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Ticketopolists win backing for online tax

Online ticket levy wins MPs' blessing

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Analysis Why is the Recording Industry Ass. of America still Diablo Numero Uno for so many people? The major record labels are at an advanced stage of terminal illness, sit on a diminishing asset base, and unable to make more than token gestures at preventing online file sharing. Perhaps it's because some people now make it a point of moral principle not to pay for music online. Or perhaps it's because "RIAA" fits so nicely on a bumper sticker.

But let's get things in perspective. If you're serious about analysing power, you need to follow the money. Today, not only is one mid-sized consumer electronics company (Apple) now bigger than entire sound recording business (both majors and indies combined), but the revenue from live music is set to surpass that generated by sales of CDs and digital downloads.

In other words, there's a new Pigopolist in town. And he sure looks a lot like the old one.

British MPs who oversee the Department for Culture, Media and Sport are a sensible bunch, with a keen eye for special pleading. But they've erred badly today. In a report on online ticket touting, the MPs have today given a strong recommendation for a levy on the resale of tickets for live events. (Report here.)

Resellers - and therefore punters - will be forced to pay this levy, and a levy collection agency would need to be established to distribute the tax. There's no recommendation that the levy is returned to performers, as the MMF (Music Managers' Forum) has proposed. As it stands, the levy will merely oil the machinery of the primary market: the promoters and their agents.

This is a quite amazing stunt to pull off - and should serve as a wake-up call to everyone.

In economics, a concert ticket is a "rivalrous" item. Your ownership of a ticket to Seat 58, Row D at a gig is an exclusive one-time "license" giving you access to that seat: no one else can sit there while you retain the ticket. If you sell the license on, then you can't sit there any more. The consumer can't magic up 1,000 more seats. The promoter and artist retain all control about the supply of the "good" into the market, which is reflected in demand and of course, the price.

Today, we're experiencing a huge revival of interest in music. The summer festival season now extends well into September, and venues from stadiums down to pub backrooms are heaving; in part, as people spend money they didn't spend on CDs on live events. Demand for popular events naturally outstrips supply, and there's a very healthy after-market for tickets, sold through auction sites such as eBay and bulletin boards such as Gumtree and Craigslist.

This is exactly what the internet is supposed to be good at: eliminating wrinkles caused by consumers having a lack of information. And it works very well.

Yet the major promoters have very nearly succeeded in banning this market outright. Instead they've won themselves a "right" not enjoyed by book authors, songwriters or composers - or even the RIAA!

(Authors, publishers and record companies don't get a cent from the second-hand sales of books and records.)

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Next page: This levy is broken

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