests that Ticketmaster would have found a way to come up with it, rather than risk deep legal trouble. Since Pearl Jam was instead seeking to make Ticketmaster modify its existing practices – practices that had already been tacitly approved of by the Justice Department – Ticketmaster instead stood its ground.

However, it turns out that the pressures of the market forced Pearl Jam back into Ticketmaster’s arms before the Justice Department had even finished its investigation.

Capitalism: A Love Story

“The bands aren’t clean, promoters aren’t clean, buildings aren’t clean and ticketing companies aren’t clean. We are all taking a piece of this.”

-Jim Weyermann, deputy director of Seattle Center, 1983 – 1993

 

From a practical perspective, it’s easy to see that the “service charge” on any ticket is actually a necessity: The artist sells “the product” (aka, the music) and ticketing companies sell the “service” of bringing that product to various venues in an effective manner. A ticketing service technically receives none of the “music” portion of the ticket revenue, and in theory, these companies add “service” charges to compensate themselves for the real work done in putting the concert on.

Ticketmaster, however, stretched that paradigm to an extreme, arguably inflating the service charges on tickets, then using that excess revenue to pay back extra dividends to venues, promoters, bands (or sometimes all three) in exchange for long-term exclusive deals.

When Pearl Jam wanted to tour sans Ticketmaster in 1994, it simply couldn’t: The band alleged that venues of the size they needed were almost all Ticketmaster-loyal venues. And if they weren’t? They could plausibly be ‘convinced’ into boycotting Pearl Jam’s tour with the threat of being cut out of any future Ticketmaster action.

“Ticket companies are service companies and our client is you, not necessarily the public,” Rosen once told a group of arena managers.

How is any of this legal? You might ask. Well first, welcome to America, enjoy your stay here! This great land is full of service fees that don’t always seem to add a lot of service and convenience fees that aren’t necessarily very convenient. Banks and credit card companies are allowed to charge you these fees for processing payments in certain ways. We know ticket companies can. “Bottle service” in a club will get you a 300% markup on a bottle of champagne for you and some friends. And, while the deli on the corner technically isn’t allowed to charge you 50 cents for using your credit card to buy a pack of Sour Patch Kids, some do it anyway.

By calling these fees “convenience fees,” “service charges” (or by the especially precious name “handling”) they can amount to anything, both in where the money goes and how much money it is. Ticket companies have taken advantage of this option for years, perhaps none more so than Ticketmaster. Today even restaurants are getting in on the action:

A 2005 New York Times article covered chef Thomas Keller’s decision to stop accepting tips at his Per Se restaurant, instead instituting a flat 20% service charge. Jay Porter, owner of the San Diego restaurant, Linkery, followed suit and moved to add mandatory services charges, later writing that: “After I banned tipping at my restaurant, the service got better and we made more money.”

Keller’s reasoning was that the tip system created inequalities in effort and reward for his staff. Critics of the move saw it as just another example of a businessman with nothing but dollar signs in his eyes: “Tips” are defined by law as belonging solely to the person that earned them, while a “service charge” is defined wholly by the business and can be distributed however the business sees fit. Keller paid back part of this service charge to a kitchen staff that felt underpaid, and increased the steady base salaries of his wait staff to compensate for their loss of tips.

Fred Rosen also created new incentives by raising services charges, but competitors lost on two fronts: They didn’t have the stable of venues or artists to draw from, and competing by charging lower service fess only meant they would have less capital to finance a market battle with Ticketmaster.

Today, Pearl Jam’s website links directly to Ticketmaster’s for upcoming tour dates. As Don King was fond of saying: “Only in America”.

Legal Misses

“As an industry, it’s extremely disingenuous to do what we do. These fees may exist for reasons that business people understand, but when a fan tries to buy a ticket for $60, and they pull out their wallet and it ends up being 80-something? Just tell them it’s an $85 ticket, so they don’t feel scammed in the process.

– Gary Bongiovanni, President, Editor in Chief of Pollstar

 

Admittedly, the story looks grim: Earnest rock band goes up against corporate behemoth and loses (possibly setting career back a few years in the process). Meanwhile, the corporate behemoth grows bigger still, with no end to its corporate behemoth-ing in sight. Will anyone stop this greed train?

To date, many have already tried and failed. Despite the success of a handful of class-action suits against Ticketmaster, lawmakers haven’t made much headway in introducing legislation that caps service charges on tickets. In 1990, both California State Assemblyman Rusty Areias and New York State Representative Jerrold Nadler proposed measures to cap service charges on ticketing at 10%. Both proposals died in committee on more than one occasion.

Free market advocates and Milton Friedman fans would offer that it’s just as well – that we have no right to decide how much individuals and businesses can charge or earn for their services. Meanwhile, good-government advocates are likely to see this as one of those places where some regulation would be likely to help the overall market, rather than hinder it.

In 1994, after hearing Pearl Jam’s congressional testimony, U.S. Rep. John D. Dingell (D) sponsored a bill along with Rep. Gary A. Condit (D) that would require ticket companies to disclose all service fees up front and on the face of tickets, demonstrating Congress’ amazing ability to miss the point of legislation. By 1994, Ticketmaster was already disclosing their fees on all tickets, and the argument provided a perfect strawman for folks like later Ticketmaster CEO Nathan Hubbard to rebut in blog posts.

In a 2010 post titled “Ticketology”, Hubbard writes: “We get it – you don’t like service fees,” and then goes on to explain to us that what we don’t like about them isn’t that pesky and possibly outrageous dollar amount, but rather the fact that we don’t know about them up front in the purchasing process. The post introduced Ticketmaster’s new policy of disclosing their service charges up front in the online order processing system, as opposed to at the end of the purchase. ‘Problem solved!’

A glimmer of hope for the price control side appeared in Baltimore earlier this year, as a Maryland court of appeals struck down Ticketmaster’s service charges under the guise of a longstanding anti-scalping city law. A temporary bill reversed the ruling, but in June, City Councilman Carl Stokes introduced a new bill to cap service charges at 15%, a move designed to limit some of Ticketmaster’s power without crippling smaller local brokers’ ability to cover legitimate overhead costs.

In July, Stokes’ bill suffered a fate far worse than death: It passed, with amendments that specifically removed the cap, as well as a few other consumer protections. Testifying in favor of the amendments were a host of lobbyists. Marceline White, director of the Maryland Consumer Rights Coalition, was the lone public dissenter. The amended bill passed 4-1.

“It’s not a bill anymore, you might as well just throw it away,” a frustrated Stokes told reporters after the vote. “It allows exorbitant fees to go even higher. Now there’s no limit to how much price gouging can take place in the city of Baltimore.”

Steps Sideways and Forwards

In 2012, String Cheese Incident channeled some of its lingering resentment towards Ticketmaster into a symbolic protest that actually did benefit their fans, albeit monetarily.

The band made a series of private deals with box offices in order to purchase tickets for their own shows upfront, and without service charges. They then resold those tickets on their own website for face value.

When Los Angeles’ Greek Theater refused to make such a deal, the band organized friends and fans with $20,000 in cash to make 400 purchases at the box office, and had the tickets returned to the band’s home base of Colorado, to be sold on their website.

Meanwhile, Comedian Louis C.K. seems to have found the sweet spot that Pearl Jam was unable to locate two decades ago.

In the past five years, C.K. has been able to leverage his comedic success into increased control over his own business practices, which has included becoming his own ticketing agent. For his most recent tour, C.K. rented theaters that didn’t have exclusive contracts with ticketing agents or promoters, and then sold tickets to his shows exclusively through his own website for $45 flat – all fees included. It took more work on his part, but as a result, C.K. was able to sell out his shows, make a healthy profit, and still keep costs low for his customers.

Granted, C.K. may end up being more of an exception to the rule than a clear example of the way forward. On one end of the spectrum, few artists will ever reach a level of success like C.K.’s, which is what has allowed him to negotiate and innovate in such a way. On the other, C.K. has yet to deal with audiences the size of Pearl Jam’s, and the costs involved with hosting one standup comic with a microphone pale in comparison to the costs of hosting a five-person rock band and crew.

Ticketmaster would argue (and they did, in Pearl Jam’s case) that they sell tickets to the biggest shows, because they are the best at making those shows happen, and therefore should charge the most for it.

Ticketmaster’s singular success, along with the relative lack of regulation they’ve been confronted with in the face of one lawsuit after another, can seem at times like a referendum on the very merits of the ‘free market’ concept, which Americans have grown increasingly divided over in recent years. By the letter of the law, Ticketmaster has done nothing illegal, and could be cast as an honest champion of free market principles by those who’d care to make that argument.

But the casual observer—who would be right to notice that these guys keep getting sued over the same damn thing—might wonder if what Ticketmaster does is only ‘legal’ in the same way that putting your company’s mailing address in the Bahamas for tax purposes is ‘legal’. Although Ticketmaster might have ironclad contracts with promoters and venues; it’s the social contract they may have broken.

If you believe that unfettered free markets lead to undue levels of income inequality, then the entire live entertainment industry in the 21st century can be seen as a microcosm of that inequality. While many concerts were once put on at a loss (theoretically leading to more sales of recorded music to make up the difference) that paradigm has flipped in the current century: Now that sales of recorded music have decayed (due in part to piracy), artists, promoters, venues, and ticketing agents alike have jacked up the prices of live entertainment, knowing it’s their only avenue to compensate.

As everyone claws to get their piece of the new pie, we see familiar patterns emerge: The top 1% of artists earn the majority of live music revenues (56% of revenues in 2003, up from 26% in 1982). In 2010, Ticketmaster—a single corporate entity—held a whopping 83% market share. Meanwhile, the wealthiest consumers get the best seats in the house, while the rest either spend money they don’t often have to see the man who wrote “Born In The U.S.A.”, or they accept that seeing their favorite artist may now be another “luxury” that they can no longer afford.

Casey Rae, deputy director of the Future of Music Coalition, believes change is coming, whether anyone wants it or not: “What you’ve got is a classic bubble, and I can pretty much guarantee that it will pop, the only question is when. I don’t think you can run a live music economy on people going to shows once a year because they can’t afford it.”

Even our ‘free market’ enthusiasts might agree: If the prices of tickets keep rising, they will eventually hit a point when people just won’t buy them anymore, and the market will “correct” itself. Until that time comes, if it ever does, Ticketmaster will continue to reap massive profits, and the average ticket buyer’s only hope is that a new free market David will somehow challenge Ticketmaster’s Goliath in a duel that actually brings down ticket prices in the process. Either that, or we’ll all have to start earning more to keep seeing concerts by our favorite bands. The American experiment continues.

Blake Madden is a musician and author who lives in Seattle.

This entry was posted in All Stories, Featured Stories, Guest Posts, Industry Trends, November 2013, Rants and Raves. Bookmark the permalink. Both comments and trackbacks are currently closed.
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