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Boulder Weekly • August 21, 2003
Alternative ticketing: SCI takes on Ticketmaster and offers a viable ticketing alternative

It was as though a white flag had been raised, surrendering to corporate greed and power. TicketWeb, the 5-year-old, Internet-based ticketing agency that had become corporate giant Ticketmasterﾕs biggest competition, had sold out to the enemy. After gobbling up its last legitimate rival, Ticketmaster once again stood alone atop the ticketing service mountain.

There was little fanfare.

This was in 2000, and, with corporate coddler George W. taking office soon after, it seemed that Ticketmasterﾕs buyout of Ticketweb was the sad, final chapter to the battle against corporate monopoly in ticket sales started by Pearl Jam in 1994.

Nobody suspected then that it was just the beginning.

Turns out when Ticketmaster took control of TicketWeb, they didnﾕt squelch the alternative ticketing voice. They amplified it.

In 1998, a small ticketing agency named SCI Ticketingﾑa partnership between local band the String Cheese Incident and local management and booking agency Madison House Inc.ﾑwas founded in Boulder. In 1999, SCI Ticketing started offering tickets through TicketWeb, utilizing the Internet as a way to directly serve fans of the String Cheese Incident. In 2001, SCI Ticketing ended their relationship with TicketWeb and Ticketmaster and began functioning as their own independent ticketing agency.

On Aug. 6 of this year, SCI Ticketing filed a lawsuit against Ticketmaster, asserting in its complaint that "SCI Ticketing has become the target of an all-out effort by Ticketmaster to foreclose it from competing in the relevant market," and demanded a jury trial.

Nine years after the initial showdown between artists and Ticketmaster, a new battle has begun. And this time the war is being waged in our own backyard.

Enter David
"This whole thing really grew up in Colorado. The band is a really local, homegrown company," says Mike Luba, founder of Madison House Inc. and manager of the String Cheese Incident. "Arguably, the band is the most successful band ever to come out of Colorado, and we did it totally on our own termsﾑno major label, no anything. Itﾕs all been done out of a little office in Boulder."

As online technology and service opportunities advanced in the late-ﾕ90s, upstart SCI Ticketing grew with it, embracing the opportunities the Internet provided. This has made the homegrown company one of the more advanced ticketing agencies in the country.

"We have a state-of-the-art system that can do high-volume, reserve seating with a shopping cart that really nobody else can do," says Luba.

SCI Ticketing has prospered in recent years, due in part to a well-run business and the ever-increasing popularity of the String Cheese Incident. But it never expected to find itself in the role of giant-killer. In fact, the plaintiffs insist that this isnﾕt a personal crusade against the 歟er corporation.

"Itﾕs none of my business how Ticketmaster runs its business, so our whole thing is that weﾕre not even anti-Ticketmaster," says Luba. "If what they claim is true, which is that they have a superior service and they can do things that only they can do, then people will buy through them. What weﾕre saying is, you know what, maybe there is an alternative. And the consumers in America deserve that option. Thatﾕs what this country was based on. Monopolies are still illegal in this country.

"Again, weﾕre not anti-Ticketmaster, weﾕre just pro-us," he continues. "We have an alternative. We can sell the same tickets at a more affordable price to the people who pay our bills and keep live music functioning."

Breaking the silence
Ticketmaster has long been demonized in the court of public opinion for its exorbitant service charges and its status as a giant, faceless organization. The fact that Ticketmaster doesnﾕt speak often to the media has made it, by its own admission, an even easier target for public and media angst.

However, the current lawsuit has caused Ticketmaster to break that silence. A spokesperson, who spoke on condition of anonymity, points out that not only have the companyﾕs business practices been deemed legal in the courts, but the spokesperson also defends the quality of service that the ticketing agency provides.

"Computerized ticketing began about 30 years ago, and the public embraced it as a tremendous convenience," the spokesperson says. "It evolved through the years, and then ﾔconvenienceﾕ became a necessity."

The spokesperson adds: "Itﾕs allowed the public to buy tickets off-site."

And the company is certainly no stranger to dealing with lawsuits. Already this year, Ticketmaster has made a court appearance for a similar lawsuit, which was summarily dismissed. In a press release issued Aug. 11, Ticketmaster questioned the motivation behind the String Cheese Incidentﾕs actions.

"This lawsuit is not about artistﾕs rights; itﾕs about money. SCI and its ticketing company are trying to step in for a ﾔfree rideﾕ on the many benefits and services Ticketmaster provides its clients," Ticketmaster states in its press release. "SCIﾕs unfair leveraging of its popularity to achieve its for-profit ticketing goals is both improper and illegal."

The press release goes so far as to redefine the matter, focusing on the rights of a business and its clients as opposed to the claims of anti-trust violations.

"The issue here is whether Ticketmaster and its clients have the right to contract for ticket distribution services," Ticketmaster states in its press release, "or whether SCI Ticketing can free-ride on those relationships by exerting pressure on Ticketmasterﾕs clients to breach their contractual commitments."

Dan Teree, chief operating officer of Ticketmaster subsidiary TicketWeb, speaks highly both of his companyﾕs role in the ticketing industry and of his former clients, the String Cheese Incident. "We fill a very valuable niche in the ticket spectrum," he says. "We loved working with (String Cheese Incident). I would like to think that down the line we could work together again."

The battleground
"This lawsuit is basically about Ticketmasterﾕs efforts to foreclose a small, innovative ticketing company from the market for the sale of concert tickets," says SCI Ticketing lawyer Neil L. Glazer.

Specifically, SCI Ticketing is accustomed to offering a certain percentage (usually around 50 percent) of its tickets directly to fans, a practice that Ticketmaster attempted to halt in May 2002, limiting the agency to 8 percent.

"SCI Ticketingﾉ has always been able to work with promoters and venues to obtain reasonable allocations of tickets to put up for sale to the bandﾕs fansﾑthe fans of String Cheese and the fans of various other acts that are clients of SCI Ticketing," says Glazer. "It affects (SCI Ticketing) because theyﾕre unable to continue to sell as many tickets to their fans as they used to."

Ticketmaster is able to enforce this limit through long-term exclusive dealing agreements, which gives Ticketmaster exclusive rights to all non-box office ticket sales. Glazer asserts that they are using these agreements to maintain a monopoly on the market, which is where Ticketmaster has allegedly overstepped its legal boundaries.

"Ticketmaster has exclusive dealing agreements with many if not most of the venues and promoters in the country. What Ticketmaster has begun to do is to basically issue cease-and-desist orders to the venues and promoters, saying youﾕve got to stop giving (the String Cheese Incident) all these tickets," he says. "There is case law on exclusive dealing agreements, and the case law basically says that when a company achieves a certain amount of power in a particular market, then itﾕs got to be really careful how it uses any exclusive dealing agreements it has. It canﾕt use them to acquire monopoly power, it canﾕt use them to maintain monopoly power, and it canﾕt use them to foreclose competition in the market. What we allege is that Ticketmaster is doing all of those things."

These actions, asserts the complaint, "are causing damage to SCI Ticketing and may lead to its demise."

So what's new?
It would be natural for folks who remember Pearl Jamﾕs fight against Ticketmaster to cast a cynical or perhaps even fatalistic eye toward SCI Ticketingﾕs lawsuit. After all, Pearl Jam was arguably the most popular band in the country with massive ticket-drawing power at the time of its battle with Ticketmaster. If they couldnﾕt defeat the corporate giant that had only recently taken control of the market through its 1991 buyout of Ticketron, then what chance does a small ticketing agency from Boulder have?

According to SCI Ticketing, there are striking differences between the two situations.

"The big, colossal difference is that we now have a technology that can do things that Pearl Jam couldnﾕt do, through no fault of their own. Itﾕs just the technology didnﾕt exist," says Luba. "(We) have a fully functional ticketing system, thatﾕs the big difference. We have an alternative.

"And the other thing is that Pearl Jam actually never filed a lawsuit," he continues. "They had the Department of Justice take on the case. We believe thereﾕs real laws here that are being broken, and weﾕre willing to go to court and prove it in front of a judge and a juryﾉ I think if Pearl Jam was trying to do what weﾕre doing now, I think it would have been a totally different story for them."

There has also been a change in the economic climate. While the economy was hitting its stride in 1994, it has been nose-diving since 2001. With the public watching its wallets a little closer, who has the advantage?

According to Associate Economics Professor Tracy Mott at the University of Denver, the issue can not be easily explained by textbook economics. "If String Cheese needs Ticketmaster more than Ticketmaster needs String Cheese, obviously itﾕs better for Ticketmaster," says Mott. "(But) there are these unique things about a situation like this. String Cheese, because it has a somewhat unique market, perhaps its supporters are more concerned with loyalty than they are with other matters. Their devotion to String Cheese Incident is not very affected by the economic situation. But to the extent that there are marginal customers out thereﾉ obviously the lean economic times makes it tougher on them."

According to Luba, something else has changed in the decade since Pearl Jamﾕs scrap with Ticketmasterﾑthe ticketing corporation has established an even tighter stranglehold on the industry.

Says Luba: "The problems that (Pearl Jam) were sick of back then are not only the same now, but theyﾕre even worse."

Alternative music
Although the String Cheese Incident may not be at Pearl Jamﾕs level of popularity circa 1993, the band still has a firm foundation on which to stand up to Ticketmaster. The plaintiffs arenﾕt cash-strapped teenagers complaining about the hit that convenience charges will have on their beer money. Nor are they an upstart organization looking for some quick publicity. SCI Ticketing is a legitimate, successful business with an insiderﾕs knowledge of anti-trust law.

And according to those at SCI Ticketing, they did not bring up a lawsuit against a major corporation on a whim.

"Itﾕs really critical that itﾕs really clear that this was not entered into lightly," says Luba. "Weﾕve hit a space where to really play the right, the safe, appropriate places, thereﾕs nowhere for us to play because we canﾕt get any tickets. Ticketmasterﾕs exclusive dealing agreements are so far-reaching, and the web is so locked down, that thereﾕs just almost nowhere for us to play."

Adds Glazer: "Weﾕve put together a team of some of the most talented and experienced anti-trust litigators in the country. My firmﾕs got a long history of being extremely selective about the cases we take on, and we would not have filed this lawsuit if we didnﾕt believe it to have merit. So we are reasonably confident.

"If we prevail here, it will hopefully open up the market to more competition and open up the market for artists," he continues. "In particular, to have more ability to pick lower-cost, higher-quality alternatives to deliver tickets to their fans."

A valid question, however, is whether or not this lower-cost, higher-quality alternative exists.

"We use our own ticketing system, so we put our own shows on sale and sell them through our own box office solely," says Erica Zimmerman, box office manager of the Boulder Theater.

For 10 years, the Boulder Theater has done its own ticketing and has been very successful at it. They pride themselves on being a small, local business and have practically created a blueprint for other venues to take control of their ticketing situation.

"Because we donﾕt use a big ticketing agency, weﾕre able to keep our service charges low for our customers. And thatﾕs the ideal situation," Zimmerman says. "It has to do with the fact that a big corporation doesnﾕt own the rights to our theater. Because weﾕre a locally owned, privately owned business, weﾕre able to set our own standards for ticketing.

"The only time that we run into troubleﾉ is sometimes Ticketmaster wonﾕt let us print our own tickets, so they send us hard Ticketmaster tickets," she continues. "Then we have to fool with our ticketing system to have it not print out and rely on their accuracy when they send lists of people whoﾕve bought tickets. So when it comes to be the night of the show and weﾕre running the box office, thereﾕs usually not a Ticketmaster representative here, so weﾕre responsible for making sure that their patrons get in."

Perhaps this inconvenience is why Ticketmaster tacks such a high convenience charge to their fee.

Regardless, it is clear that, as evidenced by SCI Ticketing and the Boulder Theater, viable alternative ticketing options are possible. They can even thrive as a part of the local community.

"I think itﾕs helped us to build up a very reliable clientele of people who come back again and again, simply because itﾕs very easy for them to come here and buy their tickets," says Zimmerman. "They can do it over the phone. They can walk up. They can do it over the Internet. Still, they can count on the fact that itﾕs not Ticketmaster. People are thanking us again and again that weﾕre a hometown venue in that way. Weﾕre proud of being a local business."

Connecting the dots
On the surface, SCI Ticketing doesnﾕt appear to be saying anything that the general public didnﾕt already assume: Big corporations can exploit and misuse their power and Ticketmaster, which is no stranger to the courtroom, works in potential violation of anti-trust laws.

But digging deeper into the case, SCI Ticketing is bringing to light viable alternatives that disprove Ticketmasterﾕs claims that there are no legitimate alternatives to their service. They are also exposing how Ticketmaster uses exclusive dealing agreements to thwart potential competition. They are also showing that small companies are not dependent on the government to take action for them, learning from the mistakes that Pearl Jam made nearly a decade ago. With technological advances, the little guys now have the power to take on the big boys themselves.

"I would hope that the public can connect the dots and see this as one aspect of much bigger problems that are happening in the music industry, that are happening throughout the arts, and that are happening throughout society," says Glazer.

For Luba, the lawsuit is as much about social obligation as it is about his business. "If we donﾕt stand up for this because weﾕre either gonna be intimidated or scared or threatened or run off, then weﾕre no better than anyone else who just capitulates to this bullshit," he says. "I think people in this country deserve better than what theyﾕre being force fed nowﾉ People are sick of being commodified and being treated as entities to be marketed to.

"We work in an industry now where every year the gross of the industry goes up and up and up, and yet we sell fewer and fewer tickets. And thatﾕs horrifying," Luba concludes. "For lots of people, music saves their lives. And if we let big business run that element out of being human, then weﾕve all failed as a society."