Wednesday, 26 October 2011

Booking fees

Everyone hates them; why do they exist?

Tickets are sold in a really odd way. When you go to Tesco's, you don't see your groceries labelled on the shelf with the cost price, and when you take them to the checkout suddenly discover that you also have to pay a shelf stocking fee, and a credit card processing fee, and a head office administration fee. The cost of sale is included in the displayed price; it is assumed there is a cost price that Tesco's paid, and they're selling it on for a profit.

From the point of view of the box office, or the ticket agency, the "Face Value" of the ticket is the cost price. The price that's advertised to the consumer is the amount that the producer expects to get for the ticket - there's no margin to cover the cost of sale. Which is why the whole cost of running the ticketing operation - call centres, staff, webservers, developers, licences - has to be covered out of a "booking fee" lumped on top of the ticket price.

It wasn't always like this. When I was writing the "Deal Calculator" for Artifax Event - a nice little bit of functionality that let you put in the projected or actual box office take, and worked out the split and guarantees and first calls and so on, and reported how much money went to the venue and how much went to the promoter, there was a field for box office commission, that had a default value of 10%. Normally, the gross take would have the box office commission, credit card processing fees, PRS fees, taxes and so on deducted, and then what was left would be divvied up between the promoter and the venue.

What changed this, to grossly over-simplify, was TicketMaster. They'd do a deal with the venue or promoter and offer to take all the tickets and sell them without an inside commission, which meant that the venue or promoter could completely avoid the cost of sale. Brilliant; an offer you can't refuse. TicketMaster would then have a monopoly on the tickets for that event, and if it were a big, definitely-going-to-sell-out must-see show, they could charge what they liked on top as the "booking fee", and the punters would pay it. Which is why if I look up X Factor 2012 tickets right now on the Manchester Evening News Arena website it lists them as £32.50, and if I click on the "buy now" button I go straight through to the TicketMaster site, where they are listed as £38.00: £32.50 + £5.50 in fees. That's about 17% in fees. Plus a 2 pound delivery fee, which you pay whether you collect the tickets from the box office, have them posted to you, or even choose to receive them by email, so if you're ordering two tickets, that's a 20% markup, or twice the traditional box office commission.

Now, don't get me wrong. Selling tickets is complicated. 20% is not an unreasonable markup for a retail operation. Amazon takes about 20% on books, for example, and whilst they've got to worry about moving physical lumps of preprinted paper around, with ticketing, you've got your usual costs of call centres and webservers and delivery and fulfillment, but in addition to that there are unique factors that make ticketing hard, which I will expand in a later post.

So it's not the size of the booking fee that's the problem: it's the fact that it's exposed to the customer. Those X Factor tickets should have been advertised as costing £39, and everyone would know what they were buying, and the retailer or box office or agent should have a margin on the inside of that price where they make their profit and pay their costs.

The distinction between "face value" and "booking fee" is enshrined, if not in law (I just had a quick look, I'll google harder later) then at least in the Code of Practice of the Society of Ticket Agents and Resellers:

They define

5.  The “face value price” of a ticket means the
price recommended by the organiser of the
relevant entertainment or event as the price at
which the ticket would normally be sold direct
to consumers by the Box Office, including any
mandatory additions imposed by the organiser
such as a “Restoration Levy”. This price will
be displayed on the face of the ticket itself and
therefore excludes any mark-up or additional
charges that may be levied, and excludes any
discount or other concession

which sounds reasonable until you consider that in many cases the agency has an exclusive deal, there is no box office from which you could buy tickets to avoid the booking fee, the box offices themselves charge booking fees these days, and that the public are perfectly capable of comparison shopping for basically everything else, so there's no reason for tickets to be different, and presenting the prices differently in fact makes matters worse.

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