Concert Tickets Too Expensive? Blame Box-Office HistoryDean Budnick
Aug. 24 (Bloomberg) -- While watching the “Today Show” one morning in 1967 from his Southern California home, Roy Bellman felt his knees buckle. The program was offering remote coverage from the iconic Gimbels department store in New York’s Herald Square. There, a reporter breathlessly introduced the “world’s first computerized ticketing system.”
For Bellman, a manager at Computer Sciences Corp., it was as though the floor had dropped out beneath him. He could barely process the images on the flickering screen because, up until that moment, he had thought that his company -- not the one featured on the “Today Show” -- was developing the world’s first computerized ticketing system.
The early era of computerized ticketing -- in which box offices stopped relying solely on paper tickets and began moving to inventory-management systems stored on mainframes -- is a tale of two operations, functioning in relative secrecy on opposite coasts, developing promising technology with flawed business models.
In New York, Broadway producer George W. George had commissioned a study to determine whether it would be cost-effective and technically viable to sell tickets via computer. He eventually pitched the idea to Edgar M. Bronfman, the head of Seagram Co.’s U.S. operations.
The resulting company, Ticket Reservation Systems, was incorporated on May 4, 1965. It soon formed a partnership with the upstart computer manufacturer Control Data Corp. TRS used the company’s Control Data 1700 minicomputer (which was not all that “mini” by today’s standards, occupying as much space as a large office desk). A team of programmers created software that allowed the 1700 to communicate with remote outlets that had a ticket printer, a Teletype printer and a “latched keyboard” on which the keys remained depressed after someone typed each entry until manually released.
The system debuted on July 6, 1967, selling tickets to the musical “I Do! I Do!,” as well as the off-Broadway performance of “Drums in the Night” and the National Professional Soccer League’s New York Generals.
Meanwhile, in the California offices of Computer Sciences Corp., Bellman had begun a project pitched by a self-described “automation consultant” named Walter T. McHale. Initially dubbed the Teleticket Concept, the new endeavor had been renamed Computicket by the time it began operations, almost a year after the TRS launch. Bellman’s team put two IBM mainframes at the heart of a system that provided retailers with a monitor and a ticket printer built into a console that, the Computicket brochure said, “is handsomely custom-finished with a counter top of durable, wood-grain Formica. There is ample counter space for check writing, change making, etc.”
Although Ticket Reservation Systems and Computicket developed on opposite sides of the country, with varied approaches to their programming and hardware, they used similar revenue models. Consumers typically paid a service charge of between 25 cents and 50 cents, while the companies also pocketed matching fees known as an “inside charges” from the theaters, producers and sports teams that used the system. Both companies soon worried, however, that these sums would be insufficient to keep them solvent.
Computicket and TRS had failed to anticipate that their clients were willing to commit only a fraction of available ticket inventory to computerized sales.
As Bellman recalled in an interview, “They were reluctant to change the way they had been selling tickets, so they would give most of their inventory to their traditional distribution points and maybe give us 10 to 30 percent of the venue. That’s such a small amount of tickets to be selling, and we’re advertising, ’Come to us and we’re going to give you the best available seats.’ But it wasn’t true because we didn’t have best available. So we had credibility problems from the get-go, and we also started to worry almost immediately that the volume of sales wouldn’t be enough to keep the doors open.”
It wasn’t. Within 18 months of selling its first ticket, Computicket had lost $12.7 million and no one knew how to stanch the flow. On April 3, 1970, Computer Sciences Corp. announced that Computicket would cease operations.
As for TRS, in late December 1969 the Chicago Tribune reported on “the red ink flowing over the new company’s books.” Bronfman sold a 51 percent interest in TRS to Control Data, which rebranded the company Ticketron.
By Sept. 1, 1970, Ticketron had borrowed $16.6 million against a line of credit. Because the business was so costly to run and staff, and because each ticket sold brought in so little revenue, it was disastrously inefficient. When a new president was installed, he told Control Data executive Bob Price, “The only way I can have Ticketron lose less money is to walk down the street and, every time I see somebody trying to use one of our terminals, hit him over the head with a two-by-four.”
Still, Ticketron limped through the 1970s, bolstered by an emerging market for rock concerts that had been an afterthought when it launched. In 1982, however, someone finally solved the great riddle of ticket revenues.
Fred Rosen, a lawyer who had been hired by an investor to monitor the business practices of a struggling startup called Ticketmaster, saw price elasticity where no one had thought to look for it. His vision was to eliminate the inside charges and then raise the service fees paid by the public, with a portion of those funds rebated to the promoters and venues.
In the years to follow, with Rosen as its chief executive officer, Ticketmaster would offer cash-starved venues advances against royalties and signing bonuses. In exchange, the company asked for full inventory of all tickets sold to the public, required an exclusive agreement to provide ticketing services and encouraged clients to close their box offices on the first day of a sale. (Since tickets were available at the box office without service charges, this meant increased revenues from outlet sales for the facilities, which almost always complied.)
In 1991, Ticketmaster swallowed Ticketron, by which point the live-entertainment industry had long since come to recognize the revenue opportunities in ticketing. The various entities involved in the process of booking, hosting and promoting live events increasingly wanted larger slices of the pie. When those slices were deemed too thin, they all agreed to bake a bigger pie. The ticket-buying public was left to swallow it. Indigestion persists to this day.
(Dean Budnick is the co-author of “Ticket Masters: The Rise of the Concert Industry and How the Public Got Scalped” and the executive editor of Relix Magazine. He teaches history at the University of Rhode Island and Roger Williams University. The opinions expressed are his own.)
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