"Is This The End Or Just The Beginning?"
Good afternoon, everybody.
I am delighted to be here today.
I have just come back from the MIDEM conference in France where the woes and the future of the record and publishing industries and their future digital relationship were being discussed.
The word "content" was being thrown around as if music equates to cans of baked beans. Many years ago at a Billboard conference in America I accused Ticketmaster of treating tickets as if they were cans of baked beans. However, much to my amazement, Fred Rosen delivered the goods to my offices - a truckload of baked beans!
The industry is in a precarious state. On the one hand, CD sales are dropping at an alarming rate: 10 percent in 2007 alone.
On the other hand, digital sales in music are finally creeping up to 15 percent of the total music market in 2007, equating to $2.9 billion. But there is a lag in transition from CDs to paid-for digital downloads because of piracy.
The spread of piracy has been allowed to expand unchecked because members of the recording industry neglected to talk to each other. To some extent, the public had an opportunity for revenge as we had treated them so badly.
In the same way we as promoters allowed our industry to be controlled by the third party ticket sellers, the record industry has allowed the ISPs the same position.
"The Internet has become a high tech Wild West, a lawless zone where outlaws can pillage works with abandon or, worse, trade them in total impunity." - Nicolas Sarkozy, President of FranceWhen computerisation began, we threw away the opportunity because of our incapacity to talk to each other and the ensuing greed that was offered by third parties.
From a lay point of view it must seem strange that whilst record sales are declining, the live business is blossoming. But there is a reason for this. Live music is a unique experience and people like to share that experience of the emotion of live music by being with their friends at a gig.
We have collectively tried and succeeded in improving the facilities at venues. Artists have upped their presentations and the older artists have a clear understanding of what the public wants to see and hear, and gives it to them. However, the one aspect that we have failed miserably with is the ticket.
Paul McGuinness gave an inspiring speech at MIDEM. He attacked the ISPs, calling them thieves. He berated them for not taking a responsible view on the issue of piracy. I quote: "I call on them today to start doing two things: First, taking responsibil-ity for protecting the music they are distributing and second, by commercial agreement, sharing their enormous revenues with the content makers and owners."
He accused the heroes of Silicon Valley as manufacturers of burglary kits. However, when I had a drink with Paul and asked him about the secondary ticket market, he said that U2 would run its own auction site.
So, on the one hand, he is attacking the Internet pirates for stealing his artist's music but, on the other hand, he is quite happy for the very same fans to be ripped off by the secondary ticket market, providing the money, of course, goes to him and his artist.
This is the dilemma that the industry is facing today: honesty and a duty of care to the thousands of fans that support us.
"Over the last seven years, the share of total ticket sales for the Top 100 tours has declined from 86 percent down to 59 percent."
In the late 1990s, Bob Siller-man, having made a fortune in radio, started to roll up promoters and created SFX. He firmly believed that tickets were under-priced and his contention was that if a scalper could get $500 for a ticket then that should be the price.
This created a huge hike in ticket prices, particularly in the U.S.A., which came to a head with Barbra Streisand and The Rolling Stones selling tickets for more than $1,000 each. But this has backfired, particularly in Europe where there is resistance to such high prices.
By and large, everyone else in the industry had deliberately under-priced tickets; one, to create demand and, two, to prevent a huge imbalance between the top and bottom of the market.
However, it is interesting to note that in America, where the average ticket price has increased from $38.70 in 2004 to $61.45 in 2007, the number of tickets sold has decreased from 72.2 million in 2004 to 63.5 million in 2007. Over the last seven years, the share of total ticket sales from the Top 100 Tours has declined from 86 percent to 59 percent.
On the other hand, on a global level where the secondary market has not taken such a grip and ticket prices such a hike, gross sales in 2007 have increased by 9.8 percent.
As Internet technology improved, fans switched from physically buying tickets to buying them over the Internet and, at the same time, peer-to-peer piracy in music ran amok. Savvy promoters thought that they had hit the jackpot with Internet sales as they could now collect detailed data about their fans. In return, the fans should have been offered better opportunities and rewards - but they weren't.
The truth is that we began to alienate fans by inventing and thus increasing more and more box office charges. In America, promoters and venues had vested control of ticket distribution to virtually one company. As such, the actual price printed on the ticket started to become meaningless.
A very strange game was created between the promoters and the box offices, as well as the artists and the box offices. Artists tried to take more of the pot to the point where it was uneconomical for the promoters to do their jobs properly.
In return, promoters created inside deals with venues and box offices in order to counterbalance so that they could get a fair share of the proceeds. But the fans lost out, because "add-on" ticket charges to the prices printed on the tickets became expensive.
In the meantime ticket scalping, or touting as it is known in the U.K., which had been around since the business started albeit in a very small way, suddenly came to the forefront. Internet technology allowed the touts to become "legitimate" by changing their name to the secondary ticket marketeers.
Whilst the record companies, through lack of foresight and core planning, allowed the digital industries to create Web sites that enabled the consumer to steal with impunity, we in the live industry allowed the very same ISPs to carry traffic which allows the public to be ripped off when trying to purchase a ticket.
So in order for the fan to be true to its hero it is stealing music on the one hand and paying through the nose for the live experience on the other hand. This is a mess!
It is interesting to note that governments, particularly in France, have announced an agreement under which ISPs commit to disconnecting persistent copyright infringers on their networks. This method is now being adopted in an ever-growing number of countries.
The government is starting to take an interest in piracy but in the main it has not adopted the same attitude towards piracy in ticket sales. In fact, in the United States it has loosened controls to allow a complete free market to reign.
So how do we deal with this? My contention is that a ticket is currency; a time and date to a seat or position at a unique experience. It is not a commodity to be continually tarted up and resold.
We had the opportunity to get to grips with this disease but failed to do so because of greed.
We, in the U.K. as a unified group, have tried to convince our government to outlaw the resale of a ticket but have so far failed, partly because of the "open skies" policy in the U.S. We are now at the point where everybody wants to join in and adopt this method of distribution.
My concern is that this will seriously damage an industry that is blossoming.
"Viagogo estimates that the European market for secondary ticketing is $9 billion and that by 2010 the global secondary ticket market could exceed $25 billion."
Traditionally, our business was built on demand. If you could sell 1,200 seats, you would play a 1,000-seater because those 200 would be the first in the queue next time. We then went through a period where the artist said, "Last time I did 1,200 seats. Why don't we try a 2,000-seater because you never know, I might sell it. But, by the way, can you pay me on sellout anyway because I need the money?"
This process has not done any good because it's a turn-off to a fan to pay through the nose and then be in a half-empty facility - and indeed, too many promoters were losing money but that has now changed. We have allowed the ticket to be commo-ditised and a new, burgeoning third-party industry has grown up around us.
Viagogo estimates that the market for secondary ticketing is $9 billion and that by 2010 the global secondary ticket market could exceed $25 billion. More than 1,000 secondary ticket agencies have sprung up in the United States.
Collecting data in this market is difficult and often anecdotal. However, one thing is for sure: Like Ticketmaster did in the 1980s, this market will consume all of us in the near future.
To those who believe that auctioning tickets is the way to go: Why have a ticket price at all? Wouldn't it be easier to do the Radiohead model for record sales when they put their concerts on sale? Once the auction is over and the gross is ascertained, then the financial deal can be done with the artist.
However, of course, this may very quickly backfire. Currently we have allowed a false market to come into being. More and more people, including some seriously well-organised gangs, are buying up as many tickets as they can when the onsale starts or indeed when the pre-onsale starts, whatever that means, with the sole intention of profiteering.
At a friend's tennis club one of the players boasts happily in the bar that his business is now running a team of 20 to 30 students whose sole job in life is to grab the full allocation of tickets for shows that are in demand. In fact, he also added that he is retired from his previous job as he is making so much money out of reselling tickets.
In 2006, Ticketmaster resold 329,000 tickets whilst StubHub apparently sold 3 million tickets.
Does anybody seriously think that a fan wakes up in the morning wanting to go see Bruce Springsteen with the sole thought of how much more he can pay for the ticket than the price advertised?
Of course, if you look at the cream of artists there are always those squillion-aires who have to be at a show and don't care what price they have to pay. In fact, I used to have a neighbour who only bought from a ticket tout because he thought he could get better seats for my shows than I could offer him.
We are undermining what the value of a ticket is. There is a Web site called Blagger.com which lists reams of complaints from people buying tickets on the secondary market who have been completely ripped off.
There is no control whatsoever in the secondary market to differentiate between a genuine ticket and a rip-off, either in position in the venue or in fact of receiving any tickets at all. Our business is being consumed by organized gangs and bedroom marketeers buying up as many tickets as they can with the sole purpose of selling them on the secondary market.
EBay probably is the most arrogant Internet company I have ever come across. They stick two fingers up to anybody who complains when they have not received their ticket, or where they are allowing tickets to be sold knowing that the terms and conditions are to the contrary, claiming solely, "buyer beware."
Live 8 was the one and only time that we blackmailed eBay to take tickets off their system. Dozens of charitable events are being ripped off by this wonderful company. I have even attended a meeting with our Secretary of State where she questioned them on this issue and eBay virtually told her to fuck off.
Here is a classic example that I picked up on Friday of a site selling Led Zeppelin tickets for a tour that does not exist! Where is the duty of care to our fans?
Of course for the promoter, as people are buying up the maximum allowance of tickets, he is selling out faster. But in truth, all that is happening is that the fan is being alienated by being forced to go to the secondary market to buy a ticket at a hugely inflated price, which they should have been able to buy at face value.
We have to decide what we are in business for. I am in the business because I love music and am thrilled at the opportunity to present the new upcoming artists as well as the great supergroups.
Nothing gives me a better thrill than standing at the back of the venue watching the band and the fans interfacing and having a great time. Seeing those fans leaving the venue beaming and buzzing is what keeps us all alive. What we are doing now is alienating those very fans that support us all.
In the same way, artists are being alienated from their record companies because the record companies treated them like serfs. We are doing the same with our fans.
Artists have to stop milking the live market and promoters have got to stand up for their beliefs and protect the fans that support us all. If we wanted to control the secondary market, we could, but why do we need to auction tickets? Why not be honest with ourselves and the public? The secondary market is getting out of hand. With more than 30 percent of all tickets sold and growing rapidly, it will consume us all.
In parallel to this we have another problem. Most of the supergroups of today will be gone in the next five years. Who is going to replace them? More importantly, how are we going to replace them?
Nicola Slade wrote an editorial in Record of the Day complaining about the lack of headliners: "The challenge is finding enough new talent to fill the building and keep this business afloat. People who organise festivals are struggling to find enough headliners because no new talent is coming through. We need more Arctic Monkeys. One band like that every decade isn't enough."
There are more than 1.2 million rock acts and 1.7 million R&B acts alone clamouring for attention on MySpace. So how do we filter through this to find new major artists?
A 15-year-old student at an IFPI focus group said, "The bad thing about MySpace is that there are 100,000 bands and no filtering. I am trying to find bands I like but just get tired of looking."
So whilst music content is becoming more readily available with the major mobile companies focusing more and more on music, great acts that are globally valid are becoming scarce.
In my opinion, we have a pincer movement that ultimately will decrease the number of people going to shows. There are fewer big acts to get to grips with and a false ticket market when we find them.
The solutions are obvious: We have to train new young promoters and managers. We have to nurture potentially great new bands and let them grow naturally. Performing live is the easiest way of grabbing an audience.
We have to learn how to take advantage of the new distribution opportunities. We have to work with the mobile phone companies, not just by taking their money but also how to use them to help grow the new artists.
And finally, we must find simpler ways of giving better ticket distribution that is safer and more secure than we currently have.
The obvious solution is to make the mobile phone the ticket because as of now the SIM card is the only unique system that is personal to the user. The easiest thing to do is to join the secondary market and make it official, but that does not detract from forcing a fan to pay more than he should.
We have to be stronger with artists by saying no when they get too greedy. We need to put honesty and integrity back at the top of the agenda of this fantastic business that we are in.
We have venues now that are becoming entertainment districts, giving the fans and artists alike a much better live experience. Let's make sure we have enough artists and fans alike to fill them.
And finally, for the 360-degree model that everyone is talking about, I have been in it since 1984 so I don't know what the fuss is all about.
What I do know is that record company attitudes are as greedy as the artists where they can be. They want to supplement their lack of income from CD sales by grabbing a piece of everything else. But they have to treat artists as partners and employ experts who show how to handle the components of the 360.
This maelstrom will settle down and some of us will continue to thrive. When we consider the fans are as important as the artists then we will win the day.Last updated February 22, 2008