How Web3 Can Reduce the Impact of Scalping on the Ticketing Industry

The event ticketing industry has seen some significant changes in its lifetime. Today, the application of ticketing is almost unrecognisable compared with its early roots of paper tickets and handwritten information.

For live events, ticketing serves several functions that are crucial to the success and safety of the event. For fans, they provide a form of entry validation, ensuring they are granted access to the correct area within the venue. For the venue staff and event organisers, tickets serve to control crowd dispersion and venue capacity, both vital for the live event to take place safely.

The constant development of technology has increased the utility of tickets, allowing them to perform their functions better as they continue to be digitalised.

The change from paper tickets to electronic ones has also brought a host of benefits. For example, tickets can be securely distributed worldwide at the touch of a button at less cost to the environment than paper tickets. In addition, digital entry via QR codes has made access to the venue a more seamless experience for the audience.

However, the shift to digital ticketing has failed to address one of the biggest problems plaguing the industry, the out of control secondary market. If anything, technology has, until this point, aided the secondary marketplace, as we will see.

Scalping

There is almost no sector within the live events industry that is immune to the issue of ticket scalping. Scalpers buy tickets from the box office and look to sell them at inflated prices on the secondary market.

Most fans will be familiar with the cries of “tickets here” from shady looking characters as they enter venues. Still, the increased availability of technology has moved this practice into the digital realm, arguably making the issue even more pronounced.

Scalpers are now able to sell their tickets without having to stand outside freezing venues late at night thanks to the various platforms for ticket resale. The broader availability of buying bots has also created a real issue for box office sales. These automated computer scripts are programmed to buy up tickets en masse, which scalping collectives can then sell for substantial markups.

With the limited availability of tickets from the box office due to the buying bots employed by scalpers, disappointed fans flock to secondary marketplaces looking to secure a ticket for their favourite event. With no restrictions on resale prices, the profits made by scalpers can be eye-watering. At the same time, the companies that run secondary marketplaces also benefit from the fees they charge to conduct these transactions on their platform.

Restrictions placed on the number of tickets available per customer and other technological efforts to mitigate the impact of scalping have done little to regain control of the secondary market for event tickets. As a result, scalping remains one of the biggest problems the event ticketing industry faces, and its scope is vast.

Scalping Affects Everyone

Scalping is a pronounced problem for large scale and international events. Still, it is also an issue at smaller, local level events. For example, one of our newsletters recently covered a local musician in Liverpool, Jamie Webster. He found tickets to his sell-out show being offered for more than three times the original box office price after they sold out within 15 seconds.

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Large scale festivals, sporting events and concerts all suffer from the issue of scalping, too, with secondary marketplace sites like Viagogo and StubHub frequently appearing at the top of internet searches for popular events. It’s rare to see a huge event like the Glastonbury festival or Coachella take place without the emergence of outrageously priced tickets almost the moment the box office sells out.

The same goes for headline acts like Adele. Her 2021 Las Vegas show saw tickets sell out within seconds, only to be listed on the secondary market for up to $37,000! Interestingly, Adele’s show was also subject to the Ticketmaster Verified Fan programme, which only allows registered fans early access. Nevertheless, despite efforts, it seems a significant number fell into the hands of people eager to turn a profit.

In 2014, UK MP’s debated a bill proposing tighter regulations for the secondary ticketing platforms, a bill that was ultimately blocked. This dealt another blow to the live events industry, which is desperate to see some form of regulation governing the price tickets can be sold for after the box office. The reason given by the then culture secretary Sajid Javid was that the secondary marketplaces and their sellers are “classic entrepreneurs”. They provide a valuable service that people are willing to pay for and “deserve to be rewarded”.

This is often the argument used by those involved in profiting from the secondary marketplace. That it is simply capitalism at its finest, and scalpers are nothing more than honest, enterprising individuals who spot an opportunity to put food on the table.

Of course, it makes sense that there is a secondary marketplace for tickets to be resold. There are legitimate cases where resale is necessary or beneficial to buyers and sellers. Plans change, and marketplaces can provide a service connecting those who missed out with those who can no longer attend an event.

However, the depiction of secondary marketplaces and scalpers as “classic entrepreneurs” hides the reality that buying bots and scalping collectives can make it almost impossible for loyal fans to get tickets for high profile or popular events. The deployment of technology and collectives to beat individual fans removes the level playing field at the box office and makes it hard to swallow the line that those involved “deserve to be rewarded”.

Hidden Cost

The other element ignored in labelling the secondary marketplace as entrepreneurial is the issue of where revenue is directed from secondary sales. The argument clearly exists that if tickets are in such demand that they can be sold for a much higher price, surely a percentage of that revenue should go directly to the artist or event organisers who create the interest that drives up the price and who have made the event possible.

However, the technology to apply this hasn’t existed, and there has been surprisingly little effort to create it. This represents a real hit for artists and event organisers, especially those just starting out who may not have the funds behind them of the international headliners. As long as scalpers continue to turn such vast profits, it seems unlikely that much can be done with Web2 technology to stem their impact on the revenue of artists, event organisers, and box office sales.

While it seems that governments are unable or unwilling to action legislation to protect the interests of loyal fans buying event tickets, an alternative solution has emerged in the form of Web3 technology.

Scalping Solved?

Where the last technological revolution arguably aided scalpers in profiting from the secondary marketplace, it turns out Web3 has the potential to aid fans in their ability to secure tickets.

It might not be quite as simple as completely eliminating the problem, but NFT technology has the potential to significantly reduce the impact of scalping through the use of smart contracts and the traceability that blockchain networks provide.

Using non-fungible tokens (NFTs) as tickets offers the opportunity for the blockchain’s immutable ledger technology to guarantee its authenticity. It also opens up the possibility for smart contracts to set rules around the resale prices of tickets and where revenue is directed from any resales.

Defining a royalty split with a smart contract means that when a batch of NFT tickets is minted, a smart contract will automatically direct revenue from any secondary sale as defined in the code of the smart contract.

To see how this might impact scalping, let’s look at an example. If a smart contract stipulates that an artist should receive 80% of the revenue from any secondary sale, the profit potential for a scalper is drastically reduced, as it leaves only 20% for them. In turn, this also creates an equal marketplace at the box office, with scalpers less willing to engage in purchasing vast amounts of tickets.

Wrapping Up

While it’s unclear whether or not it’s possible to use Web3 technology to eliminate scalping completely, it’s clear that smart contracts have the potential to seriously dent the ability to make a profit from the secondary market.

That’s one of the reasons we’ve created SeatlabNFT, to help take back control of the secondary market, providing fans with equal box office access and the ability for artists and event organisers to determine royalty splits directing revenue from any secondary sales to where it belongs.

There’s a load of additional utility provided by blockchains and NFT ticketing too, which can help revolutionise the event ticketing industry.

To hear more about our platform, keep on top of our upcoming token launch or hear about our incredible NFT membership cards, make sure you stay in touch via the channels below.