A Window Into Ticket Scalping
Lawsuit Claims Ticketmaster Sold Tickets at Markups to Face Value
By ETHAN SMITH of the WSJ

Ticketmaster Entertainment Inc. and its current chief executive paid a ticket broker to sell tickets at more than their normal face values to concerts by the Eagles, Journey and other acts, according to a lawsuit the broker has filed against the ticketing giant.

While the underlying lawsuit is a breach-of-contract allegation, the alleged events it describes highlight the broader importance of ticket reselling for the concert industry.

A planned merger by Ticketmaster and concert promoter Live Nation Inc. is based in large part on giving them greater control over ticket prices, allowing the companies to compete more effectively against ticket brokers. Executives at the companies have said they see no benefit from scalping, as ticket reselling is commonly known. But the arrangement described in the lawsuit, if true, would be one of several recent examples of ways the companies have found to do just that.

Many brokers complain that a tie-up of Ticketmaster and Live Nation would put them out of business because the higher prices the merged company could charge would leave little room for broker markups.

"This is a meritless lawsuit which we will defend with vigor," a Ticketmaster spokesman wrote in an email, declining further comment.

The lawsuit was filed last week in Los Angeles Superior Court by Chuck Lombardo, a ticket broker in the New York area who alleges that Ticketmaster reneged on an agreement to buy his company and give him a three-year employment contract. Ticketmaster last year hired Mr. Lombardo and his company, Elite Entertainment Inc., as consultants when Ticketmaster was building a presence in the secondary ticketing market, according to the suit.

The alleged events described in the suit took place nearly a year after the collapse of separate talks, with the code name Project Showtime, that would have led to Ticketmaster acquiring six regional brokerages, including Elite. Ticketmaster also routinely sells premium-priced tickets on its Ticketexchange.com site, which had been billed as a place for fans to sell tickets to one another.

Mr. Lombardo in his suit says his duties for Ticketmaster in 2008 included selling "premium tickets," essentially prime seats at higher than normal face value, for concert tours by high-profile artists, including Journey, Van Halen and other artists. People in the concert industry have said acts typically would benefit from such arrangements. Mr. Lombardo's suit says Ticketmaster agreed to pay him 6% of gross ticket sales.

In one instance, Mr. Lombardo alleges that talentmanagement company Front Line Management sold him tickets to concerts by one of its clients, the Eagles, for above their face value. Mr. Lombardo then resold the tickets for more still and shared the difference with Front Line, he says. Ticketmaster bought Front Line last October and made its chief executive, Irving Azoff, CEO of the combined company.

A representative for Journey, Van Halen and the Eagles said the bands were unavailable for comment.

Mr. Lombardo's lawsuit comes as historically strained relations between Ticketmaster and brokers have reached a new level of tension. In addition to their complaints about the planned merger, brokers have complained about Ticketmaster's introduction of electronic tickets, which customers can pick up only at a box office shortly before an event and are nearly impossible to resell except in limited circumstances controlled by Ticketmaster. The company says the practice helps ensure that fans have access to tickets at the original sale price.

Mr. Lombardo in his suit says Ticketmaster last October proposed acquiring his company and hiring him. But soon after and without explanation, he says, Ticketmaster withdrew the offer and began pressuring him to accept less money than he believed he was owed for the work he had done. He claims that under pressure from Ticketmaster, he accepted the lower payment terms, thinking he was still in line for an employment agreement, though none materialized. The suit asks for damages to be determined during trial.

The lawsuit was reported by TicketNews.com, whose owner also owns a ticket brokerage and resale site.