I was listening to this NPR story about scalping, and online “bots”, and just kind of shook my head that this kind of extreme arbitrage situation is allowed to exist:
If they are sold at “enormous markups”, isn’t it Econ 101 that the venues or performers who originally sell the tickets are obviously pricing them way too low? I mean, I get that it may be difficult to know what is the ideal price at which they will all just barely get sold (or, alternatively, what brings the most revenue, regardless of whether they all sell). But it strikes me that since they are being sold online, there is a simple system they could use that would squeeze out much more value and relegate sites like StubHub to being what they were presumably originally intended to be: a place to unload tickets when you have a change of plans.
Start the sale at some crazy price you doubt anyone will pay. $1,000? $10,000?
Reduce the price by one percent per minute (or five percent every five minutes if you want to kind of give people a chance to sit and think about it for a bit).
Let people see in real time what tickets are being sold, in what sections, and how many are left (this part needs to be transparent and scrupulously honest, or it’s an unfair trade practice).
Continue until either all the tickets are sold, or you reach your minimum “reserve” price.
For most concert performers, that isn’t their sole source of income. If they just priced all their tickets at $1000, a lot of their fans would decide that these were entertainers for rich selfish bastards and never download a track or buy a t-shirt again. The masses would drift away. After the masses drift away and find the next cool thing, the rich people won’t want to go to their concerts either, because they are no longer cool.
Sure, they could then lower their ticket prices, but nobody wants to see them anymore. Sic transit gloria mundi.
You have to decide between a quick cash grab or long-term viability.
When the scalpers buy up tickets, fans get mad at the scalpers, not the performers. The performers can throw up their hands and say “We’re mad at them, too!”
I’ve heard the following “anti-scalper” scheme suggested:
When you order and pay for a ticket, you must supply ID; admission will be granted only to the person who presents the matching ID. If you can’t attend (e.g. you got sick) you can relinquish the ticket and receive a refund if it re-sells.
I’ve heard of this being used for student tickets with college football: student who wishes to attend the game goes online and books a seat (paying a seriously reduced rate compared to general admission). Admission requires swiping your student ID at the stadium turnstile.
Nataniel Ratliffs show here sold out instantly. I did a search, TicketFly original price $25 ‘Resellers’ price 145 -185 depending on the ‘seat’. There are no seats, its general admission in a big open hall. In Apparently in some jurisdictions ticket reselling is illegal but I am not sure how well that works - these guys probably are not even be in the same country. You think it would be easy to make this sort of practice impossible with some simple rules on the sellers website though.
The creepy dudes selling a few tickets outside the venue on concert day are a sleezy annoyance. These guys that buy up all the tickets in a few minutes after they go on sale are evil scum. I expect organised crime is involved.
For me, price is not as much an object as the security (not to mention legality) of going through legitimate channels. If I can’t get a ticket legitimately I will not even look at resellers due to the chance that your ticket is a dud in addition to not wanting to enrich and encourage scalpers. So mispricing tickets actually would drive me away from a concert moreso than if they were priced at $100+ in the first place. I say “would” drive me away because I have only run into 1 situation in the hundred+ or so concert tickets I’ve bought where they were sold out the first day. I didn’t look for resales.
I think you guys are missing the OP’s point. SlackerInc isn’t asking if the venues could stop scalping; he’s asking why they are allowing somebody else to do it.
It’s a fair question. If I’m selling a block of tickets to somebody for $25 apiece and I know they’re going to immediately turn around and resell those tickets for $150 apiece, why am I selling them for $25? Wouldn’t it make more sense for me to raise my prices and keep the $150?
Call me cynical but my speculation is that there is most likely some collusion going on and the scalpers are actually kicking back a share of their profits in order to keep the system going. Let’s say, for the sake of argument, that the venues have to pay their acts 75% of ticket sales. So they sell 20,000 tickets at $25 apiece for a total of $500,000 and pay the act their $375,000 share and keep the other $125,000. Scalpers bought all the tickets but then resold them for $150 apiece. So the scalpers made $3,000,000 minus the $500,000 they paid for a profit of $2,500,000. And then the scalpers turn around and pay the venue $1,250,000 under the table. The venue is happy because it’s getting a higher percentage of the profits from the sale of the scalped tickets then it gets from the sale of the legal tickets. So the venue has no incentive to raise its legal prices or to eliminate scalper sales.
Scalping is a gamble. If the event doesn’t sell out they may not be able to get any more than they paid for the tickets to start with, and may end up with many unsold. There are events where the venue may add seats due to popularity, and they can jack up the price on those and are doing exactly the same thing as the scalpers, gaining additional profit based on demand. But the venue has to originally set it’s prices based on the expectation of attendance and they want the price to be attractive initially. I really don’t see anything wrong with scalping, it’s no different than a speculative investment in any product.
Venues do not unilaterally set prices for big-time acts that sell out arenas. The prices and the rent for using the facility will be specified in the contract between the entertainer and the venue. For an example, see this discussion of the contract between U2 and the stadium authority which manages the Meadowlands.
Entertainers set prices (relatively) low, for the reasons already described by Alley Dweller in Post #2. The disconnect between long-term entertainer interests (moderate prices) and short-term supply and demand (high prices) creates arbitrage opportunities which are very difficult to manage out of the market.
It wouldn’t surpise me if the venue operators are the resellers in many cases. Ultimately, this would be a scam to avoid giving the act its fair share of the profits. 75% of $25 tickets is a much smaller payment than 75% of $150 tickets.
In the old days concerts were like advertisements trying to get fans to buy the albums. Now it is more like the reverse, so tickets prices are now higher and there is less arbitrage.
However, because being a part of a mass of fans is part of the experience of a good show, it is more important for the bands to sell more tickets than to make the most money on a given show. Thus they price the tickets lower than they otherwise would. Younger, poorer fans are probably more likely to be enthusiastic and their energy may also help the show be better.
Once they get in the venue the band can sell the fans merch and the venue can sell them beer, so it is more important to sell a bunch of tickets than to maximize profit just on tickets sold.
Price negotiations led to bad feelings. The fan who buys the ticket at anything less than the cheapest available for the section, feels like the got gouged and are less likely to continue to be fans of the group. Being gouged by a scalper does not reflect poorly on the group but rather likely increases fan loyalty.
Not necessarily. There’s three things you have to consider about the scalping business.
In many cases the tickets are being purchased by the scalper far below face value. Sporting events are especially prone to this because many tickets are bought in the form of season tickets (which confers a discount) and the tickets for particular games are sold by the season ticket holder to scalpers (conferring another discount.) If you’re a Yankees season ticket holder you might not be able to go to all 81 games and will dump your tickets on a scalper for way below list price.
Even knowing that, though, the season ticket approach, which is done not just for sports teams but other types of events, too, is favourable to the venue/team because it’s guaranteed up front income.
Price discrimination is hard. You describe a sort of ideal price discrimination scenario, but realistically if a team, venue, or concert hall tried something like that it would take people nine seconds to figure the system out.
Price discrimination is terrible, terrible PR. Boosting people for a thousand dollars to see a show is something you EXPECT of a scalper; you know the scope there. If the venue did that, though, it would reflect poorly on the artist/team/whatever and the venue.
I go to hockey games at the Verizon Center in DC. On the outside of the building there are signs citing city law that prohibits selling tickets, regardless of cost relative to face value. To get in the venue I usually am walking between a group of men trying to buy or sell tickets and DC police offices leaning against their cars watching the crowd. I know they are there security, not to specifically enforce that law but the paradox is interesting.
My thought is that if I buy something and want to sell it and someone else is willing to buy it for an agreeable price, it should not be illegal. Don’t know if it worked but I did see a classified ad that tried to sell a Rolling Stones cassette (it was that long ago) for several hundred dollars and they seller would give you two free tickets to their concert.
This is critical. My wife is a big music fan and loves going to concerts. She’s been to so many concerts for a few bands that the performers recognize and know her (shocked me the first time I witnessed it).
She has a network of friends who are also frequent attendees of concerts. At one point, a popular band started raising the prices of tickets and merchandise and charging large amounts for autographs after becoming very successful commercially. This alienated much of their dedicated fanbase. This isn’t the cliched “you’ve sold out” complaint (it had always been a pop band) but an impression that they’d become greedy and were gouging fans.
In the long run something like that can only hurt a band. When you’re old and need to rely on your long-term fans who still fund your royalty payments after you’re no longer the flavor of the month you’ll wish you hadn’t burned those bridges.
I’ve noticed some of the concerts I’ve bought seats from via Ticketmaster the last few months have required you to present the card you used to buy the ticket and have your entire party with you when you arrive. I suspect that’s a step they’re taking to crack down on resellers.
In some cases the original ticket vendors ARE the scalpers. They take a certain cut of the tickets and send them directly to their own in-house reseller at a markup.
The second reason for outrageous markups is the tax break: Companies and certain individuals can claim meal and entertainment expenses on their income tax returns.
Since no tax agency is ever going to check who went to a particular concert, scheming taxpayer just buys the expensive tickets and then claims it as a deduction on their income tax return.
If confronted, they pretend that the tickets were given away to a potential client in hopes of drumming up business.
I suppose the ideal scenario for bands and venues is to engage in some kind of secret collusion with scalpers, or even use shell corporations to own both parts of the market. But if they are instead only netting a small percentage of what the vast majority of concertgoers are actually paying, I still think that is stupid on their part and helps no one except the scalpers, who have done the least to deserve the money.
Doesn’t anyone think my suggested system is at all clever and workable? I understand an eBay auction approach is another way to go, but then you set a time limit and you still have people with bots jumping in for a penny or a dollar higher at the last second. I like the idea that people can watch the prices fall, and when they see one they are willing to pay, they and do it and not worry about being outbid.