Shadowy evil robots victimize poor Ticketmaster

The New York Times explains how Ticketmaster is a victim of shadowy malign robots:

Concert Industry Struggles With ‘Bots’ That Siphon Off Tickets

By BEN SISARIO
Published: May 26, 2013

As the summer concert season approaches, music fans and the concert industry that serves them have a common enemy in New York.

Paul Allen, former CEO
of TicketMaster

You know, I haven't bought concert tickets in a few years, but when I was paying 40% "service" charges to Ticketmaster so my son could go to shows, my impression was that the concert industry "serves" fans mostly in the Rod Serling sense.

And in Russia. And in India.

That enemy is the bot. 

“Bots,” computer programs used by scalpers, are a hidden part of a miserable ritual that plays out online nearly every week in which tickets to hot shows seem to vanish instantly. 

Long a mere nuisance to the live music industry, these cheap and widely available programs are now perhaps its most reviled foe, frustrating fans and feeding a multibillion-dollar secondary market for tickets. 

According to Ticketmaster, bots have been used to buy more than 60 percent of the most desirable tickets for some shows; in a recent lawsuit, the company accused one group of scalpers of using bots to request up to 200,000 tickets a day.
Ticketmaster and its parent company, Live Nation Entertainment, have stepped up efforts to combat bots, in part to improve the ticket-buying experience for concertgoers, but also to burnish the company’s reputation with consumers. 

In a previous century, I got into an email argument with Paul Krugman over the economics of the concert ticket business. Krugman announced that he was working on explaining how oddities of the concert ticket business could be accommodated to microeconomic theory. For example, why are concert tickets priced at X, but routinely a huge fraction of them end up at third party resellers being sold for say 2X? Why don't the artists charge 2X in the first place? (Krugman is most celebrated today for his opinions on macroeconomics, but back then he didn't seem very interested in macro.) Before he published his theoretical breakthrough, however, he wanted to know if anybody else had any theories.

So, I wrote to Krugman to explain my theory: The Ticketmaster monopoly is a big skim-scam. Either the corporate bosses are themselves skimming tickets for resale before the public can buy them, or they are letting employees skim as a form of untaxed compensation. 

The result has been a game of cat and mouse between the company and the bots. 

“As with hackers, you can solve it today, and they’re rewriting code tomorrow,” said Michael Rapino, Live Nation’s chief executive. “Thus the arms race.”  On a recent Thursday afternoon, the screen showed that the red visitors were making 600 times more ticket requests than those the system identified as being most likely human. ...

Bots are not kicked off the system, but rather “speedbumped” — slowed down, sent to the end of the line or given some other means of interference, to allow a regular customer through. 

“We’re not trying to stop anybody from buying tickets,” Mr. Carnahan said. “We’re just trying to make sure that a fan can buy the tickets.” ...

Live Nation will not say how many of the 148 million tickets it sells each year are bought using bots, and in many cases it may not know. Few ever admit to using the programs; official groups like the National Association of Ticket Brokers, which represents many of the biggest resellers, condemn them and say they supports anti-bot measures. But people at nearly every level of the concert business blame bots for wreaking all kinds of economic havoc. 

“There are sold-out shows in reserved-seat houses in New York City where we will have 20 percent no-show, and that 20 percent will be down in the front of the house,” said Jim Glancy of The Bowery Presents, an independent concert promoter in New York. “It’s speculators who bought a bunch of seats and didn’t get the price they wanted.” 

Concert promoters, artist managers and ticketing services say that bots are now an ever-present force, not only during the high-traffic moments when a big show officially goes on sale, but also at the odd moments when a promoter releases a few dozen extra seats with no announcement. 

Three years ago, four men connected with a company called Wiseguy Tickets were indicted on conspiracy, wire fraud and other charges, for apparently using bots to get tickets to Bruce Springsteen, Hannah Montana and other concerts.

I'd be more sympathetic toward this story of Ticketmaster being plagued by bots if Bruce Springsteen tickets hadn't been notoriously skimmed before the Internet existed. In my 1999 discussion with Krugman I pointed out my friend Kevin's experience in 1980 camping out on the sidewalk in front of a Ticketmaster window (or perhaps Ticketron, back then which was later bought by Ticketmaster, anti-trust laws be damned) to be first in line so he could get front row tickets for one of Bruce Springsteen's four shows at the L.A. Forum. At 9:00:00 AM he tried to buy front row seats ... and all that was available was something like the 37th row.

Springsteen, who back then would set moderate ticket prices that he thought would affordable by working class folks, was publicly outraged by the vast amount of skimming for his 1980 Los Angeles shows. (It would be really interesting to have a frank discussion with Springsteen -- a well-intentioned, intelligent, and not naturally cynical man -- about what he's learned over the decades about the theory and practice of the music industry.)

The NYT article eventually gets around to a red pill perspective:

Not everyone is convinced that bots are the primary villain of the everyday concertgoer. The Fan Freedom Project, a nonprofit group financed by StubHub, has pushed for anti-bot laws around the country, and Jon Potter, its president, praised Ticketmaster for filing its lawsuit last month. 

But he also criticized the industry practice of “holds,” in which sometimes large blocks of tickets are reserved for sponsors, fan club members and industry contacts, and never go on sale to the general public. 

In other words, the ticket-selling industry is skimming tickets, just like Springsteen said in 1980.

When it comes to the secondary ticket market, Live Nation has a complicated position. As much as it is trying to block bots, it also profits from the ticket resale market through TicketsNow — its own version of StubHub — as well as through deals with major sports groups, like the National Basketball Association. Mr. Rapino sees no contradiction in Live Nation’s stance.

I bet it's complicated.

Live Nation Entertainment was founded a couple of years ago by the merger of Live Nation concert promoters, which had pretty much of a monopoly on big concert promotion, and Ticketmaster which had pretty much of a monopoly on ticket sales. The Obama Administration cleared the merger with some stipulations to promote competition.

Sure, why not let two monopolies merge into a super-monopoly? What are you, some kind of conspiracy theorist?

Basic economic theory suggests that profit maximization occurs through price discrimination.

The reason why third parties go to the trouble of crafting bots is to profit from price discrimination: resell tickets to some 37-year-old lawyer who wasn't paying attention when the tickets first went on sale.

But, economic theory also suggests that ultimate profit maximization occurs through perfect price discrimination under monopoly conditions. In other words, economic theory suggests that it would be pretty stupid for the Ticketmaster / Live Nation monopoly to let a bunch of third parties vacuum up much of the price discriminating profit, rather than proactively grab that piece of the pie for themselves. If the bands don't like it, they can ... well ... What can they do?

Typical fan's reaction to Pearl Jam's
defiance of Ticketmaster monopoly

A couple of decades ago, the biggest band in America was Pearl Jam. They were outraged by how much in fees Ticketmaster insisted on adding onto their fans' ticket costs. So, they decided to defy Microsoft billionaire Paul Allen's TicketMaster monopoly. They wound up getting frozen out of most of the prestigious venues with only State Fairgrounds and the like available to them. In theory, you could make a pretty good Frank Capra movie about how the public rallied to support the spunky rock band bravely standing up to the corporate monopolist. But, instead rock fans mostly decided that Pearl Jam had to be uncool losers to defy a billionaire.

When I pointed out to Krugman in (I believe) 1999 this long history of corruption within the concert ticket business, he was offended. There was no place in economic theory for this kind of insinuation, so why was I bringing it up? We went back and forth for awhile, but Krugman became increasingly acrimonious at the very idea that the music industry wasn't completely on the up and up.

Interestingly, a 2010 NYT profile of Krugman reveals:

Certainly until the Enron scandal, Krugman had no sense that there was any kind of problem in American corporate governance. (He consulted briefly for Enron before he went to the Times.) Occasionally, he received letters from people claiming that corporations were cooking the books, but he thought this sounded so implausible that he dismissed them. “I believed that the market was enforcing,” he says. “I believed in the S.E.C. I just never really thought about it. It seemed like a pretty sunny world in 1999, and, for all of my cynicism, I shared a lot of that. The extent of corporate fraud, the financial malfeasance, the sheer viciousness of the political scene—those are all things that, ten years ago, I didn’t see.”