Re: Is Scalping All That Bad?

Re: Is Scalping All That Bad?

Last week, Mark Gimein wrote an article titled “Is Scalping All That Bad?” that touched on both the politics and economics of ticket scalping. While the article raised new thoughts about old issues, it failed to address the question posed by the title. I argue that the question is not the right one. It is not about whether scalping is “good” or “bad” ; that is one of those questions they ask in business school that has no right or wrong answer. The more interesting question to ask is: if ticket scalping is a problem, why are primary ticket sellers (such as Live Nation and Ticketmaster) supporting and engaging in the practice?

The general public and primary ticket sellers alike have a love-hate relationship with ticket scalpers, one that is entirely based on the perceived beneficiary of a given scalping transaction. If a fan gets a ticket from a scalper at the last minute for a ‘fair price’, scalping is good. But, when the popularity of an event drives resale prices high, scalpers are bad for profiting from basic economic theory. On the primary seller side, Ticketmaster is happy to use ticket resellers to clear out inventory or gain from resale profit, but they blame scalping practices when CNN runs a story suggesting that the parents of a 12-year old Miley Cyrus fan might have to pay $2,000 for a front row center ticket to see a sold out show. Never mind Ticketmaster is gladly offering a similar front row seat for $2,605.

Ticket resellers are not the enemy; they are a service provider. They would not exist without a large market of buyers – people like you and me – who don’t want to admit we use scalpers to solve our lack of planning (making time to buy a ticket or not buying until we know we can go). Someone was silly enough to pay $2,000 for a Miley Cyrus ticket, and though that is alarming, the facts are that her average resale ticket prices on StubHub in 2007 were $257. Either way the blame for this should lie with Miley’s management and Ticketmaster – not the ticket scalper. Two simple facts support this truth.

First, artists, promoters and Ticketmaster support scalping by holding back better tickets and selling them for a much higher price. In other cases they reduce available ticket inventory by holding them back for promotional purposes (sometimes up to 20%). Combined, these actions both reduce available ticket inventory on the primary market and increase perceptions of short supply, which enables higher resale pricing.

Second, as scholars have noted (Courty and Atkinson), most event tickets are artificially priced low as a service to fans – a decision made by both promoters and artists and rubber stamped by primary ticket sellers. This alone is a key reason why scalping is so widespread: under pricing creates a market for resellers to profit from mis-pricing.  If Miley Cyrus, Trent Reznor, or any other artist wants to do a service to their fans, it is letting the better seats price to what the market will bear and not some artificially low price that invites scalping. Yes, some of the better seats will have to sell for $200 and not everyone can afford that, but not everyone can sit in the front row.

To be sure, ticket resellers can make supply appear to be scarce and position their tickets at higher prices, but they need the primary market to deplete supply for this to work. Ticketmaster and Live Nation do exactly this by queuing 50,000 people for 10,000 under-priced seats at the same time with little economic diversification, making it easy for buyers to cheaply acquire tickets for resale.

It is fair to question the size and scope of ticket scalping, but it’s not useful to cast scalpers as villains. Instead, everyone should be calling on Ticketmaster and Live Nation to take a genuine leadership role in developing ticketing solutions that reduce the potential for scalping without limiting a buyers options. Ticket sales are comprised of a fluid combination of elements including price, seating preference, the attendee’s knowledge of their schedule, weather, and microeconomics. Primary market selling methods should provide buyer’s with options that take these pricing influences into account- not force them into a no-way-out transaction like paperless ticketing just to take a hit a scalping.