Marianne M. Jennings and Stephen K. Happel, emeritus professors ,W.P. Carey School of Business, Arizona State University
Another Taylor Swift concert. Then comes weeping, wailing, and gnashing of teeth with accompanying demands that someone in any branch of government address the injustices of the ticket world once and for all. Pause and breathe, dear fans, for regulators have been tinkering with the distribution of tickets since the time of Shakespeare. Through centuries of plays, concerts, and sporting events, those regulations have not reduced prices or ensured that more fans got tickets.
What regulation has wrought is Taylor Swift debacles. In the name of consumerism, reasonable prices, and fairness, regulation allowed TicketMaster to acquire and operate a vertical monopoly. TicketMaster now controls the venues, primary ticket sales, and the secondary market for those tickets. Ticketmaster has class monopolist classic behaviors: incompetence, poor service, and ticket prices reaching $5,000+. The Wall Street Journal reports resentment by Swift, Springsteen, and Beyonce fans reaching $1,311, $480 and $469, respectively.
But artists, politicians, and consumers are determined to hark back to the 1850s in the United States, when goverments imposed price controls on tickets. Price controls produce corruption, even higher prices, and more fans clamoring for tickets.
Beyond price controls, there are, once again, calls to eliminate the perceived source of evil in ticket markets: ticket brokers, aka “scalpers.” During a Pollstar panel, Irving Azoff, James Dolan, and Garth Brooks, along with monopolist Ticketmaster, called on Congress to pass the Fair Ticketing Act. Along the lines of an Inflation Reduction Act, opposite outcomes spring from ill-named legislation. When the word “fair” shows up in any statute, basic economics is tossed to the wind.
The Fair Ticketing Act would banish ticket brokers from the face of the nation. Decades of our research into the primary and secondary ticket markets yield this advice: Wrong direction. Big mistake.
The ticket market has unique qualities. The supply of tickets to one-time events is fixed and live shows carry a certain psychological irrationality. A Taylor Swift type-concert brings demand that far exceeds the limited supply inherent in venue size.
Into this mix we throw promoters and artists with a delicate balancing act in pricing tickets. Promoters need to fill all seats but do not want to sell low. Artists feel the backlash when zealous consumers and avid fans cannot get tickets or cry foul on high prices. Even Bernie Sanders was dogged by loyal Marxists when they learned they he was charging $95 for admission to his book signings. Artists lack the Bernie je ne sais quoi option: Throw your publisher under the bus. Ticket buyers continually weigh when and where to get tickets as prices fluctuate. Even Bernie’s Marxists turned to the scalpers.
One much-maligned group, ticket brokers, provide a service to promoters, artists, and consumers. Ticket brokers understand ticket markets more than the other three interested groups combined. They are in the business of arbitrage. Ticket brokers use instincts and experience to assess the market for an event. They buy primary sale tickets and then resell those tickets to those fans who were unsuccessful in the TicketMaster scramble.
Brokers make money because promoters and artists set a too-low initial selling price too. But brokers assume the risk of buying tickets for events without knowing which way prices will go or if the event will sell out. If prices climb, brokers take the heat. Artists and promoters throw them under the bus.
Brokers simply play an economic and critical role – they help buyers get seats. But brokers also absorb the losses for both the artists and promoters when an event falls flat. The seats are sold because of them, but they are not always filled because brokers are left holding tickets they cannot give away.
True enough — brokers make money when demand is high. Artists and promoters then wail that someone else is taking “my money.” But nary a word is heard when brokers absorb their losses because they are stuck with tickets. Brokers make money if they are shrewd enough to predict markets and courageous enough to lay down the scratch and face the slings and arrows of consumer and regulator backlash.
In 2015, the Grateful Dead held a farewell concert at Soldier Field, capacity 73,000, in Chicago. As the Dead had done for decades, they attempted to prevent ticket brokers from buying tickets. They had fans send postcards requesting tickets. A committee then decided who got the tickets and then determined a fair price. With brokers restricted, the somewhat ungrateful Dead discovered that resale prices went through the roof. Fans capitalized on the demand and priced accordingly. Dead fans were outraged, in a subdued manner Grateful Dead fans can manage.
The Dead tried a different approach for their last concert at California’s Levi Stadium, capacity 73,000. Rather than restrict the sale of tickets by brokers, the band opened up sales to brokers. Brokers bought large numbers of tickets, expecting Chicago sky-high resale prices. As the event approached, ticket prices went down. The classic cartel phenomenon took hold and prices plummeted. The brokers absorbed the losses, not the Dead.
Country singer Zach Bryan, outspoken critic of ticket prices, plans to sell tickets to his upcoming tour for no more than $156. By using non-transferable technology, the official website will control resale and only allow face value to be paid. Tickets purchased on non-official sites will not be honored. This revolutionary price control is being implemented by the market rather than government mandate.
Yet, there is a downside to Bryan’s plan. Assume Bryan and his entourage are pure at heart and are not planning to hold some tickets back to sell at higher prices. The secondary ticket market always finds a way because markets abhor underpricing. Bryan will still face backlash from fans. Bruce Springsteen has tried to “boss” the market for decades in the name of fairness. As noted, his formulas have likewise alienated his fans.
The Bryan fairness approach may be an economic decision – the artist is focusing on a long term strategy. That one price-serves-all ingratiates a performer to fans and could be a long-run revenue maximizer as fan popularity rises in response. The loss-leader artist approach has market potential because it relies on economics.
Yet, despite Bryan’s best efforts, tickets for his events can still be found on resale platforms like Vivid Seats and Tickpick for hundreds of dollars more than fair value. Brokers have undoubtably found a way around Bryan’s resale restrictions, which will probably lead to greater efforts to rein them in. Brokers, as players in a secondary market, find tickets. Roadies given free tickets have also been around since Shakespeare and they too value placing them for an open market.
Having brokers buy up tickets to major events can be the best way to benefit artists, promoters, and fans. The market will inevitably control the price of tickets, commensurate with fluctuating demand and the fickleness of fans. The most inaccurate word used by those denouncing brokers and calling for their elimination by government action is “fair.”
