Dead kelly, p.1
Ticket Masters, page 1
Copyright © Dean Budnick and Josh Baron, 2011
Published by ECW Press
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Library and Archives Canada Cataloguing in Publication
Budnick, Dean
Ticket masters: The rise of the concert industry and how the
public got scalped / Dean Budnick, Josh Baron.
Includes bibliographical references.
ISBN 978-1-55490-941-4
Also Issued As:
978-1-55490-949-0 (PDF); 978-1-55022-949-3 (PBK)
1. Ticket brokerage. 2. Performing arts—Ticket subscription.
3. Performing arts—Ticket prices. 4. Ticket scalping.
I. Baron, Josh II. Title.
HD9999.T522B83 2011 381’.4579 C2010-907123-9
Developing Editor: Jennifer Hale
Cover Design: David Gee
Text Design: Tania Craan
Production and Typesetting: Troy Cunningham
Dean: To my gold circle: Leanne Barrett, Caroline Budnick, Quinn Budnick, Alfred Budnick and Janet Budnick
Josh: To Rachel: Thank you for enduring my frequent absences during our first year of marriage and for being my biggest champion through your ceaseless encouragement.
PROLOGUE
The Summer of Their Discontent
THE CHAIRMAN HAD SPOKEN.
On the evening of August 3, 2010, Irving Azoff, whose role as chief executive officer of Ticketmaster had recently expanded following an industry altering merger that furnished the new title of Live Nation executive chairman, bypassed the company’s publicity firm to offer his first direct message to ticket buyers via the social networking service Twitter.
Azoff’s comments fell in the midst of what looked to be the most miserable U.S. summer concert season on record. Weak ticket sales had forced the cancellation of numerous high-profile performances, starting with a series of stadium shows by Azoff’s longtime management client the Eagles on a bill with country superstars the Dixie Chicks and Keith Urban. In the weeks that followed a number of “recession-proof” acts did the same, as the Jonas Brothers, Rihanna and Lilith Fair all canceled multiple dates. Limp Bizkit scrapped its U.S. amphitheater tour and Christina Aguilera soon followed suit, citing “prior commitments.” Even the annual American Idols Live! outing, which had blown out tickets in prior years, was forced to scale back its itinerary, dropping seven shows and rescheduling many others.
Entertainment reporters and Wall Street pundits alike took particular interest in the flagging amphitheater sales figures since most of these “sheds” were under the control of Live Nation. The summer of 2010 represented the first official go-round for the blended company after the government had approved the union of the world’s largest live event promoter, Live Nation, with the world’s largest ticketing agency, Ticketmaster (which had recently acquired the world’s largest artist management firm, Azoff’s Front Line).
The Department of Justice’s ruling had been preceded by nearly eleven months of inquiry and two congressional hearings. In February 2009, shortly after the corporations announced their intent to unite, Azoff had been summoned to Capitol Hill in a moment that echoed former Ticketmaster CEO Fred Rosen’s 1994 appearance before Congress in the wake of a public dustup with Pearl Jam. However, unlike the earlier inquiry, which in many respects resulted from the fight over a nickel, by 2009 billions of nickels were in play. As a result, both the House Subcommittee on Antitrust and the House Subcommittee on Courts and Competition Policy elected to weigh in on the matter.
Ultimately though, it fell to the Obama White House and his Department of Justice to determine whether to block the merger as an illegal restraint of trade. The federal government eventually granted its permission over the strident objections of opponents, who charged that the mega-company would raise prices and inhibit the development of new musical artists.
By August 2010 a growing segment of the financial community began offering its own criticism, as initial optimism regarding the prospects of Live Nation Entertainment was falling in tandem with the rate of ticket sales.
Over the course of the summer the company had taken a series of increasingly desperate measures to draw audiences into its amphitheaters. Package deals that offered coupons for a free soda and a hot dog gave way to mid-June’s “No Services Fees” promotion, which proclaimed, “Your summer concert tickets at Live Nation amphitheaters now have No Service Fees” (even as an asterisk qualified, “Parking, shipping and other non ‘service fee’ costs may apply”).
In late July the company instituted a $10 ticket program, which dropped prices even lower, scrambling to achieve a short-term financial benefit that led some prior ticket holders to grouse about their decision to purchase seats during initial sales at much greater expense.
When the expected windfall wasn’t realized, Live Nation then outfitted employees with sandwich boards and paraded them through its venues, tickets in hand, hawking the cheap seats for future shows. Yet despite all of this, sales figures remained low as audiences were uncomfortable with the overall price structure of the concert experience.
In the face of these events, at 10:53 p.m. on August 3, Executive Chairman Azoff shared his sentiments with the public via the immediacy of Twitter.
“So if you want ticket prices to go down stop stealing music.”
Seemingly absolving his company of responsibility, Azoff placed the burden squarely on the overburdened shoulders of consumers. This wasn’t the first time he had conveyed such a message. A few weeks earlier, at Fortune magazine’s Brainstorm Tech conference in Aspen, he had shared similar thoughts about his customer base with the magazine’s managing editor: “If they could figure out a way to steal the tickets they would, just like they steal movies and music. But so far they haven’t figured out how to do that.”
The declining sales of recorded music held deep significance for Azoff, who in addition to running Front Line Management had previously headed both MCA and Giant Records. Still, few concertgoers appreciated his sentiment, flustered and frustrated as they were by parking costs, concession prices, $5 add-ons for the “luxury” of a short, ordered line into the venue, as well as the very price of tickets themselves, with their vexing array of fees. Consumers pointed, for instance, to Lady Gaga’s Monster Ball tour, in which a single $20 lawn ticket could cost nearly $50 after a “facility charge” ($12), “convenience charge” ($10.05), “order processing fee” ($5.20) and “TicketFast Delivery,” i.e., print-at-home ticketing ($2.50).
The sheer magnitude of it all had led one would-be concertgoer to profess in an online forum, with equal measures of humor and irritation, “Screw Live Nation, I’m grabbing these tix after the show.”
Other music fans were baffled by their attempts to ascertain the fundamentals of concert ticket pricing. What is included in a service fee, they wondered, and why does the cost of that service vary with the price of a ticket? Who profits from these extra charges? Why are tickets sold online with impunity for five times their face value? Aren’t there laws to protect consumers? Are musicians really scalping their best seats? And what’s up with these VIP packages? Where do they find those front row tickets, and who reaps the benefits? Just what is a facility fee, and if the public is paying for renovations of some sort, shouldn’t all the amphitheaters be recast in platinum by now? And just how did ticket prices get so high anyhow?
The story is complex, the players dynamic, the motives varied.
It all began with the simple, elegant notion that tickets could be marketed and sold more efficiently with the aid of a computer.
That eureka moment unfolded in the midtown Manhattan of the 1960s.
CHAPTER 1
A Few Reservations
THE LAST THING HARVEY DUBNER needed was another idea man.
He’d seen his share of them parade though his Madison Avenue office at New York City’s Computer Applications Incorporated (CAI). As vice president of system design, Dubner occupied a unique role at the software house, serving as CAI’s lone hardware expert. Most anyone who was pitching a potential project ultimately was funneled to Dubner, who gauged its viability.
Lately this had meant deflating any number of computer-enhanced caviar dreams. Ever since CBS News had enlisted the newly minted UNIVAC to provide analysis of the 1952 U.S. presidential election, the mainframe computer had become increasingly mainstream. Over the years that followed, the public grew fascinated with electronic data processors and their seemingly limitless potential. Although computing power remained cost-prohibitive, with price tags for the larger systems running well into the millions by 1966, there was no shortage of dreamers (and schemers) who sought to put mainframes to use.1
This was where “service bureaus” ca
me into the picture. CAI, then the largest such entity on the East Coast, created custom software solutions packaged with the appropriate computer host. Typically this meant developing programs for businesses such as Western Union, TWA and even NASA. However, most any potential client with financial means would be considered if the technical feasibility of the proposed project passed muster. In many cases such determinations fell to Dubner, and in this particular week in early 1966, his lunch hours had been filled with wide-eyed entrepreneurs eager to enlist the company to develop algorithms capable of countering the house odds in Las Vegas or anticipating fluctuations in the stock market.
Dubner’s latest visitor had an altogether different goal in mind. Jack Quinn, a seasoned “start-up man” in his mid-forties, sought CAI’s assistance with his plan to utilize a mainframe to sell Broadway theater tickets. Dubner would have none of it.
“You have it all wrong,” the weary, famished VP responded. “This is not the type of problem that requires a big computer. Your main problem is servicing terminals. I wouldn’t want to touch that with a big computer.”
It also became apparent to Dubner that Quinn had no sense of the cost associated with developing such a system. Quinn didn’t blink when Dubner explained that the mainframe he coveted could cost $7 million and didn’t demonstrate any sense of relief when Dubner suggested a $120,000 alternative.
Looking back more than forty years later, Dubner laughs, freely recalling his initial encounter with Jack Quinn, the man he now credits for giving him the credibility and confidence he needed to branch out on his own and create Dubner Computer Systems in 1970. “I was not in the sales mood. I kept making trouble by telling him he was out of his mind. He’d say something and I’d knock him down. All I knew is that the guy wanted a computer system and had no concept of how much this thing could cost. That was on a Thursday. On Friday he called me up and said, ‘Can you come to my office? I like your ideas.’ I said, ‘Uh-oh.’”
Dubner was wary of wasting his time, but Quinn was only a few blocks away, so he consented.
Dubner arrived on Friday afternoon to discover that Quinn’s surroundings were somewhat Spartan and not even his own. Instead the president of the proposed new venture was occupying a corner desk in the office of another individual. The fact that the space was owned by Broadway producer Hal Prince mollified him only slightly, if at all.
Dubner took a seat, and Quinn jumped back into their exchange of the day prior.
“I like what you’re telling me. I like the concept of a small system. I like your approach. You’re an engineer, not a programmer. I’m very unhappy with programmers. They tend to do things wrong.”
Dubner found himself warming to the guy.
“It’s going to cost a lot of money. Not seven million, but a lot of money.”
“What’s a lot of money?”
Dubner pulled a number out of midair.
“Two million dollars.”
Quinn didn’t hesitate.
“Okay.”
“Okay?”
“Yes, no problem. How fast will it take you to build?”
“Well . . .” Dubner briefly sputtered before putting his mind to the task. “We should start with a pilot system. If we move on this right away, I would imagine that in three or four months we can have something running with two or three terminals.”
On Monday morning Harvey Dubner received a call. Quinn was prepared to move forward with CAI, provided that Dubner would serve as project manager. By the week’s end Dubner would have men and a dedicated machine set to create the first “computer-controlled communication service” on behalf of Ticket Reservation Systems, Inc.
From the vantage point of four decades on, Dubner grins at his memory of the initial encounters. “That’s how it all began,” he says. “I didn’t want to have anything to do with Jack Quinn when he first walked into my place. I described how I would do the job, but I was not selling him because I didn’t believe him. It was not a sales meeting; it was a free-flowing technical discussion. All I knew is here’s a guy who starts saying the right words, saying he likes me, and I start liking him. And then he jumped on it. I still had no idea where he was getting his money.”
TWO MONTHS INTO THE JOB, Dubner had ceased wondering about Quinn’s capital resources, not only because he was being paid regularly but also because he had finally discovered the source of Quinn’s cavalier attitude toward finances. Ticket Reservation Systems was being bankrolled by an investment fund that controlled the world’s largest distillery, which in 1965 became the first such company to exceed the $1 billion annual sales mark. The fund’s principal was Edgar M. Bronfman, the scion of Seagram’s owner Samuel Bronfman and himself head of the company’s U.S. operations.
Samuel Bronfman was born in Russia and immigrated to Canada as an infant in 1891 with his parents who were escaping anti-Semitic pressures in their homeland. His father, Yechiel (soon anglicized to Ekiel), entered a variety of businesses, including horse-trading, before purchasing a series of hotels, where the bars proved particularly lucrative, despite the brief interlude of Canadian Prohibition from 1916 to 1919. Sam took note of his father’s success with liquor and in 1924, five years after Yechiel passed away, broke ground on a family-run distillery. The company found swift success, aided in no small part by its practice of exporting liquor to the United States, which was then in the midst of its own Prohibition. Three years later, the Bronfmans acquired their rival, Joseph E. Seagram & Sons, and the resulting Distillers Corporation-Seagrams would become the preeminent worldwide producer and distributor of alcohol.
Edgar, the oldest male of Sam’s four children, was born in 1929. Known for his strong will (at Trinity College School, which he attended through twelfth grade, he was identified as “the boy who was caned the most”), Edgar asserted his interest from an early age in the position that he assumed would be rightfully his, that of his father’s successor. By 1957 the elder Bronfman deemed Edgar worthy of heading Joseph E. Seagram & Sons, the U.S. subsidiary of the company, soon to be based in midtown Manhattan’s new Seagram Building.2
While living in New York City, Edgar took an increasingly active role in the arts.3 The 120th season of the New York Philharmonic opened on September 26, 1961, and the New York Times listed Edgar and his wife Ann as prominent box holders in attendance, along with Vanderbilts, Guggenheims and Rockefellers. Edgar’s interest in the entertainment realm soon moved beyond that of a socialite. Over the years he would serve as an angel investor on Broadway, quietly fronting money for shows.
Edgar also had Hollywood aspirations, and in early 1967 he cofounded Sagittarius Productions with the intent to create films for U.S. television, which then could be released theatrically in foreign markets. Looking back on that venture in 1998, he wrote, “I’d always loved entertainment, and this was my chance to get my hand in the business. More than that, it provided an outlet for my creative drive. Indeed, while there were easier ways to make money than investing in the motion picture/TV industry (or Broadway, as I also found out), participating in an artistic endeavor proved to be uniquely satisfying.”
Later that same year Bronfman guided his Cemp Investments fund to acquire a stake in MGM amounting to eighteen percent of the venerable film studio. In 1951 Sam Bronfman had created Cemp (an acronym for his children’s first names: Charles, Edgar, Minda and Phyllis) as a means to protect their interest in his company and also to build for their future. Mr. Sam, as he was called by his employees, seeded Cemp with a majority of the Distillers Corporation shares, along with additional funds from his children’s trusts. His son’s MGM stock purchase unsettled Sam to the point where he made a rare closed-door office visit. As Edgar recounts in his biography, Good Spirits, his father inquired “whether we were buying all that stock so that I could meet girls.” To which Edgar assured him, “Father, nobody has to spend $56 million to get laid.”
Edgar’s ambitions in the entertainment world found another early outlet with the formation of Ticket Reservation Systems (TRS), funded by Cemp and incorporated on May 4, 1965. The timing seemed fortuitous, as on May 23, New York Times chief drama critic Howard Taubman wrote a piece entitled “How To Civilize Ticket Sales.” Taubman’s prescription was “a computerized ticket system,” whereby “what is beyond doubt is that the process of acquiring tickets would become infinitely easier and pleasanter.” TRS intended to become the first company to initiate such a process and on July 13 trumpeted its plans for “a countrywide electronic system, starting with the 1966–67 season.”
