Who Has the Tickets?

It has been a long time since I attended a big-time event for which tickets were sold by Ticketmaster. I go to hear a lot of live music, but these days that is always at a smallish local venue that either collects a fee at the door or uses its own devices to sell tickets.

The local Junior A hockey team, the Knights, play in an arena that is full to its 9,000+ seat capacity for every game, and if you want to try and get one of those seats, you are sent to a Ticketmaster site. I did that today just for fun and it indicated it had 14 seats available for today’s later game, out of those 9,000+. Prices were $56 each, plus a $5 fee.

I used to go hear the Toronto Symphony Orchestra quite frequently back in the day, so I also checked out some of their ticket prices. TSO has its own ticket sales site, and a ticket to hear Stravinsky’s Firebird and Brahms’ Piano Concerto #1 will run you just under $150 for a decent seat, plus an $8 service charge. This notion of adding a ‘service’ charge is also a regular feature of event ticket sales. It is curious, no? Can you imagine being charged a $15 fee when you buy your next microwave oven? Or a pair of jeans?

Anyway, this article is prompted by, and largely based on, of all things, a Powerpoint presentation I ran into on the web, put together by one Eric Budish, an Econ Prof at the U of Chicago’s Booth School of Business. He notes on the first page of the presentation that he bought his first scalped ticket in 1986 to see a New York Mets baseball game.

Ticket-scalping, which economists refer to as ‘secondary market sales’, and what to do about it, is the topic of his PP presentation.

Budish starts his slides with a story about a lecture given in Boston in 1867 by one Charles Dickens. Folks stood in line to buy tickets, and a limit of 12/buyer was imposed, to prevent ‘ticket speculating’. None the less, scalpers were soon selling tickets for up to $20 each, according to a story in The Boston Journal.

Scalping is an old phenomenon, is the point, but the second point he makes is that this ‘secondary market’ really went crazy once ticket sales moved to the internet. His talk is ultimately aimed at making some proposals for getting the event-ticket market to work better for fans and artists.

Before I get to that, it will be useful to go back over how things worked pre-internet, and what economics had and has to say about it.

When folks stood in line to get tickets for events, or made phone calls, some of those buyers were indeed speculators, who bought the tix with the intent of re-selling them at a profit. This was indeed speculation, since if the event was not all that popular, profitable resale would not be possible. You can’t re-sell tickets at a profit if there are plenty available at the original face value. However, what seemed to happen was that re-sale was always profitable for most well-known artists. Why? Economists saw this as in indication that the artists and their managers intentionally under-priced concert tickets. If it can always be anticipated by the scalpers that tickets can be re-sold at higher prices, why did the artists not set prices higher at the box office? Why let the ticket speculators make all that money, when higher face values would mean more money to the artists (and the venues)?

The typical explanation for this (from economists) was that the artists did not want to alienate their fans by extracting the highest prices possible from them. If a fan paid a high price to a scalper, that fan understood it was not their favourite artist who was profiting, hence no bad feelings.

Another possible explanation was the idea that the ‘best’ fans to have at the event, the ones who would cheer and dance the most, were not the ones who could afford high prices. (People who attend Toronto Maple Leaf hockey games tell me there is much to this. Leafs tickets are very expensive, and most fans are corporate types who sit on their hands. I have no personal recent experience of this.)

Anyway, the idea here in the pre-internet era was that this ‘under-pricing’ was in the long term interests of the artists and maybe even the venues.

Then ticket sales moved almost wholly to the internet for artists of any stature, and this introduced an old concept that was new to this old market, which changed things hugely: economies of scale. Now it was possible for a single operator to buy tickets for events all over the world and re-sell them. And it therefore paid such operators to invest in ‘bots’ and low-wage overseas workers to ‘get to the front of the electronic line’ and to defeat any safeguards put in place to limit sales to any one buyer.

Budish supplies a number of stories of how this changed things.

– Hannah Montana tour tickets in 2007 selling out in minutes, and dads paying $3,000 so their pre-teen daughters could attend a show.

– In 2018 tickets for an Ed Sheeran show sold out in 5 minutes, but here is the kicker – his management admitted they themselves sold tickets directly to re-sellers.

– Tickets for a three-day run of Grateful Dead ‘Farewell Tour’ shows in Chicago were offered for sale for $114,000 each on Stubhub.

– Lin-Manuel Miranda wrote an op-ed in the New York Times in 2016 titled ‘Stop the Bots from Killing Broadway’. By this point Ticketmaster had put anti-bot safeguards on its ticket site, but claimed that none the less a ‘bot army’ bought 30,000 tickets to performances of Hamilton.

As Budish says, the ‘secondary market’ had pretty much become the true market, with Ticketmaster saying that 20% of all tickets used by fans were bought on the secondary market, with the percentage hitting 90 for some events.

Things are now at the point where most of the money is being made by the organized re-sellers, like Stubhub, Seatgeek and Ticketmaster’s own secondary-market platform. There is an estimate (the slide does not specify which year) that some $15Billion in tickets sales happened on the secondary market, with Stubhub getting nearly $5B of that and Ticketmaster another $2B.

So – what to do? Budish has some ideas.

One, outlaw fees. If the fee must be paid no matter what the buyer does, then it is part of the price, and so must be stated that way. No adding fees when one gets to the point of giving credit card info.

That one is easy, and is not really related to the secondary market issue. The London Knights and Toronto Symphony sites I looked at both told me there would be a ‘service fee’. What I do not know, because I didn’t actually buy, is whether any other fees would have appeared when I got to the point of paying for the tix.

To shrink the secondary market, Budish proposes a technological fix. It is possible now to restrict re-sale of tickets by making them wholly electronic. If you buy a ticket to an event, it is downloaded to your online device (typically a smartphone) in a way that it cannot be transferred to someone else’s device. Sellers pair this with a limit to how many seats can be downloaded to any one device, and this (it is assumed) kills the resale market.

The curious part of his presentation is that he seems to think that with this technology in place, artists will naturally choose one of two scenarios.

One, they will restrict re-sale as just described, and set low box-office prices so their ‘true’ fans can afford tickets and come to the shows.

Two, they will not restrict re-sale and will set high ‘market-clearing’ box-office prices.

I do not understand why an artist who wants to set high box-office prices would not also employ the no-resale technology. When an artist and their management decide on concert prices, they can always get it wrong in either of two ways.

A, they set prices too high in the sense that tickets sit at the box-office unsold. An artist/maager who sees this happening as the date of the concert approaches can, I presume, lower prices for the remaining seats to try and sell them. This might piss off those fans who bought earlier, if they find out.

B, they set prices too low, and tickets go fast and end up on some re-sale market. Well, if artists really don’t want that to happen, then why not use the no-resale tech anyway? If you set prices too high it won’t matter, but if you set them too low it keeps money out of the hands of the scalpers.

It also seems to me that Budish assumes that artists don’t want to help ticket scalpers make money. Lin-Miranda’s op-ed suggests that may be true for him, but it is less than obvious to me that feeling is universal.

As noted above, in the pre-internet era, artists set low prices, (small-time) scalpers made money re-selling tickets, and the artists seemed mostly fine with that because they didn’t get blamed for the high prices.

It is clear that with the no-resale tech in place, the artists can set ‘low’ box-office prices without helping scalpers get rich. This is already how airlines sell their tickets pretty much. Pre-internet, airlines did this by requiring the ticket buyer to provide a full name that was included on the printed ticket. Airlines required you show a passport with a matching name when you boarded.

I just don’t see why artists who want to set high prices – whatever that means – won’t also put the no-resale tech in place.

However, another part of what Budish at least thinks about is how artists who want to set ‘high’ box-office prices might do that, and one option he considers is that they hold an auction. Or, more likely, some outfit like Ticketmaster would do it for them. You would go online to some site where you could bid the amount you were willing to pay for four Taylor Swift tix, for example. This should defeat the re-sellers, since in an auction the only way to insure getting lots of tix is to be willing to pay a lot, which pretty much kills any hope of profitable re-sale. Economists have done a lot of theoretical and practical work on auctions since I joined the profession in the 80s, and there is a consensus that auctions work much better than they used to because of their contributions. However, so far as I know, ‘work better’ mostly means auctions today generate a lot more revenue for the seller than they used to. I’m not sure that doing that for concert tickets will feel like an improvement, but Budish is an economist, so I expect he is in favour. And, it would mean that all that extra revenue would go to the artists and venues, rather than re-sellers. I suppose that is preferable.

Anyway, an artist that sells concert tix via an auction will have pretty much killed off any hope of a secondary market operating at even higher prices. Thus, they will indeed have no reason to also adopt the no-resale tech for their tix, so far as I can see. That would mean that someone who got a ticket in an auction but then had to miss the show, say due to illness, could re-sell the tix for something, at least.

One added note on the ‘hidden fees’ part of this. My strong intuition is that this is a pure internet phenomenon. A clothing retailer could certainly add a $5 ‘processing fee’ when you go to the cashier to pay for your new shirt or slacks. They do not do so only because they do not want their sales  personnel to face the customer’s anger when that happens. When paying for something on an internet platform, there is no one to feel your anger; you just pay it or cancel the transaction, and since it’s ‘only’ $10 almost everyone pays it.

That being said, there are exceptions. It’s been a while since I bought a new car, but I do recall that once you sat down with the ‘Sales Manager’ to sign the papers, all sorts of things could appear. ‘Destination charge’ rings a bell,, as does ‘Dealer Prep’. So perhaps part of it is that the amount of the extra charge be ‘small’ relative to the price you are already paying. Small enough that you don’t walk away.

Back to Budish’s techie solution to the secondary market taking over ticket sales, I absolutely hate it for the obvious (to me) reason that it makes us even more prisoners of online-enabled devices. (It also assumes that the same geniuses who figured out how to employ ‘bot armies’ won’t also figure out ways to defeat it. There are billions of $ to be made from doing so, apparently.) And, there is nothing on earth that would induce me to participate in an auction to get tickets to any concert by any artist. There’s lots of great music to be heard here at The Richmond Tavern, and all I have to do is drink a couple of beers and drop a 20 in the jug when it comes around.

I will never attend a Taylor Swift (or Rolling Stones) concert, but might one day again want to hear the TSO play. My refusal to own a smartphone or participate in an online auction will perhaps make that impossible.

So, from a personal point of view, the ban on ‘charges’ aside, I am not convinced Budish’s ideas will make the ticket market better. Bad in a different way, perhaps.

But, hang in there, folks, if they have their way, grocery and other retail stores will soon be doing ‘surge’ pricing, and ‘personalized’ pricing and all sorts of cool things that will really piss us off – and we will be powerless to avoid. It’s all about extracting the maximum Benjamins from us, as the internet enshittification of life continues.