The Little Secret of Gig Tickets That No One Wants to Admit

07/10/2011 00:00 BST | Updated 06/12/2011 10:12 GMT

It wasn't long ago the recorded music industry looked longingly at the live sector with memories of better days.

From 2000 - 2009, we read story after story of how the recorded music industry was self-immolating while concerts continued to steam ahead. Artists, it was said, would be touring all the time because that's 'where the money is' and they would use recorded music to sell tickets.

How quickly the tables have turned. Live is now shrinking while the Spotify's of the world show the majors how to make money in the digital age.

Livenation, the touring industry's bell-weather, lost £149 million in 2010, the same year that their combination with Ticketmaster was supposed to yield significant operating synergies according to management. Result indeed.

Other than the once-in-ten-years blockbuster that was the Take That Progress Tour, 2010 was the weakest year for the live industry in anyone's memory. Through nine months, 2011 has fared little better and while the pipeline for 2012 is looking robust at the moment (Coldplay, The Rolling Stones, Radiohead are a few names mentioned), the ponderous nature of touring agreements and the on-sale process provides little comfort.

Add in economic uncertainty and the near certainty of a broken Euro, it seems odd that people would be lining up to further damage the live music business, but that's just what many are doing.

This week sees the 2011 Live UK Summit at which Sharon Hodgson, MP will argue for further support of her bill to ban the resale of concert tickets in the UK.

What is odd is that in their blind rage over the resale of tickets, people in the industry support a bill that would result in the destruction of thousands of jobs in the UK live music sector.

According to PRS, the UK live music industry was worth £3.8 billion in 2010 (the industry shrank by 4.8% from 2009). Based on my own, highly unscientific, experience somewhere between 12-20% of concert tickets are purchased by people who are either speculating that prices will rise or by people who subsequently try to sell their tickets for profit.

That would mean between £450 - £750 million of live music purchases in the UK are made by those who are speculating on the value of a ticket.

Hodgson's Bill would allow promoters to designate any event of their choosing not for resale, or more likely, appoint a single licensed reseller who would have the sole, legal right to host the resale of said tickets.

This provision effectively allows promoters to charge ticket companies a lot of money for this enshrinement, or in the case of Livenation/Ticketmaster, create a walled garden in which they are the only ones who can resell concert tickets in the UK (called Paperless Tickets).

The fact is there are thousands of people in the UK who today buy concert tickets in the hope of re-selling them for a profit. Sometimes they do make a profit and many times they don't. In fact, successful speculators are willing to accept losses on many of their trades in the hopes that another Progress Tour is right around the corner.

Anyone who has ever owned shares will recognise this as a classic portfolio strategy e.g. lose on most, make a large gain on few, end up with a low, double-digit gain on a blended basis.

Were the Hodgson Bill to become law, we would be telling the speculators that they can still make a loss on many shows but they would have no chance to ever make a profit as those concerts would be off limits for resale. We could then expect speculators to rightly find another line of work.

Remember these speculators would take their £450 - £750 million with them leaving a gaping hole in the income statements of every band, manager, promoter, venue, primary ticket-er and beer distributor in the UK.

Most of the people in the music industry are not terribly well-paid so it's conservative for us then to assume that the all-in cost (with NI and benefits) of an average live music industry employee is £35,000 per year. If we do the maths, Hodgson's Bill is likely to cost the UK music industry somewhere in the neighbourhood of 20,000 jobs.

Such a blow would be devastating to the industry - and the country. Based on the ONS' July figures, unemployment is hitting the urban areas of Birmingham, Manchester, Liverpool and London hardest (6-9%), just the places where younger music industry folks live and work.

That half a billion pounds would no longer be spent on rent, clothing restaurants any more, in fact many of these folks would end up on Jobseekers Assistance costing the taxpayer even more.

Many of the people who presently work in the live music industry don't like the ticket re-selling industry and that's okay. That dislike often blinds people to the unspoken and inconvenient truth that ticket resale is part of the live music ecosystem and, like agents or venues or artists, can't be eliminated without causing a major disruption to the entire industry.