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

Ticket economics

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.



5 Responses to “Ticket economics”

  1. WiseGuy says:

    I agree that there are "problems" with the way ticket sales are held, but in principle the problem is the free market: Something like a front row ticket is more valuable than a ticket at the rear of the stadium...

    Some ideas: Lottery for floor seats - Your seat will be on the floor, but you won't know where until you arrive at the venue.

    Auction for tickets: Everyone who wants to attend places a secret bid - the highest bids take the "best" seats, and the lower bids the lower priced seats. Since nobody can be sure what anyone else is bidding... you get what you pay for and yes the front rows will be fillled with rich snobs who aren't really fans... or perhaps the rich snobs that ARE fans...

    Also, remember that at the end of the day - tickets that are $100 a seat or more.... are already overpriced, and promoters don't care all that much who is buying them, as long as the show sells out, or comes close.


  2. kinko says:

    interesting question!

    it sounds like auctioning off most of the tickets is the way to go. But to prevent a show being filled with rich people who don't necessarily like the band, this needs to be managed carefully - perhaps they auction off the worst sections first (so that the richer people will wait for later auctions for the better sections).

    And a small percentage of the seats (5-10%?) could be sold first, only in stores (and limited to maximum 6 per person). This way the die-hard fans will still queue up for hours for tickets, but ticket scalpers won't, and people won't be able to re-sell the tickets again quickly because there are still 90% of the seats waiting to be auctioned in the following months. Also, queues of people lining up for tickets and selling out at 5 past midnight makes for good free publicity in the local paper... but people who miss out can still buy some of the remainder later so people necessarily don't miss out.

    I think it's hard to say tickets at $xxx are overpriced if there are enough people out there willing to pay that price.

  3. Stu says:

    Airlines geta bad press for their strategies for selling seats, but usually only when they oversell. Not an option for a concert.

    But a tiered pricing strategy based on time of release would seem to work.
    You need to address the online sales issue as well - demand for tickets on release can easily crash many web sites and the queuing system that you get in real life isn't mirrored.

    This is a great space for a startup with a good model to do an online solution, because the majors don't have it sorted yet by any means.

  4. Craig says:

    @wiseguy: I don't mind rich snobs being fans. Some bands I would pay a lot to make sure I see. I try and go Gold Circle if there's an option. But the problem is that the bands don't run these tours as just a money-making venture: those who do go to Vegas and put on a residency, as it costs a lot less to move the gear and means more guaranteed patrons. It is not a free market, it is a subsidised engagement designed to ensure the most people see the show.

    Late night TV tapings have a "only once in 6 months" policy. Perhaps I should lose the right to get to see Crowded House two nights in a row.

    @kinko: Just as real estate agents pay homeless people to queue for spots in condo developments, scalpers can pay for places in line if they see enough economic return on it.

    @Stu: U2 made Ticketmaster melt. They've improved, but their captcha suggests ticket buying programs are causing a problem.

    Part of me thinks it's time to say that bands touring for fans are obviously a social welfare business (they're granted copyright, which allows them a short term monopoly if they agree to make their music available to society after 10 20 70 years their lifetime + a bit). They can't possibly fulfill demand - I'd go see my favourite bands weekly given the choice. Therefore they are not operating in a free market and selling tickets above face value should be illegal.

    More thought required!

  5. My option would be to use Dutch auctions (maybe two, one when the show is announced, so the promoters can be sure of covering costs and one last minute type one).

    The real problem here is that the dominant forms of payment for tickets (online/CC/etc) are geared towards known-sized payments rather than "pay up to X dollars" payments. I guess if the fees were structured right on the banks side the difference could be returned as a refund, but that wasn't the way fees used to work (but that was a while ago).

    Bear in mind that not all ticket-resellers are scalps.

    There are a bunch of legitimate businesses reselling value-added tickets (mainly in the form of ticket+transport or ticket+transport+accommodation). Most travel agents can get you flights and tickets to Andrew Lloyd Webber shows in London or New York. I'm not sure what proportion of the audience of these shows get such a package, but it's got to be non-trivial.

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