Luke Johnson: Sky-high fees need to fall

An investigation into excessive booking fees for concerts is long overdue; we need a more robust approach to fake injury claims; it's a vintage time for films about business.

by Luke Johnson
Last Updated: 21 Oct 2011

Which is the most hated brand in the US? Fast Company magazine claims it is Ticketmaster. It sold 120 million tickets, worth $8bn last year and is now owned by Live Nation Entertainment, a giant concert promoter, venue operator and artist manager. It has a near monopoly and is the villain in Josh Budnick's new book, Ticket Masters - The rise of the concert industry and how the public got scalped (ECW Press).

Why do so many people resent Ticketmaster? Because the basis of its business is a ruse - it charges an excessive levy to handle ticket sales. This commission comes with many names - a 'service charge', 'processing fee', 'booking fee' and so on. But it all boils down to the same - additional cost to the customer for almost nothing. The true costs of organising, printing, emailing or posting a ticket are very modest - but the extra fee often amounts to 10% or more of the ticket's face value. And customers are rarely told of this surcharge beforehand.

I would like the Competition Commission and Office of Fair Trading to carry out a detailed investigation into the Ticketmaster/Live Nation empire. It inflates the price of tickets to the public and is insufficiently clear as to their true cost.

I have observed a direct correlation between the number of accident claims and the state of the economy. It seems the tougher the recession, the more people appear to hurt themselves, and thus feel the need to sue. My companies are not alone in noting this phenomenon: the car insurance industry has reported a spectacular rise in whiplash injuries, leading to significant underwriting losses, and rising premiums. Curiously, the volume of such reported injuries is vastly greater than the number actually treated by the medical profession. Meanwhile, clinical negligence claims against the NHS have increased by almost a third over the past year. Companies, government and charities are under virtual siege from litigants looking for payouts.

I doubt that organisations are behaving in a significantly more careless way towards the public since the downturn began. The truth is that certain people are trying it on, emboldened by ambulance-chasing lawyers who use 'no-win, no-fee' arrangements to game the system. They conspire with desperate individuals to defraud insurers and the NHS: law-abiding citizens pay for this corruption through higher premiums and taxes.

My favourite recent example was a woman who said she fell, unobserved, in the car park of one of our restaurants. So she sued. As usual, after modest enquiries, our insurer moved to settle, so avoiding the effort and expense of fighting the claim in the courts. Luckily, our branch manager happened to mention the matter to a neighbouring store manager - who remarked that the same woman had also fallen in his car park and was suing. We drew this extraordinary coincidence to the claimant's attention, and surprisingly both claims were swiftly withdrawn.

A huge and lucrative industry has sprung up around this compensation culture. Solicitors, accident management companies, medical experts and others feast greedily at the trough. I would estimate, given that in many cases legal and other costs absorb half or more of any settlement, the total amount that these parasites siphon from society to be at least £3bn a year.

The last government passed the Compensation Act, and this one wants to scrap legal aid in such cases and exclude success fees and after-the-event premiums from litigation cost claims. This will help. But insurance companies must do more. They should beef up their investigation departments massively and automate tougher legal processes to challenge the many suspect claims. And anyone who submits a fraudulent claim should be made an example of, in both civil and, where appropriate, criminal terms. Con merchants must realise the penalties for getting caught are severe, to discourage others who think it is a victimless crime.

This has been a vintage period for Hollywood movies about business. None, I'm afraid, paints capitalism in a warm glow; but then art usually ends up attacking commerce, even if it is the beast that indirectly feeds it.

The best was probably Up in the Air, with George Clooney. He plays a hatchet man for a consultancy that specialises in sacking people. The film captures the brutality of corporate downsizing among white-collar workers, as well as the vacuous lifestyle of mid-level executives who make endless trips around the US for a living. The final sequence is the best, and it is documentary, rather than fiction: a series of brief monologues by real people, describing the moment they were made redundant. Hearing how careers were eviscerated in an instant is heartbreaking. The backdrop of unprecedented levels of unemployment in the US gives the film extra resonance.

A spectacular tale about empire building was There Will Be Blood, the Paul Thomas Anderson drama about an oilman, starring Daniel Day-Lewis. He delivers an Oscar-winning tour de force as a manic entrepreneur, hell bent on success at any price. It is a dark and gritty fable but compelling viewing.

And most recently I enjoyed The Company Men, about three characters working for a shipbuilding division within a conglomerate. It shows how short-term raiders and greedy top management in public companies can undermine manufacturing industries and jobs.

All this creative expression about the workplace has been stimulated by the downturn. Writers and directors have used the recession and its effects as interesting raw material. Proof that tough times can excite the creative imagination.

- Luke Johnson is chairman of Risk Capital Partners

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