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Monday, Nov 9, 2009
Thanks to the likes of Limp Bizkit, Pearl Jam and Britney Spears, concert prices are coming down. So why are those damn ticket fees still going through the roof?
Jun 27, 2000 | As music fans queue up for their favorite summer concerts, there's an unmistakable smell of conflict in the air.
A surprisingly large number of artists -- Phish, Britney Spears, Pearl Jam, Red Hot Chili Peppers, Creed, the Dave Matthews Band, the Dixie Chicks, Third Eye Blind and Christina Aguilera, among others -- are working hard to keep ticket prices down (a relatively modest $30-$40). Even old-timers like Bob Dylan, the Allman Brothers and AC/DC -- acts who usually charge more (since their fans skew older and have more cash on hand) -- are on the road with ticket prices that max out around $40.
Meanwhile, concert industry middlemen are showing little restraint: Their notorious service fees have escalated to as high as $9 per ticket. The result? While fans catch a break via some forward-thinking artists, their wallets are deftly picked before they ever stroll into an arena.
Why the disparity? According to promoters and building owners, the artists' nightly take has become so large it leaves the middlemen scrambling for other ways to make money. In other words, service fees -- originally created to cover the cost of placing a ticket order -- have become a robust revenue stream.
"It's a profit center," explains one industry source. "Now they have an incentive to raise service fees." The "they" here is SFX Entertainment, the concert industry behemoth that's come to dominate the business over the past three years by snapping up most of the major summer amphitheaters ("sheds" as they're known in the trade). SFX is promoting nearly 30 tours this year, including summer swings by Spears, KISS, Steely Dan and the George Strait Country Music Festival. By the end of the year, SFX will have its hand in over 3,000 shows. Meanwhile, SFX itself is in the process of merging with FM radio giant Clear Channel Communications in a $4 billion deal. So much for the concert business' mom-and-pop days.
Industry talk suggests that when SFX and Ticketmaster struck a deal in late '98, a deal in which SFX agreed not to challenge Ticketmaster by creating its own ticketing company, SFX was freed to pocket service fees above a certain level (around $4). Let's put this in practical terms: For a sold-out Sting show that attracts 15,000 fans, a $7.50 per ticket service fee and a $3 facility fee lands SFX $100,000 long before the first note is played -- or $6 beer sold. (Facility fees are exactly that: You pay for the honor of entering a venue. Some facilities now charge as much as $5.50 per customer. And no, that doesn't always cover parking.)
A Ticketmaster spokesman had no comment. SFX's senior vice president Mitch Slater confirms that his company's cut of Ticketmaster's service charge has become a helpful revenue source. But he insists, "There is a sense of responsibility not to charge ridiculous fees."
