How Blockchain and Bitcoin Could Revolutionize The Economics of Secondary Ticketing
Beata Zawrzel / NurPhoto via Getty Images – Bitcoin Embassy
Bitcoin Embassy ATM that operates in Polish money (PLN) where one can sell or buy BTC near main railway station in Krakow, Poland.
The secondary ticketing market generated $15 billion in global revenue last year, representing by some estimates 20 percent of the total live event market. It’s one of the major issues surrounding the lucrative concert tour/ticket market, as promoters and artists alike eye their share of the money generated by the likes of eBay’s StubHub, Ticketmaster’s TM+, Vivid Seats, ViaGoGo and Seat Geek.
This is where the buzz surrounding cryptocurrency and blockchain enters the picture.
Les Borsai is a former record business exec, with stints at Avalon Attractions and MCA Records and in personal management (he still reps Wynonna Judd), who got involved in the mobile, technology and gaming space over a decade ago, starting with an early iPhone game app developer, gridMob.
More recently, he’s a consultant for several players in the music/gaming/cryptocurrency space, including Ripple’s XRP, the third largest cryptocurrency behind the original bitcoin and current dominant player Ethereum’s Ether. “Think of it as ‘the Internet of money,’” explains Borsai, with bitcoin the very first adopted protocol.
Blockchain is simply the accounting ledger that keeps permanent track of all the verified transactions that have taken place, which are subject to a consensus of individual, decentralized “miners,” a majority of whom must verify each one on a case-by-case basis.
Borsai first invested in Ethereum at the initial public sale in 2014, where he paid 30 cents a unit. Those units sell for anywhere from $800 to $1,000 apiece now; It’s no wonder the millennial at the table next to us, his ears perked at the sound of our cryptocurrency discussion, asks Les whether he should sell or hold on to his own investments. So far, bitcoin and blockchain have amounted to peripheral marketing gimmicks for the music industry.
Last year, Bjork offered 100 AudioCoins in cryptocurrency for all those who preordered her latest album, Biophilia – adding she’d also accept bitcoins in exchange. YouNow, a YouTube style video streaming service, recently launched its own Etherium-based cryptocurrency for Rize, the latest iteration of its app, where more than 40 million users show their appreciation for individual broadcasters with a digital tip jar that inspired the new initiative. One of the most logical uses of blockchain, though, is in the live event ticketing sector, as a way to control and harness the secondary market.
That can be done by simply programming into the blockchain code the revenue splits or rules for each transaction, or how money is to be divvied up when a ticket changes hands. Several significant Silicon Valley startups are already devoted to this very concept.
“This technology makes it more difficult to pass a ticket along and allows you to price it a lot more dynamically,” said Rich Holtzman, a longtime artist manager (Portugal. The Man), who has spent the last two years working as a consultant for StubHub, learning the secondary ticketing business. “It’s no wonder I just got a call from a guy who does blockchain.”
Ticketmaster recently introduced Ticketmaster Presence, a proprietary digital system that company President Jared Smith says has many of the same attributes as blockchain, with the ability to function in real time. The technology is already in place at several NBA and NHL arenas, and the NFL plans to adopt it for the coming season.
“Tickets, in their current form, are both anonymous and transferable,” Smith said. “Our system, much like blockchain, can identify individual transactions and even program rules for that chain of custody.”
Ticketfly co-founder Dan Teree, who helped sell the company to Pandora in 2015 for an announced $450 million (before it was flipped again to Eventbrite last year for less than half that), now heads his own tech company, Stealth. He recently joined forces with Naveen Jain, who worked on Linkin Park’s website, where he frequently offered ticket presales, to help integrate blockchain into his company.
Their new startup is currently in stealth mode.
“Blockchain technology and ticketing are on an inevitable collision course,” Teree said. Twenty-year music industry vet Jain, who studied computer engineering at Purdue and then began to work building websites, has expanded into running online fan clubs and ticket presales for artists including Bon Jovi, Tim McGraw, Jason Aldean, Carrie Underwood and the Lumineers.
He more recently created RedBox Tickets, offering last-minute unsold concert ticket inventory at the ubiquitous DVD kiosks, which is how he first met Teree.
Like cryptocurrencies, tickets are priced according to supply and demand, but, as Jain pointed out, “There are a great many interesting things you can do when it comes to blockchain and ticketing that grant artists and promoters more control over their assets than they’ve ever had before.”
The idea is to turn the tickets into digital tokens, assets on a blockchain, which allows promoters and artists the ability to code specific rules as to how they’re to be used, up to and including sharing the sale money from the secondary market and beyond in a pre-determined, equitable manner.
Said Jain, “Every time the ticket is resold, a percentage of that income can be directed back to the original owners — the artists, the promoters, the venue. … This is groundbreaking for our industry.”
“Every live ticketing system that has a potential for any secondary trading aftermarket will be on blockchain technology five to seven years from now,” predicted Teree
Technology veteran Kavon Soltani is also developing what he calls “a ticketing platform that awards ethical behavior and no longer takes advantage of the consumer … without being too cumbersome to users.”
“Putting your inventory on blockchain would eliminate some of the most heinous practices of the secondary market,” he said. In time, Soltani anticipates concert ticketing creating its own ecosystem, and maybe even a dedicated currency.
“It’s a natural evolution of the industry. Blockchain isn’t the holy grail; it’s a piece of technology that allows us to realign how these tickets are sold in a way that benefits everybody. But we’re still looking at a bit of a runway before it truly takes off.”
Taylor Swift’s controversial Verified Ticketing plan, in which she offered rewards for certain consumer behavior that allowed greater access to concert tickets, is a glimpse into the future, one in which a cryptocurrency – say Swift Notes – becomes the artist’s own monetary system, a closed garden where fans get an actual stake in their idols’ financial success.
Putting tickets on sale in the future could resemble a stock market initial public offering, allowing the consumers, rather than the rapacious secondary market, to determine the opening price.
“The Ticketmasters, Eventbrites and Live Nations are going to love this technology, and will incorporate it into their own offerings,” insisted Sultani. “This could threaten to make the StubHubs of the world obsolete.”
San Francisco-based Carla Riggi, an indie musician herself, is preparing to launch a new app, BandDjinni, later this summer, with an eye toward bringing independent artists, local club promoters and fans closer together, using a “blockchain-based infrastructure to empower its economy.”
Taking a cue from Taylor Swift’s fan engagement efforts, Riggi is more keen on “building relationships” than a commerce site, with a view toward allowing artists to connect with those five or 10 superfans who show up at their shows in each city.
“That’s how you build recognition and long-term attachment,” she said, citing an eventual emotional commitment that will then turn into an economic one. “I feel the gap between the major label acts and the indies has widened,” Riggi said. “There are so many overlooked opportunities in the indie space. Musicians need a leg up. They need to be empowered to take control over their careers and economics.
“The thing about Blockchain is it provides an infrastructure that offers decentralization, transparency and accountability.” Borsai, a veteran of both concert promotion and artist management, still doesn’t believe that cryptocurrency and blockchain technology will usher in any new big players in the ticketing area … at least not in the foreseeable future.
“There are longstanding relationships in place that supersede new technology,” he said. “It’s a difficult field to break into because Live Nation and AEG have all this pre-existing experience with promoters and other ticketing companies. The big guys may well adopt the technology, but it will be difficult to supplant the entities already entrenched in that space.”
This story originally appeared in VenuesNow