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Ticket seller Mario Livich (Nick Westover/© 2009 Nick Westover)
Ticket seller Mario Livich (Nick Westover/© 2009 Nick Westover)

Small Business

One for the revolution, please Add to ...

The punch came hard and fast. It was 23 years ago, but Mario Livich still remembers the sting.

The fist dropped him to the pavement. As he lay on the ground, stunned, the Vancouver teenager who had taught himself how to hustle tickets had a single thought running through his head: Please don't take the money.

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It was Expo 86. The city was teeming with tourists and ticket scalpers outside venues. And stuffed inside Mario Livich's jeans was $20,000 in cash.

They never got the money. They never even looked for it. The guy who sent Livich to the concrete had only come to deliver a message. This stretch of sidewalk belonged to serious scalpers – and Livich was a nobody. If he kept up the brisk business he was doing, they were going to break his legs.

As he skulked away, Livich made a decision. He wasn't going to back down. After all, he was good at this job. He knew the business inside and out: buying up tickets on the cheap, then flipping them at a healthy profit whenever demand outpaced supply. This, he vowed, would be his career. “The next day, I show up, my mouth is swollen, but I'm there,” Livich says. “They realized I wasn't going to leave and they were probably going to have to kill me if they wanted me gone.”

Two decades later, that business on the street has evolved into ShowTime Tickets, the largest ticket broker in Canada, with about $5-million a year in sales, 19 staff and one of the busiest ticket resale websites in North America. Livich's competitors in the ticket “aftermarket” rank among the biggest names in business, from StubHub, which is owned by eBay Inc., to TicketsNow, the resale site run by Ticketmaster Inc., North America's dominant player in live entertainment.

The aftermarket falls into the grey areas of legality. Most provinces and states frown on reselling tickets, but the laws lack teeth. The job doesn't win Livich any popularity contests with the average fan just trying to land a pair of decent seats to a concert or game at face value. But to his best customers – in particular, corporate clients who can spend up to $100,000 a year wining and dining VIP clients with front-row seats and corporate boxes – the service is worth a premium and they're happy to pay accordingly. Michael Jagger, president of Provident Security, a Vancouver home-security firm that uses ShowTime about 10 times a year, buys tickets for clients or to reward staff. “We had an employee we knew was a big Peter Gabriel fan and he happened to be coming to town,” Jagger says. “Well, you don't just call up Ticketmaster and get the first five rows. With [a broker] you're paying for the ticket, but you're also paying for the dirty work of someone sourcing the ticket for you.”

ShowTime claims there is not a ticket in the world it can't get its hands on, either through its own aggressive strategies for buying tickets directly or by tapping its vast network of contacts, which range from season ticket holders shedding unwanted seats, to the odd concert promoter willing to quietly slip the company a few rows on the side. As long as the customer is able to pay what the market demands, Livich explains, “We are never sold out.”

But the ticket reselling business will go into overdrive in the next few months. Livich's boast of never being sold out will be put to the test when the Olympics come to town in February. Tens of thousands of fans will flood into the city, many arriving without tickets. They will be met by a host of ticket resellers. Livich, 44, calls this the “travelling circus,” a hotbed of brokers that springs up at major events around the continent like the Super Bowl or the World Series. Several hundred resellers are expected to parachute into town, ranging from the big players like StubHub, which plans to open a temporary office during the Games, to independent brokers working feverishly out of hotel rooms. For Livich and company, the competition to secure seats and time the market for maximum profit will be as heated as the athletic events themselves.

To no one's surprise, the gold medal hockey final is the hot ticket in the early going. Livich, a clean-cut, professional-looking man who wears dark suits and pastel shirts to the office, compares the match to the biggest diamond ring in a jewellery store. “People may not be buying, but everybody wants to know how much it costs,” he says.

Livich and his staff have been working the phones since summer, trying to secure as many tickets to the final game as possible. His sources are diverse: ShowTime first tries to buy the seats itself, logging on to the Olympic website as any fan might, hoping to be picked in the lottery that organizers have set up to distribute seats as fairly as possible. After that stream is exhausted, ShowTime taps its carefully nurtured network of contacts, including fans and other professional brokers who have secured the rights to buy tickets through the lottery system. For every ticket sold on his site – even the ones for which he's only acting as middleman broker – Livich collects a commission of at least 20 per cent.

It doesn't matter that the tickets haven't been produced yet. On its website, ShowTime is already selling tickets to the game, which have a face value of between $350 and $775, for between $3,275 and $4,875 per seat. Olympic organizers wanted to prevent this sort of inflation – but the free market prevails, Livich says. The aftermarket prices are dictated by demand, plain and simple.

When asked how many gold-medal hockey seats ShowTime has accumulated so far, Livich is coy. “We have zero right now, because they haven't been issued yet,” he says with a smile. “How many do we have the rights to? That's a different story. Thousands.”

ShowTime's offices are located in the shadow of BC Place, where the opening and closing Olympic ceremonies will be held, and not far from General Motors Place, where hockey fans will congregate on a nightly basis throughout the Games. The offices are clean, bright and friendly, not dissimilar to a real estate office designed to sell you a home. By February, the streets outside Livich's window will be closed to vehicles, but throngs of tourists will shuffle past ShowTime's storefront on a daily basis. If location is everything, this is the kind of spot most companies would die for during the Games.

Livich staked his claim on this location long before the idea of the Vancouver Olympics was even aired. The notion of getting into reselling first occurred to him as a teenager when he saw $40 concert tickets being sold for $100 outside a venue. But it was Expo that made him into a professional. Instead of buying a few tickets here and there and flipping them for a higher price, Livich used Expo to begin speculating, buying up bigger blocks of tickets to sell, with an eye to heftier returns. In particular, Livich figured there was ample money to be made by purchasing the last few unused days of a seven-day Expo 86 weekly pass from patrons who were leaving the grounds. He then walked those passes over to the entrance gate and flipped them to tourists who only wanted a day pass. He bought at a steep discount, sold at a slight discount and pocketed the difference.

The Expo cash stuffed in his jeans allowed him to branch out. Livich began buying up swaths of seats to concerts and hockey games. He got to know employees of concert promoters – a key source of bulk tickets if the right relationships are forged. He also networked in the scalping community, in order to swap seats and manage inventory.

It was important to milk every possible source, since demand for a given event can surge without warning. Season ticket holders have Livich on speed dial so they can unload games they can't attend; likewise, Livich has a contact list of those who will sell prime seats (centre ice at most NHL rinks, for example) if the price is right. Though few people admit it, everybody is a seller, he says. “A lot of season ticket holders, they invest in season's tickets, they may or may not claim that as a business expense. Then they sell them and get some cash back in their pocket,” Livich says. “What people do with their tax returns isn't my business.”

Even the teams are sellers. “I've dealt personally with team owners, where I'm sitting in a hotel room with a suitcase full of cash and they're selling tickets,” Livich says. “I'm not going to go into further details, but everyone likes cash. So I've cultivated those relationships.”

To be a ticket speculator, you have to have guts. On any given day, ShowTime will have millions of dollars of tickets on its site. Their liquidity – Livich's ability to move them at a profit – relies heavily on mercurial influences on value: the ability of a team to keep winning, of a star athlete to stay healthy, or of a song to stay popular. “I have a tremendously high tolerance for risk,” Livich says.

He nearly lost everything in the early days, betting too big on certain concerts and being stuck with a fistful of tickets he could barely give away for free. A particular R.E.M. concert in the mid-1990s left a bitter taste in his mouth. He overestimated demand for the show, and secured a bulk deal for tickets from the promoter. As the date approached, Livich realized he had too much merchandise and was forced to dump the tickets for next to nothing to fans outside the stadium. “It was horrid,” he says.

His big break came in 1994, after years of grinding out meagre returns. That year, the Vancouver Canucks entered the NHL playoffs with modest expectations on their shoulders, and the local fan base was accordingly lukewarm on tickets. But Livich realized that if he loaded up on Canucks playoff tickets through Ticketmaster, his exposure would be minimal but the upside was huge. If the Canucks lost to the Calgary Flames in the opening round, as expected, he wouldn't have to pay for the scheduled games after that – they would never be played. But if the team advanced, the prices he could fetch for subsequent rounds would only increase, in tandem with fan excitement. So Livich begged and borrowed for as much cash as he could get, going to friends, family and eventually loan sharks to build up capital.

The wager could not have worked out better. The Canucks upset the Flames and marched through to the Stanley Cup finals that year, going all the way but losing to the New York Rangers in seven games. In addition to profits – estimated in the hundreds of thousands – the coup brought in a flood of calls from brokers across the United States who wanted tickets. With this contact list, ShowTime branched out internationally.

Still, Livich craved one thing – legitimacy. He wanted out of the street game and into something cleaner. “My mother has always said to me, ‘When are you going to get a real job?' ” he says.

Livich's parents came to Canada from Croatia when he was 4. Seeing his parents toil to make a living – his mother putting in long hours scrubbing toilets in hotel bars and restaurants – was a powerful motivator. He wanted to control his own destiny. With money from the Canucks playoff run, he went in search of a proper place to build a company from scratch, landing the small space across the street from BC Place in 1995.

Forty-eight hours later, having built a front counter himself, Livich opened for business, with one employee. Today, behind the counter are tech staff, salespeople, ticket buyers and marketers. They field orders from all around the world over the phone and through ShowTime's website, as well as from walk-up customers. “I think it took my parents 15 years to accept that I was a legitimate business person. Just recently, they realized: I have a job, I do have a business,” he says with a laugh.

Some people, however, don't hold the business in much esteem. Though ShowTime has a loyal customer base of people who are willing to pay for the convenience and reliability of the service rather than queue up for tickets, many fans despise the aftermarket as opportunistic.

But disgruntled fans aren't the only problem any more. The rise of resellers like ShowTime and StubHub on the Internet is a disruptive force in the ticket industry, not just a nuisance on the street corner. Their success has provoked an unholy war in the business. Ticketmaster, the goliath primary seller of tickets, enjoys a near monopoly that threatens to shut people like Livich down. And the way Ticketmaster sees things, it would be doing fans a favour.

Miley Cyrus is not only a squeaky-clean teen star; she may also be the future of the ticket industry. Cyrus's concert tour this year employed a Ticketmaster innovation that it is pushing to venues across North America as the new industry standard: tickets without actual tickets.

In this paperless model, fans buy a ticket with a credit card (or, in the case of Cyrus fans, their parents' credit card), then swipe that card at the door instead of having their ticket punched, ripped or scanned. As with an airline ticket, the seat to a Miley Cyrus show is not transferable, so it's difficult to resell if you don't have the credit card used to pay for it.

“The brokers hate paperless ticketing because they know what it does,” says Joe Freeman, senior vice-president at Ticketmaster Inc. “It gets tickets directly from the artist and the event provider into fans' hands at the price the event provider wants fans to pay. It's a pretty potent tool.” MTS Centre in Winnipeg and Copps Coliseum in Hamilton were among the first venues in Canada to use Ticketmaster's paperless ticket system, introduced last year for tours by Metallica and Tom Waits.

The National Association of Ticket Brokers, a U.S.-based lobby group representing companies like ShowTime, has lashed out at the idea, calling it anti-competitive. The association wants the paperless ticket model to be scrutinized as part of investigations that have already been undertaken by competition regulators in Canada and the U.S. Those probes concern Ticketmaster's proposed merger with event promoter Live Nation, which would give the company an even greater hold over the market. To make their argument, both sides – Ticketmaster and the resellers – are holding themselves up as defenders of the fans.

“If there's a broker in California, he's going to think long and hard before buying a paperless ticket to an event in Ontario,” Freeman says, since the reseller would have to be on site with his credit card for the buyer to get into the show. Were the system in place for the Olympics, gold-medal hockey tickets might be easier to come by at face value for the average fan. At events where the paperless system has been used, “We're already seeing the public is getting enhanced access to tickets,” Freeman says.

Resellers such as Livich and StubHub say the system will simply line Ticketmaster's pockets, while doing more to harm than help customers, since it will make it hard for fans to hand over tickets to friends when they can't attend an event themselves. It also poses an obstacle to fans who want to use the aftermarket to buy a ticket to a sold-out show.

“When one company with market power tells fans they can't deal with competitive marketplaces, then we suspect fans are not being served,” says Lance Lanciault, StubHub's director of legal affairs. “More importantly [if there is an online resale market] consumers know what market prices are, so they're less likely to be tempted to pay above-market prices to a seller on the street who doesn't offer any consumer protections.”

While both sides rush to the defence of the helpless consumer, a bigger game is afoot. The brokers and resellers fear Ticketmaster is trying to corner the market for itself. Despite its protests, Ticketmaster has its own resale site, TicketsNow: The company is both a primary seller and an aftermarket player. If the company can shut out ticket resellers and have TicketsNow act as a transfer site for paperless tickets, it will have the market to itself, allowing seats to be exchanged with the press of a button.

Ticketmaster has already found itself in hot water over its ownership of TicketsNow. Fans in New Jersey complained this year that they were being automatically directed to the resale site to buy Bruce Springsteen tickets at inflated prices mere seconds after the concert went on sale.

Lawmakers have yet to rule on the inherent conflict of interest for companies that play both markets. In the meantime, primary ticket sellers are increasingly being lured to join the game – including Olympic organizers in Vancouver, who have mulled over the idea, and professional sports teams that have set up resale sites of their own, taking a commission on each sale.

Freeman says Ticketmaster is working on finding a way for fans to transfer tickets in the paperless model – and it will collect a fee on the transaction, even if the parties aren't exchanging money themselves. Freeman is unapologetic about the charge, comparing it to a service charge at a bank machine. “We know we're not the most beloved company,” he says. “But it takes time and resources to build out the capability. It's only right that we charge for it.”

Livich admits it will be hard to circumvent paperless tickets. “There's the hassle factor. Say you buy two tickets, maybe you could go walk somebody in with you, so you burn one ticket and sell the other. Or you can give somebody your credit card to use. There's always ways to work around the system,” Livich says. “But there's not a scalable solution, no.”

As a fan attending events, the paperless ticket idea is a potential problem for Jagger. “What if I want to buy the tickets as a gift? And if I can't go to a hockey game, usually I'll end up giving the tickets to my brother. What do I do then?”

For every jackpot like the Canucks' 1994 playoff run, Livich has another story about losing his shirt betting the wrong way. Brokers will often fill orders in advance at a certain price, then set out to procure those tickets for less, aiming to profit from the spread. Livich has tried to forget about the 2006 Super Bowl, when a ShowTime employee took a large order of tickets from a corporate buyer in the U.S. and locked in at a specific price, only to see the market spike a few weeks later when the Seattle Seahawks unexpectedly made it to the final against the Pittsburgh Steelers. With demand for tickets soaring by the hour, ShowTime was forced to honour the order at a loss – buying the tickets it needed at much higher prices to supply the client. The fiasco cost the company $120,000.

“The general perception is, ‘Look how much money these guys are making, they're criminals,' ” Livich says. “But it can be a skinny business.” ShowTime might make a margin of 20 per cent to 25 per cent on sales, but that number is cut in half by overhead. Then factor in a slumping economy, when corporate expense accounts are curtailed, and the business gets lean in a hurry.

Last year ShowTime lost money in the down economy. “It's been challenging, absolutely. You end up sitting on a million dollars of inventory, such as hockey tickets. But when the economy turns, that turns into a tremendous liability,” Livich says. “It's perishable product.”

For the Olympics, ShowTime has rights to tickets locked up for every event, from luge to biathlon, in order to capitalize on medal matches, but also on the inevitable media sensations that seem to erupt from nowhere and draw big crowds. Think Eddie the Eagle, the ski jumper who stole the show at the Calgary Olympics in 1988. On the other hand, a Slovakia-Finland final in hockey would be devastating.

To Livich, reselling tickets is like speculating on pork bellies and corn futures, but far more interesting. “Any time the stakes are high, you can blow your brains out. Absolutely,” he admits. The Olympics will be a crucial moment for Livich's company: If demand isn't there, ShowTime will lose out on commissions from stacks of tickets it can't sell. If demand is strong, the company will be perfectly positioned. In its pursuit of profit, ShowTime has also waded into brokering the rights to hotel rooms in Vancouver during the Games, a market that works on the same supply-and-demand principles as tickets do.

Livich walks out to the street and glances over at BC Place. It is sunny, but the air has turned cold. Vancouver 2010 is nigh. “If you're anybody in this town, you're going to want to entertain people during the Olympics,” Livich says. “To do that, you're going to need tickets.” And like it or not, you're probably going to need to know Mario Livich.

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