Guest post by Richard Howle

People just don’t get booking fees. They don’t understand why, having paid for their tickets, they then have to pay extra just for the privilege of buying them. No one likes them, no one wants to pay for them (me included) and the ticketing industry is really poor at explaining them. So why are they important?

Firstly, let’s talk about why they exist. When you buy a ticket to an event, the value of that ticket goes to the event organiser in order to pay for that event (venue hire, equipment hire, artist fees, advertising etc etc). The company that you are buying the ticket from doesn’t see any of that money. Sometimes there may be a little inside commission paid by the event organiser to the ticketing company but it is a nominal amount and is very rarely paid for live music events, So although you are paying your favourite ticketing company £100 for two tickets, the ticketing company is only acting as a middle man, passing that money on to the event organiser. The only money earned by the ticketing company is the booking fee.

Here’s an illustrative example:

£200 ticket, £10 booking fee = £210.

-£200 ticket price sent to event organiser
-£1.67 VAT paid to HMRC
-£2.50 fee paid to event organiser
-£3.15 paid to card processing/fraud checking (1.5% of transaction value )

Leaves £2.68 to cover the entire services the ticket agent offers, which are outlined below, out of a £210 transaction (~1%). This example does not take into account handling/postage fees which are rarely profit making and often just cover costs.

And the ticketing companies need to earn money because, despite what some think, it does cost money to sell tickets. Whilst, from a consumer point of view, buying a ticket is usually a straightforward process (although the industry has more work to do to make it simpler), the technology behind that is very sophisticated. This is not the place to bore you with the intricacies of ticketing systems – but take my word for it, they are more complicated than they look; And with consumers demanding ever more developments to make it easier and more convenient to buy tickets (select your own seats, mobile ticketing, multiple payment methods, print at home tickets etc) ticketing systems are set to grow ever more complicated and that costs.

On top of the ticketing system costs, there is the infrastructure surrounding them – IT support, hosting, backup, website etc. If there is one thing that ticket buyers hate more than booking fees, then it is when the system crashes and they can’t even buy the damn things in the first place. And then there are staffing costs – the people required to sell the tickets. And whilst it is true that significantly more tickets are now sold online than via the phone, the reduction in the number of people required to sell them hasn’t reduced in the same proportion. Booking lines have now become website support centres with people calling about bookings made online (usually when they have made a mistake) and, increasingly, customers are now turning to Twitter or Facebook with their queries. I remember at a recent conference a major ticket agent describing how they were taking one person a month off their phone team and putting them on the social media team such was the increase in online queries that needed a human to respond. The important thing to note here is that they were not reducing staffing numbers – only reallocating them.

So system costs, infrastructure costs, staff costs – it is all beginning to add up. Add into that VAT and business costs and suddenly we can see that there are real costs attached to selling tickets. But that’s not all – in order for a ticketing company to compete in this world for (and no one likes a monopoly so there are multiple companies selling tickets) there are marketing and advertising costs and affiliate fees in order to ensure that they secure the sale ahead of one of their rivals. Ticketing companies spend a fortune with Google every month. Finally, of course, ticketing companies are commercial enterprises – they have to make some profit, too.

So hopefully that goes some way to explaining why there are booking fees, but why are they so important? Essentially ticketing companies are no different to any other retailers. What I have just explained is simply the cost of sale which applies to any retail business. But when you go to a supermarket, for example, you don’t go to the checkout and get told that that your shopping comes to £100 and on top of that there will be £15 shopping fee.

Except that, in effect that is exactly what you have been charged*. The supermarket buys a product at the wholesale price (face value in ticketing terms) and sells it with a mark up (booking fee) at a retail price. The only difference between the ticketing company and the supermarket is that the ticketing company tells you what that mark up is, tells you how much you are paying the retailer.

*And actually, in reality that mark up is significantly higher at the supermarket. Whereas large ticketing companies will operate on margins (booking fees) of 10-15% the supermarkets will operate on margins of at least 40% but can go up to 70%, 80%, 90%+ on some products (because it is hidden we never truly know).

So why do ticketing companies declare their booking fees (margins), why not just hide them in the price like the supermarkets do? If consumers weren’t aware of them they wouldn’t get upset about them. And here we come to the crux of the matter – why booking fees are important.

If I want to buy a box of Kelloggs Cornflakes it doesn’t really matter where i buy it. If I buy it from Sainsbury’s, Tesco, Waitrose or my corner shop it is the same product – I know what I am getting and having a shopped around I know roughly what it is worth – yes it might be more expensive in my corner shop, but its just down the road and I am prepared to pay more for the convenience. But I am not being ripped off, I am making a choice to pay more and I am still getting the same product that I would have done if I had got in the car and driven to Tesco.

Lets just apply the same logic to buying an event ticket. My niece would like Justin Bieber tickets for her birthday (I’ve tried to discourage her but one just can’t compete with teenage hormones). Just like cornflakes there are a number of places that I can buy those tickets. Lets call themNiceTickets.Com, GoodTickets.com and DodgyTickets.com. I look on their very nice websites and I see the following prices:

NiceTickets.com: £75; GoodTickets.com £80 and DodgyTickets.com £77.

The first two ticketing companies have sold out so, despite their dubious name I will get my tickets from DodgyTickets.com, because although they are not the cheapest – they are around the same price as the others

But then I look in a bit more detail and i see that those prices include booking fees:

Nicetickets.com £75 (£70 face value +£5 booking fee);

GoodTickets.com £80 (£70 face value + £10 booking fee);

DodgyTickets.com £77 (£45 face value + £32 booking fee).

Hold on, £45? Why are those tickets so cheap compared to the others?

And suddenly, the difference between buying cornflakes and Justin Bieber tickets becomes abundantly clear. I will have the same eating experience no matter where I buy the flakes.Itis always the same product. But my niece’s viewing experience of Bieber will be different depending on what tickets I buy. With 15,000 seats in the arena there are 15,000 different viewing experiences on offer. How on earth can I make a judgement as to which is going to be best? The way I do that is by looking at the face value price. The more I pay, the better the viewing experience.

If those ticketing companies hadn’t told me about the booking fee I would have had no way of judging that the view from the DodgyTickets.com tickets was significantly worse than the other tickets. In fact, because their price was similar I am likely to expect that the viewing experience would be similar.

So that is why booking fees are important, not their existence – but the fact that I know of their existence rather than them just being included in the overall price.

Now, obviously this is a very simplified illustration and I use it only to demonstrate the principle. I am certainly not suggesting that this is the perfect model for selling tickets or that there aren’t better solutions, nor that aren’t unjustifiable fees (like for print at home). I will examine these another time. But I do hope that it, at least explains why we have booking fees. Even if we don’t like or agree with them, the transparency that they provide makes the ticket buying process a much fairer one.