Service Charges in the secondary ticketing industry:
A part of TicketsFromTheWeb.com's: "Not Necessarily a blog"

TicketMaster has used services charges as part of their pricing structure as long as I can remember, probably since their inception.  As long as there have been service charges, their have been ticket buying customers angry about them.  I can remember waiting in long lines, often overnight, to get tickets, with the consensus in the line complaining about the $3 service charge they were adding to the ticket.  Pearl Jam fought against this inflation of ticket prices that they couldn't control...  and lost.
However, this is not an essay about service charges on the front end of the industry.  Further, this is not an essay about the profit added by ticket brokers.  Both of those are subjects worthy of their own discussions.  This is an article about the practice of ticket brokers structuring that profit as "service charges", "connection fees", or "convenience fees".  It is one man's opinion.  It should be noted that I hold the overwhelming majority of my colleagues with the highest respect.  It is not a criticism of the industry, it is a criticism of a trend within the industry.

When I began working in the professional end of the industry in late 2002, I was offered membership with a company who operates an inventory database (often called an exchange) from which brokers can share each other's inventory to maximize sales potentials and to give each other's inventory maximum exposure.  The way it works is that professional sellers (some brokers, some just wholesalers) upload their inventory into a database.  That database is then distributed to other brokers websites.  The seller holding the inventory sets a wholesale price.  Theoretically, this price reflects "market value", but the seller can place whatever price they wish on a ticket, although mispricing a ticket affects it's likeliness of selling.
Each broker displaying the inventory on their website sets a "markup" on the wholesale price, allowing them a piece of the sale.  By example, a ticket may have a price set by a wholesaler of $100.  If a broker used a 25% markup, that ticket would sell for $125 on their site.  It's not too different than a travel agent, who receives a commission for booking the travel services offered by 3rd parties such as airlines and resorts.  These inventory feeds are the reason you may see the same tickets listed on multiple broker websites, because they often are the same.  The difference is often price, service, and knowledge.

At the time I started TicketsFromTheWeb.com as a fully functioning eCommerce site, the industry was flourishing and hundreds of new brokers were marketing websites, competing for market share and customer acquisitions.  The sites were competing for marketing space and often using "Lowest Prices!" type marketing.  Sometime around the beginning of 2004, a trend began of brokers disguising their prices by displaying a lower retail price, only to add that same profit back in at the end of the sale as a "service charge".  For instance, that same ticket with the $100 wholesale price would be displayed on a given brokers site for $105, but then have a $25 service charge added at the end, making the total price $130 (before adding shipping).  So the consumer who is doing price comparison sees the cheaper upfront price and is fooled to thinking that their end price is lower, when indeed the final price on other sites is lower.  Some clients simply assume that they're paying those service charges at the end on every site, so the display price is the only thing they look at.

At TicketsFromTheWeb.com, we rejected this trend, even though it put us at a disadvantage from our competition.  Instead, we used our "up-front" pricing structure as a marketing focus.  I felt that there was a more discerning group of clients who understood this tactic and would respect us for not employing it.
We have never used service charges or any other form of deceptive pricing.

I have always been impressed by the ticket brokering community.  The fact is, we share inventory and rely upon each other to supply that inventory and fill orders.  We're generally friends with one another, respectful of one another, and mindful of the fact that, although we are each other's competition, we rely on each other to grow as individual companies, and as an industry.  But there was such a "Boom" in the industry, including a ton of new brokers (I myself was part of that boom, although I came early in the boom), that some were simply after some quick money in a booming market, rather than being concerned about long term stability of the industry. 

I believe those who are serious about their business, regardless of their industry, need to be stewards of the industry.  Good business practices are not always convenient.  But many brokers, including some of the very biggest, caved in to the pressure created by a few and began employing the same practices in order to display more competitive prices and continue acquiring new clients.  Again, I felt as though there was a group of clients who would appreciate our upfront approach and it would become a positive factor in their buying decision.  We began taking every opportunity to tell clients that we did not use service charges and using the upfront approach to gain and retain clients.

As with any industry, Ticket Brokers face a set of unique challenges as an industry.  In our industry, among the biggest challenge is public perception.  Gone are the days of fat, cigar smoking brokers hawking tickets on street corners.  Now, the industry is very professional, technologically advanced, and publicly scrutinized.  The way I see things is that online brokers have two massive hurdles in terms of consumer confidence.  The first is that the public is still sketchy about ticket brokers.  Old reputations still haunt us, and a media that tends to only report on the industry when an unfortunate few harm us, or when prices for certain events skyrocket to newsworthy prices.  The second hurdle is that there are still many who are sketchy about buying from any online business.  We are both of those things, and need to work hard to overcome those hurdles, even if it is at the sacrifice of immediate profits.
The public perception of our industry is that we will mislead our clients in the interest of profit.  While I dispute that perception in most cases, I believe that the only true goal of end-of-sale service charges is to mislead the user to believe that the website is offering a better price than which they are.

Because we all start with the same wholesale price (remember the inventory feed), a broker can only sell for "x" amount cheaper than another without losing the ability to be profitable.  I have seen many sites display a retail price which is lower than the wholesale price (a negative markup).  I just can't even think of an argument for this practice other than to mislead the user.

I am unapologetic about what I do for a living.  There are many who wish to demonize brokers, believing that if it weren't for our existence, anyone could easily buy an unending supply of great seats.  As one who knows ticketing far more intimately than the average Joe, I can assure you that that is simply not the case.  I believe our industry is a bona fide service.  But, again, that's a different argument.  But if we are to ever gain the trust and confidence of the general public and shed those old reputations that we no longer deserve, we need to take every opportunity to take the high road and do business with the utmost integrity.  Even when circumstances make it inconvenient.  Even when we can justify why it may be okay to take a less integral route.  Even when it may cost us in immediate profits, we have to run our businesses in a manner which will hold up to scrutiny.
Baseball is at the end of what will long be known as "The steroid era".  Major League Baseball seemingly turned a blind eye to the problem because of the profits the problem produced.  Now they have been called before congress on at least two occasions and embarrassed because of their convenient reaction to a known problem.  I'm obviously comparing two very different things, but the point remains that good practices, which are good for the long term stability of an industry or a brand, are not always convenient.

Part of the discussion that I am trying to reserve for it's own dedicated page is that which I eluded to before, of defending the industry's value.  I again point out that I defend the industry's value to the greater good.  I believe we provide a bona fide service that many benefit from.  To that point, I believe that, if we truly believe that point, we should have no need to disguise anything we do.  We should be transparent in our business practices and up front with our clients.  Service charges are designed to provide a less-visible way to add to the total revenue brought in on a sale.  I can't think of any argument to the contrary.  What I don't understand is why we need to trick any client.  "Here is what we offer."  "Here is how much it costs."  I believe that the overwhelming majority of TicketsFromTheWeb.com clients are educated, intelligent clients who are fully capable of making an educated buying decision based on the value (or lack thereof) they find in our product, service, and pricing.

Ticket brokers make money by purchasing tickets at the publicly offered prices ("face value") and selling them at increased prices reflecting "market value".  Sometimes these prices can be significantly higher than face value.  Prices are not determined by a percentage over face value.  Rather, they are determined by market value.  Our clients know how we make our money!  I don't understand why we need to trick anyone.  For every client TicketsFromTheWeb.com doesn't capture because they are tricked into believing they have found a cheaper price, I believe we gain 2 more clients who look further into the situation, realize our final price is usually the cheaper one in the end, and appreciate the approach we have to doing good business.

If you've read this far, I appreciate your attention to my ramblings.  I hope you agree with the TicketsFromTheWeb.com approach to treating our clients with the respect they deserve.  Our clients have allowed me to be self employed for several years and meet so many great clients who have become our friends.  I believe that these service charges are ultimately bad for our industry and I am proud to say that TicketsFromTheWeb.com never gave in to the pressure to use misleading practices.