Business | YEN FOR LIVING

Without concerted effort from Japan's industry players, online scalping looks unstoppable

by Philip Brasor and Masako Tsubuku

Special To The Japan Times

Several weeks ago, 116 pop music artists and 24 concert-related companies bought full-page advertisements in two national dailies. The ads publicized the signatories’ determination to combat the practice of reselling concert tickets on the internet, which has resulted in hugely inflated prices for popular acts. By squeezing out fans who couldn’t afford these prices, the message said, the resale market was threatening the very existence of popular music.

Exactly what these artists and companies are going to do about it, however, isn’t clear; nor, exactly, is what they can do, short of convincing the government to ban ticket resales over the internet. Reselling tickets is basically online scalping. Parties buy as many tickets as they can for popular shows through proper channels and then immediately resell them at high markups on specialized ticket resale sites such as Ticket Camp.

Though the international media makes a big deal out of the fact that CD sales still remain relatively strong in Japan, the fact is, revenues for recorded music here are dropping, just not as fast as they have in other countries. Live music is still a profitable endeavor, which means the music industry relies more and more on concerts to survive. Takao Nakanishi, the president of the Association of Concert Promoters, one of the organizations that placed the ad, recently told the Tokyo Shimbun that “resales that go beyond the realm of sensible have become commonplace, so many fans who want to attend concerts are being shut out.” In addition, “it hurts the artists,” since none of the extra money being spent on tickets is going to them. People who spend more money than they expect to spend on tickets do not buy merchandise at the concert venue, which now makes up a considerable portion of music income. More to the point, the extra money spent on resold tickets isn’t going to promoters and record companies either.

Traditionally, ticket scalpers (dafuya), normally associated with criminal organizations, stand in front of concert venues before shows buying extra tickets for below face value and then turning those tickets around for inflated prices. The practice started in the 1960s at baseball games, and local governments eventually passed regulations to outlaw it, but not because prices were considered extortionist. What concerned local governments was the scalpers’ pushy methods and that the transaction occurred in a “public place.” If these two conditions are met, the transaction can be labeled a public nuisance.

In fact, there are no laws that expressly prohibit the resale of tickets for whatever amount a seller can get. Usually, whenever arrests are made with regard to scalping, it is because the transaction took place in the physical world and one of the parties involved was a member of an organized crime group. Another way police can stop ticket resales is to invoke local business regulations, which is what police in Sapporo did when they arrested a woman for reselling 300 tickets over a period of 15 months without a license.

But with the rise of internet resales over the last 10 years, on-site scalpers are becoming rarer. It’s easier and less time-consuming to resell tickets online, and for most resellers there’s no fear of being picked up by the police.

During a recent discussion on J-Wave FM, lawyer Kensaku Fukui explained that the concert industry is now facing two major problems that feed on each other: ticket resales and an acute shortage of venues in Tokyo due to a confluence of major renovations and new construction for the upcoming Tokyo Olympics. The trend now is that tickets for popular shows sell out immediately and many show up in a matter of hours on sites like Ticket Camp.

As an example, he mentioned the “High and Low” tour of the all-male R&B collective Exile. One-third of the tickets that were sold — about 37,000 — ended up on resale sites. All the tickets had a face value of ¥13,000, and resale prices ranged from ¥18,000 to ¥210,000. Ticket Camp takes 10 percent of whatever price the seller gets for a ticket. Fukui estimates that all the resold tickets for the “High and Low” tour were worth ¥400 million, which means Ticket Camp may have made a cool ¥40 million on just one tour, and without sharing in the risk that promoters have to shoulder.

But as radio personality Daisuke Tsuda said on the same show, doesn’t the fact that so many tickets are sold for such high prices indicate there’s some sort of “imbalance” in the market? Shouldn’t the tickets be priced higher in the first place?

Generally speaking, Japanese concert promoters do not go in for “dynamic pricing,” meaning a range of prices that better reflect the various abilities to pay of people who want to attend: higher prices for better seats for people who can afford them, and lower prices for people of more limited means. This system is commonly used for events like kabuki, stage musicals and classical music shows, but pop music presenters, reflecting artists’ desire to be “fair” to all their fans, usually set ticket prices low, since concerts are considered “fan service” rather than a money-making endeavor. That sensibility made sense when record sales were healthy and concerts were deemed promotional events, but not anymore.

Fukui also points out that promoters are averse to dynamic pricing because they have to pay a percentage of ticket revenues to the Japan Society for the Rights of Authors, Composers and Publishers (JASRAC). This fee covers all performance rights for whatever songs are presented.

JASRAC’s system for determining the fee is to take a percentage of the average of all the ticket prices. If all tickets are ¥13,000, then JASRAC bases its fee on that amount, since the average will be ¥13,000. But with dynamic prices ranging from, say, ¥10,000 to ¥100,000, the average will be higher even if total ticket revenues are the same, and the promoter will have to pay more to JASRAC. Nevertheless, dynamic pricing would probably eliminate at least some resales, since it would be difficult to charge inflated prices for the higher end tickets. Tickets for many foreign artists who come to Japan nowadays include VIP options, where richer fans can get a special booth with free drinks, or a chance to meet the artist. These higher prices alone can cover the operating costs of a concert.

The main problem facing concertgoers is what to do with tickets they can’t use. In Japan, there are no refunds or exchanges, so if a ticketholder falls ill or otherwise is unable to attend the show, they cannot get their money back, so internet resale sites are their best resort. The South Korean concert industry recently changed its policy to allow for refunds. In Japan, where ticket sales are dominated by three agencies — Pia, Lawson and E+ — who work as a de facto cartel, it’s unlikely that refunds will become a reality. Though the technology for paperless e-tickets is now available, hard copies of tickets are still the overwhelming flavor in Japan, a system that allows agencies to charge a number of extra fees that can add as much as ¥1,000 to the face value of a ticket depending on when you buy it.

But as Fukui points out, the concert industry doesn’t seem to have a solution beyond protesting — as represented by the anti-resale ad. Specific acts, like the boy band Arashi, have instituted high-tech methods such as facial recognition to make sure that the people who enter the venue are the same people who originally bought the tickets, but such methods are limited to acts with dedicated fan clubs and may not be economically viable for other artists. The best solutions are dynamic ticketing and e-tickets that concertgoers can keep on their mobile devices, but those solutions would require that all the various players in the industry work together.

Yen for Living covers issues related to making, spending and saving money in Japan on the second and fourth Sundays of the month.

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