Refund Battle for Cash
Cash is King. That is the unofficial mantra of the coronavirus economy. It is echoed in the stock market, small businesses, venture startups, real estate, and homes across the world. While times like this may not be unprecedented, the uncertainty perhaps is and exacerbates the current situation. With not knowing what to expect in the coming months or even years, survival is the focus. This means hoarding cash and living to fight another day.
This dynamic is no less true and possibly even more so in the ticketed event industry. It involves a web of money currently caught intermingled between artists, teams, venues, marketplaces, brokers, and fans. When things are normal, the system is a complicated machine, but it is a well-oiled one that churns out events and deals flow. Even when there are one-off cancellations due to weather, sickness, etc, the process can be unwound and sorted out with money reversing its track. Everyone has enough cash on hand to figure it out. However, when events across the board are not happening, it is like an oil change was missed and the entire system comes to a grinding halt.
Let’s take a single hypothetical event to simplify the problem and explain what happened here. It could be a stop on a music artist’s tour or a game in a professional team’s season; the concept will be the same. When the virus puts a halt on tours and seasons, that single event can now be considered to be in limbo. What happens to it (rescheduled or canceled) will have major consequences. However, for over a month, the majority of event organizers basically put everything on hold to buy time and see what happened with the virus. Now normal policies with large primary ticket marketplaces such as Live Nation (and its subsidiary Ticketmaster)through which the majority of artists and teams sell their tickets would allow for a ticket buyer to get a refund for an event for a postponement for our single hypothetical event.
This policy got flipped on its head with the mass event postponements and cancellations due to COVID-19. With the money flowing from multiple events, a one-off refund for a postponement is easy for Live Nation to handle. However, when there are mass postponements across the board, Live Nation is even more reliant on the policies of upstream entities such as venues, artists, and teams. Live Nation’s pause on postponement refunds eventually created a strong backlash in the public from fans and secondary brokers alike.
Recently with indefinite postponements setting new dates or being canceled altogether, Live Nation responded to criticism and re-updated its policy. Rescheduled events had 30-day windows to request refunds, and in limbo, postponements would also have 30-day windows however those would not open until 60 days after the postponement announcement. While clearly not the same as original policies, the importance of cash preservation on both sides can be seen as buyers get refunds and cashback while Live Nation can better plan its risk with the limited time windows.
On the other side of the industry is the secondary market where it is fairly standard for marketplaces to make sales final unless events are canceled. So they do not have the postponement issue that the primaries have, but they are fighting the cash battle on the cancellation side. When a ticket holder sells a ticket on a secondary stage, they typically get paid when they deliver the tickets with some exceptions across marketplaces. When an event cancels and a seller was paid for a sale already, the secondary marketplace must recoup that sale from the seller. Looking ahead at future events, this led the vast majority of secondary marketplaces to progressively update their payout policies. Sellers would not be paid until post-event to mitigate against the mass financial and logistical nightmare that is happening and bound to happen with more event cancellations. Fans and brokers reselling their tickets are on the short end of this policy change as their cash is now being held longer than expected during a time when many individuals and small businesses need it most. Similar to the issue of primary marketplaces changing postponement policies, the mass number of cancellations has created an unfortunate situation with less than ideal solutions.
The event ticket industry in both the primary and secondary marketplaces is one of the most direly impacted industries from the crisis. Along with the travel industry, events currently face practically no demand due to forced cancellations even though there may be theoretical demand out there. The financial leveraging and cash recycling practices during normal times now have these industries fighting to let the show go on, from the individual to the billion-dollar corporation. And the ticket with the highest demand right now is cash.