Beyond the bots ticked off over ticket prices or the eternal

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UCLA Entertainment Law Review

Title Beyond the Bots: Ticked-Off Over Ticket Prices or The Eternal Scamnation

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Journal UCLA Entertainment Law Review, 25(1)

ISSN 1073-2896

Author Elefant, Sammi

Publication Date 2018

DOI 10.5070/LR8251039716

Peer reviewed



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BEYOND THE BOTS: TICKED-OFF OVER TICKET PRICES OR THE ETERNAL SCAMNATION?

Sammi Elefant*

Abstract In 2016 alone, despite the passing of federal legislation banning its use, automated ticket-buying software known as "ticket bots" attempted to purchase five billion tickets at a rate of ten thousand tickets per minute on Ticketmaster's website. The secondary market for tickets to live music, live theater, and sporting matches is worth roughly $8 billion worldwide,1 and so far, the profits accrued by cyber-scalpers have proven valuable enough for violators to run the risk of facing fines or criminal penalties legislation may impose. It turns out that ticket bots are not the only problem contributing to secondary-market resale and price inflation. Industry insiders such as artists, managers, and producers, have a storied history of reducing the number of tickets actually made available to the general public. In some instances, less than half of available tickets for concert stadium tours have been put on sale. Courts have struggled to protect public interests against monopolization of the free market. They have often employed a "rational basis" test to defend laws prohibitive of ticket resales, including anti-scalping measures. However, with the advent of e-commerce technology, cyber-scalping brings jurisdictional and identification issues to the forefront. This Article suggests that current federal legislation should be amended to ban industry insider hold-back practices and the internal resale of tickets at inflated prices, thus making more tickets available for public sale at face value. This Article further argues for the implementation of non-transferrable paperless ticketing procedures claiming the already proven benefits of such procedures significantly outweigh minor inconveniences to the consumer. Lastly, this Article explores the likely effects of moving the sale and purchase of tickets onto an open-source blockchain that the public can participate in on a global scale. The golden ticket here is that such blockchain technology does away with the need for a central database controlled by a ticket-sale platform vulnerable to scalpers. Instead, blockchain constitutes a

* J.D., Suffolk University Law School, 2018; B.S. & B.A., Emerson College, 2015. Sammi Elefant can be contacted at sammielefant@.

1 All dollar amounts are in U.S. dollars unless otherwise indicated.

? 2018 Sammi Elefant. All rights reserved.

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decentralized transaction platform that removes scalpers from the equation entirely; tickets exist as digital assets that cannot be transferred outside of the blockchain, rendering ticketing transactions virtually impervious to scalpers and free of the inflammatory forces cyber scalping otherwise superimposes on the marketplace.

Table of Contents

Introduction.................................................................................................. 2 I. History: Origins of the War on Ticket Bots................................... 7

A. Tickets as Licenses and the Right to Exclude Patrons................. 7 B. The Birth of an Industry: Scalping Finds Fertile Ground on

Broadway......................................................................................... 9 II. The Ticketing Industry: Not Your Basic Market Structure..... 12 III. Legislative Efforts to Curb Cyber-Scalping............................... 20

A. State Regulation Before the BOTS Act....................................... 20 B. Federal Regulation and Legislative Enforcement...................... 21 IV. Securing Online Transactions....................................................... 27 V. Proposals............................................................................................. 30 A. Enhancing the BOTS Act............................................................. 30 B. The Non-Transferrable Paperless Ticket Debate....................... 33 C. Marketplace Restructuring With Dynamic Pricing.................... 35 D. The Promises of Blockchain........................................................ 37 Conclusion................................................................................................... 40

Introduction As U2 was accepting their third award of the evening at the 2005 Grammy Awards, drummer Larry Mullen used the stage to apologize to the band's fans.2 "Due to circumstances beyond our control, a lot of our long-suffering fans . . . didn't get tickets [to our tour] and I'd like to take this opportunity on behalf of the band to apologize for that."3 Why were loyal fans unable to purchase tickets?4 The simple answer: Kenneth Lowson.5

2 James Montgomery with John Norris, U2 Working On How To Dismantle A Ticket-Scalping Bomb, MTV News (Feb. 16, 2005), [] (describing the band as once again apologizing for the way tickets had been distributed).

3 Id. 4 Jason Koebler, The Man Who Broke Ticketmaster, Motherboard (Feb. 10, 2017), https://

motherboard.en_us/article/mgxqb8/the-man-who-broke-ticketmaster (outlining the career of Kenneth Lowson and his effects on the ticketing industry). 5 Id. (showing the vast and permanent effects of Lowson's scalping business).

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Beyond the Bots3

Lowson, the former CEO of Wiseguy Tickets,6 earned his title as the most successful ticket scalper7 in recent history for buying nearly all general admission tickets to all types of live entertainment events and reselling them at hugely inflated prices.8 He is further credited with creating the first ever automated software known today as "ticket bots."9 In an interview, Lowson recalled the U2 tour: "They apologized on the Grammys because of us, and then they had a second round of sales to make up for it. We took all the good tickets in that second round too."10

Five years later, Lowson would find himself at the center of a legal dispute, with forty-two counts of wire fraud charges against him and two other colleagues in the seminal scalping case U.S. v. Lowson.11 The case ultimately concluded with a plea deal that dropped all wire fraud charges.12 Lowson and his colleagues were charged with one count of conspiracy to commit wire fraud, narrowly avoiding a conviction that could have carried a prison sentence of up to twenty years.13

Even though Wiseguy Tickets has since folded, the initial sale price of live-event tickets has increased exponentially over the past few years.14 Wary of losing markup potential to scalpers, primary ticket vendors have hiked the initial price of tickets for live events to the point where most consumers can no longer afford to purchase them at face value.15 Scalpers remain the primary reason for price surges.16 Indeed, scalpers have profited off of live

6 U.S. v. Lowson, 2010 WL 9552416 (D.N.J. Oct. 12, 2010) (charging Lowson and Wiseguy

Tickets as "knowingly and willfully" engaging in fraud).

7 See Scalper, Cambridge English Dictionary (Online ed. 2016),

us/dictionary/english/scalper (defining a scalper as a person who sells tickets

at an increased price without official permission).

8 See Koebler, supra note 4 (characterizing Lowson as the man who broke Ticketmaster).

9 Id. (crediting Lowson with writing the software that automated ticket purchases in mass

amounts); see also Lowson, 2010 WL 9552416 at *2 (reporting Lowson as the creator of

CAPTCHA Bots that circumvent security walls).

10 See Koebler, supra note 4.

11 See Lowson, 2010 WL 9552416.

12 See id.

13 See Koebler, supra note 4 (discussing the outcome of the case).

14 See Marie Connolly & Alan B. Krueger, Rockonomics: The Economics of Popular Mu-

sic 13 (Nat'l Bureau of Econ. Research, Working Paper No. 11282, 2005) (concluding

that concert ticket prices rose at a greater rate than inflation).

15 See Catherine Valenti, Concert Ticket Prices Rise, Sales Fall, ABC News (July 9, 2015),



[

UER4] (exhibiting how the music industry began charging premium prices for the best

seats as they were losing that profit from scalpers).

16 See James J. Atkinson, The Economics of Ticket Scalping, (May

3, 2004), [https://

C97B-47NN] (using Paul Krugman's three marketing theories to show how

scalpers impact the market).

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entertainment since the 1800s.17 The first recorded account of ticket scalping was in a letter, dated in the year 1850, from opera singer Jenny Lind18 to her promoter P.T. Barnum19 during the first leg of her New York tour.20 In that letter she wrote:

You know that I have always been in favor of having lower prices to my concerts, and you have invariably expressed your willingness to them so far as could safely be done and at the same time prevent speculators21 from taking advantage of the reduction. Will you permit me to suggest that Tripler Hall is immensely large and that with proper precaution you might certainly avoid selling tickets to speculators and at the same time put the prices within reach of the people at large.22

Lind's advocacy for her fans reflects just how difficult it was to combat scalpers, even at a time when it was easier to identify them as they were physically present outside the venue.23 Those responsible for fueling the secondary market were not just individuals, but also multiple networks of people, including ushers and theater managers who would enjoy a cut of the markup obtained by the scalpers to whom they siphoned off tickets purchased from primary vendors.24 New York City theater manager Harry Miner explained the infiltration: "I don't mean to say that it is customary for managers to take out nearly the whole of their orchestra and give it to the speculator in the lobby, but I have seen it done on several occasions."25 Scalping proved to be a viable business,

17 See James Anthony Devine, Ticket Scalping in the Late 1800s and the early 2000s-- Much has Changed, Much is the Same, Seton Hall L. Sch. Student Scholarship 210 (2014) (providing an early history of the ticket scalping business).

18 See Gladys Denny Shultz, Jenny Lind The Swedish Nightingale 11 (1962) (detailing the life of one of the most highly regarded singers in the nineteenth century).

19 See P.T. Barnum, The Life of P.T. Barnum (1888) (narrating the life of showman and promoter P.T. Barnum).

20 See Kerry Segrave,Ticket Scalping:An American History, 1850?2005 3 (2006) (showing a transcript of the letter from Jenny Lind to P.T. Barnum).

21 See Speculation, Online Etymology Dictionary, speculation (last visited Mar. 23, 2018) (dating the term `speculation' back to 1774 and defining it as "buying and selling in search of profit from rise and fall of market value").

22 See Segrave, supra note 20 (quoting Lind's letter to Barnum). 23 See James Anthony Devine, Student Paper, Ticket Scalping in the Late 1800s and the early

2000s--Much has Changed, Much is the Same, Seton Hall L. Sch. Student Scholarship 210 (2014) (discussing the lack of regulation and enforcement against ticket scalpers). 24 See id. (explaining that theater managers and secondary sellers were working as allies to withhold seats and pass them onto scalpers for a cut of the profit). 25 See Dividing The Pudding, N.Y. Times at 5 (Dec. 14, 1883 at 5), . timesmachine/1883/12/14/issue.html?action=click&contentCollection= Archives&module=ArticleEndCTA®ion=ArchiveBody&pgtype=article [] (observing that theater managers often conduct business with the scalpers). These networks also included hotels who received advanced tickets for out of town guests, grocers who received advanced tickets in exchange for advertising, students, and even artists themselves. Id. See also Michael Riedel, Razzle Dazzle: The Battle For Broadway 6 (2015) (detailing "ice" as the term for ticket corruption in New York

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and would continue to flourish with the creation of the internet and the proliferation of online transactions.

As internet usage became mainstream, broadband access and technological developments created an online marketplace, giving scalpers a more direct target.26 Arguably, the main cause of resale market growth was the implementation of the computerized ticket-buying software known as "ticket bots," which Lowson himself pioneered.27 Ticket bots are hawkish computer programs that thwart security walls on authorized internet sale sites such as Ticketmaster, AXS, and Telecharge.28 This software enables scalpers to purchase large numbers of tickets within seconds of the time they are made available to the public for purchase.29 Through what amounts to unauthorized priority buyouts, the ticket bots leave the average consumer with no other option but to purchase tickets on the secondary market for potentially up to ten times face value.30

In an effort to fight monopolization by the secondary ticket market, fifteen states have either passed or proposed legislation to criminalize or impose fines for the use of ticket-bot software and to offer a civil remedy to those who have been injured by its use.31 As live entertainment productions often tour across

theatres, particularly on Broadway). This is what Harry Miner was describing. Some theater historians argue that ticket corruption dates as far back to Ancient Athens, where fans had to bribe someone to get a ticket to Medea's sold-out run at the Theater of Dionysus. Id. 26 See Zak Guzman, The Surreptitious Rise of the Online Scalper, CNBC (Mar. 4, 2015,), [] (explaining how new software developments make scalping more accessible). 27 See Jim Zarroli, Can't Buy A Ticket To That Concert You Want To See? Blame Bots, NPR (Jan. 28, 2016) [] (explaining how scalpers use technology to buy mass amounts of tickets instantaneously). 28 See Alexis Kramer, Pushy Ticket-Buying Bots Feel Heat From Federal, State Officials, Bloomberg BNA Daily Report For Executives, Mar. 26, 2015 (showing how bot software simulate the actions of human beings). 29 See id. at 1 (detailing the capabilities of ticket bots). 30 See Josh Cornfield, Lawmaker Fighting Ticket Freeze-Out in the Name of Springsteen, Associated Press: The Big Story (Aug. 21, 2016) [] (highlighting the investigation conducted by Attorney General Eric Schneiderman's office that found third-party brokers resell at average margins of 49 percent over face value). 31 See Alexis Kramer supra note 28 (discussing the laws passed by different states); see also Cal. Bus. & Prof. ? 22505.5 (2015) (making it unlawful to use computerized software to circumvent security measures); Colo. Rev. Stat. ? 6-1-720(1)(a) (2009) (providing the increase in civil penalties recoverable by the State with regard to deceptive trade practice concerning online ticket sales); Fla. Stat. ? 817.36(5) (2016) (concerning the authorized resale of tickets for not more than one dollar above admission price charged); Md. Code Ann., Com. Law ? 14-4002 (2014) (lacking specific provision for online ticket resale); Minn. Stat. ? 609.806 (2016) (recognizing the use of ticket bot buying software as a misdemeanor); Or. Rev. Stat. ? 646A.115(2) (2010) (making it unlawful for a person to intentionally use or sell software that bypasses security measures established to ensure equitable distribution of tickets); Tenn. Code Ann. ? 39-17-1104(b) (2014) (punishing conduct designed to interfere with operations of ticket sellers by fine); Vt. Stat. Ann. tit. 9, ? 4190(a) (2009) (constraining interference with internet ticket sales).

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