The String Cheese Incident recently announced that they would be selling service fee free tickets to shows on their upcoming summer tour. As an article in yesterday’s New York Times detailed, the group was able to accomplish this by advancing money to fans who purchased tickets without service charges at box offices and then handed them over them to SCI for resale. This is the realization of a plan that the group first contemplated nearly a decade ago after Ticketmaster announced it would limit the number of seats that the group could sell through its own ticketing service. The conflict resulted in a lawsuit that the String Cheese Incident filed against Ticketmaster in 2003 that ultimately resulted in an out of court settlement in the group’s favor.

The book Ticket Masters: The Rise of the Concert Industry and How the Public Got Scalped by Dean Budnick and Josh Baron, devotes an entire chapter to this event. An excerpt from that chapter appears below. A new expanded paperback edition of Ticket Masters has just been published. To learn more, visit Ticketmastersthebook.com.

From Chapter 9 of Ticket Masters : A Quiet Victory
In May 2002 Ticketmaster sent letters to venues and promoters with whom it had exclusive agreements. The letter stated that Ticketmaster would no longer allow them to provide direct artist-to-fan ticketing with the historical allocations that they previously had been given. Only “legitimate” fan clubs would be allowed an allocation, and to qualify as legitimate, four requirements had to be met: (1) members must pay at least $15 per year; (2) no more than four tickets can be purchased by a member for a performance; (3) tickets are not allowed to be resold; and (4) there must “meaningful” interaction between the band and fans.

The new requirements didn’t sit well with a band like the String Cheese Incident.

“Our argument, in terms of precedent, was that Grateful Dead were able to do it through mail order since the beginning of time,” offers manager Mike Luba. “We would sit in meetings with Terry Barnes, the chairman of Ticketmaster, who is actually a really decent guy, and I would say to him, ‘Terry, all we were doing was ripping off the idea the Dead had with mail order. It’s just an e-mail order. That’s all it is. You already set the precedent. What’s the big difference?’ That was a very scary argument to them.”

Ticketmaster’s CEO at the time, John Pleasants saw String Cheese as “waving the flag that there’s this evil company that won’t let us sell our tickets; they’re our tickets,” he reflects now. “Basically, you’re getting at this emotional issue, which is who owns the ticket? The artist thinks they own the ticket, the building thinks they own the ticket and the ticket actually sits in Ticketmaster’s system.” But the fact remained – and remains – that an artist does not own the tickets inside a venue it’s playing.

Riffing, Pleasants throws out a hypothetical example: “String Cheese struck a deal through their promoter to play in the building, and the inventory is owned by the Pepsi Center, and the Pepsi Center has contractually given it to Ticketmaster. [The band] can raise as much hell as they want to [about receiving their desired ticket allotment]. They’re just breaking the law when they do it.”

Madison House and the String Cheese Incident were offered what was deemed a viable alternative by Ticketmaster and Clear Channel, the ticketer’s biggest client and the country’s largest promoter. If the band hired Coran Capshaw’s MusicToday – which Clear Channel had a financial stake in via its SFX purchase – to handle its artist-to-fan ticketing, the “legitimate fan club” requirements would be waived and the band would get a twenty-five percent larger ticket allocation. They passed.

Instead String Cheese Incident played very few Clear Channel or Ticketmaster-operated venues in 2002. “I do remember the conversations of, ‘Hey, we may be shut out of some of these venues that we want to play if we go this route and decide to fight them,’” recalls the group’s Moseley. “We are going to have to look at playing alternative venues. Actually we did some of that. The talk was, ‘Is that going to be worth it? Is the fan base going to respond favorably to the fact that we’re trying to take on Ticketmaster and we’re consequently in different kinds of venues than they’re used to? Or would the fan base rather see us in the regular venues and go through Ticketmaster to get their tickets? We felt like the fan base was behind us. It didn’t matter where we played.”

And when the band did play a Ticketmaster venue, they had developed a rather creative way to secure – or ensure, depending on how you looked at it – their desired ticket allotment.

“As the ruling had come down that we can’t have a fifty percent allotment anymore, when we’d book a show, part of [the conversation with the promoter] was, ‘What’s the ticket allotment?’” recalls Luba, increasingly animated. “We’d say, ‘We don’t want any ticket allotment; people can buy as many as they want; and there has to be no service charge at the box office.’” The proposed end-around was for SCI Ticketing to parcel out cash to fans and send them to the box office where there was no service charge to buy the necessary inventory themselves, to sell directly back to fans.

“So when we were going to play the Fillmore in Denver, we would say to the promoter, Don Strasburg, who is a really good friend of ours: ‘Don, if you don’t let us sell the tickets, we’re going to send 4,000 kids to the box office and have them each buy eight tickets, and then they’re going to come back to our Boulder office. So instead of making all the out of town people pay the $11 service charge, they’re going to pay our $3 service charge.’”

While box office point-of-purchases were at an all-time low, the no service fee policy had long been something Ticketmaster highlighted in response to public criticism over its convenience charges. “For us it was a huge bat they inadvertently put in our hands because we could threaten it,” says Luba. “They knew we were crazy enough that we would literally send 1,000 kids with $240 each to buy 8,000 tickets for the allotment. There was nothing they could do to stop it.” (While they never followed through with it, Luba does have a mental picture of parceling out stacks of cash for ticket-buyers: “It might have gotten to the point where we actually took a picture and sent it somewhere and said, ‘This is what’s happening.’” )

As the year wound down, the band’s continued conflicts with Ticketmaster became untenable. The internal conversations amongst Madison House, SCI Ticketing and the String Cheese Incident circled around whether or not they had the resources and willpower to take legal action. The general consensus was that they had neither. The legal costs would be enormous to fight a company of Ticketmaster’s size, and String Cheese was a band that thrived on playing concerts to as many people as possible, not one that wanted to deal with labor-intensive tour routing that avoided Ticketmaster by playing less-than-desirable locations à la Pearl Jam. And then, out of the blue, Luba got a phone call from an attorney who said he was interested in helping them.

SCI Ticketing filed a civil lawsuit in the US District Court of Colorado on August 3, 2003, at 3:12 p.m. The twenty-page document was precise in articulating SCI Ticketing’s genesis, the concert industry dynamics that had made its existence so precarious and the resolutions it was seeking. It charged Ticketmaster on four counts: (1) Ticketmaster has entered into combinations and agreements in violation of section 1 of the Sherman Antitrust Act; (2 and 3) Ticketmaster has monopolized and attempted to monopolize or abused its monopoly power in the market in violation of section 2 of the Sherman Antitrust Act; and (4) Ticketmaster had practiced tortious interference with prospective business advantage. Both Clear Channel and MusicToday were named in the suit.

“SCI Ticketing has become the target of an all-out effort by Ticketmaster to foreclose it from competing in the relevant market,” the suit argued. “Acting on instructions from Ticketmaster, venues and promoters have refused to continue their practice of supplying SCI Ticketing with reasonable allocations of popular music concert tickets to offer for sale to the public.”

It argued, based in part on publicly available Pollstar reports, that Ticketmaster clearly had a monopoly within the concert industry. It had exclusive agreements with approximately eighty-nine percent of the top fifty arenas, eighty-eight percent of the top fifty amphitheaters, more than seventy percent of the top theaters and more than seventy-five percent of the top clubs.

In regard to consumer fairness, the suit used the band’s shows at the Warfield theater in San Francisco the previous month as one example: the difference in price between a fan buying four tickets to four different shows from SCI Ticketing versus Ticketmaster was just over $85.

The suit also highlighted King Crimson’s spring tour earlier that year, which had utilized SCI Ticketing. All of the promoters signed and returned the ticket allocation agreements except Clear Channel, which indicated that because of pressure from Ticketmaster, it would not be allocating the company any tickets to any shows at Clear Channel venues. SCI Ticketing was forced to issue a letter to fans and was now, it argued, likely to lose King Crimson’s and other future clients’ business.

A week later on September 11, two years to the day after the company was supposed to launch its wholly owned ticketing service, the band, along with Luba, SCI Ticketing’s Jason Mastrine and attorney Neil Glazer, held a press conference in New York.

Mastrine made it clear that, “We are not saying Ticketmaster doesn’t have a place in the ticketing business, but we have a different philosophy of doing business, one that caters directly to our fans.”

Luba’s comments were broader: “The music industry is suffering right now, but there is no reason that the artists and their fans have to go down with it,” he told the press. “We hope that the positive ramifications of filing this lawsuit will reach well beyond just the String Cheese Incident and their fans and benefit everyone.”

Ticketmaster responded to SCI Ticketing’s press conference with a press release the same day. “While it has been our company policy to not comment on pending litigation, SCI Ticketing has so distorted this issue in its public statements that we feel compelled to clarify the record,” it began. “Earlier this year a Federal Court dismissed a similar lawsuit brought against Ticketmaster. The claims that have been asserted by SCI Ticketing in this new lawsuit likewise lack merit and we are confident that they will also be dismissed after all the relevant facts are established.”

It went on to assert: “By demanding very large allocations of tickets, SCI has attempted to break valid contracts for its own self-promotion and monetary gain. … SCI and its ticketing company are trying to step in for a ‘free ride’ on the many benefits and services Ticketmaster provides its clients. SCI essentially wants to skim the best, most easily sold tickets and leave Ticketmaster and its clients with the job of selling the rest. … SCI’s unfair leveraging of its popularity to achieve its for-profit ticketing goals is both improper and illegal.”

Pleasants remembers the lawsuit being “a big deal for about seven days,” that it was nothing more than “a piece of noise that flared up.” Pleasants, the man responsible for turning Ticketmaster into a consumer-facing company, is surprisingly rigid in recalling his assessment of the situation. “String Cheese, if I remember correctly, was going into Ticketmaster’s buildings and were pulling fifty percent of their inventory and selling it to their fan club,” he says. “And if they were doing that, that is – in effect – illegal, full stop. There is no debate about whether it is illegal or not – it is illegal. Ticketmaster has a contract that is for exclusively selling every ticket in a particular building. If String Cheese wanted to sell half of their tickets through their website, they should go play in a park or some other place that is not with an exclusive contract with a ticketing company, with Ticketmaster or anybody else.” Simply put, he says, “There’s a thing called the law, and if I remember correctly, they were breaking it.”

Typically, Ticketmaster responded to lawsuits with a motion to dismiss that said, in effect, whatever laws they claim we’re violating, we’re not. However, in this instance, much to everyone’s surprise, Ticketmaster filed what’s called an “answer,” essentially a countersuit that systematically responded to each paragraph of SCI Ticketing’s lawsuit.

As the company noted, “Ticketmaster would prefer to resolve this matter outside of litigation, but now has no choice but to respond to the frivolous claims that have been asserted. Part of that response will be a countersuit by Ticketmaster against SCI Ticketing (and its founders) for intentionally interfering with contracts and relationships in which Ticketmaster has made great investments. The issue here is whether Ticketmaster and its clients have the right to contract for ticket distribution services or whether SCI Ticketing can free-ride on those relationships by exerting pressure on Ticketmaster’s clients to breach their contractual commitments.”

Glazer saw the countersuit as Ticketmaster “throwing down the gauntlet and saying, ‘Two can at play at that game.’” Whereas large corporations typically delay trials through requests to dismiss, this was different. “It indicated to me that we really had something that they were taking very seriously,” suggests Glazer. “What I took away was they didn’t necessarily want this to be a big public battle over big meaty questions of law.”

“We were trying to be nice and be artist-friendly,” says Pleasants. “I didn’t want to go out and sue String Cheese. I wanted to say, ‘Listen, let’s figure something out. We understand – we want you to have a fan club.’ But a fan club selling six percent in the corner, we can kind of look the other way. You taking the inventory everywhere you go? We’re not going to look the other way. Why? Because then everybody’s going to take half the inventory, and our business is destroyed because we’re not standing up to our law. Either you defend the law or you don’t.”

National newspapers like the New York Times, popular culture magazines like Rolling Stone and publications like Mother Jones all covered the story. It was typically framed as Pearl Jam, Round II. And while the String Cheese Incident was certainly righteous in its decision to fight Ticketmaster, it didn’t really talk about it from the stage the way Eddie Vedder had during Pearl Jam’s fight.

As fall gave way to winter, behind-the-scenes conversations between the band, SCI Ticketing, Madison House, Ticketmaster, Clear Channel and various others continued. As a group whose success was dependent upon touring, there was concern about String Cheese’s future livelihood in regard to upsetting promoters with whom they had longstanding relationships. There was concern over legal costs. There was concern that no other band or organization had stood up in support. As the band began making tour plans for 2004, the strains of the fight were being increasingly felt.

“We got hamstrung enough to the point where it became so distracting that, at the end of the day, as willing as we were to go pretty fucking far, these are dudes who just wanted to make music,” says Luba now of the band’s growing uncertainty about a protracted battle. “This was taking over everyone’s life.”

The band and management’s persistence, however, was paying off. As time wore on and the fight faded from the papers and the public eye, Ticketmaster became increasingly willing to negotiate with SCI Ticketing by early 2004.

“The reality was – and we were really clear about it – all we wanted to do was be able to sell fifty percent of the tickets to our fans,” says Luba. “It got to the point where they came back and said, ‘OK, look us in the eye and tell us you’ve been lying to us the entire time, or we’re going to give you everything that you need and go do what you need to do.” In addition SCI Ticketing would also be allowed to resume sales for other clients, though the allocated allotments would be at or below previous percentages, likely in the ten percent range, which was in line with most of MusicToday’s clients.

As part of the proposed settlement agreement, SCI Ticketing, Madison House and the band would have to agree that there would be no fanfare or press releases; there could be no announcements of how they beat Ticketmaster.

Says Glazer, “There were a lot of meetings, a lot of conversations, a lot of soul-searching because the band had staked out a very strong position and had decided to carry the torch on behalf of themselves and everybody else out there, and all of a sudden this was just going to disappear.”

Mastrine for his part, as head of ticketing, was not in favor of settling. “I think ultimately there was the determination that there could still be a business model based on an out-of-court settlement, and that was not where I stood on it,” he says. “I love those guys dearly and care about them a lot – and still do work with them – but there was a difference of opinion there internally. Mine was that ticketing is my professional life, and getting involved with an antitrust lawsuit with Ticketmaster is significant; it’s career changing in a lot of ways. If we’re going to do it, let’s do it.” Mastrine’s bottom line was that if “you take on a lawsuit, you do it because you’re going to take it all the way. You don’t do it because you want an out-of-court settlement.”

Luba’s opinion was that if Ticketmaster was giving SCI Ticketing exactly what it wanted, what was the case? “Neil and I were sitting there,” he recalls, “and the Ticketmaster lawyer was going, ‘Look, we’re all big boys. As soon as we stand up in front of the judge and say we’ve given in to everything you guys asked, obviously this suit is about something else.’ We were like, ‘Yeah, they’re probably right.’”

To learn more, visit Ticketmastersthebook.com .