Ken Lowson is setting the groundwork for his triumphant return.
The one-time scalper and inventor of ticket bots is returning to the live entertainment industry six years after he was arrested by the FBI and eventually released on a no-jail plea deal. He’s officially out of the bot game and returning to ticketing, hoping his past experience at Wiseguys Tickets puts him in a unique position to tackle the problems of the ticketing world with his new company TIXFAN.
“I’m now working with teams and artists to take out my old competition. And I can make ten times what I was making at Wiseguys,” he said. “I’m going to cost the scalpers $10 billion to save the fans $9 billion and make myself $1 billion.”
Lowson is the inventor of much-maligned “ticket bots,” a type of software that allowed him and other scalpers to buy up big chunks of tickets and resell them at a markup on sites like StubHub. In 2010 his Los Angeles office was raided by the FBI and he and two others at the company were arrested. Instead of a lengthy prison stint, Lowson and partners Kristofer Kirsch and Joel Stevenson pled guilty to one count of conspiracy to commit wire fraud, which he said was a result of a payment to a Russian programmer.
“It was either fight the plea, go bankrupt and potentially land in prison, or take this plea and not do any jail time,” said Lowson, who was forced to forfeit his $1.2 million bail as part of the deal with federal authorities.
Bots are now illegal, outlawed when former President Barack Obama signed the Better Online Ticket Sales Act. They weren’t illegal, however, when Lowson and his team were using them to buy up over one million tickets and generate a profit of $25 million. Lowson contends he never did anything illegal — he never hacked into a ticketing site or used stolen credit cards. He received legal help from the Electronic Frontier Foundation, the Center for Democracy and Technology and other online advocacy groups who argued that Lowson may have violated a ticketing company’s terms of service, but he didn’t break the law.
Instead, he studied the ticketing websites compulsively, installed super high-speed internet lines to improve latency, used computer systems from all over the world to boost propagation and had programmers write scripts that automated orders, quickly filled in CAPTCHA and bought up hundreds of the best tickets in seconds.
Technically he didn’t even scalp the tickets — his business was wholesaling tickets to scalpers. His clients would give them their credit cards, and he would use them to buy on their behalf and charge them a fee.
“We do the same thing to get around paperless ticketing,” he said. “We told our clients ‘figure out which customers want to go to the show, and give us their credit card numbers and we’ll buy up the tickets on their cards for them.’ The brokers would charge their client an extra $500 per ticket for that type of service.”
“He’s pretty intense”
Lowson considers himself a lifetime entrepreneur — by age 13 he ran a candy-selling network dispatching 30 kids from his blue collar San Leandro, Calif., neighborhood to buy and sell candy. He says he made his first million in his 20s selling newspaper subscriptions.
He describes himself as a “ticket guy with Aspergers.” He doesn’t have the condition; he’s more of a social robot. He also readily admits to having OCD and worried (out loud) about how he was going to be portrayed in this article.
“He’s pretty intense,” another reporter who profiled Lowson said. “But he seems to be fine if you ignore him for a while and then pick back up when you’re actually ready.”
That was very helpful advice. I’m not going to psychoanalyze the guy, but I can tell you that a) he is very smart and b) he is very concerned about coming off stupid. Maybe that’s why he got along so well with scalpers — every broker I’ve ever met has spent an inordinate amount of time trying to convince me they’re not a criminal. They just assume I think they’re a scumbag.
Lowson used to run with all the big brokers, partying at the big secondary conferences in Vegas and dropping major coin at the strip clubs. The brokers loved Lowson now seem to hate him – or at least hate competing against him.
“Basically, guys in our community are upset he is sharing what some would consider trade secrets to the press in a time of public turmoil for scalpers in general,” one broker told me.
A flash intro set up for Wiseguy’s website.
Lowson says he’s not sharing secrets; he’s just working to empower rights holders and create fan and resale market accountability.
“Every tactic used to get tickets to fans actually resulted in less tickets being sold to fans,” Lowson said. “CAPTCHA. Wristbands. Presales — hell, presales are the best thing to every happen to brokers.”
Lowson has lots of great stories — he talked about the old days when ticket brokers would pay off store owners, while the fans waited outside. The store owner would set the clock back three minutes, sell the broker all the good tickets and then let the fans in to buy up the lawn seats. Another trick was to call up the ticketing company before an onsale and ask a question on an unrelated order. About a minute before the show went on sale, the broker would tell the rep on the phone, “check out Bruce Springsteen at (Madison Square) Garden. It’s going on sale in 30 seconds” and have him buy up the first two rows.
“And then I could wholesale a ticket I just paid $70 for $600,” Lowson said.
He said he would be working three calls at once, evening telling the operators what buttons to push.
“I’d have them chanting ‘F2, 10, Return’ and then boom!” he said. “They’re operators making $9 an hour, they didn’t care.”
Perhaps that’s the broker’s secret sauce — that they know more about how the ticketing systems work than the people working the phone. When ticket sales went online, so did Wiseguys, focusing on big bandwidth pipelines so that they could access ticket milliseconds faster than anyone else.
That was the true secret of ticket buying, he explained — understanding how the internet pipelines worked and understanding how those pipelines were connected to the ticketing companies. He understood latency and built systems that could rely on dozens of computers around the world, with thousands of credit cards and IP addresses designed to buy up the best tickets and then get out so the fans could buy the shitty ones.
“They knew who they were they selling to, and since they didn’t cancel them, we thought we were cool,” he said.
When CAPTCHA came out, many brokers attempted to use optical character recognition to defeat the security measure, but that didn’t work great, Lowson explained. The optical readers weren’t fast enough and most only had a 10 percent success rate.
Lowson soon figured out that the images many of the ticketing companies used for CAPTCHA were static — there were only about 20,000 images in the CAPTCHA database. So he had his guys pull an all-nighter, download all the images, type in the characters and then use image matching software to recognize the CAPTCHA image and auto-fill the text.
“People thought it was so complex, but we were just using macros that would fill in the information based on keystrokes,” he said. “And we were in and out in a minute, we didn’t sit on them for an hour and keep pulling seats,” he said. “We thought we were doing it smart and we thought we were legit.”
He’s not sure if the big ticketing companies tacitly approved of what he was doing or simply chose to look the other way. After all, he was making the ticketing companies a lot of money in fees and helping them sell the crappy seats.
“If the ticketing companies don’t sell the good tickets to the scalpers, there’s no one to push the fans back and up,” he said. “I’m talking about the shittier seats. The upper-level seats that are generally priced higher than they should be. Who is gonna buy a shitty seat that can’t make money? Not a broker, it’s gonna be a fan.”
He does, however, acknowledge he was operating in a bit of a legal gray area, and some people were doing sketchy stuff. The big one was spec ticketing listings — posting tickets on StubHub you don’t have and then fulfilling orders after the sale. One of his guys did it for a Miley Cyrus show and wasn’t able to follow through because the supply was too low, causing the price to spike higher than what the brokers had paid.
That brought some serious heat on the broker, who then blamed Lowson for not delivering the tickets. “He needed a scapegoat, so he threw me under the bus,” Lowson said. “The next thing I know, 40 agents with shotguns are raiding my office.”
Preparing for his comeback
“I’m already operating, I just don’t talk about who my clients are,” Lowson said, explaining how his company TIXFAN can be broken down into three buckets — ticket profit, fan credibility and seller leverage on behalf on the team and the fan.
He said he is focusing on helping teams sell directly and find new ways to exercise leverage, using presales to market directly to fans and groups who want to go to your shows.
“We’re not a ticket broker, we’re there to make sure your tickets are sold the way you want them to be sold,” he said, noting TIXFAN operates more like a consultancy or ticket marketer earning 7 percent on the transaction.
“Wouldn’t you rather have 1,000 of your fans making money or 20 brokers who are trying to control everything?” he said, adding that if scalping must happen, the money should go not go to professional resalers.
“I think you’re going to see the rise of the fan scalper,” he said. “If you are making $50,000 a year and you have two tickets that are worth your next paycheck, who do you think the next scalper is?”
Reputation for being a Wiseguy
So how did he beat his case? By arguing he never did anything illegal — he simply created a super efficient system for buying up tickets that never hacked into a ticketing system or overburdened the system. Federal authorities tried to argue he broke the law because he violated the terms of service of the big ticketing companies, but a number of legal advocacy groups filed Amicus briefings in his defense. They argued that if Lowson was prosecuted for violating a website’s terms of service, than just about anyone who ever lied on a dating site or posted a topless photo on Instagram could be thrown in jail.
Basically they couldn’t convict me on anything related to tickets,” he said. “It came down to a plea and my lawyer was like ‘do you want to risk going to prison and them bankrupting you, or take this one count for conspiracy to commit wire fraud.'”
He said he is out of the bots game. Even so, “I believe the law’s biggest impact was that it raised awareness — you can’t keep using the Boardwalk Empire rules in the 20th century,” he said.
Was he a sacrificial lamb for all the bad behavior that had been going on in the ticketing industry?
“Maybe. I’ll never be a victim. And my ego was a problem,” he said. “I let myself get surrounded by sycophants.”
He also called his company Wiseguys Tickets, I pointed out, which only inflamed the narrative that he was a criminal.
“Yeah, looking back that was probably a bad idea.”