“Only losers take the bus”

The Victorian government has recently announced that passengers under the age of 18 will get access to free public transport (as long as they hold the appropriate travel card). Although this is being heralded as a cost-of-living measure, I can’t help thinking it’s also about removing a section of “fare non-compliant” passengers from the books.

I’m not saying that under 18s are over-represented among fare dodgers and under-payers. The latest PTV data available does not give a demographic breakdown, but the average non-compliance is 4-5% across all transport formats and routes. Overall, buses have lower compliance rates, and since school students would likely account for a large proportion of weekday bus journeys, one might reasonably assume they form a significant component of fare non-compliance.

It will be interesting to see what the take up is for these free travel cards. Recent research shows that even where fares are as low as 50 cents, there is still a high level of non-compliance. My own very limited research (conducted recently while waiting to meet a passenger at my local train station) suggested that most of the passengers traveling without a valid ticket were young people, many of whom had just come from a match at the MCG (so they could afford a ticket for the game?) or were sporting the latest noise-cancelling headphones (again, they can afford Dr Dre but not a Myki?). Not all of these younger passengers were of school age, of course, but it was interesting to see the high preponderance of youth being waved through at the barrier.

Talking to station staff, it was clear that they have no choice but to let passengers enter/exit the gates even though they don’t hold a valid ticket. First, if stopped, there is every chance that a passenger will simply try to jump over the barrier, and if they hurt themselves in the process, the station staff will probably get the blame. Alternatively, if the passenger decides to kick their way through the gate and manages to break it, there is a greater inconvenience to other passengers (and the station staff will bear the brunt of that, too). Secondly, barrier staff are probably not trained to deal with potentially aggressive and violent fare-dodgers – it’s not worth the risk or the hassle. Better to let the Authorised Officers, armed with relevant powers, training and equipment to deal with ticket evaders.

Does any of this matter? After all, public transport is a utility for everyone; so what if 4-5% of users are non-compliant? That might be seen as a small price to pay if it means we all get to use a public service to get from A to B. But are the 10s and 100s of millions of dollars governments lose each year due to fare dodging a reasonable cost to the rest of society, and the vast majority of passengers who do the right thing? While access to public transport is a public good (even a public right, some would argue), it does not convey an entitlement, and comes with an individual cost, under a “user pays” principle. (But since public transport is underwritten by government funding and subsidies, couldn’t we argue that our rates and taxes have already paid for it, so we are entitled to use it for free? Well, under the same argument, drivers and vehicles shouldn’t have to pay to use public roads….)

There is an argument to be made that if something is made available for free, we may come to undervalue it (or take it for granted), causing us to treat it with less care and consideration than if we have paid for the privilege. On the other hand, from a passenger’s perspective, I might be less inclined to avoid paying if I felt that I was getting value for money, or that my user experience was much better than it often is. We have all experienced dirty or smelly vehicles, graffitied carriages, delayed, cancelled and overcrowded services, petty vandalism and anti-social behaviour when taking public transport. Seeing fare-evasion as part of a wider societal decline may seem an extreme stance – but lumped in with other petty crime and broader social ills, it can give rise to populist grievances that our political leaders ignore at their peril.

Public transport can never be 100% reliable or fail-safe (thanks to weather events, power outages and transport strikes). But from a user experience of train systems in places like Japan and Europe, I know it can be much better than it is here in Australia. Nationally, it feels like this particular public service is never going to be a top priority for our local, state or federal governments. It’s always a bit of an afterthought, and gets overlooked in the need to pander to car lobbyists, airline duopolies and the construction industries. Even where public money is being put into transport infrastructure and system upgrades, they always seem to take a lot longer to complete, and cost a lot more (and deliver a lot less) than we were promised.

You’re more likely to hear our politicians campaigning about fuel excise, road congestion, speed limits, EV concessions, extra airport runways, car parks, local car manufacturing (er, maybe not so much these days!), than about integrated transport hubs, high-speed intercity trains, and contactless ticketing systems.

It’s this attitude that reinforces the common notion that “Only losers take the bus…” (….and only bigger losers actually pay!).

Apologies to Fatima Mansions for the misappropriation for the title of this blog.

 

Cooking the books?

Over the many years I have been writing this blog, I have often commented on the publishing industry, from my personal experiences, to industry trends and future outlook. The recent collapse of Australia’s online bookseller, Booktopia, prompted me to revisit the topic.

First, a declaration – I am an unsecured retail creditor of Booktopia. Orders for books I  paid for in advance of their publication dates still have not been fulfilled. Obviously, I am not alone; there are about 170k retail creditors, owed a total of $15m. That is an average of about $90 per creditor, although some retail customers are owed more than $10k.

Second, Booktopia’s total debts of around $60m are nearly one third of annual turnover ($198m in FY2023). In FY2022, annual turnover was $240m. Clearly, this was a business in decline, and in financial trouble.

Third, I should have been alert to the problems when I enquired about my outstanding orders, shortly before the administrators were called in. I knew the books had already been published, so I wanted to know when to expect them. This was part of the reply I received, in mid-June:

“We have been experiencing difficulties procuring new stocks from our supplier lately, we are so sorry for the delay.”

Fourth, it transpires that publishers, wholesalers and distributors were experiencing payment delays from Booktopia. Suppliers were reducing or cutting off their credit lines, and declining to supply more stock unless the existing debts were cleared. The administrators are doing their best to realise any remaining value of the business, including a trade sale of Booktopia (as a whole, or as parts). The assets include warehouse stock (some of which may still be owned by the publishers/wholesalers), customer lists, technology, goodwill and other IP. But it was made pretty clear at the first creditors’ meeting that unsecured trade and retail creditors should not expect to get their money back any time soon, and certainly not in full. (A total of $15m in secured debt will get preference, including employees.) So even if the unfulfilled but paid-for stock can be located, there is no apparent obligation for outstanding orders to be completed. In fact, the administrators were suggesting that retail creditors should contact their banks or credit card providers, to see if they could recover their money via those channels. (Which is why insurance premiums, card fees and bank charges go up, of course.)

I don’t understand why Booktopia’s retail and trade debts were allowed to get to such a high percentage of their turn over. Book publishing and distribution shouldn’t be that hard – either the book is in stock at Booktopia, and can be sent immediately, or it is available to order from suppliers and can be fulfilled within a reasonable time. For books that have not yet been printed, surely the customer’s money should be held in some sort of escrow account, and the cash not accessible by the seller or recognised as revenue until the order has been completed?

Of course, books go out of print, and customers may have to wait for a re-print or a new edition. Or the industry needs to consider print-on-demand solutions. Funnily enough, that is one of the key recommendations of the Ad Rem report on the Australian publishing industry (“The Australian Book Industry: Challenges and Opportunities”) in 2001….

Next week: Notes from the UK

 

 

Ticket scalpers? Blockchain could fix that!

Music fans of a certain age and demographic have been complaining loudly about the use of “dynamic pricing” when trying to buy tickets for their favourite band’s highly anticipated reunion tour. (There must be a pun in there about “Don’t book online in anger”?)

Part of the rationale given for using a demand-based pricing system is to disincentivise scalpers. The higher the cost of the ticket in the primary market (not the same as the ticket’s face value), the smaller the potential mark-up in the secondary market. Except that some tickets with a face value of $150 were priced at $450 at the box office, only to be re-advertised in the secondary market for several thousand dollars. In other words, the touts have simply increased their margins, in response to the so-called dynamic pricing mechanism.

Without offering any sort of apology or mea culpa, the said band have now announced additional tour dates, tickets for which will be allocated and sold in a form of ballot. Stop me if you think I’m being cynical, but by quickly adding dates to an existing tour itinerary, it shows that the band knew there would be excess demand, because it’s not that easy to reserve major (and highly profitable) venues, even 12 months in advance. And if they can run a ballot system now, why couldn’t they have done that in the first place?

All of which simply shows how out of touch bands like this are with technology and market dynamics. In short, ticket sales and allocations could have been achieved far more equitably if the band and their promoters had chosen to use blockchain, crypto and web3.0 solutions.

Here’s a simple list of options that could have been used:

1. Issue all tickets as NFTs (non-fungible tokens)

2. Limit the number of tickets per digital wallet and/or the number of wallets per ticket buyer

3. Ensure the use of soul-bound tokens to link wallet ownership and ID to specific individuals (to limit the number of tickets per wallet, and to limit the resale of tickets)

4. Run social media campaigns, quests and airdrops to allocate and distribute tokens that entitle holders to a place in the ticket queue – e.g., the more active a wallet holder is in the band’s fan community, the higher their chance of securing a priority place in the ticket queue

5. Pre-publish the expected ticket price ranges, and enable wallet holders to vote on the minimum/maximum price they would be willing to pay (using something like Snapshot)

6. Cap the amount an NFT-based ticket can be sold for in the secondary market or write the token smart contract to allocate a percentage of the resale value as a commission to the ticket issuer

Of course, the UK competition regulators are taking a close look at this ticketing fiasco, to see if so-called dynamic pricing breached fair trading or other consumer protection laws. If punters were not aware that they may have to pay far more than the advertised or face value of a ticket, this would appear to be unfair and unconscionable conduct. It’s potentially a form of under-quoting – advertise the ticket at a artificially low price, then force buyers to pay well over the face value at the actual point of sale (under the guise of “market demand”), knowing full well that the fans had little or no choice in the matter.

One final thought – knowing the volatile history of this band, the chances are that the concerts (or at least some of them) may be cancelled. Hopefully, the ticket agent and box office operators won’t be counting the advance ticket sales as recognised revenue, rather they are required to hold the funds in a verified escrow account until the performances are delivered and the ticket revenue actually earned….. (again, something that could be easily factored into a smart contract – no release of funds until the loud-mouth sings?).

Next week: Cooking the books?

 

 

 

False Economies – if it’s cheap, there must be a reason!

When I was 7 or 8 years old, I asked my parents to buy me a specific brand of toy as a birthday or Christmas present. With the best of intentions, they chose instead a close approximation of the real thing – presumably because it was cheaper, and to them it was exactly the same. Of course, being cheaper, it was badly designed, poorly made, and was nothing like the toy I had asked for. From memory, it only lasted only a few months before falling apart.

This was my first lesson in false economies – cheap and cheerful can quickly become cheap and nasty, rather like some cheaper brands of peanut butter, which are bulked out with sugar, oils, fats and other additives (instead of containing 100% peanuts).

Many years ago I had some shirts made in Shenzhen, because they seemed like a bargain. Sadly, another false economy – after I got them home, I realised the cut was all wrong, and I’m sure they had substituted a cheaper fabric to the one I had chosen. They were unwearable. On the other hand, some jackets I had made in Hong Kong lasted nearly twenty years, because I had paid a bit more to go to an established tailor.

I’m not saying that more expensive branded goods and so-called luxury items are always “better” – but as a general rule, when doing like-for-like comparisons, you get what you pay for. When an item costs more to buy, it invariably lasts longer because of the materials used, the better design, the superior manufacturing and the overall higher quality.

I appreciate that in the current economic environment, consumers are even more cost conscious, and are looking for value for money, if not actual bargains. But just because something is cheap, doesn’t mean it’s the better option. Look at the true cost of fast fashion, fast food, fast money

Next week: The Law of Diminishing Returns….