[Economist Eric] BUDISH: Something that’s not widely understood is that these service fees often — part of them goes back to the venue. ... So Ticketmaster takes all the P.R. hit for these egregious service fees. But actually a lot of that money spreads its way around the rest of the food chain.
[Head of music at Ticketmaster North America David] MARCUS: It’s actually historically kind of part of Ticketmaster’s business model to take on the burden of that negative sentiment. ... We would say it in the hallways: the reason that we’re successful as we are is because we take those bullets on behalf of the venue, the artists, the promoter....
[Stephen] DUBNER: OK, so let’s back up a bit here — the real scalping is going on between who and whom?
[Scalper Ken] LOWSON: Well, promoters and teams sell directly to brokers. You know, and then those brokers and list them on the marketplace. You know, for a team owner, it’s their ticket. And for a promoter, it’s their ticket, it’s not the artist’s ticket. I don’t know another industry that intentionally advertises one price to intentionally hold it, and resell it secretly....
DUBNER: Yeah, but what we’re told is that artists are typically not getting any of that additional markup. Are you saying that’s not the case, that they are getting some of that markup?
LOWSON:Well, maybe it’s something like that. But their managers are hired to make them the most money. And in the end, you know, if you’re taking a guaranteed amount that’s higher than the revenue from the tickets. It’s like a pre-scalp.
DUBNER:I just want to make sure I understand it. So it’s not that the artists are, per se, getting a cut — let’s say a ticket sells for $100 on the primary, gets marked up to $500 right? It’s not like the artist is getting any of that additional $400, it’s that the guarantee that their manager negotiates for them is based on a ticket sale price somewhere in between $100 and $500, is that what you’re saying?
LOWSON: Well, they’re negotiating with, you know, a promoter which is for a flat amount per show. There’s 50 shows on the tour, “we want $50 million.”--Freakonomics Radio on who's making really money on service fees and scalping