Good afternoon. Thank you for inviting us here.

I represent Outbox Technology, a company based in Montreal that has been operating since 2006. We develop ticketing systems for arenas and theatres.

We are used to massive on-sales for big concerts in arenas and stadiums. We also have as a client, Cirque du Soleil in its worldwide touring shows, so we are present in multiple countries, including Canada obviously. We also have a joint venture with a promoter called AEG, Anschutz Entertainment Group, in the United States. We have deployed technology in their venues in the U.S., Canada, the U.K. and Sweden.

I have been in this business for 30 years, now as president of Outbox, but earlier as a founder of Admission Network here in Canada. We have been pioneering technology to make ticketing easy, as well as to try to limit the impact of bad actors in this business.

I've also worked for Ticketmaster, as they acquired one of our companies. I was their chief technology officer for three years in the U.S.

I am here to share my experience and answer any questions you might have.

Let me start by defining a few terms, the way we use them.

The primary inventory owner, the venue or the promoter, typically contracts with a ticket agency or a ticketing vendor to sell tickets directly to the public. That primary ticket agency is usually an exclusive provider of services to that venue in North America.

Secondary selling channels are different from ticket brokers in our vocabulary. They are platforms that allow sellers to reach buyers, to post tickets and sell to buyers, while a ticket broker is an entity that acquires tickets in bulk for resale, using these secondary channels, including their own. There is a significant difference between a secondary selling channel and a ticket broker in the definition.

B2C is a business, a broker, selling to the consumer, while C2C is an individual, or a presumed individual, selling to another individual. Some of these businesses are legal. For example, in Quebec, C2C selling is legal. B2C requires certain controls. You can imagine the interest in being perceived as a C2C channel.

I looked up the definition of a “scalper”. It's a person who resells tickets at a large or quick profit. In the U.K., they call them “ticket touts”, which is the same thing.

A fraudulent buyer is different. It is someone who purchases a ticket with an illicit method of payment, which will result in a chargeback by the credit card company and a loss of the revenue to the promoter, venue or artist after the show. Sometimes we can confuse “fraudulent buyer” with “scalper”. If they pay their bill, they're a scalper. If they don't pay their bill, they're a fraudulent buyer.

I will outline two big differences in the secondary market between major league sports and concerts.

In major league sports, there is a natural supply of tickets for the secondary market from the season ticket holders and the bulk ticket buyers, the brokers. There is demand for single-game tickets and limited availability in the good seats, so there is a natural meeting of needs between the season ticket holder who doesn't want to attend the 40 games and the single-ticket buyer who would like to attend one event.

In concerts, the demand for concert tickets frequently exceeds supply, so seats are not sold at the optimal price on the primary market, resulting in an immediate sellout and listing at a much higher price on the secondary market. There is a very limited natural supply of tickets to resell on the secondary market for concerts. Real fans who buy tickets want to go to the show. During on-sales, other actors buy tickets, often breaking purchase limit rules.

Let me briefly describe the sports market. I understand you're probably more interested in the concert market, but I think it's important to differentiate the two.

As to the market size for major league sports, for a typical major league team, the best estimates are that about 30% of tickets for any given game have been resold. It might be much higher for certain teams, but this is a broad average. The average markup can be as high as 60%, but as many as 50% of the tickets sell below face value. The image of Super Bowl tickets selling at 10 times their value is real, but in reality for a regular hockey or basketball game, half the tickets will actually resell below face value.

Sellers post tickets on multiple selling platforms. There are professional sellers who buy season tickets or buy tickets in bulk directly from the teams and use advanced tools to manage these listings across dozens of selling channels, often at different prices on different channels—the same ticket at a different price on different channels. The sellers pay a fee to the platform when the sale occurs and keep the “upside”—the difference between the value they paid and the value they sold. Sales tax is sometimes, but not always, paid and remitted, depending on the quality of the seller.

Buyers select a selling platform based on their experience, or often simple search engine ads. They pay an average fee of 10% to 15% to the platform that operates the selling channel. Therefore, there is a natural, “everybody gets what they want” sort of environment in the sports resale market.

The secondary market for concerts is different. Demand for big concerts exceeds supply. This is a result of the market not being at an economic equilibrium. Seats are not sold at the optimal price on the primary market, resulting in an immediate sellout.

At the risk of oversimplification, we see this happen for concerts for several valid reasons. One, the artists do not want to charge too much and disappoint their real fans who won't be able to afford tickets. Two, the artist wants real fans in the seats. Three, artists and promoters prefer a quick sellout, securing status as a highly popular event—bragging rights. Promoters would rather sell out quickly, eliminating any financial risk and stopping further marketing expenditures on the event.

As I said, there is a limited natural supply of tickets on the concert side. This is a form of arbitrage, the simultaneous buying and selling of commodities in different markets in order to take advantage of differing prices for the same asset—the definition in the 17th century. They try to buy beyond purchase limits and accumulate inventory to resell.

One of the roles of primary ticket platforms, like ours, is to enforce the rules of the ticket limits—the purchase rules—and stop robots. During major on-sales, up to 90% of online traffic can be robots. We have to stop them from blocking seats or buying tickets.

As a quick comment on robots and their intentions, we have to realize that they are not only used to buy tickets. They are also used to block tickets. As we sell tickets or reserve arenas, or reserve theatres, we have to put seats on hold for a few minutes for the normal consumer to check out. The robots take advantage of that and block all the seats that they can to generate a false sellout situation, forcing people to search again and find their platform to buy tickets on the secondary market, even though there are still tickets, presumably, available on the primary market, but they are being blocked by their robots.

This is a quick overview of our environment. If you have any questions, please go ahead.

I thank you for inviting us here.