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June 19, 2017

'Paperless' ban aids CT ticket resellers

PHOTO | Contributed TicketNetwork's South Windsor headquarters is on Gerber Road.
A view of TicketNetwork’s website, which allows users to buy and sell tickets to concerts, sporting and other events.

In a victory for ticket-reselling companies, Gov. Dannel P. Malloy has signed into law new requirements anticipated to boost sales in the secondary market — transactions facilitated through online exchanges like those run by South Windsor-based TicketNetwork, StubHub and others.

The law essentially amounts to a ban on “paperless” ticketing, which various musical acts, sports teams and venues are increasingly using to make it more difficult to transfer or sell purchased tickets.

A similar bill died in the legislature seven years ago, facing fierce resistance from Connecticut entertainment venues — including the Bushnell Center for Performing Arts, Goodspeed Musicals and the Palace Theatre in Waterbury — which say the new law will hurt consumers by making ticket prices more expensive. Meanwhile, ticket resellers portray the law as a matter of consumer rights — making it easier to transfer or sell tickets to others.

Connecticut now joins New York, which passed a paperless ticketing ban in 2011, and Virginia, which did so this year.

It's one of a number of business-facing bills that survived — or just as importantly for industry lobbies, died — in the Connecticut legislative session that concluded earlier this month, without passage of a two-year budget.

Lawmakers are expected to reconvene in special session this summer to hash out a spending plan, a process made more difficult by a projected $5 billion deficit.

Ticketmaster and various major musical acts, sports teams and others have used paperless ticketing over the past eight years to combat price markups charged by resellers and to retain more control over the resale process. In some cases, companies are involved in both primary and secondary ticket sales.

For example, Ticketmaster — a dominant primary seller — entered the secondary market in 2008 through its $265 million acquisition of TicketsNow.

Paperless ticketing systems often require ticket purchasers to swipe their credit card at the venue to gain entry. That places an undue burden on consumers who want or need to sell or give a ticket to someone else, proponents of the new law argue.

“[Paperless ticketing] meant the brokers not being able to sell as many tickets as they otherwise could in Connecticut,” said Jay Mullarkey, TicketNetwork's vice president of broker and community relations. “[The new law] will help us sell more tickets.”

More transactions will mean revenue for TicketNetwork, which doesn't own the tickets it sells on its exchange, but receives a cut of each sale. The company says it employs more than 500 people in the state. StubHub, a major U.S. ticket reseller, has operations in East Granby, but recently announced it was closing that outpost and moving the 200 or so jobs to Salt Lake City, Utah. StubHub says it has 540,000 Connecticut users who sell or buy tickets online.

Under the state's new law, private venues, performers and their primary ticket selling partners must offer consumers a fully transferable ticket option, such as printable tickets or mailed paper tickets.

The law also allows venues with fewer than 3,500 seats to opt out of the new requirement. It also doesn't apply to events at public colleges.

It's unclear exactly how prevalent paperless ticket sales have been, and how often event attendees get turned away as a result of paperless restrictions.

But it's clear the technology has become more popular and has been embraced by performers including Bruce Springsteen, Iron Maiden and Adele, as well as the New York Yankees and Cleveland Cavaliers.

In a Department of Consumer Protection report released early this year, DCP said it canvassed 30 venues in the state and found that paperless ticketing is used infrequently.

However, the report cites a 2015 Kid Rock concert in the state in which the performer demanded that premium seats be sold through ticketless systems.

In its successful lobbying effort, TicketNetwork, which works with approximately 1,400 brokers, and other supporters of what is now Public Act 17-28, focused on a consumer-rights argument. They said paperless ticketing can cause headaches for consumers who may face hurdles trying to offload tickets, especially at the last minute.

“They were trying to stop people from reselling tickets, but they don't realize they hurt a lot of consumers,” said Evan Honeyman, TicketNetwork's director of business development. “This takes control and puts it back in the consumers' hands.”

Venues unhappy

While ticket exchanges are happy about the new law, a wide rift remains between them and area entertainment venues.

A number of Connecticut venues spoke out strongly against the paperless ticketing ban, arguing it mainly serves to pad the revenues of online exchanges and that any frustrations consumers face are largely exaggerated.

“Does anyone believe the live entertainment industry enacts measures simply to frustrate the people with whom we regularly do business?” Thomas Ferrugia, director of governmental affairs at the Broadway League, which represents more than 20 Connecticut performing-arts theaters, wrote in testimony against the proposal earlier this year. “However, the broker lobby makes this fallacious accusation to create the impression that they are acting in the best interests of our patrons when, of course, nothing could be further from the truth.”

Venues' main resistance is that ticket reselling often leads to marked-up prices. They also argue that resellers use “unscrupulous methods,” such as building websites that mimic the look of a particular venue and advertising available tickets before they go on sale. Use of bots that rapidly reserve tickets during pre-sales also remains a problem in some instances, though Congress outlawed the practice last year.

Connecticut considered paperless restrictions in 2011, which led to testy exchanges on both sides. During those deliberations, TicketNetwork filed a lawsuit against Bushnell CEO David Fay alleging that he slandered the company during public testimony. The suit dragged on for about three years before it was settled.

Meantime, New York restricted paperless ticketing in 2011, but its current Attorney General Eric Schneiderman issued a report early last year recommending that the ban be lifted because it was giving resellers an easier way to move tickets for marked-up prices.

Several major acts canceled appearances in New York because of its paperless-ticketing ban, including singer-songwriter Yusuf Islam, formerly known as Cat Stevens.

It's unclear how musical acts might respond to Connecticut's new law.

TicketNetwork's Honeyman said he doesn't think there will be major pushback in the state.

“If anything, [bands] should be happier their fans don't have to jump through hoops to get to their events,” he said.

Ferrugia said many venues are investing in cybersecurity to detect reseller activity with the aim of canceling tickets they purchase.

Venues, he said, are trying to please as many customers as possible — by offering the lowest-priced tickets — because they want repeat business.

If a customer buys a marked-up ticket on the secondary market, it can create negative feelings toward a venue. And “minor inconveniences” that can be created by paperless ticketing are worth it, he argued.

Transferring a ticket through a primary seller's proprietary system is “a very small price to pay for the often outrageous unscrupulous practices that we see in the secondary market and how many people are being taken advantage of by ticket brokers,” Ferrugia said.

Related story: Businesses largely held harmless in recent session

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