Final Investigative Report: Live Event Ticketing Practices
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REPORT FROM THE NEW YORK STATE SENATE COMMITTEE ON INVESTIGATIONS AND GOVERNMENT OPERATIONS CHAIR SENATOR JAMES SKOUFIS Final Investigative Report: Live Event Ticketing Practices MAY 18, 2021 COMMITTEE ON INVESTIGATIONS AND GOVERNMENT OPERATIONS • CHAIR • Senator James Skoufis • COMMITTEE MEMBERS • Senator Thomas F. O’Mara Senator Todd Kaminsky Senator Alessandra Biaggi Senator Anthony H. Palumbo Senator James Gaughran Senator Elijah Reichlin-Melnick • INVESTIGATIVE STAFF • Evan Gallo, Esq. Sara DiBernardo, Esq. Chief of Investigations Counsel CONTENTS I. EXECUTIVE SUMMARY ........................................................................................................ 2 II. STATE AND FEDERAL LIVE EVENT TICKET LEGISLATION ............................................... 4 A. ARTICLE 25 OF THE NEW YORK STATE ARTS AND CULTURAL AFFAIRS LAW ............... 4 B. UNITED STATES BOTS ACT ................................................................................................. 9 C. UNITED STATES BOSS ACT ................................................................................................ 11 III. EXTERNAL REPORTING AND NOTABLE ACTIVITY........................................................... 12 A. OFFICE OF THE NEW YORK STATE ATTORNEY GENERAL ............................................. 12 B. UNITED STATES GOVERNMENT ACCOUNTABILITY OFFICE ............................................ 15 C. FEDERAL TRADE COMMISSION BUREAU OF CONSUMER PROTECTION .......................... 16 IV. NEW YORK STATE SENATE INVESTIGATION .................................................................... 18 V. INVESTIGATIVE FINDINGS AND RECOMMENDATIONS ..................................................... 20 A. MEASURES AGAINST USING BOTS .................................................................................... 20 B. BROKER LICENSURE REQUIREMENTS .............................................................................. 21 C. REFUND POLICIES ............................................................................................................. 23 D. SPECULATIVE TICKETS ..................................................................................................... 24 E. ALL-IN PRICING ................................................................................................................ 26 F. FEES, PRICE FLOORS, AND STAGGERED SALES ............................................................... 27 G. RESELLING FREE TICKETS ............................................................................................... 29 H. TICKET HOLDBACKS ......................................................................................................... 30 I. MEMBERSHIP PASSES FOR PROFESSIONAL SPORTS ........................................................ 33 J. EXCLUSIVITY CLAUSES IN PRIMARY TICKET VENDOR CONTRACTS .............................. 33 VI. CONCLUSION ..................................................................................................................... 34 VII. APPENDIX: SENATE HEARING WRITTEN TESTIMONY..................................................... 36 1 I. EXECUTIVE SUMMARY New York State is among the premier national and global live entertainment event markets and destinations for performers and fans. The home of Broadway, thousands of renowned venues large and small, iconic professional sports franchises, and some of the most famous artists, producers, and names within the industry, one timeless lyric embodies what it means to play and succeed on arguably the biggest stage in the world: “If I can make it there, I’ll make it anywhere. It’s up to you, New York, New York.”1 New York’s ability to attract top talent to its illustrious theaters, amphitheaters, stadiums, and arenas – from Midtown Manhattan’s Carnegie Hall and Madison Square Garden to Harlem’s Apollo Theater, from The Bronx’s Yankee Stadium to the Bethel Woods Center for the Arts, and from the Saratoga Performing Arts Center to Brooklyn’s Barclays Center – has never been in doubt. However, the likelihood of a resident or tourist securing tickets at an affordable price to attend a live entertainment event at one of these locations remains an uncertain reality – at best – for a multitude of reasons, including, but not limited to, influence and direction from all corners of the industry such as performers (i.e. artists, teams, etc.), promoters, venues, primary ticket vendors, secondary resellers and marketplaces, and the demand of the public itself. The far-reaching and tremendous economic impacts arising from the ongoing COVID-19 pandemic and the related fiscal consequences faced by the live event industry at-large do not go unnoticed and remain extremely relevant. At the time of this report’s publication, the lights on Broadway remain dark and patrons have only recently begun attending sporting events with capacity expected to grow within the coming weeks.2 In New York City alone, arts, entertainment, and recreation “accounted for 93,500 private sector jobs at 6,250 establishments in 2019 […] [having] an average salary of $79,300 and provid[ing] $7.4 billion in total wages.”3 The NYC 1 “(Theme From) New York, New York,” as composed and written by John Kander and Fred Ebb (1977). 2 See gen “Governor Cuomo, Governor Murphy and Governor Lamont Announce Significant Easing of COVID-19 Pandemic Restrictions on Businesses, Gatherings and Venues” (May 3, 2021). Available at https://www.governor.ny.gov/news/governor-cuomo-governor-murphy-and-governor-lamont-announce-significant- easing-covid-19 3 See “Arts, Entertainment and Recreation in New York City: Recent Trends and Impact of COVID-19,” by the Office of the New York State Comptroller (February 2021). Available at https://www.osc.state.ny.us/files/reports/osdc/pdf/report-12-2021.pdf 2 performing arts and spectator sports subsector “accounted for half” of those jobs, as well as “an average salary of $114,600.”4 The arts, entertainment, and recreation sector as a whole experienced “the largest decline among the City’s economic sectors,” suffering a 66% reduction in employment from 2019 as of December 2020.5 It cannot be overstated how much of an economic driver the arts and cultural sector (of which live entertainment is a major component) is for this state, as it “contributed $120 billion to New York’s economy, or 7.5% of the state’s economic output, and employed nearly half a million people, according to the U.S. Bureau of Economic Analysis” before the pandemic.6 For New York City – arguably “the hardest-hit metropolitan area,” “taxable revenue from performing arts companies fell 85% [from spring 2020] compared to 2019, dropping from $25.2 million to just $3.8 million” with much more lost in related spending activity at restaurants, hotels, etc.7 We must continue to recognize and internalize the fiscal and cultural value associated with this broad economic sector to ensure its future success with so many lives dependent on its survival. With support for various industry stakeholders in light of COVID-19 also in mind, policymakers must now address the looming expiration of Article 25 (“Article 25” or “Ticket Law”) of the New York State Arts and Cultural Affairs Law (“ACAL”) in its current form as of July 1, 2021, which governs many aspects of “transactions involving tickets for admission to places of entertainment.”8 As will be discussed at greater length within this report, Article 25 has been subject to numerous amendments and regular extenders for much of its history. The New York State Legislature is once again tasked with deciding what provisions of law to amend, supplement, extend, and/or sunset this year. Though we must do all that is possible to allow every musical, concert, and sporting match to thrive as we reopen the state and national economy, we must fully consider adjusting pre-pandemic practices that negatively impacted the affordable, accessible, and transparent distribution of tickets sold to fans. Simply put, legislation must be enacted to further ensure that ticket sales across New York State are fair and transparent for all parties involved. 4 See id. 5 See id. 6 See “One Lost Weekend,” by The New York Times (September 23, 2020). Available at https://www.nytimes.com/interactive/2020/09/24/arts/new-york-fall-arts-economy.html 7 See id. 8 See NYS ACAL Sec. 25.01. 3 This report, as well as the findings and policy recommendations incorporated herein, is the culmination of the New York Senate Standing Committee on Investigations and Government Operations’ (“Committee”) examination into multiple facets of the live event ticketing industry in the state that will be further discussed in Section IV.9 In sum, the following findings have been identified by the Committee, which will be detailed along with related recommendations in Section V: Bots still loom large over ticket sales; Broker licensure requirements deserve updating; Refunds demand expansion in certain circumstances; Risks of speculative tickets outweigh rewards; All-in pricing empowers customers; Fees, price floors, and staggered sales deserve greater regulation; Reselling free tickets offers no consumer value; Holdbacks are opaque and lead to less inventory for fans; Membership passes should be allowed for all professional sports; and Exclusivity clauses in primary ticket vendor contracts reduce competition. II. STATE AND FEDERAL LIVE EVENT TICKET LEGISLATION a. Article 25 of the New York State Arts and Cultural Affairs Law i. History and Background of New York Law Outside of federal