Category: StubHub Ticketing Scam

Updates for Nov. 20 @ArtistRights Symposium at @AmericanU @KogodBiz in Washington DC

We are announcing the time schedule and speakers for the 4th annual Artist Rights Symposium on November 20. The symposium is supported by the Artist Rights Institute and was founded by Dr. David C. Lowery, Lecturer at the University of Georgia Terry College of Business.

This year the symposium is hosted in Washington, DC, by American University’s Kogod School of Business at American’s Constitution Hall, 4400 Massachusetts Avenue, NW, Washington, DC 20016.  We are also pleased to have a Kogod student presentation on speculative ticketing as part of the speaker lineup.

Admission is free, but please reserve a spot with Eventbrite, seating is limited!

The symposium starts at 8:30 am and ends with a reception at 4:30pm. The symposium will be recorded as an audiovisual presentation for distribution at a later date, but will not be live-streamed. If you attend, understand that you may be filmed in any audience shots, questions from the floor or still images. The symposium social media hashtag is #ArtistRightsKogod.

Schedule

8:30 — Doors open, networking coffee.

9:00-9:10 — Welcome remarks by David Marchick, Dean, Kogod School of Business

9:10-9:15 — Welcome remarks by Christian L. Castle, Esq., Director, Artist Rights Institute

9:15-10:15 — THE TROUBLE WITH TICKETS:  The Challenges of Ticket Resellers and Legislative Solutions:

Kevin Erickson, Director, Future of Music Coalition, Washington DC
Dr. David C. Lowery, Co-founder of Cracker and Camper Van Beethoven, University of Georgia
  Terry College of Business, Athens, Georgia
Stephen Parker, Executive Director, National Independent Venue Association, Washington DC
Mala Sharma, President, Georgia Music Partners, Atlanta, Georgia

Moderator:  Christian L. Castle, Esq., Director, Artist Rights Institute, Austin, Texas

10:15-10:30: NIVA Speculative Ticketing Project Presentation by Kogod students

10:30-10:45: Coffee break

10:45-11:00: OVERVIEW OF CURRENT ISSUES IN ARTIFICIAL INTELLIGENCE LITIGATION: Kevin Madigan, Vice President, Legal Policy and Copyright Counsel, Copyright Alliance

11:00-12 pm: SHOW ME THE CREATOR – Transparency Requirements for AI Technology:

Danielle Coffey, President & CEO, News Media Alliance, Arlington, Virginia
Dahvi Cohen, Legislative Assistant, U.S. Congressman Adam Schiff, Washington, DC
Ken Doroshow, Chief Legal Officer, Recording Industry Association of America, Washington DC 

Moderator: Linda Bloss-Baum, Director of the Kogod School of Business’s Business & Entertainment Program

12:00-12:30: Lunch break

12:30-1:30: Keynote: Graham Davies, President and CEO of the Digital Media Association, Washington DC.

1:30-1:45: Coffee break

1:45-2:45: CHICKEN AND EGG SANDWICH:  Bad Song Metadata, Unmatched Funds, KYC and What You Can Do About It

Richard James Burgess, MBE, President & CEO, American Association of Independent Music, New York
Helienne Lindvall, President, European Composer & Songwriter Alliance, London, England
Abby North, President, North Music Group, Los Angeles
Anjula Singh, Chief Financial Officer and Chief Operating Officer, SoundExchange, Washington DC

Moderator:  Christian L. Castle, Esq, Director, Artist Rights Institute, Austin, Texas

2:45-3:15: Reconvene across street to International Service Founders Room for concluding speakers and reception

3:15-3:30: OVERVIEW OF INTERNATIONAL ARTIFICIAL INTELLIGENCE LEGISLATION: George York, Senior Vice President International Policy from RIAA.

3:30-4:30: NAME, IMAGE AND LIKENESS RIGHTS IN THE AGE OF AI:  Current initiatives to protect creator rights and attribution

Jeffrey Bennett, General Counsel, SAG-AFTRA, Washington, DC
Jen Jacobsen, Executive Director, Artist Rights Alliance, Washington DC
Jalyce E. Mangum, Attorney-Advisor, U.S. Copyright Office, Washington DC

Moderator: John Simson, Program Director Emeritus, Business & Entertainment, Kogod School of Business, American University

4:30-5:30: Concluding remarks by Linda Bloss-Baum, Director of the Kogod School of Business’s Business & Entertainment Program and reception.

by Trichordist Editor

CHICKEN AND EGG SANDWICH:  Bad Song Metadata, Unmatched Funds, KYC and What You Can Do About It: Speaker Update for Nov. 20 @ArtistRights Symposium at @AmericanU @KogodBiz in Washington DC

We’re pleased to announce additional speakers for the 4th annual Artist Rights Symposium on November 20, this year hosted in Washington, DC, by American University’s Kogod School of Business at American’s Constitution Hall, 4400 Massachusetts Avenue, NW, Washington, DC 20016.  The symposium is also supported by the Artist Rights Institute and was founded by Dr. David Lowery, Lecturer at the University of Georgia Terry College of Business.

The Symposium has four panels and a lunchtime keynote. Panels will begin at 8:30 am and end by 5 pm, with lunch and refreshments. More details to follow. Contact the Artist Rights Institute for any questions.

Admission is free, but please reserve a spot with Eventbrite, seating is limited! (Eventbrite works best with Firefox)

Keynote: Graham Davies, President and CEO of the Digital Media Association, Washington DC.  Graham will speak around lunchtime.

We have confirmed speakers for another topic! 

CHICKEN AND EGG SANDWICH:  Bad Song Metadata, Unmatched Funds, KYC and What You Can Do About It

Richard James Burgess, MBE, President & CEO, American Association of Independent Music, New York
Helienne Lindvall, President, European Composer & Songwriter Alliance, London, England
Abby North, President, North Music Group, Los Angeles
Anjula Singh, Chief Financial Officer and Chief Operating Officer, SoundExchange, Washington DC

Moderator:  Christian L. Castle, Esq, Director, Artist Rights Institute, Austin, Texas

Previously confirmed panelists are:

SHOW ME THE CREATOR – Transparency Requirements for AI Technology:

Danielle Coffey, President & CEO, News Media Alliance, Arlington, Virginia
Dahvi Cohen, Legislative Assistant, U.S. Congressman Adam Schiff, Washington, DC
Ken Doroshow, Chief Legal Officer, Recording Industry Association of America, Washington DC 

Moderator: Linda Bloss-Baum, Director of the Kogod School of Business’s Business & Entertainment Program

THE TROUBLE WITH TICKETS:  The Economics and Challenges of Ticket Resellers and Legislative Solutions:

Kevin Erickson, Director, Future of Music Coalition, Washington DC
Dr. David C. Lowery, Co-founder of Cracker and Camper Van Beethoven, University of Georgia
  Terry College of Business, Athens, Georgia
Stephen Parker, Executive Director, National Independent Venue Association, Washington DC
Mala Sharma, President, Georgia Music Partners, Atlanta, Georgia

Moderator:  Christian L. Castle, Esq., Director, Artist Rights Institute, Austin, Texas

by Trichordist Editor

No Bots, No Billionaires: StubHub’s Grotesque IPO Demonstrates Another Artist Ripoff By Our Tech Oligarchs

By Chris Castle

StubHub is one of the richest thieves in the live ticket arbitrage market. The company is also a direct beneficiary of the U.S. government’s abysmal failure to enforce the Better Online Ticket Sales (BOTS) Act. Just like Spotify, another Goldman Sachs’ grifter, StubHub’s main objective is about to be a reality–a $16.5 billion initial public offering that will make its executives even richer. In case you were wondering where the value of all that touring was going, now you know. And StubHub’s IPO is yet another slap in the face to artists, not to mention the fans exploited by this tech oligarch.

Given the government’s newly acquired interest in the ticketing business as measured by the Department of Justice antitrust lawsuit against Live Nation, you would think that the DOJ and FTC would also step up to their obligation to enforce the BOTS Act. Remember, The BOTS Act, signed into law by President Obama in 2016, was designed to curb the use of automated software (bots) that purchase large quantities of event tickets, often within seconds of their release, to resell them at inflated prices through market makers like StubHub. It is so under-enforced that StubHub will no doubt be able to sneak out an IPO and slurp up money from the pubic trough before anyone knows better.

BOTS-driven Risk Factors

If it were ever enforced, the BOTS Act could have a significant financial downside for StubHub. I can’t wait to see the risk factors about bots in their IPO prospectus because let’s face it–if there were no bots and no boiler room operations, StubHub probably wouldn’t have much of a business. No bots, no billionaires. This one is not a theoretical antitrust case, this one is dealing with real-time massive consumer fraud about to be perpetuated and funded by the public financial markets.

The government’s enforcement of the BOTS Act is so poor that Senator Marsha Blackburn, a gifted legislator and one of the law’s co-authors, found it necessary to introduce even more legislation to try to get the FTC to do their job. The Mitigating Automated Internet Networks for (MAIN) Event Ticketing Act is a bill introduced in 2023 by Senators Blackburn and Ben Ray Luján that aims to give the FTC even fewer excuses not to enforce the BOTS Act. It would further the FTC’s consumer protection mission against IPO-driven ticket scalping. 

The sad truth is that the FTC didn’t take its first action to enforce the 2016 law until 2021. And that’s the only action it has ever taken. Yet we live in hope.

When the drafting sessions get started for the StubHub IPO, the underwriters really need to ask themselves how big a hit the company’s valuation will take when prosecutors figure out how dependent reseller platforms are on bots and market manipulation to extract hard-earned dollars from enthusiastic fans.

And it isn’t just bots by the way. MTP readers will recall our discussions about speculative ticketing which turns live event tickets into commodities to be traded like pork bellies–minus the consumer protection of the securities laws. Speculative ticketing is when a market maker like StubHub allows shady operators to offer the public a ticket that the seller doesn’t actually own and may not even exist. This is what happens when an artist has publicly announced a concert tour but has not yet put the tickets on sale. Speculative ticketing lets a scalper offer a ticket that doesn’t exist without properly disclosing that the seller doesn’t own the ticket being sold.

Now that just sounds criminal, doesn’t it? Selling something you don’t own?

StubHub RICO Suave

And speaking of criminal, StubHub is currently defending a civil RICO case in New York, accused of making a market for tickets it is not able to sell. The Kaiser v. StubHub class action lawsuit, filed on January 3, 2024, in the Supreme Court of the State of New York, alleges fraudulent ticket sales by StubHub, Inc. The plaintiff, Daniel J. Kaiser, a resident of Brooklyn, New York, claims that StubHub knowingly and repeatedly advertised and sold fraudulent tickets, thereby defrauding consumers and violating the Racketeer Influenced and Corrupt Organizations Act. 

What’s RICO? Civil RICO can be brought by private plaintiffs like Mr. Kaiser, but criminal RICO has to be brought by the government. Criminal RICO cases are initiated by government prosecutors, who must first obtain an indictment from a grand jury, followed by a criminal trial. While both civil and criminal RICO cases address racketeering activity, criminal RICO focuses on punishing and deterring criminal behavior, requiring a high standard of proof and resulting in severe penalties. Now there’s a risk factor. How’s this sound:

Potential Liability Under the Racketeer Influenced and Corrupt Organizations Act (RICO)

We are currently under investigation for potential violations of the Racketeer Influenced and Corrupt Organizations Act (RICO). RICO is a federal law designed to combat organized crime by allowing for both criminal and civil penalties for acts performed as part of an ongoing criminal organization. The investigation is focused on allegations that certain activities conducted by our company and its affiliates may constitute a pattern of racketeering activity under RICO.

Uncertainty and Potential Impact on Business Operations

The outcome of this investigation is uncertain, and we cannot predict the timing, outcome, or potential impact on our business, financial condition, or results of operations. If we are found to have violated RICO, we could face severe penalties, including substantial fines, forfeiture of assets, and significant reputational damage. Additionally, a criminal conviction under RICO could result in imprisonment for our key executives, which would severely disrupt our management and operations.

Nothing says white collar crime like RICO. This kind of consumer fraud is happening on a massive scale, yet the FTC apparently doesn’t feel it rises to the level of an investigation priority. 

Making it Stop

In the face of this weak-kneed approach to law enforcement, artists could simply prohibit the resale of their concert tickets. If companies like StubHub keep trying, that very well may be the result, particularly with fan-to-fan solutions like Twickets competing with the likes of StubHub. How about this risk factor:

Restrictions on Ticket Resales Could Adversely Affect Our Business

Our business model relies significantly on the resale of concert tickets. However, many artists and event organizers have implemented policies that prohibit the resale of their tickets above the face price. These restrictions are designed to prevent ticket scalping and ensure that fans can purchase tickets at reasonable prices.

If artists or event organizers enforce these resale restrictions, it could limit our ability to sell tickets at a premium, which is a key component of our revenue generation. This could result in reduced profit margins and negatively impact our financial performance. Additionally, compliance with these restrictions may require us to implement new systems and processes, which could increase our operational costs.

Furthermore, any violation of these resale restrictions could lead to legal actions against us, including fines and penalties, and could damage our relationships with artists, event organizers, and customers. This could harm our reputation and result in a loss of business opportunities.

Investors should consider the potential impact of these resale restrictions on our business and financial condition before making an investment decision. There can be no assurance that we will not face additional restrictions or legal challenges related to ticket resales in the future, which could further adversely affect our business.

Underwriters be thinking, where do I sign up, right? Maybe not.

[This post previously appeared on MusicTechPolicy]

by Trichordist

Minnesota Bans Speculative Ticketing

There will be no pork bellies for StubHub in Prince Country. Minnesota Governor Tim Walz today will visit the iconic First Avenue venue in Prince Country to sign HF 1898, the state’s expansive new protection for fans, venues and artists against speculative ticketing abuse by the StubHubs of this world.

Readers will remember we have a big issue with speculative ticking (which we think is illegal securities trading like trading pork belly futures) so we are naturally quite pleased to see the Governor champion this legislation along with Minnesota Lieutenant Governor Peggy Flanagan plus State Senator Matt Klein and Representative Kelly Moller who co-authored the legislation. David and Mala Sharma testified against speculative ticketing in Georgia and Chris testified in Pennsylvania supporting that state’s proposed ban on the practice.

The key provisions of the new Minnesota law include prohibitions for:

  • directly or indirectly employing another person to wait in line to purchase tickets for the purpose of reselling the tickets if the practice is prohibited or if the venue has posted a policy prohibiting the practice
  • sell or offer to sell a ticket without first informing the person of the location of the venue and the ticket’s assigned seat, including but not limited to the seat number, row, and section number of the seat
  • advertise, offer for sale, or contract for the sale of a ticket before the ticket has been made available to the public, including via presale, without first obtaining permission from  the venue and having actual or constructive possession of the ticket, unless  the ticket reseller owns the ticket pursuant to a season ticket package purchased by the ticket  reseller. 
  • An operator, online ticket marketplace, or ticket reseller must not sell a ticket unless:
  • the ticket is in the possession or constructive possession of the operator, online ticket marketplace, or ticket reseller; or
  • the operator, online ticket marketplace, or ticket reseller has a written contract with the place of entertainment to obtain the ticket.

Good stuff, another step forward for the good guys.

by Trichordist Editor

I Grift Therefore I Am: Jared Polis Supports Silicon Valley’s “Speculative Tickets” Grift in Colorado

If you had a chance to watch the CLE panel that David Lowery, Mala Sharma and Chris Castle did for the University of Texas School of Law CLE last week, you’ll remember that the panel spent a good deal of time talking about “speculative tickets”. In fact, the title of the panel was “When is Ticketing Like Pork Bellies?” which was a direct reference to the similarities between speculative tickets and commodities futures contracts (like pork bellies).

The way this grift works is that somebody (or some thing in the case of bots) offers to sell a promise to sell a ticket in the future. The trick is that the ticket is not yet on sale anywhere but certain dates have been announced so it will be on sale. This could be any ticket, like a concert tour or a sporting event like the Super Bowl, the Rose Bowl, the World Series, and so on.

This is actually worse than a pork belly contract, because you know that the pork bellies exist when you buy the contract, you just don’t know the price. Market events could cause the price to fluctuate, but there will be some pork belly available somewhere. So to even call it a ticket is a misnomer. It’s a promise to sell something that may exist to get all Cartesian about it.

The grifter prices the speculative ticket promise at a premium, naturally. Some of them actually promise an actual seat, some promise a certain section or block of seats. They then list that ticket on a ticket reseller market place like Stubhub which was most definitely lobbying in force for the nonsensical Georgia ticketing bill that failed and which we assume is behind all these bills that keep popping up like syphilitic warts.

After the ticket is listed, a fan buys the speculative ticket promise and waits to get their actual tickets. And this is the really insidious part. As David noted on our panel, the grifter’s transaction is like covering on a naked short in short selling. Naked shorts are a very risky thing because unlike with speculative tickets, the market enforces the trade. You will pay on that bet unlike speculative tickets where there is no market enforcement except the occasional prosecution by a state attorney general or the FTC.

It seems impossible for the speculative ticket short seller to obtain the actual tickets without using bots. Plausible, perhaps, but seems very unlikely. Thanks to Senator Marsha Blackburn and Richard Blumenthal and their BOTS Act, federal law prohibits using bots, but again, it’s a science of getting caught. Senator Blackburn recently complained quite rightly that the FTC is not sufficiently enforcing the BOTS Act.

If the grifter cannot come up with the tickets, it is apparently very rare that the fan gets their money back. The fan will be offered all manner of things other than cash or maybe the grifter just slithers off into the night. Awful stuff, right?

The grifter is preying on the buyer’s love of the artist or the team (or the family member of the buyer) which is so great that they are willing to spend the money because they are made to believe they have a sure bet that will pay off with a real ticket. What kind of a heartless dickweed would do that to someone?

And here’s where Jared Polis comes in. If you’ve never heard of him, Jared Polis is the governor of Colorado. The Colorado legislature recently passed SB60 that would have joined other states in banning speculative tickets. But–on June 6, 2023 Jared Polis vetoed the bill.

So how did StubHub get to Jared Polis? Remember, Jared Polis is a 99er who made a fortune on the Internet before the Internet repriced itself. He also founded TechStars, so he’s a VC, too. So he knows all about grifters and could not give a rip about artists–as he has demonstrated many times. But his veto letter is worth reading because of its complete head up the ass approach to speculative tickets.

Polis goes through the “if you only had a brain” analysis saying there are some good things in SB60 which he could support but then there are the bad things which he, Polis the Lawmaker, simply cannot abide–like a prohibition on speculative tickets. Except he doesn’t call them speculative tickets like the Federal Trade Commission does, or the Attorney General of New York. Oh, no. In his veto letter, he calls them “innovative products that address existing market failures, such as online ticket waiting services“.

Wait a minute–are we talking about the same thing here?

The bill prohibits anyone that “Advertises, offers for sale, or contracts for the resale of a ticket unless the person has possession or constructive possession of the ticket and the person has an agreement with the rights holder.”

Somehow the bill language got transformed from protecting consumers against speculative ticketing to a whole new thing, an innovative product that a VC might invest in and even take that company public. Or could have in 1999.

Sure seems like Polis is in on the grift, don’t it? You can’t call it a conspiracy theory because there’s nothing theoretical about it.



by thetrichordist

The Attack of the StubHub Future Bots: @davidclowery asks the Georgia Legislature when is a Georgia concert ticket a “security”?

By Chris Castle

Silicon Valley’s answer to Charles Ponzi may be called StubHub or its parent company Viagogo. I’m sure you’ve run into the StubHub grift. A band releases tickets for a show, the bots descend and having grabbed the best seats turns to StubHub and its ilk to resell the ill-gotten tickets at ever higher prices. Everyone denies they did anything wrong, they had no idea where their tickets were coming from. Instead of being prosecuted for wire fraud and other bad juju, these ticket scalpers allow reselling of botted tickets on a grand scale. All the while decrying bots as an illegal practice while leaving out the “but we make money together” part. See Better Online Ticket Sales Act (“the BOTS Act”), 15 U.S.C. § 45c.

However vile is this grift, it’s kind of an old story. The only thing that’s breaking news about a Ponzi scheme is not the ghost of Charles Ponzi. Rather, its when smart people–you know, your betters–fall for it yet again. But StubHub revealed yesterday in the Georgia Legislature that they actually thought they would put one over on a wiley old committee chairman who just didn’t buy the huge helping of Smarm by the Bay when the Silicon Valley lobbyists oiled their way into the Georgia House of Representatives Regulated Industries Committee. You have to get up pretty early in the morning to fool and old fox and Valley Boys are not early risers.

The Chairman caught onto the con very quickly, and David Lowery helped to highlight the scalper scam. But the thing you always have to remember about our brilliant friend David is that he’s been known to pick up his pen and write the song that struggled to be written or the song that was not well received, but five years later be promoted as his best work. That’s why he’s got so many loyal fans. David takes know your customer to a whole new level, so was the perfect subject matter witness for the committee. 

So here’s the new twist. What if you didn’t have a ticket but thought that you could get one, no problem once they went on sale–thanks to your friendly neighborhood ticket bot farmer. But what if StubHub made a market for people to buy the opportunity to buy a ticket at some point in the future. That’s right–selling the botted ticket itself isn’t enough for these people. 

Now they want to sell bot futures.

The seller could not sell the ticket yet because there was no ticket available. But why leave money on the table? 

The seller of these future contracts was confident enough to make a contract with someone of unknown business acumen or sophistication who they convince that the seller would have a ticket available by the time the underlying tickets went on sale. As a market maker, StubHub would bring buyers and sellers together in a supposedly arms length transaction–I guess, I mean how would you really know how arms length it was–and the seller sold the buyer a contract to deliver a future ticket. Let’s call these contracts “futures” or “naked call options”. Or perhaps we should call them “securities.”

So just like short sellers have to cover their shorts, when the tickets get released somebody has to come up with the real tickets. Somebody would have to be confident they could get the very ticket described in the option contract–like you would be if you were the beneficiary of botting. Which, as StubHub will tell you, is illegal. So I’m probably just being cynical.

Technically, “botting” is circumventing “a security measure, access control system, or other technological control or measure on an Internet website or online service that is used by the ticket issuer to enforce posted event ticket purchasing limits or to maintain the integrity of posted online ticket purchasing order rules.”

Personally I think it’s worth asking if the act of selling the futures contract is itself a violation of the BOTS Act as a circumvention of various elements. StubHub may have a legal opinion telling them this is outside the BOTS Act, but let’s ask the FTC, shall we?

On the other hand, if StubHub is selling securities, there’s a whole different regulatory agency that should be examining their business, or it could just be Silicon Valley’s answer to hawala.

So when is a ticket a security? One way we can determine this is through a U.S. Supreme Court case that gives us a pretty clear test. One way—and it’s just one way–that an option on a ticket might be regulated as a security is if it is determined to be an “investment contract” under the test in SEC v. W.J. Howey Co.[1]   

The Howey test asks if:

1. there is an investment of money or some other consideration,  [Yes]

2. in a common enterprise, [yes]

3. with a reasonable expectation of profits, [oh, yes]

4. to be derived from the efforts of others. [Mos Def]

So that’s pretty inclusive criteria.  Before anyone brushes aside the possibility that the SEC could determine a futures contract to buy tickets to be a security, take a close look at those criteria because how the basic question is answered is one to discuss thoroughly with your securities litigation lawyer (or engage one). That advice may be a good idea whether you are either an issuer or an endorser of at the ticket or ticketing platform..

One might say that a one-off sale of a unique product—which is truly “nonfungible” in the sense that there is only one of the product in existence—may be less likely to be determined a “security” under the Howey test. But while any one ticket is a one-off, there are many tickets available to many shows as a general rule, so tickets probably are pretty fungible.

You really do have to get up early in the morning to put one over on a wiley old Georgia committee chairman. You can tell just by looking at the body language that he believes what another wise old bird told me as a youngster. If something feels illegal, it probably is.

[1] SEC v. W.J. Howey Co., 328 U.S. 293 (1946).

by Trichordist

@davidclowery: Written Testimony to Georgia Legislature Against StubHub’s Bill

GEORGIA HOUSE OF REPRESENTATIVES

COMMITTEE ON REGULATED INDUSTRIES

ADAM POWELL, CHAIRMAN

WRITTEN TESTIMONY OF DR. DAVID C. LOWERY ON HB 398

My name is David Lowery and I thank the Committee for allowing me to testify today on the StubHub legislation. By way of introduction, I am the founder of the musical groups Cracker and Camper Van Beethoven and a lecturer at the University of Georgia at Athens Terry College of Business.  I have filed amicus briefs in the U.S. Supreme Court in the cases of Google v. Oracle and Frank v. Gaos, testified before Congress on the topic of fair use policy[1] and I am a frequent commentator on copyright policy at the U.S. Copyright Office.  I advocate on artist rights in a variety of outlets, including founding and hosting the Artist Rights Symposium at the Terry College of Business (in its fourth year), my blog at TheTrichordist.com as well as Politico, the New York Times, Hypebot and other publications. Most notably I led the successful songwriter class action lawsuit against Spotify for failing to properly license and compensate self-published writers. Finally, I am a recipient of the National Music Council’s prestigious American Eagle Award “in recognition of his longstanding dedication to protecting the rights of music creators.” With this award I am in the company of such American music luminaries as Quincy Jones, Dizzy Gillespie and Stephen Sondheim.

In the interests of full disclosure, my wife has been a talent buyer at the iconic 40 Watt Club in Athens for many years and now works for LiveNation in a senior capacity.  My testimony today is my own based on my own experiences over many decades in the music business with my bands and my own research into ticketing.  My testimony today will focus on the effects of automated ticket scalping on Georgia’s many artists and resilient music ecosystem, but much of my concerns apply to all ticketed events from sporting events at taxpayer funded venues, to nonprofit fundraisers or even pledge drives for public broadcasting stations.

The Artist-Fan Social Contract Suffers When Bots Attack:  Artists and their fans enjoy a kind of social contract.  The vast majority of fans are small-dollar contributors that sustain their favorite artists.  Artist do not price their tickets at a face value that captures the present value of all revenue the artist will make on a single show.  Tickets are priced with the idea that the costs of sustaining the artist, paying the road crew, gasoline, sound, lights and vehicle equipment rental, housing, and promotion and marketing for an entire tour is amortized over an entire tour or leg of a tour. 

Pricing tickets must be decided so as to allow current and potentially new fans to see the band live which is the railhead of the artist-fan relationship and is one of the most delicate touch points of that relationship.  We do not want to price out loyal fans or new fans.

Ticket scalping has long been a problem that interfered with that social contract.  Like many other areas of our lives, when bots attack, humans suffer.  Companies like StubHub appear to allow or even welcome bot swarms as part of their business model and for all their Silicon Valley know-how, this Big Tech company seems to be unable to control their platform to avoid inflicting this suffering on fans and artists. 

Unlike the careful decision-making that goes into setting ticket prices for a tour in the pre-StubHub era, ticket prices set by these online market makers seem to play an arbitrage game that attempts to extract the maximum price that ticket traders are willing to pay for that one essential artist with the best seating and a well-heeled clientele, rather than the small dollar donor to the artist’s sustenance.  This arbitrage (some would say illegal market cornering) allows StubHub to free-ride on the artists reputation, marketing and other investments in their brand as well as the particular concert.

Ticket scalping has largely become another Silicon Valley racket in my view.  It is virtually impossible for artists to compete and it is impossible for all but the richest fans to get the tickets they want to see the artists they love at a price they can afford. I have come to the realization that it is impossible for artists and fans to fix the problem because it has become a free-rider problem. StubHub isn’t operating because of “fan freedom” or other feel-good bromides. They are drawn to the business for one reason.

StubHub wants to take a skim off the artist’s value and the fan’s love and enthusiasm by commoditizing this exchange at scale. StubHub’s platform is not that different than a commodities exchange; the good could be a Cracker show, a Bulldog’s football game, or a pork belly.  StubHub doesn’t seem to care; they do it for the money and just for the money.

Is StubHub Selling Securities as an Unlicensed Broker Dealer in Violation of the General Solicitation Rule?  I call the Committee’s attention to a phenomenon I discovered in my research for today’s hearing: StubHub appears to be making a market in selling opportunities to buy tickets, i.e., a commodity, that have yet to go on sale. In other words, StubHub appears to be selling an option to buy a ticket in the future that does not yet exist and that the seller doesn’t own. The careful wording of their boilerplate disclaimers is a little too clever, and suggests they are aware of this practice. (Please see Exhibit A that details the author’s purchase of what appears to be the promised delivery of a ticket in the future, rather than the purchase of an already existing ticket).

This practice appears to be selling an option to buy a commodity in the future by an unlicensed broker dealer in a general solicitation to the public without complying with applicable federal or state securities laws.

Paying it Forward: Resale Royalties for Scalpers:  StubHub may refuse to police itself but the State of Georgia can recover some of the value of StubHub’s free riding by establishing a resale royalty to be distributed to artists and venues for transactions occurring in Georgia. California already has a similar law on the resale of fine art. This is a very intriguing idea that would essentially force scalpers to return some of the value they have extracted from the artist’s brand to the state in which the transaction took place. I speak of the resale royalty as returned to artists and venues, but I am program-agnostic. The payment should also be returned to the performers, universities, or taxpayer funded venues around the state.

The resale royalty could be a way to continue to support communities that were hard hit by COVID and venues that survived based on the Save Our Stages funding.  It would be better to fund this support from parasitic free riders than from hard working Georgia taxpayers.

Anticorruption Protections:  When observing the amount of money and the number of high value transactions fixed by StubHub and other online marketplaces—effectively in cash—I am struck by the potential for bad actors to use the platform to hide cash transfers.  I see no reason why StubHub should be treated differently than a bank in reporting these transactions to authorities such as the Georgia Bureau of Investigation or the Department of Revenue.

I would encourage the Committee to work with these agencies to determine the need for more detailed reporting of the origin and destination of higher dollar transactions, such as $10,000 in a single deal or series of deals closed by StubHub and its progeny. It is also apparent that the Georgia Department of Revenue is not likely receiving proper short term capital gains reporting from StubHub.

Conclusion:  If this seems that these recommendations seem to advance the heavy hand of government, I will dispute that—these recommendations allow StubHub an opportunity to fix its own wagon.  As Judge Patel told Napster in 2001, you created this monster, now you fix it. Further as StubHub has come before this august body to urge legislation that would regulate the practices of its market competitors, artists and venues it’s only fair that StubHub receive the same treatment.

[1] See The Scope of Fair Use: Hearing before the Subcomm. on the Courts, Intellectual Property and the Internet of the H. Comm. on the Judiciary, 113th Cong. (Jan. 28, 2014) (statement of David Lowery) [hereinafter Scope of Fair Use].

by Trichordist Editor

StubHub Backed Astroturf Posing as Fans Deceive GA Legislators in Attempt to Draft Bill That Would Cement StubHub’s Dominance in Ticket Resale.

Georgia’s music advocacy coalition GMP along with artists and independent venues have been raising the alarm about a draft bill in the Georgia State Legislature that would seemingly limit ticketing fees. In reality the language of the bill makes it clear that this is simply a Trojan horse bill that seems to limit artist fan clubs, indie venues and others to sell face value non-transferable tickets to fans.

Despite what Washington DC lobbyists posing as fans might claim, I can tell you that in my experience what music fans want is face value tickets directly purchased from venues and artists. Out of necessity these tickets must be non-transferable to keep them from being scooped up by shady organized groups apparently working in concert with StubHub and others who scalp or make a market for scalpers.

The biggest contributing factor to outrageous ticket prices is not the ticketing fees, but the StubHub markup. StubHub knows that artists and venues are sick of StubHub making it impossible for fans to buy tickets at face value, that’s why they have been going from state to state, getting legislators to pass laws that block venues, promoters and especially artists from selling non-transferable tickets. In the case of Georgia draft legislation mandates that resold tickets be sold only through a “licensed broker.”

You know, like StubHub. This is lawfare.

It is not widely understood, but those pre-sales of tickets at face value by artists directly to their fans are technically resales, because artists generally buy them upfront from the concert promoters. This extraordinarily cynical bill would essentially end this long standing part of the artist-fan social contract. It is simply designed to make the state of Georgia safe for StubHub’s exploitative free-riding business model.

So how did Georgia legislators find themselves in the business of making the world safe for StubHub? Well perhaps because they thought they were doing the bidding of a grassroots organization supposedly representing fans frustrated by high ticket prices. In particular a group called Fan Freedom. (www.fanfreedom.org) has been all over the capitol pretending to speak for fans.

And this group is not limiting its efforts to Georgia. We know of four states where this “grassroots organization representing fans” is simultaneously pushing similar bills. How does a grassroots organization simultaneously push bills in Washington, Florida, California, Maryland and Georgia?

Maybe it’s not a grassroots organization.

According to publicly available sources. Fan Freedom was launched by StubHub’s then owner eBay in 2011. The stated goal was to convince lawmakers that primary sellers like Live Nation and Ticketmaster should not be allowed to place limits on ticket transferability. The astroturf group partnered with the National Consumers League to mask ticket resellers’ objections to the anti-scalping measures as “consumer opposition.”

https://www.ebaymainstreet.com/pl/news-events/ebay-stubhub-celebrate-launch-fan-freedom-project https://www.ticketnews.com/2011/02/fan-freedom-project-launches-to-curtail-ticketmasters-restrictive-paperless-ticketing-system/ https://web.archive.org/web/20110808123624/http://www.fanfreedom.org/ https://www.nytimes.com/2011/07/21/business/media/scalping-battle-putting-fans-in-the-middle.html

Fan Freedom Project was initially managed by Jon Potter, a long-term political consultant who has been involved with other industry-funded astroturf efforts and founded the Digital Media Association, the trade association for Big Tech against artists and songwriters–which has been on the wrong side of every creator issue known to man or beast.

https://www.linkedin.com/in/jonpotterdc/

In 2019, the Tech Transparency Project reported that one group he was behind, the Connected Commerce Council (3C), was not the organic collection of small businesses it presented itself as, but effectively a front for his DiMA pals Google, Amazon, and Facebook.

https://www.techtransparencyproject.org/articles/big-techs-new-disguise https://www.politico.com/news/2022/03/30/connected-commerce-council-amazon-google-lobbying-00021801

Fan Freedom Project’s president since 2016 has been Chris VanDeHoef, the former the director of government relations for TicketNetwork who now runs a government relations firm called Penn Lincoln Strategies. Yet he is apparently running around the capitol intimating he represents “fans.”


https://www.pennlincoln.com/about-us/chris-vandehoef

In Georgia the “grassroots” Fan Freedom Project is paying big money to Cornerstone Government Affairs which is headed by Chris Carpenter who was legislative counsel to Gov Roy Barnes. I say big money because GA only requires noting of expenditures that exceed $10k and based on what they were paid by other clients its likely to be a lot more than 10k. Plus they have registered five lobbyists. Five lobbyists in a single state for a grassroots organization? That’s 1970s tobacco industry level of lobbying! And they are doing this in fives separate states simultaneously.

This year, Fan Freedom Project hired a firm called Johnson & Blanton to lobby on its behalf in Florida, where legislation was recently introduced that would require primary sellers to offer transferable tickets. While StubHub is also actively lobbying in Florida. It has retained the firm Metz, Husband & Daughton as lobbyists in Florida since 2021. This is not a grassroots operation, its industrial scale mega-corporate lobbying operation.

https://floridapolitics.com/archives/528216-lobbying-compensation-mid-major-firms-fared-well-during-first-quarter-2/ https://www.floridalobbyist.gov/LobbyistInformation/GetLobbyistPrincipal
https://www.flsenate.gov/Session/Bill/2022/1316
https://www.flsenate.gov/Session/Bill/2022/1316/BillText/Filed/PDF
https://www.flsenate.gov/Session/Bill/2022/969
https://www.flsenate.gov/Session/Bill/2022/969/BillText/Filed/PDF
2https://floridapolitics.com/archives/528216-lobbying-compensation-mid-major-firms-fared-well-during-first-quarter-2/ https://www.floridalobbyist.gov/LobbyistInformation/GetLobbyistPrincipal


Artist have no problem with The State of Georgia helping fans by limiting high ticket pries and add on fees. Further most artists would be willing to accept a compromise where they offer both transferrable and non-transferable tickets at different prices. If that’s really what consumers really want. Indeed other industries, like hotels, rental cars companies and airlines offer both refundable and non refundable tickets. There is some good legislation to be made here, but first we have to be clear, the way the bill is currently written it gives StubHub a free-ride on efforts and investments of Georgia artists, venues, promoters and fans.

Let’s fix this bill.

by Dr. David C Lowery