Hidden fees drive up concert costs


April 1, 2001



As the summer concert season kicks into high gear, rock fans will find themselves digging deeper into their wallets than ever before.


It isn't because of escalating ticket prices--industry observers say those have leveled off since the dramatic increase of the mid-'90s.


The biggest price hike for consumers in 2001 is in the form of service charges and add-on fees that can inflate the face price of a concert ticket by $15 or more.


In 1994, when alternative rockers Pearl Jam joined the Justice Department in launching an ill-fated assault on Ticketmaster, the ticketing giant routinely added an average of $3 to $4 in service fees per ticket.


Those fees now average $8 to $9 per ticket. And the consumer doesn't learn about them until seconds before making a purchase.


Ticketmaster defends this increase by saying that credit-card charges have escalated. The company adds that consumers are also paying for developing technologies, including bar-code scanners at concert venues and tickets that can be printed out on home computers.


But some industry insiders blame the increase on the recent emergence of SFX Entertainment as the dominant national force in the concert business.


The New York-based promoter has spent $2 billion since 1998 to acquire dozens of venues nationwide. In the Chicago area, it now owns the New World and Alpine Valley music theaters, and it has long-term agreements to book the Allstate Arena and the Rosemont Theatre.


''The real issue is that SFX's $2 billion consolidation of all these companies is being paid for by the consumer,'' says Jerry Mickelson, co-owner of Jam Productions, SFX's Chicago-based rival. ''What they're doing in my mind is crazy, but this is how they're making money.''


SFX does not dispute that service fees have risen. ''My question is why do we have to blame anybody?'' says Fran MacFarren, the company's vice president of business development and business affairs. ''Yes, they've increased, and they are what they are, and really it's part of the ticket purchase--part of the overall price.''


Escalating fees


''It used to be that selling tickets was a cost center in the concert business,'' says Gary Bongiovani, editor of the concert industry trade publication Pollstar. ''Now it's a profit center.''


An examination of prices for the best seats at the major concerts currently on sale in Chicago via Ticketmaster.com or Ticketmaster phone operators reveals total add-on costs of $14.75 per ticket for U2 at the United Center, $16.50 for Ozzfest at the World, and a current high of $17.55 for 'N Sync at Soldier Field.


In 1994, when Chicago attorney Paul M. Weiss filed a class-action lawsuit on behalf of consumers who were upset about Ticketmaster's ''monopolistic practices'' and unreasonable service fees, it cited add-on charges of $3.25 for an INXS concert, $4.25 for the Ramones and $4.25 for Soundgarden.


That same year, Pearl Jam became a vocal critic of Ticketmaster after it discovered that the company had added a $3.50 service charge to $18 tickets for its shows at the Chicago Stadium and the New Regal Theatre.


Pearl Jam joined a handful of other rock groups at a congressional hearing to protest Ticketmaster's ''exclusivity agreements'' with major concert venues. Those agreements stipulate that bands must sell their tickets through Ticketmaster in order to perform at that venue. But neither the hearing nor a concurrent investigation by the Justice Department resulted in any action against Ticketmaster.


''Pearl Jam chose to make it an issue, and it ended up hurting their career ultimately,'' Bongiovani said. ''You cannot tour America and play the right places to play without using Ticketmaster. It's just the nature of the way the business has evolved.''


Today as in 1994, the major piece of the pie in add-on ticket fees is the Ticketmaster service charge. That charge is highest when consumers order online or by phone. It can be $2 to $3 cheaper when people appear in person at a Ticketmaster outlet.


In the past, the Ticketmaster service charge could be avoided at the venue box office. But SFX-controlled facilities such as the New World and Alpine Valley do not open their box offices on the day that tickets come on sale for an event. They only open on the day of the show to sell any remaining seats--and even then there's a ''box office fee'' of several dollars.


''It's an individual market decision--the World and many of our other theaters are located in remote locations'' where it does not pay to staff a box office, says SFX's MacFerren.


Some independent arenas such as the United Center and smaller venues like the Vic Theatre and Metro do open their box offices when tickets come on sale, and tickets may be purchased at those locations for face value without any add-on fees.


Besides Ticketmaster service charges and a per-order handling charge, SFX also charges a ''facility fee'' for every ticket sold at the World and Alpine Valley.


''We view it as part of the gross ticket price, and it's money that's earmarked to remain at the local venue,'' MacFerren says. ''It helps with operations costs, maintenance, capital improvements, etc.''


The independently owned United Center and Allstate Arena do not charge facility fees, although the city-owned Soldier Field tacks an extra $3.15 onto every ticket sold.

Hidden costs


Neither Jam nor SFX publicize the price of concert tickets in their newspaper or radio ads. They provide that information to the press for inclusion in concert listings, but they give only the face price of the ticket. In many cases, the ticket is not available for the listed price anywhere in Chicago.


For example, SFX announced the top ticket price for Ozzfest at the World as $75.25. But that ticket cost $91.75--$16.50 more--when it was purchased via Ticketmaster on the phone or on the Net. The same ticket cost $86.50 when it was purchased for cash at a Ticketmaster outlet. Since the World does not open its box office, those were the only places the ticket was actually available.


''The reason they're secretive about it is they don't like advertising the fact that there are these exceptionally high service charges on selected shows,'' says Pollstar's Bongiovani. ''The only way to find out what a ticket costs is to actually call up and try to buy it, and at that point I guess the assumption is that you're so far along mentally toward buying the ticket that you'll pay whatever the cost is. It wouldn't strike me as the best way to do business, but that's the way it's done.''


An attorney familiar with the concert industry and ticketing practices characterizes this policy as ''perfectly legal, but certainly misleading.''


Says SFX's MacFerren: ''There's really no intent to mislead consumers. Frankly, it's a comment that I really haven't heard before--we have not gotten a lot of complaints about that.'' Still, SFX has pledged to begin giving the press information on the total ticket price with all add-on fees included.


Ticketmaster officials maintain that credit card companies are the main culprit behind the increase in add-on fees. At a retail store, the merchant absorbs the fee that's charged by the credit card company--usually about 4 percent of the total transaction. But the concert business passes that cost along to the consumer.


''It used to be common practice for the venue or the promoter to pay the credit card fee,'' says Jeff Kline, Ticketmaster executive vice president. ''Now it has become a common practice with most venues and most promoters that the credit card fee is added on top.''


Still, the credit card companies charge only about $2.60 for a $65 ticket--and that's a small fraction of the jump in add-on fees. Ticketmaster says another reason for the increase is the cost of research and development.


''A portion of your service charge is going toward developing new technology--the Web site, the bar-code scanners in the buildings, the anti-counterfeiting measures,'' says Ticketmaster spokesman Larry Solters. ''Those are expensive, and we're not a charity.''


But some industry sources charge that SFX is working with Ticketmaster to jack up the service fees at the venues it owns as a source of extra profit for both companies. Ticketmaster and SFX both refuse to discuss the specifics of how service charges are set at Chicago venues such as the World and Alpine Valley.


''Since SFX has consolidated, the public has been injured by the increase in ticket prices and service charges as well as a healthy increase in food and beverage at their venues,'' Jam's Mickelson says. ''The remaining independent promoters are the only ones pointing out the issues.''


Mickelson says he has spoken with Justice Department representatives who are investigating SFX for possible antitrust violations. The Justice Department refused to comment.


SFX is now Ticketmaster's single largest client. MacFerren defends the promoter's exclusive arrangement with the ticketing company and says that it's the most efficient and reliable means for ticket distribution.


''Ticket service charges are a mechanism of assessing money to cover the cost of ticketing,'' MacFerren says. ''Is there a profit component in that? Sure. But you know what? They're a for-profit company, we're a for-profit company, and these are the charges that are added to the tickets for the cost of selling. I can't apologize for the fact that we're both for-profit companies.''




The SFX effect


In its quest to dominate the live-music industry, SFX Entertainment has enticed investors with the vision that concert audiences are a valuable commodity that can be sold to advertisers for all manner of ''cross-promotional'' marketing.


To date, this has resulted in a lot of between-act commercials and an increase in corporate sponsorships at SFX shows.


Now Chicago will see another manifestation of this philosophy. On Wednesday, SFX will announce a new corporate sponsor for the New World Music Theatre, which will be renamed in honor of a consumer electronics manufacturer.


New York-based SFX acquired the New World and Alpine Valley in 1999 when it bought out rival promoter the Nederlander Organization as part of a $93.6 million deal.


Chicago-based promoter Jam Productions originally spurred construction of the $23 million, 30,000-capacity World in the late 1980s, acting in partnership with south suburban real estate developers and the village of Tinley Park. In 1994, five summers after the venue opened, Jam sold its interest to Nederlander, which managed the facility until it sold out to SFX.


SFX itself was purchased last year by radio giant Clear Channel Communications, further expanding the possibilities for ''cross-promotional synergy.'' In the new company's vision, music fans will drive to an SFX concert while listening to a Clear Channel radio station that's playing the artist who's performing at an SFX-owned venue. And the company will sell advertising every step of the way.