Cover Story: Sympathy for the Scalper
Or, how I learned to stop whining and love the ticket brokers
The Key lime tarts and vegetable crudite with fresh herb dip aren't what you'd expect from a ticket scalper. But scalping has been very, very good to Robbi Raitt. By reselling tickets, Raitt funded his road trips across the country a decade ago. Today, the practice covers the rent for the Buckhead headquarters of Empire Tickets, where he employs 22 people. And on a chilly night in February, it paid for the caterer, the valets and the wine at the opening of Orange Hill, a gallery in Inman Park that Raitt founded as a showcase for his collection of folk art.
Unlike typical galleries, which can be austere and minimalist, Orange Hill is cozy and cluttered, like a living room. Warm light gives the space a homey glow. On opening night, guests milled about, balancing wine glasses and plates. Off to a side was Raitt, posing for pictures with friends.
That Raitt was cutting such a public figure is unusual in his profession. Technically speaking, Raitt is a ticket broker; you won't find him on the street - anymore, that is - selling tickets. Instead, he's cultivated a list of well-heeled clients who will gladly pay $1,000 for a Sunday badge to the Masters, or two or three times that for a seat at the Super Bowl. If you compare the business of ticket reselling to, say, "American Idol," the street scalper would be Will Hung and Raitt would be Kelly Clarkson.
Still, many don't recognize any distinction. They see ticket brokers merely as scalpers with ties and BMWs. To these fans, brokers are even worse than scalpers. They mark up tickets not $20 or $30, but hundreds, turning playoff games and hot concerts into exclusive events for the wealthy. In the eyes of their critics, ticket brokers hover somewhere between spammers and Enron attorneys.
No surprise, then, that most brokers' response to journalistic inquiries is reminiscent of a dog sizing up an approaching skunk - a mix of curiosity and revulsion. One broker I called left me with a challenge before hanging up: "If you can find one positive story about ticket brokers in Georgia, I'll talk to you."
It was my hope to demystify the industry. I wanted to find out where the hell they got their tickets. I wanted to see what connection there was between the broker in his well-appointed office and the scalper on his grimy street corner. I also wanted to find out if brokers had any moral qualms about their livelihood.
Mostly, though, I wanted to get in on the action.
In January, tickets for the first leg of U2's North American tour went on sale. (Tickets for the band's Nov. 18 show at Philips Arena go on sale Saturday, March 12 at 10 a.m.) As it had done in recent tours, U2 was "scaling the house." That practice itself isn't unusual; most acts today charge different prices depending on the quality of the seat. But U2's top ticket price was as high as $170.U2 was selling its seats through Ticketmaster, the much-loathed behemoth that has a stranglehold on the ticketing business. The company's "convenience" fees can sometimes jack up a ticket price by 30 percent of its face value. In the case of U2's show, convenience fees meant an additional $10 per ticket, plus another few dollars for the "order processing charge."
Of course, tour manager Paul McGuinness was quick to point out that the best tickets - those that granted you access to the arena floor where there were no seats, presumably allowing you to get close to the stage - were the cheapest, around $60 apiece. But those tickets were scarce.
The band's fan club, U2.com, offered fans an in. For $40, not only would you get a stupid key chain and an e-mail account with U2.com in the address, you'd also get first crack at tickets, days before they went on sale to the regular public.
But the "presale," as such things are called, was a colossal screwup. Some fans who entered their secret access codes were told they were invalid. Others were told there were no seats available. Some who actually placed orders learned the orders never went through. But a lucky few actually scored tickets. And many of those were ticket brokers, who turned around immediately and posted the tickets for sale on eBay. Bids soared to stratospheric heights.
Message boards for U2 fans were ablaze with invective against the band. Went one: "I'm seeing cracks in the facade of benevolent sincerity that Bono has so carefully crafted over the years. Will we hear more boastful claims about being the biggest band in the world? Yeah. More like the biggest rip-off!"
Within days, the band's drummer, Larry Mullen Jr., posted a message apologizing for the botched presale. Mullen wrote that he found it "appalling" that scalpers had actually co-opted the presale by signing up for fan club memberships, buying tickets, and then offering them at a price high above face value. Imagine! The band vowed to track down offenders and cancel their ticket orders. In the meantime, Mullen promised, future ticket sales would be allotted on a seniority basis: Those who'd been fan club members the longest would be first in the queue for presale tickets.
Mullen expressed hope that the new plan would "go some way towards reassuring you of our total commitment to our audience."
Of course, one wonders if a $160 ticket price reflects a total commitment not to the audience but to the band's own retirement fund. One thing the outlandish price certainly accomplishes, however, is this: It cuts into the margins of ticket brokers. And ticket brokers live on the margins. The higher the face value of a concert ticket, the riskier it is for the brokers. They're forced to shell out more for the ticket.
"When it's a higher price ticket, you don't have as much room to mark it up," said a sales manager at 2-tickets.com, an Atlanta-based broker. (Like others I talked to, he didn't want his name used.) "If it's a $50 ticket, well there's a lot more people who can afford to pay $100 for a ticket, as opposed to a $175 ticket that you mark up another percentage."
Since 2001, ticket brokers have been free to operate in Georgia, provided they register with the state, pay $500 for a license, and have a storefront. By regulating brokers, the state can collect tax revenues on their sales. And for the brokers — there are about 30 licensed ones in Georgia — the license gives their business a patina of credibility, while further stigmatizing the traditional "scalpers" who do business on street corners the night of a concert or a hockey game. Responsibility for regulating the brokers falls to Tom Mishou, administrator of the Georgia Athletic and Entertainment Commission. "Regulating" is a bit of a misnomer, however. Mishou's office processes the license applications, collects money and pesters brokers whose licenses have lapsed. But beyond that, the state's role is negligible.
"It's like herding kitty cats," Mishou explained. "We do not regulate the ticket broker business for fraudulent activities. The General Assembly gave us no budget for any of that. We don't have the manpower to make sure everyone selling on the streets have legitimate tickets."
Mishou often speaks as if the broker and the street scalper are one and the same. What's difficult to determine is how frequently that's the case. For instance, all the brokers I spoke with said they rarely sell tickets on the street. Their hope is to unload all of their tickets long before the event. And yet, walk around Georgia Tech, just minutes before a basketball game, and some scalpers will tell you their tickets come from brokers, although they won't identify them.
Other scalpers are just independent operators, like Tim Abercrombie. For the Tech/Duke game recently, Abercrombie arrived with a fistful of cash and no tickets. He quickly bought two from a fan looking to unload a pair. Abercrombie paid $75 each and was hoping to resell them at twice that.
"On a good day, I can make a thousand to $1,500," he said. Abercrombie is just a three-point shot from the ticket window - a clear violation of the state law that forbids scalpers from selling within 1,500 feet of a venue. But the cops leave him alone. Not so at the Georgia Dome. Abercrombie's been arrested for scalping there before, but he shrugs it off as just the price of doing business. "You pay your $50 fine, you get out," he said.
Indeed, the Georgia World Congress Center, in alliance with Philips Arena and Turner Field, is pushing a bill through the General Assembly that would expand that "no scalping zone" from 1,500 feet to 2,700 feet at those venues. The bill would essentially make it a criminal offense for anyone to re-sell tickets within that half-mile radius. And outside that circle, the only person allowed to sell tickets on the street would be the individual purchaser - the guy with a few extras he's trying to unload.
If such a law actually were enforced, it would be a death knell for scalpers. But that's a big "if," as the current law isn't enforced with any regularity. After all, Abercrombie conducts business with impunity just feet from Tech's Alexander Memorial Coliseum.
Lawmakers are considering one other measure - establishing a "bullpen" for scalpers where they could hawk their tickets. In that way, the argument goes, if a fan buys a counterfeit ticket, the police would know where to find the scalper. A city of Atlanta regulation also calls for scalpers to wear city-commissioned badges. Good luck finding one who does that.
While proponents of toughening the law say it's about protecting the consumer, there's another agenda at work. Most events at the big venues, such as Philips Arena and Turner Field, don't sell out. That means venues are competing with scalpers for business. Kick the scalpers out, and fans without tickets have no choice but to buy tickets at the window, which translates into more money for the venue.
By the time he opened Empire Tickets in 1996, Raitt already was an old hand at ticket reselling. In the early '90s, he worked at a restaurant on Roswell Road. "I was just kind of known in the area as the guy who could find tickets," he said, as he sat in the lobby of Empire Tickets, two flights up from the street in the heart of Buckhead. Raitt looks younger than his 35 years. His mop of brown hair is fashionably tousled. Flip-flops dangle off his bare feet. "Some guy would say he wanted Braves tickets. I'd ask what are you willing to pay? He'd say $100. I'd buy them from someone else for $75 and make $25 a ticket."
It's capitalism's oldest formula - buy low and sell high. But the simplicity of the concept belies the difficulty of its execution. First, the broker must know what events to go after, how much to pay for them, and what events to ignore. And most importantly, the broker has to know where to find the tickets.
In 1999, Eliot Spitzer, New York attorney general, released a report on ticket reselling. His conclusion? "Ticket distribution practices are seriously skewed away from ordinary fans and towards wealthy businesses and consumers." In his report, Spitzer talked about "ice" - the bribes paid by some scalpers to those with access to tickets, such as promoters, venue owners, or those manning ticket outlets.
Peter Conlon, the legendary local concert promoter, remembers years ago going to a Turtles record shop the morning a Springsteen concert was going on sale. "Bruce had asked all of us to go to a different store and watch and see if the first person in line got the tickets," he recalled. But at Turtles, the door stayed locked for a few minutes after tickets went on sale. Finally, Conlon got the employee to open the door. "I went in and he was pulling off tickets before the thing opened. He waited until the system went active at 8 o'clock and kept the door locked until 8:03. And he was pulling 30 tickets. When I caught him, he said some guy was paying him to do it."
Not surprisingly, every broker I spoke to says there's no magic formula to how they get their tickets. Like everyone else, they (or their lackeys) stand in line at the ticket outlet, they work the Internet during an online sale, they dial Ticketmaster continuously. But how do they consistently get such great seats? The answer, say brokers, is simple: Fans sell them to us.
Wherever Raitt goes, he's on the lookout for tickets to buy. And not just Raitt, of course. Nationwide, there are hundreds of brokers, all offering to buy tickets off season ticket holders and lucky fans. And while they're all in competition, they're smart enough to know they can benefit from each other's inventories. So if it seems a rather bizarre coincidence that Peachtree Tickets and Encore Tickets and Empire Tickets each seem to have a pair of seats in the same row to the same show, you're right to be suspicious. The fact is, they're each selling the same pair of tickets. Whoever sells it first shares the profits with the broker who actually possesses the ticket.
But if the Internet has made brokers seem bigger than they truly are, it's also cut into their business. Thanks to the Internet, you can buy tickets for virtually any show from anywhere, as long as you have a computer connection. And, also thanks to the Internet, once you've bought those tickets, you can sell them online.
Albert Yang, a 27-year-old computer programmer in Atlanta, was one such opportunist. On eBay, Yang was selling two tickets to U2's May 21 show at Madison Square Garden. They weren't great seats - the mezzanine on the opposite side of the arena from the stage - but they were a hot commodity.
Yang, a longtime U2 fan, spent almost $400 on the tickets, and then found he couldn't go. So he looked at what similar seats were going for on eBay - $300, $400, even $500 apiece.
Yang listed the tickets on eBay on Feb. 15. Within two days, bidding had climbed to more than $800 for the pair. As the days went on, a few U2 fans left him some nasty messages. "They're saying, 'You're just as bad as the scalper. You're scum of the earth.' I'm like, you're entitled to your opinion. I don't do this for a living. I felt like I got lucky. I'm not forcing them to pay. I'm not holding a gun to anyone's head."
On Feb. 22, the auction ended. The winning bid?
$1,625.
Is reselling tickets at a premium — price-gouging, essentially — unethical? As someone who's stood in line for hours in the pre-Internet days for Springsteen tickets only to be turned away at the ticket counter, I'd always thought so. And I certainly wasn't the only one."The quest for a ticket," said Mishou, the state official, "is at the same level emotionally as the quest for another hit of cocaine."
But I kept going back to Albert Yang. His profit on one transaction was more than $1,200. Could I do the same thing? And could I justify it ethically?
I called Edward Queen, director of the ethics and servant leadership program at Emory, to ask about ticket resellers. "They're selling tickets at the price the market will bear," he said. "But there is the issue of how do these individuals get hold of such a large number of tickets? And are they really creating a monopoly that then artificially inflates the ticket prices?"
To Queen, the fact that eBay sales typically involve only two or three tickets, as opposed to hundreds, didn't matter much.
"Depriving other customers of a product they have a legitimate reason to expect to purchase at face value, especially if there's an intent element - well, there's a disturbing aspect to that activity. Now, people who do that are going to give you all manner of rationales: 'The ticket price was so high this is the only way I could afford to go,' etc. But that doesn't undo the questionable moral aspect of it."
Not the tacit approval I was seeking. Andrew Cohen, acting director of the Jean Beer Blumenfeld Center for Ethics at Georgia State University, gave me a second opinion.
"It's a mutually acceptable transaction," he said. "Some people might think it's unfair, but I'm not sure that having access to inexpensive concert tickets is a basic human right. ... In this particular case, it's unfortunate, but not unjust."
Stephen Happel, an economist at the University of Arizona who's studied the secondary ticket market, was even more encouraging. To Happel, ticket brokers work in consumers' favor.
"They're doing good for society. It's really Adam Smith's invisible hand. It looks like a lot of greed, but it's really social altruism!"
Even to a moral relativist like me, that last line set my bullshit meters clanging. How could there be altruism at work here?
"Because ultimately, with the ticket brokers, there's a chance that I can sit at the 50-yard line of the Super Bowl," Happel said. "Otherwise, there's not a living chance in hell I will ever sit at the 50-yard line at the Super Bowl."
Happel said that "most of the time," scalpers and brokers actually drive prices down. "They bring more seats out into the marketplace than would have been there otherwise. They increase the volume of tickets. But what you see reported in the newspapers is not the nine games where prices were below face value, but the 10th game where prices went up and up and up, and scalpers were getting huge amounts."
The fact remains that such a system ultimately rewards the wealthy and punishes others. Even Happel agreed with that. For bands that want to make sure the best seats go to true fans, he has a suggestion.
"You block out the first 10 rows, and people can start lining up at any time for those. But it's one person, one ticket, and you have to go directly to the seat. I'd give those tickets away for free, and then I'd charge like crazy for every other seat in the house."
In fact, several acts are doing something similar - although not giving away the seats for free, of course. For John Prine's April 15 show at Fox Theatre, his label conducted a presale for tickets for the first few rows. But the tickets can only be retrieved at will call the night of the show, and by the person who purchased them. The fan will then be led directly to his seat.
But will call for an entire venue? Not feasible. Imagine the lines.
No, tickets aren't going anywhere soon. Which means there's money to be made. You just have to be smart.
As a beginning scalper, I decided to concentrate on shows I absolutely knew would be a hit. U2 was the band. Its initial slate of shows had sold out fast, and so when a string of new dates went on sale, I was ready with my Mac, my cable modem and my credit card.I started out slow, buying two of the cheap seats for one of the band's four shows in Chicago. Within three days, I'd sold them on eBay for $179.50. Minus eBay and PayPal fees, my profit was about $50.
Feeling cocky, I stepped closer to the edge the next weekend. I spent $900 buying up eight tickets - two sets of two in Vancouver, a pair in Phoenix, and a pair in Seattle.
As high as the demand was for these concerts, I was running a risk. When a concert sells out quickly, bands frequently put a second show on sale. That can tip the balance of power from the seller to the buyer.
That's what happened in Phoenix. The two tickets that cost me $360 sold on eBay for only $219.50. There went $140 down the crapper.
But I bounced back with the other shows. The favorable exchange rate meant I spent only about $200 for four tickets in Vancouver; together, they netted me about $506 on eBay.
I found the margin theory was holding up. The two pairs of expensive seats I bought - in Seattle and Phoenix - I sold at a net loss of $85. But the cheaper seats in Chicago and Vancouver I sold at a profit of about $359. After deducting eBay and PayPal fees, I netted $170 from the whole endeavor. Decent, but no Albert Yang.
Then I got greedy. I figured I'd try my luck with other bands. Widespread Panic looked hot. Its three-night stand at Radio City Music Hall had sold out in minutes. I figured the solitary show they were playing in Boston was sure to be a hot ticket. But I miscalculated - the venue was much bigger, and the show was on a weeknight.
Then, like an idiot, I made a similar miscalculation for Panic's show in Columbus, Ga. Another miscalculation. I now have what amounts to four bookmarks that cost me $170.
So long, profit.
Happel was sympathetic to hear about my mixed results. "Markets can trick you," he said. "The same thing happened to me when New Kids on the Block came through here. I thought I'd buy eight and sell six and take my daughter. I had a hell of a time selling them. That's why it's such a tough market to make money in."
While there is a speculative nature to ticket reselling, brokers often conduct business in reverse: They make the sale, then find the product. That can be risky. Consider this year's Super Bowl. Raitt took orders from clients for tickets, charging them around $1,850. But then he found he couldn't buy them for less than $3,000 from his contacts. Still, he had committed himself.
"If I take the order, they get the ticket regardless of what I have to pay for it," he says. "If I pay a little bit under, I make money. If I have to pay more, I just take the loss. It's just part of the game."
I asked Raitt if he ever wrestled with the ethical implications of what he does. He didn't hesitate.
"Is it right? It's supply and demand. That's what this country was built on. It's not really an ethical or a nonethical thing.
"We're just giving clients access to something they normally wouldn't have."