Craig Box's journeys, stories and notes...

Archive for April, 2008

Ticket economics

Saturday, April 5th, 2008

When a band wants to tour, there are a number of factors that need to be considered. I think this is a problem to be solved by a gaggle of mathematically or economically minded persons.

Some assumptions:

The average band:

  • Wants to choose a size of venue based on the sort of show they want to put on (intimate club, stadium, etc)
  • Wants as many fans to see their show as possible, and at a reasonable price (determined by them and their management)
  • Will have to consider financial return on their tour:
    • Wants every show to be a sell-out
    • Will play more shows in bigger markets
    • Will still go to the odd small place to please fans there
    • Can't be expected to handle ticketing all on their own

So, we introduce:

The ticket agent (Ticketek/Ticketmaster etc)

Their motivations are different:

  • Keep a good relationship with the band (read: "their management")
  • Maximize profit for every show within the constraints they are given
  • Sell each ticket for the maximum possible value

Keeping in mind:

The scalper, or ticket tout

  • Is the nemesis of the band
  • Isn't cared about by the ticket agent at all

The last point is important - ticket agents, notably Ticketmaster, have noticed recently that people are obviously prepared to trade more money for a more guaranteed chance, or less standing in line, etc. They have started auctioning off the rights to better seats themselves, thus making their own profit and the scalper's profit, all in one. And even if they don't do this, if the show is a sell-out, their involvement is mostly over.

A small number of tickets are often put aside for a 'fan club presale'. If the presale were allowed to sell all of the tickets, smaller shows would surely sell out just on the presales. Then, the band only gets the die-hard fans, and loses the chance to show their music to new people. This idea also started to fall apart when scalpers started joining fan clubs.

Presale tickets often go onto eBay or Trade Me the moment they've been purchased. You can't make reselling tickets illegal, or it's not fair on people who honestly can't attend any more. If you make reselling tickets at a profit illegal, economists and free-market wonks complain, saying they obviously are worth what the market is paying. The band set a price lower than that because they don't want an audience full of rich people who don't like their music, they want an audience of their true fans.

U2 could have played two more nights in Dublin or any large world city and probably made more money than bringing the Vertigo tour to NZ. They did that because they wanted to play for fans in this area, and presumably because the more places you go, the flow-on from record sales etc increases.

I went to buy tickets for a gig today, and found that the better seats were reserved for people paying with American Express. So, another financial incentive is added for the ticket agent: the kickbacks from the credit card companies.

Some bands (U2 in NZ for example) save some tickets to release the day before the show, so people who missed out still have a chance at the price that they set, not the inflated-4x price that the scalpers set. This is something they obviously feel they have to do because the system is broken for them.

The problem that needs solving:

  • If you put the best tickets on presale for fans, they will be bought by scalpers and fans will miss out.
  • If you put the best tickets on sale for the people who get in first, they will be bought by everyone, and there's no incentive to run a presale.
  • If you put the best tickets on sale for substantially more (not just one price for Gold Circle and one for GA, but $500 for front row and $100 for everyone else) you will have a show full of rich people in the front row, who aren't really who the band wants to be there.
  • You can't really disallow reselling tickets.
  • To disallow reselling them for a profit would require buy-in from law enforcement and marketplaces, which isn't likely - especially if the marketplace profits from them.