The (Super) Ticket Opportunity

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TLDR;

1. NFTs offer a promising solution to problems like scalping and fraud in the ticketing industry.

2. Beyond access, NFT tickets can enhance the event experience and offer unique post-event memorabilia.

3. Many events don't face the high-demand issues NFT ticketing aims to solve, focusing instead on building consumer loyalty.

4. Successfully integrating NFT ticketing requires navigating a complex landscape of existing ticketing systems and partnerships.

5. The transition to NFT-based ticketing will be gradual, requiring strategic approaches to overcome industry fragmentation and technical challenges.

Ticketing is everyone's favorite use case to explain how NFTs can be useful beyond profile pictures. It's an enticing opportunity, and understandably so. It's a big market. According to Statista, the event ticketing market is expected to reach ≈$84 billion this year.

It's also a space with much more depth than most people consider.

I've seen many takes about the expansive and obvious opportunity that NFT ticketing presents, but few that consider the realities. 

This essay explores that opportunity and some of the challenges to navigate. 

Ticketing Status Quo

Tickets to entertainment experiences (sports, movies, live events) are access passes. We buy a ticket and it grants us access to a thing. That's the core utility of a ticket, which means that its utility (and value) expire "at the door". After you've used it to access the thing, the ticket has fulfilled its purpose.

Back in the day, tickets were paper-based, and you might keep a ticket stub as a memory object. Today, tickets are largely digital—no more than an email with a PDF attachment. After the event, your ticket stub disappears in the stream of emails in your inbox or is relegated to an app's off-screen "History" tab.

A ticket can be and do much more. And in the future, it should!

The Obvious Opportunity

In-demand events have a big problem with no perfect solution: demand far outstrips supply. This has led to severe bot-ing, scalping, and fraud problems in the industry. 

Scalpers buy up tickets and sell them at inflated prices on secondary markets. Scammers will take this further and sell the same ticket multiple times. The end result is that the consumer experience can be chaotic and stressful. 

NFTs and blockchain technology can be compelling solutions to these industry challenges. This is the first prominent argument people go to when explaining the benefit of NFT ticketing. It's a highly relevant argument, but it should be considered with an important modifier:

Most ticketed events do not have this problem. I don't have an exact way to measure it, but far from every event has demand that outstrips supply by orders of magnitude. For ease, let's assume it matches the power law of the Pareto Principle (80/20). When demand for an event is equal or less than supply of tickets, the scalping problem is reduced and mostly eliminated. The same goes for the second-hand market for those tickets.

Rather than managing 10x demand, most event organizers (whether a concert venue or a movie theatre) must invest in generating demand and building consumer loyalty.

Expansive Utility

Another exciting opportunity that opens up when we put tickets onchain is expanding the utility of a ticket beyond access at the door.

Increased utility can drive more demand for the event and increase the perceived value for consumers. 

Some ideas of what this might look like

• The ticket becomes a node in the fandom graph, enabling the artist/studio/organizer to engage with and tailor experiences for the consumer based on it as (one of many) data points in the graph. 

• Tickets can turn into memory tokens after the event. At a sports event, the ticket would update after the game to include a video of a memorable moment (like a TopShot card). This can be further gamified by enabling people who went together to "bond memory tokens" to unlock bonus value and utility. For the organizer, it creates exciting data about how individual patron fandom graphs intersect and overlap. 

• For movies, tickets can be a gateway to character-first loyalty experiences. 

• Third-party involvement. Hotels and restaurants can offer discounts or other types of value to ticket holders of an event in their area. This enables third parties to leverage an event's attention while also benefitting patrons (and organizers) who experience value-adds for holding a ticket. 

• Patronage and event financing.

It can also be used to solve sector-specific challenges. For instance, when you go to the movies, multiple parties may want to reward you for that activity. But they want to reward you for different reasons. Going to the movies is a multi-layered loyalty activity.

• A movie theatre cares that you choose that specific location. They care less about the content you decide to watch.

• The distributor/studio cares that you choose to watch their content. They care less about which theatre you went to.

An NFT movie ticket constructed with this in mind would enable both parties to reward the consumer, leading to more value for the consumer.

Challenges

Event ticketing is a big market, and the design space for NFT tickets is vast. So, go for it, right? I don't think it's that simple. Let's explore some challenges that must be navigated to tap into this opportunity.

Tip of the Iceberg

The natural MVP for an NFT ticketing service would be to create a product that let's an event organizers publish an event and sell X number of tickets. Tokenproof is an example of one such product. It's great for that use case. For small or one-off events, this may work well. But, in many cases, the ticket is the tip of the iceberg, with a complex structure of logistics underneath.

Things like

• Season tickets, discounts, and holds

• Seat maps, sections, and tiers

• Distributors, sales agents, and aggregators

• Ticket bundles, timed releases, and dynamic pricing

That's why most continuously operating venues (concerts, theatres, movies, sports) run niche, vertical software to power their operations. The software looks like a ticketing system in the front, but it has many tools to handle all of the logistics in the back.

Running a movie theatre is very different from running a stadium. So, the event ticketing space is segmented with purpose-built, vertical software for the various segments. The importance of this can be easy to underestimate if one doesn't have insight into the industry.

Imagine someone builds a "better" Shopify, but it's better only in one dimension: slightly faster online checkout. It doesn't include features like inventory, marketing, and a POS. It's unlikely that a Shopify customer who's dependent on the "whole stack" will switch.

Without this depth of features, creating a differentiated product is difficult.

For someone bringing "NFT ticketing" to the table as the main value prop, many overhead requirements must be solved to scale into larger market segments, either by building or integrating. This leads us to another challenge.

Distribution & Fragmentation

As in any industry, players play in different segments. For live events, there are a few big venues and big artists who play them. Then, there's a massive landscape of mid-sized and small venues operating independently. In the US, the power of the former is heavily concentrated with Ticketmaster/Live Nation.

The structure is similar for movie theatres. There are a couple of big chains and many smaller, independent operators. I'm less familiar with sports ticketing, but it's safe to assume it's similarly structured.

A natural way to navigate this is by targeting the bottom end of the market, smaller events. However, if an NFT ticketing product goes to market with scalping and resale as its main value propositions, it's likely that this value proposition will be a mismatch with the market segment it is targeting.

The fragmentation of the bottom end of the spectrum across all sectors of entertainment ticketing also means that the software stack is highly fragmented. This is relevant when considering the previous challenge of feature breadth. Should an NFT ticketing platform build all the "non-crypto" overhead to compete for 1:1 with existing players in the market, or should you partner with existing players and create an integrated "layer on top"?

The latter might seem like a good option until you figure out that it, in practice, means trying to integrate with a bunch of on-premise, legacy software stacks from vendors with few incentives to be helpful.

It creates a challenging market landscape that requires smart navigation to scale beyond the initial cohort of small events that require "nothing but ticketing."

Outside Dependencies

There's also a chicken-and-egg problem when realizing expansive utility for NFT tickets. An NFT ticket would enable a third party, like a hotel, to reward ticket holders, but it's only interesting when a meaningful number of tickets are issued as NFTs. Then, they would need to invest on their end (services and products to create, distribute, and redeem such rewards) until the opportunity exists. This pushes the transition from theory to practice further down the line. 

Going back to the value chain of movie tickets, the above is likely true for a film studio looking to create loyalty and connection with fans. Distribution either requires winning the top end of the market (big chains) or taking the long and winding road through the fragmented landscape of independents—or both.

As we advance

This essay may seem pessimistic, but that isn't my intention. I believe that all event tickets will eventually be issued as NFTs on blockchains.

But I think the road to getting there is more complex than some of the "Tickets as NFTs are so obvious" takes that I often see online.

There are already many "NFT ticketing" products in the market. So far, most of them are tapping the surface-level functionality. One notable example is GET Protocol. Among other things, they offer a product that enables existing ticketing vendors to produce digital twins of tickets, integrating blockchain-based ticket issuance on top of an existing stack. This can be a way to increase adoption without building all the overhead required to offer a full-suite, vertical event software.

The exciting projects to watch will target specific segments of event ticketing, preferably with a deep knowledge of the space and a clear strategy to navigate some of the challenges we have discussed.

I'll end with a second-order opportunity I can see forming on the horizon: As the range of "NFT ticketing providers" grows and the adoption of blockchain-based tickets increases, there will be a need to orchestrate data from different ticket protocols in one unified way.

If artists want to drop rewards to their fans from a tour, they may have played at ten different venues using five ticketing providers. When they get back home, they will want a simple way to airdrop a memory token and a merch discount to all of them.

FWIW, these thoughts are based on my experiences running a company that builds a full-stack operating platform (including ticketing) for movie theaters.

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