New York City is an exceptionally vibrant market for secondary market ticket sales. In the U.S. the Big Apple is nearly head to head with Las Vegas in scalping activity and high resale prices.  It is no secret that New York has sought to curb ticket resale through various forms of legislation over the years. In June 2007 the states position changed when then Governor Eliot Spitzer opened ticket resale to the free market. The bill is presently extended through June 2010.

Despite the expected benefits of a free market in New York, legitimate issues persist. A report recently presented to the Governor & Legislature of New York State sought to evaluate these issues in considerable depth. The report offers some background on ticket resale issues in New York and answers some specific questions placed before the Department of State. Though it raises valid and highly relevant points, its conclusions are seriously flawed. The most concerning is the absence of valid data used to reach conclusions about primary and secondary market ticket sales activity.

The report, which was commissioned by the New York State Department of State, initially claims that “[T]he Department conducted a comprehensive analysis of ticket prices and their availability for popular events on both the primary and secondary markets”. Based on that statement, I expected the report to contain an empirical study of primary and secondary market ticket sales. However, three paragraphs later, the report states that “These recommendations are the product of an analysis that was hampered by the Department’s inability to compel any segment of the industry to produce valuable ticket sales and availability information on either the primary or secondary markets.” Notwithstanding that these two statements conflict with one another, how does one make any empirical claims about primary or secondary market ticket sales activity without data?

In defense of the State Department, I know first hand that some ticket sellers are unwilling to share market data for any reason. However, the claim that no one would cooperate did not make sense. In my own experience, StubHub, one of the leading ticket resale market places, has always been willing to provide data to valid research efforts. In checking the Departments claim, I asked StubHub if the New York Department of State had approached them for data. A representative for StubHub confirmed that the Department of State met with them in December of 2009, but according to Joellen Ferrer, a spokesperson for StubHub, “We were not approached by the [Department] for data”.

So, what data did the Department use to support the key findings of the report? Turns out the data were gathered by browsing select ticket prices posted on primary and secondary market ticket seller websites. This may sound like an acceptable method for gathering ticket price and sale data, but it is actually open to a great degree of error. The reason is that ‘offer price’ and ‘sold price’ are not always the same. Sometimes ticket resellers will offer a ticket for $500 that is simultanously being offered somewhere else for less. In other cases, someone may call the reseller and pay $400 by negotiating. Clearly, there is no way to know what tickets sell for or how many are for sale without having the transactional data. Therefore, claims such as  “[T]he Department failed to establish any causal connection between the existence of price caps and the availability and cost of tickets on the primary and secondary market” cannot be supported by research that is not based on actual transactional activity.

The lackluster manner in which this report was prepared is unfortunate for two reasons. First, New York is an exceptional case for ticket sales and there is a legitimate need to empirically evaluate and address unique market conditions. If those issues are going to be properly addressed, the solutions need to be based on facts and not casual observations. Second, the quality of this report pales in comparison to one that was produced ten years ago by the Department of Law titled, Why Can’t I Get Tickets?, which is one of the best in-depth analysis of ticket scalping produced by a state office.  The Department of State should look to that report as an example on how to approach this difficult issue and make a more substantial effort in doing their homework.

In a future writing, I will highlight some of the relevant issues raised by this report and propose how the state should approach the issues.