Ticket Re-Sellers, YouTube: The Many Ways Artists Are Being Scammed

Managers and artists across the music industry are rallying against YouTube because of paltry payouts.

According to the self-proclaimed “voice of the recording industry worldwide,” IFPI, ad-supported streaming platforms, led by GoogleÔÇÖs service, paid a meager $634m to recorded music rights holders in 2015ÔÇödespite boasting more than 900 million active music-listening users.

Subscription streaming platforms paid out more than three times as much, at two billion, across just 68 million paying punters. The difference? $1.37 billion.

On a related note, among the largest “secondary ticketing” (a.k.a. digital ticket sales) operators in the ticketing world is StubHub, owned by eBay. In the second quarter of this year (concluded June), StubHub hosted $1.06 billion in gross transactional revenues; money transactions that occurred on its marketplace between buyers and sellers. This was a 35 percent increase on the prior yearÔÇÖs quarter.

In three months, these transactions generated $225 million in net revenue for StubHub (eBay), an increase of 40 percent year-on-year. This growth was fueled by the recent acquisition of TicketBis (according to their site, “the best place to trade tickets”) and Ticket Utils (inventory management system), strengthening StubHubÔÇÖs global footprint.

eBay’s recent SEC filing revealed $834 million in net revenues (via StubHub) over the past four quarters.

In contrast to eBay, Live Nation owns multiple secondary ticketing brands however StubHub controls the larger market share. Live Nation runs TicketmasterÔÇÖs TM+ resale marketplace, powering both national and international platforms: TicketsNow (USA) and GET ME IN! (EU).

In November 2014, Live Nation acquired rival Seatwave, leaving Viagogo and Stubhub as its main competitors. ItÔÇÖs difficult to gather precise figures about LNÔÇÖs secondary ticketing business than eBayÔÇÖs, but we have enough information. In the last quarter, Live NationÔÇÖs gross transactional ticket resale revenues were up 43 percent year-on-year at constant currency. That’s eight consecutive quarters that Live Nation has seen growth upwards of 20 percent in secondary ticketing gross revenues. So how much money is changing hands on Live Nation’s resale platforms and how much is it retaining?

In 2015, Live NationÔÇÖs secondary ticketing operation handled $1.2 billion in gross transactional revenues; operating in 13 countries and delivering 34 percent year-over-year growth. In 2014, its resale marketplaces received $900 million in gross revenues, up 55 percent from 2013. What does this mean? It means revenue doubled over two calendar years. Those are broad calculations, but StubHubÔÇÖs net-to-gross revenue margin on resale in Q1 was approximately 22 percent.

Applying the same calculations to Live NationÔÇÖs resale business, the figures would total $264 million net revenues from secondary ticketing last year. Combined with StubHubÔÇÖs 12-month net revenue, that’s approximately ($834 million), a yearly net resale total equals about $1.1 billion between both companies.

The music industry’s portion of that $1.1 billion net revenue (an estimate) was money generated purely from the appeal of artists in addition to people willing to pay premium market prices versus the actual face value of primary tickets (typically sold through Live Nation).

However none of this resale cashÔÇöno matter which platform, Ticketmaster, StubHub or ViagogoÔÇömade its way (directly) back into artists’ pockets.

Some industry insiders are understandably outraged by this, which sparked the recent efforts of the Fan Fair Alliance in the UK. With backing by the managers of Mumford & Sons, Ed Sheeran, Arctic Monkeys, One Direction, Iron Maiden, Chvrches and Noel Gallagher.

Customary for most of the music businessÔÇÖ wider machinery, ticket resale is a topic that generally ignored. We all know why: record labels are not affected by the secondary marketplacesÔÇöitÔÇÖs the artists and managers that are most often hurt by this practice.

The likes of Universal, Sony and Warner who believe they have bigger fish to fry are currently not focusing their efforts on chasing these secondary ticket re-sellers, instead focusing on YouTube. But if secondary ticketing and artist fans continue to siphon off hundreds of millions of dollars each year without penalty, what does it mean for the sustainability of music careers in the future? Does it not affect everyone working in musicÔÇÖs global ecosystem?

It will be interesting to see whetherÔÇöas record labels increasingly demand a slice of artistsÔÇÖ live revenue as a standard practiceÔÇömore elements of the music industry will be drawn into the fray in future. Certainly YouTube deserves the flak and the lobbying efforts it’s catching to properly compensate musicians what theyÔÇÖre owed. Many might ask, as secondary ticketing revenues soar higher and higher, if Google warrants its status as the only scandal worth shouting about.

Ticket Re-Sellers, YouTube: The Many Ways Artists Are Being Scammed : The Source