Elma Ocampo
E-ticketing has become the most popular way to purchase tickets for sporting matches, concerts, and other events. While it’s certainly convenient to buy tickets online and even store them on smartphones, the technology is not foolproof, as evidenced by the recent Taylor Swift Eras concert ticketing debacle. A combination of bot attacks, the nature of the industry, and fraud created havoc for “Swifties” who desperately wanted to see their favorite performer and for Ticketmaster to deal with the financial fallout.
Could this fiasco have been prevented? It’s possible — with better fraud prevention and controls. To really understand what happened, it helps to know how the e-ticketing industry grew from less than a million dollars per year in sales in the late 1990s to being valued at $28.49 billion in 2021 and the challenges online ticketers must consider to reach a projected $52 billion in sales by 2030.
The Evolution of E-Ticketing
Before concert tickets were available online, people lined up at venue box offices and patiently waited to purchase tickets. Typically, the only way to pay was with cash, check and credit cards. The industry moved into a distributed commerce model where customers could buy tickets at record stores and other physical locations. Eventually, ticketing shifted online but was still through limited channels.
Mobile technology and e-ticketing adoption
The most impactful change in how event ticketing evolved can be attributed to advancements in mobile technology, specifically, the ability to buy and store tickets on smartphones. Payments matured as well, expanding on credit card payment options and adding digital wallets and alternative payment methods.
Over the past 20 years, online ticketing has matured, with customers being able to buy tickets on smartphone apps and websites, as well as at kiosks and even through social media channels. Demand for tickets were high, but it was the pandemic that created a sense of scarcity and extreme demand.
The pandemic effect on e-ticketing demand
During the pandemic, live performing arts and entertainment events were disrupted to comply with safety precautions. Movie productions were scarce as well – there were only 338 theatrical releases in 2020, a 66% decrease from the 987 films released in 2019. Consumers were hungry for entertainment, which inspired performers to respond with free, virtual shows that required no ticketing.
But people longed for the experience of a live performance. And once concert halls and sports venues reopened their doors, every live event became the hottest ticket in town. Fans were feverish about even some of the lesser-known performers – they wanted to have the experiences they missed during lockdown.
And when international mega-star Taylor Swift announced her Eras tour, fans were practically rabid. The marketing and promotions leading up to the national presale date created a palpable level of anticipation and excitement. We knew the tickets would likely sell out, but no one anticipated what would actually take place.
The Taylor Swift Ticketing Fiasco
On Nov. 15, 2022, the pre-sale window opened on the Ticketmaster website, which experienced “historically unprecedented” demand that resulted in website outages and multihour wait times. Over 2 million tickets were sold that day – breaking every previous online ticket sales record – however, many of the most dedicated “Swifties” ended up empty-handed.
Ticketmaster canceled further sales, citing bot attacks as one of the biggest issues. The result was hundreds of thousands of concert hopefuls with no other option but to search the secondary market, where even nosebleed seats were being resold at astronomical rates. In some cases, tickets were listed for $10,000.
Keep in mind, there was no ticket purchasing window for the general public. The only opportunity was supposedly for “verified fans”; however, that may not be the case. Both Ticketmaster and its partner LiveNation Entertainment are now under Congressional investigation, and fans have filed multiple lawsuits. One, in particular, accuses the companies of “price fixing, antitrust violations and ‘intentional deception.’” Among the questions are whether Ticketmaster intentionally misrepresented ticket availability and if presale codes are truly exclusive.
Not only does Ticketmaster have a brand reputation problem, but it will also have to deal with financial losses from those lawsuits and e-ticketing fraud.
E-Ticketing Leaves Companies Open to Fraud
Online security has been a major concern in the events industry for decades. In the e-ticketing industry, fraudsters use a variety of tactics.
Three tactics were most prevalent:
- Account takeover fraud – Fraudsters use stolen pre-sale credentials and/or credit card information to purchase tickets online and resell them.
- Fake ticket sales – Scammers who don’t have real tickets and know that demand is high lure innocent fans with too-good-to-be-true low prices, only for the buyer to find out after purchase that the tickets are fake. In New Jersey, a Taylor Swift fan lost almost $2,000 in an e-ticketing fraud scheme.
- Friendly fraud – Whether it’s due to buyer’s remorse from the exorbitant cost or not recognizing a purchase on their statement, there will likely be no shortage of friendly fraud related to this event.
As a result, online ticketing sites must field countless chargebacks, which can have a significant impact on their business because of the way the industry is structured.
Refresher: A chargeback is the penalty businesses pay when customers (or fraudsters) successfully dispute a charge on their statement. The business must refund the cost of the transaction plus a fee that may be anywhere from $20 up to $100 per incident.
What Makes Chargebacks in the E-Ticketing Industry Different?
In the e-ticketing industry, most of the tickets are sold by ticket companies that don't own or organize the event. They simply sell the tickets. Their business model usually involves charging a convenience fee, let’s say 20%, which is their revenue for each ticket.
For example, if a ticket is sold for $100, the e-ticketer – Ticketmaster in the case of the Taylor Swift event – charges customers $120. The $20 is Ticketmaster’s revenue, and they pay the remaining $100 to the event organizers, who then pay the venue and the artist. It goes without saying that the margin for e-ticketers is low. And the cost of a chargeback is high.
“When an online ticket seller experiences a chargeback, they aren’t just responsible for their margin – the $20. They have to refund the full cost of the ticket plus their margin, so $120.”
Rafael Lourenco, ClearSale Vice President
That’s assuming the ticket only cost $120.
In the case of the Taylor Swift situation, tickets were selling for hundreds and thousands of dollars, which Ticketmaster may have to reimburse. Another factor is that ticket prices change over time. Unlike with a traditional retailer, it's not uncommon for tickets to be priced in lots.
For example, if a concert is scheduled for March, tickets might be priced at $100 (plus convenience fees) until Dec. 31. In January, the second lot may be priced at $130. And if bought last minute, the ticket might go for $200. Even with a less popular performer, the stakes are high.
If customers’ banks determine that chargebacks are in order, the financial impact could be even more significant.
“When we consider that fraud and chargebacks are a considerable part of a company's total costs, you can see how fraud prevention can directly affect revenues.”
Rafael Lourenco, ClearSale Vice President
How Can E-Ticketers Protect Themselves
Fraud prevention is difficult in the e-ticketing industry because of the factors mentioned, plus the immediate nature of the transactions. Even if an e-ticketer wanted to add a contextual review for suspicious orders, consumers of this industry aren’t patient enough to tolerate it.
But there are ways companies can prevent fraud.
Require two-factor authentication
E-ticketers can prevent fraud by using two-factor authentication, where customers must input a code sent via SMS or email to confirm their identity.
Offer refunds
Many ticket resellers are willing to refund a buyer’s purchase if their tickets turn out to be fake. Why? Because it’s often far cheaper to offer a refund than pay expensive chargeback fees and penalties. In the wake of the Taylor Swift fiasco, it would make sense for companies like Ticketmaster and reseller, StubHub to offer a maximum refund amount so they aren’t having to reimburse overpriced ticket costs.
Rethink the verified fan registration system
Ticketmaster Verified Fan system typically has a 95% success rate for tackling ticket-buying fraud bots. It allows customers to create a verified account where they must prove their identity through an email address and phone number. Once approved, they receive a unique code to use in purchasing tickets during specially designated times.
Unfortunately, this is the very system that broke down during the Taylor Swift ticketing event, which means Ticketmaster and other online ticket sellers will need to rethink how they structure their system and how they communicate each level within their Verified Fan System.
Implement a fraud protection solution
Companies offering digital event tickets have to walk a thin line: Protect customers from bot attacks and fraud while making sure good customers can actually buy the tickets they want.
Fraud prevention has to be strategic. If you have a tool in place that’s too rigid and blocks the transaction, you might lose the consumer. At the same time, your fraud prevention tools and strategies can’t hinder the customer experience by asking too many questions or waiting too long to make a decision.
ClearSale’s hybrid solution offers near-instant decisions on transactions with an incredibly high level of accuracy. This gives online ticketers the peace of mind that they need to then focus on other aspects of their business instead of worrying about constant changes in fraud patterns and sales.
To learn more about how we can help you mitigate your fraud risk, contact one of our analysts.
