Ticketmaster finds another way to cut out scalpers

LOS ANGELES -- Ticketmaster Entertainment has developed a new way to resell tickets that shuts out the brokers and scalpers it has long scorned, and instead keeps the profits for itself, musicians and venue owners.

The system relies on Ticketmaster's "paperless" ticketing platform, which makes customers prove their purchase by showing a credit card and ID when they arrive at an event. Without paper tickets, there's nothing for scalpers to resell.

Now with its new exchange system, Ticketmaster has come up with a way to let buyers resell a paperless ticket, while still cutting out ticket-resale leader StubHub and other brokers. That gives Ticketmaster a chance to capture more of the so-called secondary market, which generates greater fees and profits per ticket, although fans sometimes feel ripped off.

Paperless tickets still account for fewer than 1% of all ticket sales, said analyst Brett Harriss of Gabelli & Co.

But that could be changing. Prominent musicians, such as Miley Cyrus and even former Ticketmaster critics Bruce Springsteen and Nine Inch Nails' Trent Reznor, have taken up Ticketmaster's paperless tickets. Nine Inch Nails' website called the move "an effort to keep tickets in the hands of the fans and out of the hands of brokers/scalpers."

The resale system debuted this month at Penn State's college football season opener and is likely headed for other collegiate stadiums.

The university's trial of the system cut reselling dramatically, partly because a cap was put on the price for which tickets could be resold.

The system involved 21,000 season tickets for the Nittany Lions' eight home games, which for years have been reserved for full-time Penn State students. The tickets are highly prized because they come at a big discount and Beaver Stadium is usually packed to its capacity of 108,000.

Students can buy season tickets for about $240, or $30 per game (counting Ticketmaster fees), and up until a couple weeks ago, there had been a profitable market for reselling that package to other students for as much as $1,400.

Penn State capped the number of games students could resell at six. It also limited the resale price per game to $60, or about twice the face value and fees on the original tickets. That capped a reseller's potential profit at $120, counting fees paid to Ticketmaster, as opposed to nearly $1,200 in the past.

Just 965 students chose to resell their tickets for the season opener against Akron on Sept. 5, and the average resale price was just $39.61, said associate athletic director Greg Myford.

"The students seem to be grateful for that," Myford said. "They can get a ticket and they don't have to worry about really being gouged. We've largely eliminated those only interested in scalping from the process."

The new limits helped Mike Elia, a Penn State senior who was tossing around a football in the student tent city of "Paternoville," which honors coach Joe Paterno, on the Friday before the game.

"I like it. I think it's a step in the right direction," he said. "My sophomore year, I didn't get student tickets, so I think this system will better ensure that students will be able to get tickets."

The online exchange also proved that it can bring Ticketmaster higher fees per ticket than the original sale.