The future of tickets

David Siegel , 07 Apr 2017 - Blockchain AdoptionOpinionTickets


David Siegel is CEO of Twenty Thirty AG, a blockchain innovation community, and a friend of Consensys. You can reach him at david@2030.io

A ticket is a type of contract. Ticket companies often have surcharges in the range of 5 percent just for issuing and managing their tickets. Can blockchain technology provide better, more secure tickets at a fraction of that cost? I think it can. In this short essay, I’ll break down some functions of tickets, talk about the major issues involved, then point the way toward ticketing systems using smart contracts. At the end, I’ll list any blockchain-based systems I have heard of. Let’s get started.

Today’s Tickets

The future of tichets1Tickets are contracts. From airline tickets to lottery tickets to season passes, all tickets are redeemable — that is, they represent some value you get in the future. They are printed on paper, plastic, metal, or they are digital, or a combination. They have one or more of these properties:

  • Transferable

  • Resalable at market price

  • Refundable

  • Exchangeable

  • Pass (can be used freely, multiple times in a given time period)

  • Set expiration date

  • Renewable

  • Regulated by law

  • Allows physical entry

  • Booklet (use x number of times in a given period)

  • Coupon (use to get a discount or a certain class of product or service)

As you can see, there are a lot of possibilities. Almost all tickets come with some legal language specified somewhere — often in a “terms of service” or “terms of use” contract sitting on a web page or in the fine print.

Tickets are not without dangers. You can lose a ticket, leave it at home, forget the date, destroy it, need to cancel it, and more. For about three decades now, we’ve been digitizing our tickets without changing the underlying process from a paper-based model. It’s now time to rethink what tickets are and how they are issued and used.

A Viable Ticket Ecosystem

Tickets are part of a system consisting of:

  • Tickets

  • Wallets

  • Point of use

  • Exchange

The future of tichets2To keep this essay short, I’ll focus on the tickets themselves. But note that the value of ticket aggregators is in the fact that customers can find many events and other things in one place — this is the number one factor in building a successful ticketing business, the ticketing mechanics are secondary. Today, Ticketmaster is the dominant original-ticket vendor, and the secondary market for exchanging tickets belongs to StubHub, TicketExchange, eBay, and others. These are centralized exchanges with in/out fees, huge marketing budgets, and proprietary deals.

Face-Value Tickets

Remember that smart contracts are “programmable money.” We can add logic to transactions by programming a smart contract and letting it manage the money. So too, we could add logic to tickets, manage them on the blockchain, and pay just a fraction of the price we pay today. At first, we’ll use smart contracts to imitate familiar kinds of tickets, and then we’ll discover ways that programmability lets us create entirely new types of tickets and ticket experiences.

Let’s start by looking at Lava. The entrepreneurs who started this company listened to concert venues and wanted to solve a problem: tickets were being bought in bulk by opportunists and then reselling them at the venues the day of the events for much more than face value. Furthermore, these tickets were subject to counterfeiting and what we call the “double spend” problem (showing up at a concert with the tickets you bought on Craigslist only to find those seats already taken).

So they created Ethereum-based tickets that go into your smart-phone wallet, with smart contracts that make sure they can only be sold and purchased at face value.

The future of tichets3While smart contracts can prevent ticket forgery, there is a long history of tickets being bought and sold at market prices, regardless of face value. I’ve heard of Super Bowl tickets changing hands for more than $20,000 a week before the event. I’ve bought last-minute tickets at a discount. Is this bad? People holding tickets are taking market risk. If it’s “against the rules” to sell a ticket for more than face value, then they simply sell it for face value and include a “souvenir hat” for an extra amount, and that is exactly what takes place outside of baseball stadiums each week. We’re all familiar with “peak” and “off peak” pricing for many kinds of tickets. So in reality prices of tickets aren’t static, they’re dynamic; they change in response to market forces, whether they’re “supposed to” or not.

Venues want to prevent fraud, and they want to prevent the wrong kind of people hanging out in front of their venue an hour before showtime. For these reasons, many states and countries have laws against selling tickets for more than face value, which distort the market, as people will always find a way around these laws. So we’ll have to work our way slowly toward true market-based solutions and hope regulators will eventually catch up.

Programmable Tickets

We already have smart tickets today. Airlines use complex algorithms to determine ticket prices — it’s entirely possible to sit next to someone on an airplane who paid twice or half as much as you did. But this infrastructure has many moving parts and may be too expensive for concert venues, ski resorts, and others to offer. In fact, I’m guessing we have seen the consolidation of the ticketing industry into a few large players for essentially this reason — the bigger they are, the more technology they can bring to providing solutions. Unfortunately, those server-based companies have used their consolidated market share to extract a huge amount of rent in the form of “service fees.” For 2015, TicketMaster reported gross revenues of $1.6 billion and operating income (division profits) of $158 million, with margins near 10 percent. Certainly, there are venue charges, taxes, and other fees we can’t remove, but we can reduce the fees on ticketing from around 5 percent down to a few pennies per ticket.

The Smart Contract Solution

I envision a company creating a flexible set of smart contracts that embody all the various choices, so you can issue tickets using a configurator. The configurator would be based on a central server. When you’re done, it sends you a set of tokens to your special-purpose ticket app. Ideally, there’s a market for tickets, and newly issued tickets compete alongside those being resold. While the inventory listings and exchange run on a central server (similar to the Lykke approach to financial assets), the actual tickets are blockchain-based tokens that sit in your wallet. In other words, they are traded centrally, but they settle on the blockchain. Person-to-person transfers are easy and don’t involve any interaction with the central market.

The future of tichets4It would be fairly straightforward to create a system like this that can issue and trade most of the tickets we use today. Then, we can get more creative.

Since smart contracts are fully programmable, we can include outside dependencies and more sophisticated logic. For example, if your concert is rained out or canceled, the ticket can automatically negotiate a new seat on an alternative date just by looking at your schedule. If you are busy on the alternative date, your ticket app can try to get the best market price for your ticket. In some cases, like the World Series, the total number of games depends on the outcome of the games as they are played. A smart-contract-based system for this would adjust automatically and cost far less than the systems we use today.

Smart contracts can also deal with market fluctuations. If the market for your ticket changes, a smart wallet would be able to use prediction analytics to maximize the chances of getting the best price. We can tie them to weather data, traffic data, the outcome of previous events, prediction markets, and much more.

Smart contracts will help us navigate the world of contactless payments. Soon, we won’t need a person walking up and down the train checking peoples’ tickets. We won’t need someone standing in front of the concert hall or movie theater tearing tickets in half (there’s a joke about a guy who tore his resume in half during the interview and got the job). Imagine walking onto an airplane without any interference at all — the wallet in your phone manages your access to the walkway and guides you to your seat.

Smart Contract Ecosystems

We’ll be able to use tradable tickets for many things we don’t currently. For example, as a consultant, I can offer clients a calendar where they can reserve time with me (there’s already a token for that). Rather than an appointment, you purchase a token (ticket) for my time, and then that token is tradable. Your calendar can sell off the time slot if something comes up. In this way, markets will replace many of today’s people-based decision systems, and we will use tickets as the medium of exchange. Tickets could even become investments (imagine buying a future ticket to go to the Moon)*. From there, we can create entire ecosystems of services that couldn’t have existed before, and all of it will be secure on the blockchain, costing pennies and requiring no IT departments or data centers.

The future of tichets6You can see now that the concept of tickets will probably widen considerably, crossing over to areas like course registration, vacation planning, insurance, your entire Olympics experience, renting a car, staying in a hotel, hiring a consultant, and much more. The universe of smart contracts is vast, and tickets will be a subset of features available to people designing much larger systems.


Summary

This is clearly a billion-dollar opportunity. It makes sense that a few companies are already established and more are coming. Any company that starts with a simple app that looks familiar but has far lower fees could be the next Ticketron or StubHub. There could easily be a unicorn company here; the race for smart tickets has just begun.

Blockchain Ticketing Systems

Here I will list any current blockchain-based ticketing systems. Please tell me if you hear of any new ones:

Guts in Holland
Lava in the US
Blocktix