Thursday, June 11, 2009

Scalper Smackdown: Stub Hub vs. Ticketmaster





Problem: For Miley Cyrus' upcoming "Hannah Montana" tour, she wants the sale of her tickets "to be directly to her fans," and she therefore wants to eliminate the secondary market for tickets to her concerts.

Solution: Ticketmaster will sell only paperless tickets for the Miley Cyrus concerts, which will require attendees to present a credit card instead of a paper ticket, to prevent scalping and resales.

Alternative Solution:
To control ticket resales, Ms. Cyrus has two very powerful and effective weapons under her direct control:

1. Ticket Prices: The only reason that a secondary market exists in the first place, is that Ms. Cyrus, her management, or the concert promoters, have mistakenly (or perhaps intentionally) UNDERPRICED the tickets at an artificially low, BELOW-MARKET price, which then actually CREATES the secondary market by generating EXCESS DEMAND. One way to eliminate the resale market is to raise the ticket prices to a market-clearing price. In fact, at some ticket price ($100, $500 or $1,000), some tickets would actually go unsold and there would be empty seats and tickets available at the box office on the night of the concert.

2. Ticket Supply: The only reason that a secondary market exists in the first place is Ms. Cyrus, her management, or the concert promoters, have mistakenly (or perhaps intentionally) UNDER-SUPPLIED the number of concert tickets in each city that would be necessary to meet the demand for concert tickets in that market.


Here is the concert schedule for Miley Cyrus' fall tour, with concerts in about 43 American cities. In only two of those cities, Uniondale, NY and Newark, NJ, is she doing more than one show; she'll be doing two concerts in each of those cities. The ticket resale market for Miley Cyrus concerts would be easily eliminated if she did 2, 3, 4 or 5 shows in each city, or whatever number of shows would be required to meet the demand for tickets. In fact, at some number of multiple concerts in a given city (2, 5 or 12 shows?), tickets would go unsold and there would be empty seats at some of the shows.

Bottom Line: Why is it that for "Hannah Montana: The Movie," there was no secondary market for movie tickets, but for the Miley Cyrus Concert Tour, there will be a potentially huge secondary market for concert tickets?

Movie tickets are supplied and priced to meet the market demand which eliminates the secondary market, whereas concert tickets are under-supplied and under-priced, CREATING the secondary market for ticket resales at above face value.

Eliminating the secondary market for concert tickets is EASY: a) Raise ticket prices, and/or b) increase the number of tickets. And both of the options are completely under Miley Cyrus' control (or the control of her management or promoters).

15 Comments:

At 6/11/2009 9:48 PM, Blogger Campbell said...

The worst part of this new scheme is that it places the burden of scalping on the audience. It has to bear the burden of excess requirements and fees to benefit the artist and the promoter. In fact, the only economic damage is to the artist and promoter who can't sell tickets at the scalped rate. But they could never sell out a venue for $400/seat. It's only the last 250 seats that go for that in a sellout. In my opinion, the artist, the promoter and the monopolistic ticket seller should not benefit from the secondary market.

 
At 6/11/2009 11:45 PM, Blogger sethstorm said...


To control ticket resales, Ms. Cyrus has two very several powerful and effective weapons under her direct control:

None of which you've guessed correctly.

The one way they could have done better was to strengthen the link between the card and the user with a nominal hold at the time of use; then you have the scalpers for fraud. If they used generated numbers, they're out of luck; they wont have a card to place that nominal charge. Visible results, scared scalpers, and fans with the ability to see their show.

Second of all, start firing people who aid those scalpers on the inside, and do better legwork to keep them out.



some tickets would actually go unsold and there would be empty seats and tickets available at the box office on the night of the concert.

The better reason not to allow scalping in the first place, the same thing happens; fans are still disappointed. Preventing scalping by regulatory means kills both in one shot.



Thirdly, re-establish scalping laws. How many states still have them?

 
At 6/12/2009 8:05 AM, Anonymous Chris Whitley said...

It seems that another logical approach would be an auction. You wouldn't necessarily eliminate scalpers, but you would put them at more risk for bidding up prices. If the price they paid is above the market price, they lose money when reselling the tickets. This mechanism also allows for a flexible pricing that is based on a more instantaneous demand measurement rather than trying to guess at what the average demand would be over the course of the selling period. Sell the tickets at auction (a la ebay) over a one month period and a range of market prices would be established.

 
At 6/12/2009 8:08 AM, Anonymous Anonymous said...

The artist (the artist's manager) promotes her self interest by pricing tickets below market clearing levels. This is according to Stephen Landsburg in his "The Armchair Economist." The idea is that holding prices down attracts an audience that is more likely to purchase CDs, T-shirts, posters, etc. marketed at the concert venue. There is substantial profit in these sales that might be missed if the concert ticket prices were raised to a level that rationed the tickets to an older, more affluent audience that was less inclined to purchase such souvenirs.

So the artist attempts to promote her self interest by setting prices to maximize net returns and then complains about the secondary market that is created by this pricing strategy.

 
At 6/12/2009 10:14 AM, Blogger QT said...

"Movie tickets are supplied and priced to meet the market demand which eliminates the secondary market, whereas concert tickets are under-supplied and under-priced, CREATING the secondary market for ticket resales at above face value."

Scarcity of supply is inherent to live performance. By contrast, movies are mass-marketed so there is no shortage of supply unless the distribution of the movie is limited for example, with foreign films. It would seem to be scarcity rather than under-pricing that creates a secondary market.

Comparing the movies & concerts is much like comparing an original work of art with a poster. Both may be aesthetically pleasing but one is available to millions while the other is not.

 
At 6/12/2009 10:29 AM, Blogger QT said...

Even La Scala has scalpers and the ticket prices are astronomical. Is $2,829 under-priced?

Performers may hate scalpers but unless they telecast performances from a remote studio (ie. no live attendance to draw scalpers) to thousands of theatres or make a movie of their concert that can be broadcast on TV, scalpers are a fact of life.

 
At 6/12/2009 10:31 AM, Anonymous Anonymous said...

If she was really smart, and didn't want to do a lot more shows or charge an arm or a leg for the concert, she should start a paid Fan Club. Maybe even different levels -- premiere (costs more) and regular.

Top benefit for Fan Club members: first dibs on concert tickets. If more fan club members want tickets than available tickets, she could allocate them to premiere members and then at random to Club members. If there are any left after that, then the general public.

Fan Club benefit brings in an income stream and would capture a lot of this money left on the table by "low" priced concert tickets while not causing PR problem of a high ticket price.

 
At 6/12/2009 3:26 PM, Anonymous Anonymous said...

A very probable third explanation not mentioned(other than underpricing or not doing enough events) is risk mitigation. This is typical of what you see in real estate development, the singer knows that the tickets are worth more the day of the show but doesn't want to take the risk of having an empty venue so there are willing to sell at lower than market rates to ensure a sellout. The scalper is taking the risk that the event is sold out and if not will actually book a loss not a profit. And unlike many fans that wait until the last minute to purchase, the scalper makes the investment months before a performance, which ensures everyone doing the show that they will make a profit. If it wasn't for scalpers you might have less shows since the promoters might not want to risk not selling enough tickets before they make a financial commitment.

 
At 6/12/2009 6:04 PM, Blogger QT said...

Well said, Anon. 3:26.

Decided to check both prices and the schedule to determine if "under-priced" or "under-supplied" are fair assessments.

Ticket prices are 79.50 and 59.50 in Tacoma, Washington. An additional convenience charge and building charge also applied when I tried to book tickets bringing the cost of a $59.50 ticket to $74.30 and a $79.50 ticket to $94.60.

The price may be reasonable but is not exactly low priced for a teenager on minimum wage. The same website also gives average prices for other performers with prices both above and below Miley's. Miley Cyrus earned 18.2 million last year possibly indicating that she is adequately compensated for her concert performances.

As for increasing the # of concerts, Miley's concert schedule of 43 cities over 2.5 months has concerts in different cities often on consecutive days or every other day (one assumes that much of "day off" will be spend travelling). If we compare this to Madonna's tour schedule, it looks about the same suggesting that the # of concerts is about standard for the industry.

Artie Shaw suffered a complete nervous breakdown after several months of a grueling schedule with 3 daily performances. We are talking about a teenager not an Iron man contestant.

Another option available for Miley is that she forget about trying to solve everyone else's problems and do what she does best...sing.

 
At 6/13/2009 1:01 AM, Blogger OBloodyHell said...

I can already see what I suspect is a way around this -- prepaid cards.

Buy the ticket using a prepaid card, then sell the prepaid card, with a hefty "service fee" attached. This probably even dodges scalping laws entirely.

If I'm wrong, there, someone, please tell me where it breaks down.

It won't work for street scalpers (except if they have a local rep to uphold), but it won't stop the real pros.

=====

As far as the suggestion "more concerts" I think this is not an effective option -- most performers don't want to do that many performances on a tour, and, without having done it myself, I can't argue against claims that touring is exhausting. Even if somewhat overblown, it probably isn't all that easy, so doubling or tripling the number of shows may not be all that practical.

 
At 6/13/2009 1:09 AM, Blogger OBloodyHell said...

> The price may be reasonable but is not exactly low priced for a teenager on minimum wage.

These don't sell to working class teens, QT, they sell to screaming, tittering 14yos using Daddy's Guilt-Trip & Credit Card Company.

To Daddy, those tickets are, if not a lot easier to pay for, they are at least there to assuage guilt or the inevitable "anything for the girl" feelings that fathers often have (The feminist mantra that "All Men Are Child Molesting Bastards" is, as I realize you well know, utter bullsh**) towards daughters.

"Princesses" (Jewish-American, Ukrainian, whatever) are born from such relationships, when Daddy never says "no".

 
At 6/13/2009 8:31 AM, Blogger sethstorm said...


I can already see what I suspect is a way around this -- prepaid cards.

Then by all means don't accept them.

Require something that has an actual identity that cannot change behind it without crossing into fraud. Then put some teeth behind it with a temporary hold at the time of show. Thirdly, require the name on the card match the person (removing that possibility as well).

 
At 6/13/2009 8:49 AM, Blogger QT said...

OBH,

I agree that it's dad's credit card is being targetted here. (Also don't buy most of the feminist bunk; women will achieve equality when they do not need to trash others to feel good; look fwd to commercials that depict women as stupid for a change)

Also agree that setting limits is incredibly important for a child's social development. Indulgent parents create adults with the maturity level of a 2 yr. old who are focused on what they want to the detriment of their relationships with others. (call it the Scarlet O'Hara syndrome)

Limits may be as important to the development of the child as goal setting and personal finance.

Scalpers are particularly objectionable when they get access to the best seats in the house in advance of sales to the general public like the recent Ticketmaster incident. Anon. mentioned a Fan club as a possible way around this.

The Group, No Doubt, came up with a creative method to discourage scalping. By reserving the best seats in the house for the fan club members, limiting each member to 4 seats, and printing the name of the buyer on the ticket (must present ID to show that you are the buyer), No Doubt has taken away one of the main selling points for scalpers ie. being able to offer the best seats.

Nice to talk with you. Have a nice weekend.

 
At 6/14/2009 1:52 AM, Anonymous Anonymous said...

I'm going to get some Visa and American Express Gift Cards and purchase my Hannah Montana tickets with them. Then FedEx those gift cards to the 'buyer' for hundreds of dollars more than I paid for the tickets.

Sounds like a plan, we'll see how it works

:)

 
At 7/01/2009 11:30 AM, Anonymous Anonymous said...

I am a grandmother that bought two tickets. I live in AZ and she lives in CA. I didn't read all the notices and now I am out ticket price because you are not allowed to cancel. The tickets were purchased 6/19 and I tried to cancel 6/30. What is the problem???? I wanted to give her a birthday gift. I had her mother buy new tickets but I would like a refund. The rules are TOOOOOO tough.

 

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