Issues Arise Over Brown Paper Tickets Not Being Able to Pay Ticket Funds Owed to Theaters (UPDATED)

Last night, theatre organizations received an ominous email from Brown Paper Tickets (BPT), a ticket management company based in Seattle, WA. The email notified event organizers that recent checks that were mailed out would bounce and warned them not to try to cash them. The problem is, these funds were raised by tickets sold on BPT’s various websites. Meaning, theatres that thought they had proceeds coming from performances months ago, are suddenly wondering why their money is missing from an organization they trusted to collect it.

Here is a screenshot of the email:

Schools and theatre organizations were given no clue to where their money is nor a concrete time of when they could receive those funds. I spoke to one person who was counting on a payment north of $10,000 which would help keep their theatre company afloat through the COVID-19 shutdown. Now, they’re panicking because all of a sudden, that life raft is gone.

It’s perplexing to think how an organization that is hired to collect ticket proceeds, suddenly can’t come up with said proceeds? It would be like GoFundMe all of the sudden couldn’t pay charities the money that was raised for them.

For those who don’t know, BPT is a company that schools and small theatre organizations can use to help with their ticket selling process; think of it like Ticketmaster but for small theatres and schools.

When customers purchase a $10 ticket to a school play, there is an additional fee of $.99 + 5% of the cost of the ticket. Those fees go directly to BPT for their services. The $10 is collected by BPT and then paid out to the school. So if the school raised $1,000, then BPT sends that school a check for $1,000.

This is where the problem lies. according to theatre companies, BPT is telling schools and theatre organizations that they don’t have the funds that were collected for these events. So that $1,000 for the school play? Maybe the school will get it - or maybe it’s gone. But they were explicitly told not to cash recent checks. If those funds are gone. Where did they go? No one knows at this point and BPT isn’t saying much. A statement on their Facebook page gives little information.

This statement and the previous one does not answer a question that many schools and theatre companies are wondering: Where did our money go?

There are a couple of theories and neither of them looks good for BPT.

The first is that they are using proceeds raised from events to pay the salaries of their own employees and other business expenses. BPT is listed as having between 50-200 employees on glassdoor.com and most of the salaries range in the area of $30K-$50K. That means a monthly payout of over $500K in salary alone. If business slows and there aren’t enough fees coming in, you get the idea. The issue here is that the $.99 + 5% fee is supposed to go to those expenses, not the proceeds from ticket sales.

The other is equally bad and potentially criminal. What could be happening is that BPT was using proceeds raised by a school to pay out funds owed to another theatre company. $1,000 raised for a school play could be paid out to a theatre company as an installment for $10,000 they’re owed. People have stated that they would receive their payments in installments rather than the lump sum, sometimes weeks after their performance. This would give BPT time to make up the difference with new funds coming in. Depending on how the initial funds went missing, it’s either gross mismanagement by a company or fraud.

The only reason why this has been exposed is because of the massive COVID-19 shutdowns. With events canceling and people wanting refunds, BPT is losing cash on an hourly basis. But the problem is, the cash owed to theatres should be protected in additional accounts so they wouldn’t be used for other expenses such as refunds.

So in the absence of funds from ticket sales coming in, what can BPT do to payback these schools and theatres?

Two things - the first is hope that sales for virtual events will raise enough funds to pay out everything that is owed, which is rolling quite the dice. The other is searching and securing a capital infusion. That would be an even bigger roll of the dice because what bank or investor would want to lend that kind of money for a business plan that is failing? Also, what funds would BPT use to pay the loan back?

If this sounds far-fetched, know that this is the actual plan BPT is following. They admitted to it in a customer service chat on Facebook. When a customer asked if they should assume that all their money is gone, here is a BPT representative’s response:

While I appreciate the unbelievable honesty from this customer service rep, that is the worst answer imaginable for schools and theatres waiting on tens of thousands of dollars.

Then there’s something else, which if true, is alarmingly deceitful. A couple of days ago, BPT put out an email that encouraged people to support local arts organizations by buying tickets for as many future events as they could, this way to help these organizations stay afloat. Here’s a screenshot of someone praising the act.

But given BPT’s cash flow problems, was this call to action simply to try to dig themselves out of a financial hole? It’s a reasonable question to ask.

So who is the blame for this? The obvious choice is both CEO Steve Butcher and COO Michael T. Sennott. According to research, BPT doesn’t have a full-time CFO but Dawne Swanson lists herself as “Part-Time CFO” on her Linkedin page. I imagine those folks will have to answer some tough questions in the coming days.

Many on social media are already displaying their anger. Some have filed complaints with the Better Business Bureau and others have contacted the Washington State Attorney’s office.

My advice, as hard as this might sound, is to hold BPT to their word that they will get you your money in 2-3 weeks. If they don’t or that estimate changes, take action. But if the cash flow issues with BPT are this bad, then they could file for bankruptcy which means you can file a claim but would get pennies on the dollars you're owed.

I will be the first person to admit that the COVID-19 virus is going to negatively impact businesses. But this is something different. Schools and theatre companies were counting on these funds to keep their doors open, it’s anyone’s guess if that’s going to happen now. If BPT were properly managed, they could’ve at least paid out what’s owed and then face the reality of closing doors without taking all their customers down with them.

UPDATE 3.19.20 - According to customers who recently bought tickets through BPT, they received an email stating that there is no known date of when they can expect their refunded money. Here is a screenshot of that email:

Refunding money for tickets to event X shouldn’t be a problem if those funds were collected into an account strictly for event x. BPT could have easily just sent all of that back. The question remains, where are those funds if they’re not in that account?

I’ve reached out to representatives with BPT for comment and will update this article as new information comes in.