Author: Jiyun Kyung, Business Development (https://www.linkedin.com/in/jiyunkyung/)
[TL;DR]
- In the ticketing industry, a scalping market forms due to the imbalance between supply and demand, and consumer dissatisfaction is high due to Ticketmaster's dynamic pricing and fee policies as a monopolistic company.
- XP, a Solana-based secondary ticket marketplace, aims to eliminate intermediary fees and solve the Ticketmaster problem using blockchain.
- XP issues tickets as NFTs, providing authenticity guarantees and sealing/unsealing functions, utilizing Solana's low fees and high throughput.
- XP offers credit card payments and user-friendly UX to increase public accessibility, and plans to provide various experiences beyond tickets in the future.
1. Challenges in the Ticketing Industry
The imbalance between supply and demand has been a long-standing structural problem in the ticketing industry. While popular performances or concerts have excess demand, the supply of tickets is inevitably limited.
1.1 Supply and Demand Imbalance in Entertainment Content
The demand for the entertainment industry has exploded following the COVID-19 pandemic. Basically, popular performances, sports events, and festivals have limited ticket supply based on venue or stadium capacity. On the other hand, demand for these popular events often far exceeds supply. This structural imbalance is the root cause of ticket price increases and the formation of scalping markets.
Moreover, each performance or event offers a unique, irreplaceable experience. This monopolistic characteristic leads to low price elasticity. In other words, demand doesn't decrease significantly even when ticket prices rise. Also, traditional ticket sales methods (first-come-first-served, lottery systems) often fail to reflect demand accurately. As a result, actual ticket prices are often lower than market value, which encourages scalping.
Scalpers secure large quantities of limited tickets and resell them at high prices when demand peaks. This greatly restricts general consumers' access to tickets and artificially inflates ticket prices. Lastly, with the development of the internet and social media, fans worldwide can participate in ticketing. Although there are constraints by region or country, most offline entertainment struggles to meet global demand.
1.2 Ticketmaster's Dynamic Pricing
Ticketmaster, the largest ticketing company in the U.S., introduced dynamic pricing in 2011 to address the supply and demand imbalance. Dynamic pricing essentially means not selling tickets at a fixed price, but calculating real-time demand and raising prices like an auction.
Usually, other industries like airlines and hotels use dynamic pricing to adjust prices flexibly according to supply and demand. The main variables in Ticketmaster's dynamic pricing algorithm include:
- Historical sales data, including past demand patterns for general and similar events of the performer
- Remaining seats before the venue sells out
- Seat segmentation based on stage proximity and other factors affecting perceived value
- Secondary market ticket prices from competitors and Ticketmaster's own resale platform, Ticketmaster Resale
- Seasonal events and holidays for events related to specific seasons or holidays
- Off-peak times such as weekday or daytime performances
The advantage of this pricing policy is that it can adjust the prices of popular performances or products according to these factors. For example, prices can be raised when demand is high to generate more revenue, and lowered when demand is low to increase sales. This allows sellers (artists, agencies, Ticketmaster, etc.) to earn more profit.
However, how does it look from the buyer's perspective? While this dynamic pricing policy is already familiar in the airline and hotel industries, there are several inevitable problems as the ticketing industry is fundamentally part of the entertainment industry, which is based on fans:
- From the buyer's perspective, prices are constantly changing and difficult to predict. They might initially think they can buy cheaply, but the price could be much higher when they actually purchase.
- If prices become too high, only a select few can afford to buy. Especially for popular performances or products, prices may rise so high that even original fans can't afford them.
- Buyers can't decide whether to buy based on the final price. If they've already made a reservation, they can't cancel even if the price is high. This method can be unfair to buyers.
- Trust and bond between sellers and buyers can be broken. Especially in the entertainment industry, where there's a special emotional bond between artists and fans, such pricing policies can make fans feel exploited for money.
In conclusion, while dynamic pricing can provide more profit for sellers, it can be unfair and burdensome for buyers. Particularly because the face value price of tickets can double depending on the seat, it's been a constant target of criticism from fans' perspective.
2. Monopoly Problems Exacerbating Supply and Demand Imbalance
In fact, the imbalance between supply and demand is an unsolvable challenge. Attending a specific performance in the entertainment industry is now considered a luxury good. However, there is one problem that exacerbates this imbalance rather than balancing supply and demand: junk fees resulting from industry monopolies.
Imagine you're trying to buy tickets online to see your favorite singer perform. The ticketing platform's first screen shows $55. But when you add the ticket to your cart and click "Buy," suddenly all sorts of fees are added - service fees, processing fees, delivery fees. The ticket price jumps to $80, 37% more expensive than the original price.
2.1 Exacerbation of Supply and Demand Imbalance Due to Platform Enforcement
Currently, the U.S. ticket sales market is in a severe state of monopoly by specific companies. When artists or agencies choose concert venues, most large venues are owned by one company, severely limiting choices. As a result, the artist side often has no choice but to follow the contract terms proposed by that company.
When determining ticket prices, performance costs and venue rental fees are combined, but venues often set rental fees excessively high. However, the artist side has no proper way to adjust these rental fees.
In some cases, even merchandise sales revenue has to be shared with the venue. Despite this, ticket sales can only be done through the ticket sales system operated by that company. Ultimately, most of the revenue generated from ticket sales flows to the platform.
While there have been consistent challenges to this market monopoly, they've been insufficient to attract public attention. It wasn't until Taylor Swift directly mentioned this issue that it began to gain traction among the public. However, this also shows the reality that it's difficult to speak up about this issue unless you're a famous artist.
2.2 The Ticketmaster and Taylor Swift Incident
In 2010, Ticketmaster merged with Live Nation, gaining a dominant position in the live concert market. Now, Ticketmaster is undoubtedly the number one company, accounting for over 70% of the ticketing and live performance market. While not technically a monopoly as it's not the only seller, its overwhelming market share has raised concerns about market power abuse, a situation that has persisted for a long time.
Ticketmaster has recorded over 80% market share in initial ticket sales for major concerts since 1995. In 2010, the Department of Justice approved the merger with Live Nation but demanded that some business be given to competitors. However, this measure did not increase competition in the initial ticket sales market. While there were many complaints about Ticketmaster and industry abuses centered on individual consumers, it wasn't publicly discussed.
Then in 2022, Taylor Swift, who recently released a new album, announced plans for a tour of 20 U.S. cities from March to August 2022, with Ticketmaster selected as the concert ticket sales agency. However, during the presale last November, Ticketmaster's access was frequently interrupted, and Ticketmaster unilaterally halted sales citing insufficient ticket inventory.
This incident brought Ticketmaster's market monopoly problem to light, with even the White House criticizing that "capitalism without competition isn't capitalism; it's exploitation." Eventually, in June 2023, President Biden personally summoned representatives from Live Nation (which owns Ticketmaster), ticket resale company SeatGeek, Airbnb, and others to the White House. He demanded that ticket sellers implement an 'all-in pricing' system that prevents them from imposing fees after the fact and transparently discloses viewing fees in advance. Of course, there's no sign of the industry, including Ticketmaster, implementing all-in pricing yet.
The industry and consumers have come to call this practice of taking excessive fees the Ticketmaster Problem.
3. XP: A Ticket Marketplace Solving Problems with Blockchain
XP, which we're introducing this time, is a secondary ticket marketplace based on the Solana network. So how is XP solving the ticketing industry's problems using blockchain? In conclusion, XP is solving the Ticketmaster problem by using blockchain to eliminate intermediary fees.
Looking at the resale fees of existing U.S. ticketing platforms, there's a wide range from 10% to 50%. Due to the monopolistic structure of the U.S. market, they operate by buying tickets cheaply from individual sellers and selling them at high prices.
- Ticketmaster: Buyers pay variable fees, sellers are charged 10%~15%
- SeatGeek: Buyers pay variable fees, sellers are charged 10%
- StubHub: Buyers are charged 10%, sellers 15%
Ultimately, XP has set an ambitious plan to eliminate all such junk fees through blockchain.
3.1 XP's Operating Method and Utilization
In short, XP is a secondary market for tickets. It can be seen as a kind of resale market. The secondary market is where tickets purchased from "primary sellers" (venues, box offices, teams, artists, Ticketmaster, etc.) can be resold.
Of course, the price is set by the seller who owns the ticket and may be higher than the original purchase price from the primary seller based on market value. However, current U.S. resale companies are creating a nightmare by imposing high fees, adding to tickets that are already priced higher than face value. In conclusion, XP aims to provide a more transparent, efficient, and affordable way to buy and sell tickets.
Ticket transactions use Solana's blockchain along with existing credit card payments and can be paid with USDC. This allows buyers to easily transition to the platform and use services comparable to the user experience (UX) of existing sellers. And there are no unnecessary fees (Junk Fees) in this process.
3.2 TamperProof Concept and Structure
XP encrypts ticket codes as non-fungible tokens (NFTs) to facilitate smooth exchanges between buyers and sellers. So anyone can verify when the ticket is used. XP uses a protocol called "TamperProof" for this.
Basically, the TamperProof protocol acts as an oracle and trusted notary, encrypting all codes as NFTs. Once a code is sealed within a tpNFT, it cannot be viewed until the holder unseals it.
The sealed or unsealed status of a tpNFT is displayed and immediately updated in the NFT metadata on the Solana public ledger. This means that a sealed tpNFT is guaranteed to contain an unused code, making it 100% safe and transferable.
This unique sealing feature addresses the security and authenticity concerns that are most worrisome when selling physical assets in the secondary market. And because the NFT's status is immediately updated on the Solana public ledger, transactions are secure, transparent, and verifiable.
3.2.1 Authenticity Guarantee
XP's tickets mean more than just digital admission tickets. They are tamper-proof NFTs. Thanks to this innovative ticket encryption method, buyers and sellers can participate in transactions with peace of mind, knowing that their tickets are safe and value-preserved.
3.2.2 Sealed Tickets
The protocol recognizes that the ticket has not been used yet because sealed tickets contain unused codes. And the protocol's automation features make this on-chain, allowing it to be processed securely or made visible to anyone.
3.2.3 Unsealed Tickets
Once unsealed, these tickets are ready to be transferred to the end user. Unsealing means proceeding with the sale rather than attending the performance or concert. In conclusion, keeping a sealed ticket means actual attendance, while unsealing means secondary sale.
3.2.4 TamperProof Use Cases
- Gift cards: Can sell gift cards more securely
- Document transfer: Seal and transfer documents and files of all formats within NFTs
- Tickets: Find verified tickets with 0% fees on-chain
- Coupons: Distribute promotional coupons to Web3 user bases like OpenSea, MagicEden, etc.
- Points: Seal and resell points like Starbucks stars, Amex points, United miles, etc. as NFTs in the secondary market
- Rewards and prizes: Provide rewards to Web3 communities with prizes sealed within tpNFTs
4. Why XP Chose Solana
The reason XP chose Solana is simple. It's because of the competitive advantage provided by Solana's biggest strengths: low transaction fees and high throughput. And XP is utilizing Solana's blockchain technology in several different ways:
- Tokenized tickets: The protocol encrypts and seals secret ticket codes in the form of "tamper-proof non-fungible tokens" (tpNFTs) to ensure integrity and usability.
- Composable oracle services: Companies or individual ticket sellers can use this platform to sell tickets at market prices, with ticket price data encoded into the NFTs.
- Cost-effectiveness: Thanks to Solana, XP can offer cheaper ticket sales and user-friendly payment methods (credit cards, USDC).
- Transparency: XP's tpNFTs publicly show sealed or unsealed status in the NFT metadata of the Solana public ledger. This transparency ensures that sealed tpNFTs contain unused codes.
- Large transaction volume and community building: While cost savings is one of the main benefits of using the Solana network, its high-throughput design allows artists, performers, and sellers to form communities for ticket buyers. The team believes this feature will lead to VIP experiences, fan clubs, etc. in the future.
- Security through tamper-proof protocol: Authenticity is coded into the tickets, crucial for user verification.
- Industry innovation: XP is challenging the high fees and lack of transparency in the existing ticket industry.
5. Conclusion
The biggest benefits XP offers to customers are cost savings and trust. XP's CEO Michael Sanders stated, "We're 20-30% cheaper than StubHub, Vivid, SeatGeek, and safer than Reddit or Facebook Marketplace." But Sanders says this is just the beginning.
In fact, over 34 million tickets for over 110,000 live events have been sold on XP, from Blink-182, U2 concerts to MLB games at Yankee Stadium. This is a record of 34 million tickets sold without Ticketmaster's markup.
Because XP is built on blockchain, it can provide various experiences beyond tickets, emphasizing the infinite potential when speed, scalability, and cost do not add friction. Additionally, XP is designed with seamless user experience in mind, providing a familiar and comfortable interface for ticket purchases. Customers can sign up with their phone number and buy tickets with a credit card, providing accessibility to the general public who may not understand or need to interact directly with cryptocurrency.
XP is designed not only as a secondary market but also as an event search tool, providing customers access to various tickets at competitive prices. Overall, XP represents an innovative approach by combining the features of existing marketplaces with the benefits of blockchain technology to provide a more user-friendly, secure, and cost-effective ticket purchasing experience.
In the future, various forms of UX innovation are expected to take place for the popularization of Web3, like XP, and infrastructure like WEPIN, a WaaS platform provided by IoTrust, a blockchain wallet specialist company, is expected to be developed.
References
[WEPIN Wallet SNS Channels]
