Secondary Ticketing

Mike Weatherley Excerpts

Tuesday 13th March 2012 Westminster Hall

[Mike Weatherley (Hove) (Con)]

It is an honour to serve under your chairmanship, Mr Crausby. I believe that the free market is by far and away the best method by which to allocate resources effectively. Provided the often-quoted five criteria regarding the definition of perfect markets—identical product, all firms are price takers, all firms have a relatively small market share, perfect knowledge, and no barriers to entry or exit—are mostly met, the market should be left alone to do what it does best.

Consumers should have the ultimate say on how products are delivered and at what price. However, with live music and many other activities where a finite amount of tickets are available, there is a major perfect market imperfection. Music and other forms of creative expression are vital to the British economy—from earnings to employment—and for quality of life as well. The performing arts and sport sustain employment and tax revenues that benefit all our citizens. Some 1.5 million people are employed in the creative industries or in creative roles in other industries. Exports of services from the creative industries accounted for 10.6% of the UK’s exports of services, and there were an estimated 106,700 businesses in the creative industries, which represents 5.1% of all companies. British musical talent earned £139.6 million from overseas earnings in 2008. The top three earners, in order, were the Police, Iron Maiden and Coldplay. The Performing Rights Society for Music has said that Britain is the No. 1 home of musical talent in the world. In short, it is worth us all taking an interest in the continued prosperity of the creative industries.

There is, however, a blight that creams off revenues by exploiting an imperfect market and contributes nothing to the creative copyright holders, or indeed the venues and staff who put on events. The blight consists of those who profiteer by exploiting excess demand. In rapidly changing times in the internet world, what was previously considered quaint and not much of a problem, or indeed a possible service, has now been overtaken by industrial-scale activities at the touch of a button. Government have not kept up with the rapid pace of change.

[David Morris (Morecambe and Lunesdale) (Con)]

I congratulate my hon. Friend on securing the debate. Does he agree that this is a drain not just on the musical industry, but on the Exchequer too?

[Mike Weatherley]

Absolutely. I agree—it is a drain on the Exchequer. Of course, some secondary ticketing organisations pay tax, but there is an amount of VAT and so on that is not necessarily reclaimed.

The issue is recognised by some of the music and sports industries’ leading names. The list of those who joined me to meet the Secretary of State for Culture, Olympics, Media and Sport last year reads like a “Who’s Who”: Melvin Benn, Festival Republic, who runs the Glastonbury and Reading festivals and is chairman of Wembley stadium; Harvey Goldsmith, legendary promoter of live events; Rod Smallwood, Phantom Music, manager of Iron Maiden; Ian McAndrew, Wildlife Entertainment, manager of the Arctic Monkeys; Anthony Addis, Brontone Management, manager of Muse and the Pogues; Emma Banks, Creative Artists Agency; John Jackson, K2 Agency and Sonisphere festival; Simon Davies, the Teenage Cancer Trust charity; James MacDougall, Sport and Recreation Alliance; Dan Fahey, Virtual Festivals; Neil Warnock and Geoff Meall, the Agency Group; Jeff Craft, X-ray Touring; Brian Message, ATC/Courtyard Management and Music Managers Forum; and Danny Newby, Big Green Coach. Those industry leaders have been joined by many others in recent months, including DJ Rob da Bank; Phil McIntyre, Phil McIntyre Entertainments; James Sandom of Supervision Management, who look after the Kaiser Chiefs; and Steve Parker of Live UK. That group cannot be called an isolated few—the industry is very concerned.

[Tracey Crouch (Chatham and Aylesford) (Con)]

I was surprised by the number of e-mails I received on this issue. Having heard that list, perhaps I should not have been. I received an e-mail from a constituent, Mr Sunderland from Larkfield. He said that a typical scenario is for tickets to go on sale on a Friday at 9 am, and by 9.10 am they are sold out. They are then listed on other websites at triple the face value, or even more, of the original tickets. Does my hon. Friend agree that we should be putting the fan, not the salesman, at the centre of the ticketing process for live music and other events?

[Mike Weatherley]

I could not agree more. I will come on to that point in a moment—it is on an industrial scale now. The intention of the person buying the ticket is important. If the intention is to make a profit, I argue that that is to the detriment of the industry.

It can be argued that there are occasions where intermediaries, such as agents, or, in this example, ticket touts, provide a supply and demand service. However, in the case of exceptional excess demand for a finite product, supply cannot be increased to match demand. With only a finite number of hours available to the performers, the free market falls down due to a restriction of supply. Ticket touts who take advantage of that market imperfection do nothing to add to our creative industries in terms of revenue and profits to those putting on the shows.

In addition to profit being driven into the hands of those who have done nothing to nurture and develop the product, there is the added consideration of who owns the product being performed. I hope that everyone listening to this debate will readily agree that a performance belongs to an artist, and that the artist has the right to be in control of the terms of that performance. Indeed, today the French Government have enacted a law stating specifically that. Any hon. Member who wishes to explore further why the protection of intellectual property rights is so important may wish to check out my “Rock the House” website, www.rockthehouse2012.com, which goes into that particular debate in some detail. The creative person should at all times be able to retain control of how the end product is produced, marketed and used.

I am well aware of the argument that artists realise the full value of the ticket sales, so who are they to complain if others also make a profit? That argument, however, falls down on three counts. First, there are many reasons why a business may wish to price at below full market value, such as market penetration and reward for loyalty. There is differential pricing in football stadiums; for example, in a young persons area where the club wishes to build a fan base. They could sell at a much higher rate, but choose to price market segment. The clubs would be disadvantaged if those young persons simply sold on their tickets for a profit—that would defeat the intention of a lower-priced ticket. I will come on to the Olympic example later.

Secondly, another reason would be to control the type of person attending—for example, crowd separation at football matches. That argument is well established in other areas, too. There are restrictions on who can buy certain properties, such as affordable housing units that cannot be bought by speculators and sold at an immediately higher value to someone not in the target housing audience. In addition, a band may wish to have a young crowd at the front of the stage, rather than people who can afford the premium pricing, which would not necessarily create the same atmosphere.

Thirdly, there is criminality relating to ticket forgeries and organised crime, which I will come on to later. I should point out at this point that I am not totally against the on-selling of tickets. There must be a mechanism that allows ticket buyers to recover the price of their ticket, and maybe make a small profit for their troubles, if they cannot attend. That could be done via a fan-to-fan website. That is an essential safeguard, but it is the intention when buying the ticket that is the most important consideration. We saw recently, with the debenture ticket holders story at the Royal Albert hall, that some were buying their debenture—or season ticket, if you prefer—with no intention of going to the shows, but because they were able to make a profit of 10 times the face value.

At the moment, with huge profits available for popular events, tickets are being purchased on an industrial scale, with no intention of going to the event itself. People up and down the country are contracted by ticket organisations—or are freelance themselves—that make it their job to sit at banks of computers to buy the maximum allocation of tickets at face value as soon as they go on sale. As we saw on the “Dispatches” programme a few weeks ago, some companies are willing to use their staff, and credit cards obtained for this specific purpose, to buy tickets and resell for a profit.

Before I move on, may I just address the issues brought up in the “Dispatches” programme? A lot of the focus of the programme was based on artists, promoters or venues holding tickets back and using free market mechanisms to sell tickets at an additional profit to the benefit of those putting on the concert or event. I see nothing wrong with that if it is done with the copyright holder’s permission. It seems that that was given, since it would appear that the promoter ticket allocation, for example, was in the contracts. That was known to all parties and is no different from premium pricing at the front end. It is simply a mechanism that reduces the risk to the artist on pricing, and shares that with those operating the system for them. Some artists grade their tickets from the outset at a higher premium value. We have heard about certain artists charging £1,000 for tickets in the front row. The mechanism on fan-to-fan websites is no different from that; it just uses the free market to set the price. What was wrong, as mentioned earlier, was where the secondary ticket seller was buying, via a network of intermediary operators, for the specific purpose of on-selling at a profit to them, not to the artist.

That brings me on to the Olympics. As is well known and accepted as a matter of principle, it is against the law to on-sell an Olympic ticket, whether at a profit or not—it must be sold back to the organiser. It strikes me as baffling that the Government accept this for a specific sporting event and promote strong enforcement, but are reluctant to take action for the benefit of our creative industries. Some 6.6 million Olympic tickets have been sold to the public, raising £527 million. That figure could have been much more, but the price was set and the Government seek to enforce it so it remains a “games for all”, and not just those who can pay the premium. Some 25% of tickets have been held back for other purposes, such as corporate sales and other premium pricing, but a decision was taken that 75% of the tickets should go to enthusiastic fans at a specific price below market value. The atmosphere inside the arena will benefit as a result, contributing to what I am sure will be a fantastic games.

The Home Secretary is so determined to crack down on touts, the fine was raised from £5,000 to £20,000. In May 2011, she said:

“The 2012 Games will be a once-in-a-lifetime opportunity to experience the Games on home soil. By increasing fines for touting we are sending a clear message to criminals…that it is not worth their while and they are not welcome.”

The police, under Operation Podium, have announced that every ticket tout caught will also be pursued to recover their assets, with no maximum limit to the amount that can be recovered. Additionally, internet companies such as eBay and Gumtree could also face action if they do not take immediate action, once notified of illegal activity.

The worry about the effects of ticket touting goes further. Detective Chief Inspector Nick Downing, in charge of Operation Podium, said:

“we have already seen the demand for Olympic tickets which gives criminals greater opportunity to run scams, sell non-existent tickets and even steal your personal and credit card details to use in other crimes…As soon as you allow things to go out of control, opportunities for criminals grow. And I do not want London to be associated with disappointment at finding out all the money paid out was to criminals and no tickets exist”.

That last point could have been echoed by any bank manager, who I am sure would worry about exactly the same thing.

Although examples that I have given show that extensive action is, and can be, taken to prevent ticket touting at the games, it only serves to highlight the lack of action taken against ticket touts at other events. Without legislation, artists are forced to think of innovative ways to prevent touts. Glastonbury, for example, uses a picture of every ticket holder and other events have insisted that people bring with them the credit card used to purchase tickets. But this fails in a number of ways, from the father wanting to give a present to his kids, to those who do not have a credit card or driving licence as proof of identification. Such approaches can also create problems with crowd surges before curtain-up: checking 10,000 IDs will add to entrance delays, which venues are not geared up to handle, and there are obvious safety concerns—and anyway, it adds to the Big Brother state, which surely we should avoid if we can.

I am pleased that the ticket sales for the games have gone well. The Olympics are inspirational in so many ways and I hope that the Minister will be inspired by the ticketing arrangements for the London games and use that inspiration to help all our creative industries and events that could benefit similarly from Government and police assistance.

[Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)]

I know that the hon. Gentleman is probably just about to wind up, so I thank him for giving way. I wanted to listen to his speech in full and not interrupt along the way. He has made an excellent speech, as I would expect, because he is knowledgeable about this subject. With everything that he has said, and taking into account everything that he knows about what is going on, which “Dispatches” highlighted, does he think that the time has come for the Government to consider legislation, and not just say that the industry has to try to regulate itself?

[Mike Weatherley]

I thank the hon. Lady for her intervention and I applaud her efforts in this field, without which I would never have been alerted to the issue. I thank her for that. I agree and France does, too. As I said, France has gone live today with a law specifically about this form of ticket touting, which is along the lines of the hon. Lady’s private Member’s Bill, which although introduced did not get past the next stage.

I am not advocating that every ticketed event be subject to additional legislative support. Many artists and events will be happy for the secondary market to buy and sell their tickets, but those that wish to have protection should be able to apply for support under law, in the same way the Olympics did. If it is good enough for the world’s premier sporting event, it should be good enough for our creative industry, which is worth protecting before we lose the world-beating position Britain currently enjoys.

[Andrew Bingham (High Peak) (Con)]

Does my hon. Friend agree that, whereas in days gone by people queued to buy tickets and paid cash, many tickets are now bought online via different means and that is another example of how the internet and online communication are moving at a pace? We should move to use that to help us to prevent the scenarios that he is outlining.

[Mike Weatherley]

I agree. Some 20 years ago, ticket touting at events was a quaint issue, but now it is on an industrial scale. We live in rapidly changing times. I agree that the internet is a huge game changer. The UK Government need to catch up.

It is worth noting, as I said earlier, that a secondary ticketing law goes live in France today. The French are leading the way, the Olympics demanded it, the music industry is begging for action and the fans certainly want it, but what is lacking is our Government’s grasp of the overwhelming evidence for action.

--- Later in debate ---

[Hugh Robertson]

After the hon. Lady’s private Member’s Bill was introduced, I undertook some checks with both the Home Office and the wider security services. I have checked with both the Metropolitan Police and the wider security services, and without going into too much detail about the information that they have given me, I regret to say that those organisations have told me that they think that we have the balance about right. They have said that this is a moving threat.

It is fair to say—it came across clearly in Assistant Commissioner Allison’s evidence to the Committee—that this is a new and growing threat. It is reasonably easy, through Operation Podium, to nail that down for the Olympics. However, the organisations that I mentioned do not feel—I really have asked them about this—that there is sufficient evidence at the moment for them to tell the Home Office, “Our legislative offer is deficient in this regard; we want a ban across the piece.” The police have not said that and neither, yet, have the security services.

I have asked the security services this specific question every time that we receive a briefing about intelligence behind a large range of threats to the Olympic games. We always ask about Operation Podium and the influence of large-scale criminal gangs, and the rest, on the games. The security services are happy that the current fine is sufficient to deter that activity. They are making good progress in targeting those who have offended and taking down dummy websites that have sprung up all around the place offering tickets that they cannot supply—people send off money out of misguided enthusiasm, but find that the thing is a complete sham.

At no stage, however, has anyone said that the threat is sufficient to support a more general ban. I shall come on to that in a minute, but I have an open mind. When that Rubicon is crossed, we will need to look at the matter very carefully, but I think that I have covered the Olympic-specific points, about the bid requirement and last year’s London Olympic Games and Paralympic Games (Amendment) Act 2011 being a response to a specific threat identified by the police and to a need for a higher penalty than the existing £5,000.

My hon. Friend the Member for Hove went through the range of opportunities open to event organisers, but I suspect that we are on slightly different sides of the argument. The Government are keen for event organisers to look at all the options currently available to them before we legislate, whether paperless tickets or photo IDs, although I recognise what he said about some of the shortcomings in given situations.

[Mike Weatherley]

I thank the Minister for a detailed reply. On that specific point, have the Government initiated any inquiries into alternatives, or are they waiting for the industry to come back to them?

[Hugh Robertson]

The short answer, following on from the meeting that my hon. Friend had with the Secretary of State a month or so ago, is that we are very much waiting for the industry to come back to us. It will not surprise my hon. Friend or the hon. Member for Washington and Sunderland West, who are assiduous campaigners on the issue, to know that every time that they campaign there is a counterblast from the other side—the secondary ticketing organisations, which do not want legislation for a number of reasons. Every time the matter is highlighted, we inevitably get a blast from the other side; but, as I say, we are keeping everything under review. We would like to explore the point made by another of my hon. Friends about whether the internet can be used more effectively to provide extra protection before we move to legislation.

Where does all that leave us? Personally, I have an open mind, but it is worth recording that the previous Government asked the Select Committee on Culture, Media and Sport to conduct an inquiry. The Committee included a wide range of different views but concluded, in about 2009, that there was no need for legislation at that stage. The previous Government also considered the matter and came back to it a number of times, because I think that it was a manifesto commitment of the new Labour Government back in 1997, as acknowledged by a number of my predecessors, with whom I have discussed the subject. They thought that the argument could be cut either way and that extra evidence would be needed to prove that large-scale criminality was taking place as a result of secondary ticketing.

The current Government have agreed with that approach until now, but I have an open mind. Purely in my own opinion, the moment that the security services or the police say that the activity is becoming a proxy for large-scale criminal activity and that large amounts of money are being laundered through the system, the case for legislation will become much easier to make. At the moment, the Government are satisfied to follow the recommendations of the Culture, Media and Sport Committee and the approach of the previous Government, and not to advocate a more general ban.

[Mike Weatherley]

I understand the point about criminality, but what about the ownership of the performance? There has been no mention of that. Surely, performers owning their product is at the heart of our creative industries.

[Hugh Robertson]

Indeed it is, and intellectual property and all the rest are a hot topic at the moment. There is no point in my pretending that there is anything other than a range of views. Both parties include people who believe that secondary ticketing and exchange are a perfectly reasonable way for individuals to buy tickets. It is an open market and people should be allowed to do that. There are a range of views; but, for myself, although I always have to defend the Government’s line, I have a very open mind. I am perfectly happy for us to give guarantees to events with such a bid requirement—I have no ideological problem with that at all.

[Hugh Robertson]

I am dangerously close to being out of my depth. I studied a little law at university, getting close to 30 years ago now, a bit more military law when I joined the Army and a little banking law 15 years or whatever ago, but I am not an expert. That is the first I have heard of that idea, but if someone is able to prove such a case legally, clearly the terms of the whole debate will be changed.

At the moment, I have an open mind and am happy to grant the necessary exemptions if required by a bid, but as a Government we are not yet ready to move beyond that. If the case can be proved and a particularly strong one can be made about criminality, we are open to that.

[Mike Weatherley]

Will the Minister commit the Government to look at the French example to see why it was put into statute—going live today—and what the benefits or problems will be once it has gone live?

[Hugh Robertson]

I most certainly give my hon. Friend that undertaking. I had better tread carefully, but there are a lot of things that the French do differently throughout sport and the wider entertainment industry. For example, they have a betting law around image rights, so that sports bodies can gain money from the betting industry that they can reinvest in grass-roots sports—many of the bodies are keen on that. Other things they do not do: they do not have a national lottery, which keeps many of our sports and arts events going. I will, absolutely, look at the French example, although that is not to say that, if it is a success, we will necessarily incorporate it directly into practice.