Introduction
As we look for use-cases of crypto and web3 technology, NFT ticketing comes pretty high up on the list. Contrary to many other industries, ticketing has seen relatively little innovation over the past decade. Both the primary and secondary ticket markets are highly inefficient, and the space seems ripe for disruption. So that raises the question: Why hasn’t it already happened?
In this piece, we’ll cover:
An overview of the tangible market
Current problems in the ticketing industry
Benefits of NFT ticketing
Examples of projects active in the space
Why NFT ticketing hasn’t already taken off
Overview of the ticketing industry
The ticketing and events industry has made a rapid recovery since Covid. Global revenue is estimated to hit $65bn in 2022, with a CAGR of 5% going forward. Sport events remain the largest category, but music is rapidly catching up. In addition, the secondary market (reselling tickets) is estimated to be in the range of $15bn. None of the secondary revenue goes to artists/event organisers.
The ticketing industry is highly concentrated with Ticketmaster controlling the lion share (estimated >50% market share). In Q2 2022 alone they sold 77million fee-bearing tickets (primary and secondary market) with a gross transaction value (GTV) of $7.3bn. The balance is made up by players such as Eventbrite, Stubhub, AXS Tickets.
The large players have a name recognition that helps them reach millions of potential buyers. Event organisers trust them to have infrastructure to handle large ticket sales and offer exclusive deals, which allows promoters to charge high fees. Fans grind their teeth, but still pay. At the end of the day, there isn’t any better alternative if you want to see your favourite artist or sports team playing.
What is the problem?
It is no secret that the current system isn't working very well. Issues that pertain the industry are scalping, lack of control over secondary market and fraud (fake tickets).
Scalping has led to “unfair” releases, where bots snap up a bunch of tickets and resell them for a large profit on secondary markets. Fans can’t get tickets, despite constantly refreshing the website once tickets go live. This naturally causes frustration and many are forced to turn to secondary markets where tickets sell at a high premium.
While artists and event organisers haven’t been passive in the fight against scalping, the situation has hardly improved. Examples include in-person ticket sales, ID requirements (Ticketmaster’s Verified Fan System) or simply raising prices to limit the profit of scalpers. The problem is that most of these attempts go in the wrong direction. They increase friction and make it more difficult to buy tickets. Fans want the comfort and simplicity of online sales (i.e. not cueing outside for hours), while still being able to get a ticket at a fair price.
Lack of control over secondary markets: Well-functioning secondary markets are important, because sometimes life comes in the way. You wish to resell your ticket and at least recover some of the cost. However, the current situation has meant that secondary markets are dominated by scalpers, make large profits by reselling at high premium. Artists and event organisers on the other hand are largely left empty handed. Aside from a missed revenue stream, it’s primarily a problem of dissatisfied fans expressing their frustration about high prices.
Fraud might be more difficult today with digital ticketing and increased security. It still happens though, for example with fake QR codes. Every day, fans are being turned away from venues after having bought a fake ticket on the secondary market.
Benefits of NFT ticketing
So how can NFT ticketing address these issues and improve the overall experience?
On security, NFTs benefits from being blockchain native. Currently, buyers are forced to trust the third-party website and hope that the seller is honest. With NFT ticketing, it becomes easy to verify the ticket on a public ledger. Hence, you can be sure that you won’t be turned away at the door.
Another benefit is guaranteed delivery of the ticket, since execution of the transaction is done by a smart-contract. Buyers don’t need to fear the scenario where they wire the money to the seller without getting anything in return.
Royalty split and price caps can help fight against ticket scalping and create more fair ticket sales. Since the asset and the logic sits within the same unit, NFT ticketing gives more control for the original issuer. They can for example set an upper limit on resale prices or include a royalty for each secondary sale. In the extreme case, royalties could be set to 100%. While this would effectively weed out the scalping (since the seller gets nothing), it would also mean that genuine secondary sellers (i.e. due to sickness) wouldn’t recover any of the initial cost. Hence, the balance is somewhere in between.
The problem is that NFT-marketplaces currently control royalty payments and choose whether to respect them. This means that to earn royalties, all secondary sales would need to be on a marketplace controlled by the issuer (or a partner exchange). In other words, rather than being embedded in the smart contract, it is a feature of the ticketing application. It might change in the future, which would allow tickets to be listed on any NFT marketplace while ensuring royalties are respected. Until then however, we are stuck with this hybrid system.
Digital identities and stronger relationship between fans and artists/teams. As we think about how digital identities evolve, it seems likely that NFT-based ticketing will play a part. It also creates new ways for artist and teams to enhance enhance their relationship to their fans. Some examples include:
Proof of attendance (PoA) or additional drops after the event. Proof that you actually attended an event - a virtual version of the fan T-shirt we buy today. Could be in the form of a badge, ticket or custom artwork. Not only do these add to our digital identity, but old tickets can also prove to have value later on.
Mystery NFT drop as part of a premium ticket offering. True fans are willing to pay extra for possibility to win additional benefits (VIP experience) or get a digital collectible on top of their ticket.
Automatically rewarding loyal fans through free mints or in person-experiences. For example, a fan who has gone to every home game of the season could be airdropped a free ticket to the finals, a token that can be redeemed for a free jersey or backstage access at the next concert.
Requirements for builders?
Protocols can either choose to take the integrated approach (building everything in-house) or just focus on one feature, such as building the infrastructure. There are however some general features which would need to be fulfilled for a smooth user experience:
Settlement layer with high throughput and cheap transaction fees to make high volume and low-value transactions feasible. Since the average value of a ticket is relatively low (<$100), paying gas fees worth tens (or even hundreds) of dollars is simply not feasible. Most projects seem to be building on top of Polygon or Near Protocol, which accommodate for these requirements.
Minting platform that allows event organisers and artists to smoothly create and issue tickets. Also where ticket parameters are set, such as price, number of tickets available, royalties and max price of secondary sales.
Market place for secondary sales is needed to have control of the royalties (which disincentivises scalping). As discussed above, this might change in the future if royalties become a contracted feature rather than something that’s at the discretion of the marketplace. Until then, we are limited to a more closed system where secondary sales are restricted to specific marketplaces.
A mobile wallet or app where the ticket is stored. As we’ve already grown accustomed to the benefits of digital ticketing, the same ease-of-use will be required from NFT tickets. Ideally the place where the ticket is stored and displayed from, is integrated into the primary and secondary marketplace. That way, everything is in one app which reduces friction.
Project overviews
There has been an influx of projects building in the space. Below are some examples with a short description:
SeatLabNFT is a full-solution NFT ticketing protocol built on Near Protocol. Current features include a platform for issuing tickets, market place for secondary sales and option for additional NFT drops. In July 2022, Seatlab launched a £1m event creator fund to boost growth and adoption. Event organisers can apply for grants (non-repayable) to help with the cost of running live events worldwide. In exchange, Seatlab becomes the official sponsor and a ticketing client in the process. The token SEAT is expected to be listed in October.
Get Protocol is built on top of Polygon and offers infrastructure (backend) for NFT ticketing. Founded in 2016, it was one of the first protocols in the space. Get Protocol was created to bring transparency to the ticketing industry by leveraging blockchain. In total, 2.6m tickets have been sold using the protocols (of which 500k in the last 3 months). The native token GET launched through an ICO in 2017, with a fully diluted value of ~$50m today.
There are several integrating partners that build on top of Get Protocol’s infrastructure. GUTS is Get Protocol’s own showcase of the technology. Examples of other partners include DeFy Tickets and Relic Tickets.
Oveit is a full-stack solution that gives event organisers the benefits of NFT ticketing, without having to think about any of the technical aspects. Features include payment solution (fiat and crypto), mobile application, market place and platform for initial issuance. Oveit uses the ERC1155 standard for tickets and transactions settle on Polygon.
Coachella also deserves a honourable mention, who earlier this year launched lifetime passes (Coachella keys), as well as some NFT collectibles in collaboration with FTX. The NFTs and marketplace are built on Solana.
Why now?
It’s hard to point to one single reason why NFT ticketing hasn’t taken off already, but we can think of some possible explanations:
Firstly, the infrastructure and technology simply hasn’t been good enough. Given the low value of an average ticket (<$100), you need a settlement layer that is cheap to use. It also needs the throughput to handle large ticket releases. Other crucial pieces of the puzzle are marketplaces and mobile wallets, which have only seen more development in the last couple years. So while NFT ticketing has many benefits and works in theory, it is yet to be proven on a large scale.
Secondly, the general public only started hearing about NFTs within the last year or so. While perception has improved, there is still healthy scepticism among both artists/event organisers and fans. Adoption of Web3 native technology will take longer than diehard blockchain-proponents want to believe. A better way to scale is to make the UX so seamless, that the user doesn’t even know the backend is powered by blockchain and NFTs. In other words, get all the benefits without the faff.
Thirdly, the incumbents have a lot of leverage over event organisers. Due to high consolidation, they can extract more value from the market. Hence, they are incentivised to keep things as they are. Sports teams and bigger venues also have long-term deals spanning over several years, which makes adoption slower.
Conclusion
Artists have been complaining for years about the current system. They’ve been powerless thus far, but NFT ticketing seems to offer at least some tools. The underlying infrastructure also seems robust enough to enable ticketing at large-scale events. At the same time, sentiment is warming up to the idea and some projects are gaining traction. Case in point - France is now flirting with the idea of selling NFT tickets for the Paris 2024 Olympics(!). So while a transition won’t happen overnight, the trend is positive.
Thanks for reading!