Eric Fuller

Lawrence Peryer:          Where are you?

Eric Fuller:                    I’m in San Diego, California.

LP:                                And how is it there?

EF:                                Raining.

LP:                                Oh, ok. That adds to the cabin fever, I’m sure.

EF:                                Oh, it’s always fun.

LP:                                Maybe it’s a cleansing rain.

EF:                                Exactly.

LP:                                How are you and your loved ones?

EF:                                We’re all safe and well. And you?

LP:                                We’re doing okay. I’m up in Seattle and the weather here has been unseasonably beautiful, really since the start of the lockdown. So we’ve been lucky in that regard because I think if it were normal Seattle weather for this time of year, it would be a bit more gray and a big more rainy and we’d all be a bit more crazy.

EF:                                I’m sure.

LP:                                Yeah, so so far, so good. Thank you for making time to talk with me today.

EF:                                My pleasure.

LP:                                Your piece in the medium has really gotten a lot of traction and has been the top of a lot of discussion of folks I’ve been interacting with. That piece was on – initially, you know, the headline that caught me was that – I was expecting really a castigation of Stub Hub and the situation that they put themselves into.

But I think you did a really remarkable job of expanding the discussion into a really an overview and a deep dive of the interdependence of all the different stakeholders in the live entertainment ecosystem. And I want to sort of explore some of the topics that you went into in that piece today if that works for you.

EF:                                I’d be happy to do it.

LP:                                that’s great. You talk about a system of trust that exists and has to exist for the live music ecosystem to stay healthy and robust. And I wonder if you could expound on that a little bit and give the listeners some context as to what you mean by that.

EF:                                Well, sure. Ticketing is a lot more complicated than it appears to the casual purchaser of a ticket. The person that buys a ticket once or twice a year basically goes on line, clicks a button and expects to go to a show and they never think about it.

The nearest parallel I can make is that once upon a time, I was married to a woman who thought it would be fun to be a fashion designer. And so I said, “Okay, sure.” Never thinking that in order to make a dress, you had to figure out how to design it, where to make the pattern, who would sew it, where do you buy the label? Where do you buy the zipper? Where do you buy the button? Where do you get the box that you ship it in? Do you put with a hanger? Do you ship it in a bag?

And the more that you went, the farther down the rabbit hole you would have to go before you could figure out how to do something as simple as sending a dress to a store and getting paid for it.

Tickets, in many ways, are like that because there isn’t anything ticket unless somebody decides to put on an event. And only then do you get to the point of ticketing and the whole sort of complex matrix of who’s in charge of ticketing at any particular arena which is a whole other hour we don’t have today.

Once you cross that rubric, then the question is who are you buying the ticket from? Are you buying the ticket from the primary market and if you’re buying it from the primary market, in what priority are you to buy it? Do you have a Citibank or an American Express card? Are you a Facebook fan of the – let’s call it a band – or do you have a Spotify passcode? Or do you have a venue passcode or do you have a Live Nation or Access passcode?

There was a lot of discussion about this a number of years ago when Attorney General Schneiderman of New York laid out the complexity of getting a ticket. Ultimately, at some point, the tickets all get bought to a show that’s in demand. To a show that’s not in demand, there’s nothing to talk about. You can walk up the day of the show and buy a ticket at the door.

But to a show in demand, the demand might be 2X or 10X or 100X availability of supply. And that’s where the trust factors come into play because you have multiple parties that are involved in trying to correct the supply and demand mismatch. And that’s where you get the speculators, both large and institutional, or small and using a $3,000 Visa card and hoping like heck they can sell enough tickets to pay the payment before the interest kicks in.

The mechanism of both the delivery of the ticket from the buyer to the selling market and from the market to the ultimate fan that’s going to go, it’s just incredibly complicated at every level.

And the more the technology gets layered on to make tickets electronic only with rotating QR codes, the more places there are to have a glitch and the more systemic issues there are that have to be built so that you can remedy the glitch because the show’s going to start whether or not you are there.

Something I learned frankly in O’Hare Airport one year at Christmas as I was running late to a flight and I watched the flight before mine leaving, as the guy ran up to the gate waving his ticket at the gate agent and said, “Wait, wait, wait, I have a ticket. What am I supposed to do?” as the plane backed away. And the gate agent said, “Use it to wave goodbye to the plane, because it’s gone.”

LP:                                [Laughs]

EF:                                [Laughs] It’s the same thing.

LP:                                And so given that there’s a web of interest and a web of parties from the person whose initial idea it was to stage an event and the talent they secured and the ticketing partners they brought to the table and the venue and their interests and all the people down the line and you end up with a consumer doing a transaction somewhere to get a ticket.

Everything you just described, how do you think that plays into the mind of the consumer? What is the consumer thinking and more importantly, expecting, when they buy the ticket and now in a situation when the events are in question?

EF:                                Well those are two very different questions so I’m going to break it in half. Up until this happened, up until this immediate pandemic problem that we’re having, what had happened was we had changed the perception of the consumer from the idea that buying a ticket resale was risky. That you were going to get handed a ticket that might or might not work and your money was at risk and you would be nervous and your date might be made at you because he or she didn’t get to see the person they wanted to see and your night would be shot.

The genius of Stub Hub and some of the early electronic marketplaces – Ticket Network – was that they sort of instilled in the consumer a security that tickets that were bought over the internet were safe and that they would work and frankly they did. They are safe and they did work.

That security became so pervasive that you could have multiple marketplaces spring up and all of them got enveloped in the blanket of security that was created by the early pioneers that took on the arrows and back to built that.

So even this year and last if you looked at the conferences that were held in Washington, D.C. about ticketing, there was really little conversation about the idea that tickets just wouldn’t work. The tickets that don’t work are the guys that are counterfeiting tickets and selling them through non-institutional marketplaces and it’s a tiny percentage.

But the consumers – even though we’ve seen a couple of markets fail – have been protected. When Score Big failed, when Razor Gator failed, the brokers themselves let their own capital go to make sure that the perception of the marketplace in whole wasn’t affected that they might have bought a bad ticket through a resale market.

The market sits there with their hands in their pockets whistling and didn’t do anything which was just interesting. Although to Stub Hub’s particular credit, when the Super Bowl debacle happened a few years ago when there was a squeeze in the price of Super Bowl tickets – too many had been shorted – Stub Hub stepped up with $2 or $4 million and got all their people through the door so I will credit them for that.

So now we have a situation where the secondary market and the primary market are the same in the mind of the consumer. They’re just places to buy a ticket. And I think that applies to your company light as well we it applies to Stub Hub or TicketMaster resell or Seat Gate or Vivid Seats or any of the other three dozen or more significant players around the world.

And what we’re facing now is something that nobody knows how it will play out which is why I started the conversation and it has two parts to it. One, what happens when you’ve bought a ticket to an event which is not going to happen?

And I say quite frankly in my article, NBA is done for this year. I don’t think baseball is going to go and I don’t think there’s going to be anybody in the stadium to watch football. I think sports for 2020 are either not happening or they’re playing for television only for the television money.

So anybody that’s bought tickets and paid for them for those events has to figure out how to get their money back because you can’t reschedule a basketball game from the 2020 season when it’s being played in 2021. It just – from a resale perspective – doesn’t work.

Then there’s a whole separate kind of group of things like you have a massive tour that was put on by the Rolling Stones, supposed to start May 5^th here in my hometown of San Diego.

Millions and millions of dollars’ worth of those tickets were sold and millions and millions of dollars’ worth of those tickets were sold on the secondary market and even more surprisingly, I think more dollar volume went through the Motley Crue stadium tour which was supposed to kick off pretty soon.

Those shows most likely will go. They’ll just go in the summer of 2021. So for those kind of shows, probably people that are holding those tickets are fairly confident that unless Mick has another heart problem or Nicky 6 goes back to mainlining heroin. they’ll just have to wait a minute and they’ll see their show.

So less urgency, right? It’s like a flag post. It’s like you work to the flag. We’re going to get through this pandemic. Life will return to normal and at the end of it, I’m going to get to see my show anyway.

So one group of people, their shows are canceled and they’re not going to happen and a one group of people, their shows are in the future and most of them are going to want to go, in my opinion. Right?

So is there enough money to make the people whole whose shows are canceled and if so, how do we do it? And that’s why I spent so many words trying to walk people through the math. Because there’s a perception in the public that Stub Hub owns all the tickets that they sell. And so why won’t Stub Hub just give us back the money and they’ll go collect it? Well I mean they’ve got to collect it ticket by ticket by ticket. It’s hard to do.

So the conversation that I’m trying to start and I’m doing some other things that you’ll see coming up very quickly, is, as an industry, all of us have a stake in this. Primary and secondary marketplaces have a stake because otherwise they’ll be looking at regulatory intervention like we’ve just seen with the federal mandate that airlines refund passengers for flights which are canceled, not just give them credit.

And there’s a marketing mandate which is you’ve had a vibrant concert and sports industry with people buying expensive tickets with the click of a button with absolute security that they’re going to work on a marketplace that’s $20 billion plus worldwide. How much damage do you want to do to that marketplace and how do you prevent that damage? Because recovering from damage at scale is a decade. It’s not a short-term thing.

LP:                                One of the things that you spoke about was this concept of an anti-trust exemption for a sort of consortium of entertainment interests whether it’s concert promoters in whole, the sports leagues altogether.

Can you talk a little bit about what would drive – what would be the need for that and what would be the hopeful outcome if that were able to happen?

EF:                                Well I think there’s two really important parts, right? One is, the ticketing system works, but it works like a Russian bank. It’s not really logical. There are competing incompatible systems for ticket creation and delivery and transfer.

That adds burdens to the consumer that originated organically as people built their own systems and growth was fast and people were trying to keep up with their growth.

Well now, we have a year or so to sit down and think about maybe we want to make this all compatible. The good news of having some gray hair is I remember when VHS and Betamax both came out at the same time and we forced people to choose which system they were going to buy or we made clunky ways that they could kind of balance between having both with an AV switch or something.

There’s no reason that we couldn’t talk about integrating a unified ticketing system so that it’s easier to deliver tickets to consumer and we have probably better security because there’s less holes in it.

LP:                                So to your mind, would that be one set of plumbing with different consumer front ends so that the fan could – the marketer brand and fan could have their own relationship and their own selling proposition, but there would be a common set of plumbing for issue and access control?

EF:                                Sure. And think about cell phones as an easy example, right? You can buy phones from Apple or you can buy them from Samsung or you can buy them from Google or Amazon or the grocery store phones when you’re on the run where you just have 20 minutes and you can throw it in ocean and get another one.

LP:                                My preferred method.

EF:                                Absolutely. Why not? That’s right. I want to be frank and earnest with you. I’m Frank in New York and Ernest in Chicago.

LP:                                [Laughs]

EF:                                But you don’t have to figure out how to get your cell phone to log onto its independent, unique spectrum and figure out how to make that spectrum connect to the spectrum of the person who you’re trying to call. And there’s no reason for ticketing to work that way.

                                    And now we have time. We have time to think about fixing the plumbing which, by the way, solves a lot of the security faults that people are concerned about. That’s one part of what needs to be talked about.

The other part of what needs to be talked about is that we were in a robust economy. I mean money was freely flowing. People were paying, in my opinion, stupid amounts of money to go see a tiny dot at 800 yards away from the top of a stadium because they wanted to be there. I don’t think that’s going to exist for a while when we get back.

So now everybody that’s been thirsty for six months or nine months or 12 months is going to try and re-start, and if you try and shove too much product out the door, your system topples.

And lastly, if you think about the idea that we’ve had a global shutdown of every venue, of every tour, of every theater company, we need time to re-assemble them. It’s wonderful if you want to play but who’s going to sell the hot dogs and rig the lights? How are we going to make sure before we roll Taylor Swift in with 95,000 people to go to her twice-delayed or whatever number of times they delay her love festival, that the systems are going to work and the plugs that haven’t been used for a year actually fire up.

LP:                                It sounds like of the three points you raised there, the middle one is really the one where there’s some impact around trust issues because that speaks a little bit it sounds like, in the absence of anti-trust protection, it could be collusion in terms of people planning when to route tours. People planning how to price them. If you want to have a marketplace where things are more affordable for a period of time while things ramp back up, you would need that intra-industry cooperation that, in the absence of some kind of anti-trust protection is essentially collusion.

EF:                                That’s absolutely – it’s after you. No, after you. And look, right now you’ve got Bottle Rock re-scheduled to go the week before Coachella takes their next three weeks. Boston calling just gave up and canceled. I mean that’s what October looks like. I don’t think any of those go in October. So now what do we do? Do we put them back in the spring? And then is Coachella 2020 a week before Coachella 2021?

And how many weekends are available for festivals and how many people are showing up for a festival? You’ve got half a year or more of sports that never went this year. Are you going to jam them all in so sports are running 12 months on top of each other? You have to think about, in a post-pandemic economy, that’s not at a Roaring 20’s boiling point where people – this entire millennial generation is, for the first time, seeing that prices go down. What happens to free spending?

I remember what 2008 looked like. I was in New York with the Secretary of the Treasury and President Clinton and all the big hitters at the Clinton [00:18:25] initiative while they were saying it’s all going to be fine and they were forcing Bank of America to buy Cutrite (ph) one day and Merrill Lynch the next.

But if you can read a room at all and you looked in the eyes of everybody you were talking to, nobody had any idea what was going to happen. And that shutdown was nothing like this one. We’ve closed the economy.

LP                                 Let me ask you this. Can you tell me a little bit about how you see the difference between Motley Crue and the Rolling Stones going in the summer of 2021 versus the summer of 2020, and why that’s not the case of I’m holding a Golden State Warriors ticket for March 26, 2020 and I’m just going to get that same game in 2021. Why is that not analogous in your mind?

EF:                                I think that – potentially it’s analogous but remember that – let’s start with many of the seats that are re-sold – and I’m talking about re-sold seats. People that have tickets from the teams directly will have the ability of taking a credit from the team and applying those to seats in the next season so those are easy.

But the people that bought a set of Warriors tickets on the secondary market or Green Bay Packers tickets or tickets you can’t get because the season ticket holders have all the seats or all the seats you’d want to sit in, those season ticket holders may not still have those seats next year. Let’s start with that.

A lot of people that have seasons aren’t renewing them. A lot of brokers that own dozens or more of seasons can’t renew them because all their money is tied up in their 2020 seasons and they’re not getting their money out of it and they can’t come up with the money to pay for the 2021s. So where do you get those seats from?

LP:                                Gotcha. Right. That’s clarifying for me. I thought another interesting topic you went into was your opinion as to which sports are going to be suffering the worst impact. You may have even phrased it as “who’s not going to make it” Who’s at greatest risk.

Could you talk a little bit about your thinking behind how you sort of stack ranked the vulnerability of each of the major sports?

EF:                                Yes, but in fairness, I have to tell you that I’m much more of a concert guy than a sports guy. So what I know about sports is just from what I’ve seen in demand, having spent 10 years with my hands deep in these marketplaces.

Baseball has just a ton of games and a ton of tickets and there’s just always demand because it’s still the American pastime and I go to two or three Padres game a year for no better purpose then it’s a beautiful ballpark to go down and eat Phil’s barbeque and drink two beers.

I could care less what’s on the field. But I’m 25 feet behind home plate when I eat barbeque and drink the two beers. And it’s just a lovely way to spend the late afternoon and early evening talking to whoever I’m there with and once in a while a ball goes over the wall and you stand up and yell. Okay? There’s baseball.

Golf has its own thing, right? I mean golf is fun to watch. I’m a golfer. It’s fun to go watch the guys do stuff that it’s just unfathomable. But it’s just a day in the park. It’s not that big a deal.

But on organized team sports, which require a lot of money, a lot of players’ salaries, a lot of operating overhead, you can just look at where the money flows. Football owns the money. They own the television money. They own – they’ve just been relentless in the way they’ve monetized that sport and they’ve built it into sort of the must-see – not just Sunday – but must- see Monday, must-see Thursday, monopolize the discussion, fan dual draft games, everything is centered around football first.

Basketball has done a great job of making something exciting continuously through the game, building fan engagement and really making that an event that’s almost, in a sense, like wrestling in that the whole time you’re in the room, there’s accelerants to your adrenalin kicking in (ph).

LP:                                A lot of stimulation.

EF:                                A lot of stimulation. So then move to the lesser sports and by lesser sports, the ones that have less TV money, the ones that have less TV coverage and therefore the less capacity to withstand a drought.

And so, I called out hockey, maybe unfairly because I’m in San Diego where it’s warm and we’re not a hockey climate. But my impression is hockey is less capitalized than football, baseball and basketball. And I called out wrestling because that’s just like a staged sport. It’s theater. And my only thought there was that in a time when there’s going to be too much supply, people will go first to what their highest and best love and last to the things that are kind of fun and something else to do.

But in a time of money being tighter or time being compressed, those are the last things you’d have the opportunity to go to.

LP:                                Yeah, it’s interesting, too, as it relates to wrestling, I’d be curious to know in sort of the political hierarchy of booking, if you assume that the sports tenants are going to have first dibs on their arena for any kind of re-scheduling, and then the relationship with the national or even local concert promoter because he’s bringing more events to you per year. I would think you’re going to put him second. Wrestling comes around. Yes, it’s evergreen. It might come around every year but it’s not bringing you the same volume as the rest of your pipeline in terms of business.

So I could see even in so much as wrestling is predicated on the gate business as well as the TV revenue, I just can’t imagine their first in line when it’s time to be getting some of the remaining open dates that are going to be so coveted when this world climbs back up.

EF:                                And don’t forget that you’ve got UFC really eating into their market share because it’s sort of like wresting on steroids. It’s just a more aggressive sort of event and I think that it crosses over the same fan base.

LP:                                Yeah, in the time we have left I’d love to have a little bit of a Stub Hub specific conversation.

EF:                                Sure.

LP:                                So hard to ignore the news from earlier in the week, earlier today that there was a class action suit filed by a customer. I think it was in Wisconsin saying that Stub Hub has violated basically their fan [00:22:31] guarantees by moving to the credit or coupon model. So instead of getting your money back on a transaction, Stub Hub’s issuing 120 percent of what you paid in the form of credits and coupons and it hasn’t taken long for customers to start to cry foul.

EF:                                You know, I don’t read it that way. Look there’s 14 states that require refunds. I think Stub Hub made a very bad PR mistake in the way that it handled this. I think they could have come just come out and said, “Look we got 28,000 event that canceled. Nobody ever planned for that.” I stole the Monty Python line in my piece that nobody expects the Spanish Inquisition.

This is a crisis that nobody ever could see coming. Never. In the way that it would just shut everything down on a dime. So the class action suit – I mean lawyers file class action suits. They could file a class action suit against us because they wasted their time because this podcast wasn’t interesting to them.

LP:                                You wouldn’t do that. [Laughs]

EF:                                I’m not saying they’re going to win but you could file it. I mean that’s somebody that’s taking a swing to get first in line to try to get some money to go away. And they’re going to get blown out if there’s a bankruptcy. It’s a publicity thing.

Sure. Of course, Stub Hub violated their terms and conditions. The terms and conditions at the point the person bought the ticket was you get a refund if you can’t get the ticket or the event is canceled. But they can’t pay.

So, it’s the same force majeure clause argument that’s being put in place by everybody that’s saying we’re not holding our festival in March of 2020 because we can’t. The government shut us down.

LP:                                So put aside, for a second the relative futility or the relative merits of a class action suit and being able to collect on it or not because it dovetails directly into another really interesting part of your piece which was the sign someone is about to fail.

I think that that was really stark to see that there’s really a few essential components that an observer can look for when a business is distressed and you outlined a couple of those things. I wonder if you can talk about them here and how they lead you to your conclusions about Stub Hub?

EF:                                Sure. Business is really complicated but at its core, it’s really simple. Business – and we’re back to trust. All business is about trust. There’s a trust between the merchant and the consumer. There’s a trust between the partners and the businesses, there’s a trust between the merchant and its suppliers.

And that trust is founded on one simple principle. You will do what you say you will do. That’s it. Right? I’m not going to do another podcast if you say let’s do it at 4:00 on Tuesday and you show up at 7:30 a.m. on Thursday wondering how come we’re not doing it now.

So in any business, the primary indicator of whether or not you’re fulfilling your trust obligation is do you deliver what you’re supposed to deliver and do you do it timely and do you deliver what you promised to deliver? And if you owe money you pay it and you pay it on time.

                                    Even when it starts turning second story time, then you know you’ve got a cash problem and when it’s second story time and you’ve got a cash problem and you don’t get a straight answer, then you know you have a really big one.

Now you don’t have to be really smart. I don’t claim to be the smartest guy in the world but if every event that you sold tickets to for the next let’s say six months, is canceled, and you’re selling tickets at a rate of $1.2 billion every three months, $400 million a month, the number of refunds you might have to issue very quickly turns into an astonishing number and likely one you don’t have the cash to pay.

If it happens that three weeks before every tour in the world got shut down, you paid $4 billion cash to make an acquisition, you’re probably a little light in your wallet to start. Right? So I mean it’s just simple logic.

And it’s proven out by the way that their acting. And I don’t think they’re acting maliciously. I don’t think they have a choice and frankly, I think everybody’s in some way in the same boat. If the government came out tomorrow and said to the ticketing conpanies, you’re giving back all the money right now – just like we made the airlines do – the only thing that the ticketing companies could do is say you gave the airline a $50 billion bailout so they could give that money back. What are you doing for us?       Nobody has that kind of money.

LP:                                Yeah. Well I think you’ve pointed out a few things that I think it’s very fair to point out. One is that Stub Hub and other businesses that came of age in that sort of post-initial.com era in the ticketing space, did provide a very big service of taking this activity that used to happen on the street, that used to happen in dark corners and made it mainstream, showed the primary market just exactly how big the ecosystem was, probably led to a lot of the increase or rapid increase in primary ticket pricing if only to come back to secondary or to finally have a true view of what tickets were worth.

But they provided a real service in cleaning up something t hat was very dangerous. It didn’t completely eradicate the problem but I don’t think it’s any one company’s responsibility to completely solve all the problems in a business.

And I think the other point you raise is that it’s not about acting maliciously. Right? The biggest criticism you could make – and it’s a larger indictment of the space – is just the recklessness of the business. Of the paying forward and the paying so far in advance to suppliers.

It’s inherently risky but to your point, it seems like the only people that foresaw the potential of a global pandemic shutting down the entire live events industry, was maybe eBay. [Laughs] I would like eBay to start picking my lottery numbers for me because the foresight that they seem to have had there – my God, that’s going to go into the M&A Hall of Fame, that one.

EF:                                Well which is what I said right? That’s why when I was talking about the acquisition made perfect sense for Eric Baker and [00:30:08]. I mean it completed them. It dove in a massive hole but it didn’t work out the way they expected which is why I said that [00:32:06] son could finally say somebody made a worse deal than me.

LP:                                [Laughs]

EF:                                So there’s a little light. You know, I mean it’s comedy when it happens to somebody else, and tragedy when it happens to you. You know? It’s just misfortune.

LP:                                Yeah, well I think the other thing too is – I said to you at the beginning of the conversation that your piece has been on the minds of a lot of people and the subject of a lot of discussion. But I don’t see a lot of people gloating about it. Nobody’s happy to see this happening.

Because to your point, it’s couched in the context of the larger ecosystem. When the biggest tree starts to shake in its roots, that means that the whole hillside is subject to erosion and nobody wants to see that. Awful metaphor but I think it’s not something to be excited about or to gloat about. It speaks to some really fundamental problems that we’re all going to be cleaning up for a while.

EF:                                Well and I agree with you and I appreciate the depth with which you analyzed the piece. I don’t write this stuff just because it makes me feel good. I write this stuff because I feel it’s part of how I can contribute to the industry as a whole.

And right now, what I’m doing is working on building some solutions that I’ll be trying to offer to the industry as a whole that should be fairly predictable if you read what my piece is suggesting. And you’ll see those rather quickly.

                                    For a living, I consult all across this industry and in the past, it was easier to do because we were just arguing about how you price something and where’s the balance and what’s the fairness and whose ox is getting gored.

But we now, as an industry, have the opportunity to continue to go the way we used to go or to take the time off that has been placed upon us and use it to make the industry work better and more stable in the future.

So that’s what I’m advocating for and since I have the capacity to communicate through certain channels other people might not have, I’m using it and I hope it makes it better for everybody.

LP:                                Well on that note, I think I’d love to stay in touch with  you over the coming weeks as we see how this evolves, as we see how the Stub Hub situation plays out as you start to develop some of the things and roll out some of the things that you’ve been talking about. I’d love to catch up with you again and check in.

EF:                                Any time. Any friend of my friend Dave Wakeman is a friend of mine.