How to Buy Your Tickets Smart: An Overview of Ticketing Markets

Durable goods are defined as a product that “consumers derive the benefit from the purchase of the good over a number of periods … [and] consumers can decide the timing of their purchase” (Belleflamme and Peitz 2007). Tickets to games and shows are considered durable goods in the sense that consumers who buy tickets to a performance receive an “experience” they carry with them. For example, the experience of going to a Warriors game this year would stay with you forever as Steph Curry has officially reached Wu-Tang’s “for the children” status. Besides, someone who sees tonight’s show is generally unwilling to pay as much for a ticket for tomorrow’s show.

Davidson Wildcats' Stephen Curry (30) celebrates his team's 82-76 victory over Gonzaga in the 2008 NCAA Division I Men's first round tournament action Friday, March 21, 2008, at the RBC Center in Raleigh, North Carolina. (Jeff Siner/Charlotte Observer/MCT)

(Jeff Siner/Charlotte Observer/MCT)

Tickets are first sold in primary markets and are issued at the box office or online with a face price printed on them. In 2011 and 2013, the average price for a music tour concert admission was about 78 dollars, but this number increased to 82 dollars in 2014. In addition, the concert ticket sales revenue from 1990 to 2014 amounted to 6.2 billion dollars (Statista 2016).

Courty’s model of ticket pricing suggests two reasons why promoters would want to deter brokers. First, consumers who buy late lose out in equilibrium since “brokers capture some of their surplus” (Courty 2003). Consumers usually ask promoters to intervene for a fairer price, which would result in promoters being caught in the middle of a conflict that is really between consumers and brokers. Second, promoters want to take advantage of the profits that can be earned in the late market. The model shows that unless resale is prohibited, promoters should not offer any additional tickets in the late market for equilibrium outcomes. Thus, we observe many restrictions from promoters upon brokers.

Time line of a simple model presented by Courty (2003).

Time line of a simple model presented by Courty (2003).

That was the story thirteen years ago. Today, resale websites such as SeatGeek and StubHub allow anyone to upload their tickets and price them freely to sell. Most sites focus more on transparency than getting a good deal by using phrases like “the price you set is the price buyers see.” As a result, information is more symmetric between sellers and buyers, which leads to the strategy of getting fairly priced tickets.

People typically try to buy tickers from resellers right when they go on sale or just before the show. Supply seems to be highly constrained by demand during the first few days that tickets go on sale. Researchers find that ticket prices during the first couple of months are all over the place and are especially pricey when the tickets went on sale on resale websites. Also, in the two weeks leading up to the concert, a buying and selling frenzy brings most of the auctioned ticket prices down, sometimes even below the primary market ticket value. Therefore, the ideal time to look for tickets at auction is in the two weeks leading up to a given event.

Interestingly, celebrity musicians and other famous touring performers face problems similar to those of a durable good seller with market power. Todd Kendall (2005) investigates how the durable good monopolist could lead to high rates of drug abuse and other self-destructive behavior observed among celebrities in his paper “Durable Good Celebrities.”

Sources:

Belleflamme, P., & Peitz, M. (2007). Industrial Organization: Markets and Strategies. Cambridge, UK: Cambridge University Press.

Concert ticket sales revenue in North America from 1990 to 2014 (in billion U.S. dollars). (n.d.). Retrieved March 21, 2016, from http://www.statista.com/

Courty, P. (2003). Some Economics of Ticket Resale. Journal of Economic Perspectives, 17(2), 85-97.

Kendall, T. D. (n.d.). Durable Good Celebrities. SSRN Electronic Journal SSRN Journal.

The Ticket Economist | The politics and economics of ticket resale (aka scalping). (n.d.). Retrieved March 21, 2016, from http://www.ticketeconomist.com/

11 thoughts on “How to Buy Your Tickets Smart: An Overview of Ticketing Markets

  1. Some high-level sports organizations are taking action against resale websites due to, as you mentioned, the tendency of secondary market prices to fall below primary market ticket value. The New York Yankees recently banned print-at-home tickets, the primary method for StubHub users to get a physical copy of their ticket, from being used for admission to Yankees Stadium for Major League Baseball events. The lack of a print-at-home option makes it significantly harder for fans to acquire tickets via StubHub, a fact that many believe will drive fans to the official Yankees Ticket Exchange, where ticket values can be controlled by artificial price floors.

    The Yankees still maintain their partnership with Ticketmaster, which serves as the franchise’s official ticket resale partner. Ticketmaster allows the Yankees organization to set a dynamic artificial price floor, meaning the price floor varies depending on the game, section, and seat. On the contrary, StubHub sets the minimum listing price for MLB games at only $6.

    The Yankees pointed to the prevalence of fraudulent print-at-home tickets as the rationale behind their decision, but many critics argue that the Yankees are trying to put a stop to the lower-than-face-value ticket sales that undercut an important source of the franchise’s revenue.

    http://www.bloombergview.com/articles/2016-02-22/mobile-ticketing-may-leave-some-yankees-fans-behind
    http://www.nydailynews.com/sports/baseball/yankees/yankees-no-longer-accepting-print-at-home-tickets-article-1.2535419

    • This is an interesting team to mention. Being a degenerate Yankees fan, I am certainly biased, but certain team’s ticket demand is much greater than that of others. In 2015, Yankee Stadium was filled to, on average, 80% of capacity; this is in the top 10 for MLB teams. On the other side of the spectrum, there are a number of teams that do not consistently fill their home stadium by more than 60%. These differences in ticket demand are what likely lead to the Yankees taking their tickets off of Stubhub, while Cleveland Indians tickets are still available for resale purchase. The Yankees will likely lose a larger per-capita amount of revenue from their high-demand tickets being resold for cheap. For the Indians, any ticket sold for the price of a hotdog is valuable revenue.

      http://espn.go.com/mlb/attendance/_/year/2015/sort/homePct

      • This is more in the vein of what Joe said, but I think these different ticket structures do work better depending on the team/artist and a variety of other factors – location, time, weather, etc. There are many factors that go into consumer ticket purchase decisions, and I would be interested to see a complex model that accounts for all of these factors and what that model has to say about these situations.

        For the Yankees, the desired cartel-like structure works best because the team has a constant high demand for tickets. Other teams, like the NBA’s Charlotte Bobcats (now the successful Hornets after a rebranding), could barely sell tickets across any of the available platforms, and were constantly plagued with low attendance. I think it will certainly be interesting to see though, since the online ticket shops have matured into the market, what the next direction for the ticket exchange market is moving forward. Will we see more and more franchises/artists taking control of tickets in a push towards a cartel-like (either at the franchise/artist level or the league/agency level) ticket structure?

    • The love triangle between consumers, brokers, and promoters seems to grow with tension as technology advances. As pointed out in another reply, the Yankees have banned print at home tickets, but will they eventually ban bar codes sold on these websites as the need for physical tickets diminishes in a more digital world? This feud also raises a few ethical questions to consider. Are the performers of these shows losing substantial wages or are their wages now adjusted for fair pricing without “artificial price floors”. At the end of the day I believe these sorts of disputes will continue with advancements in technology and lobbyists from these industries seeking to legally restrict the sales of 3rd party tickets.

  2. As to counterfeit tickets, there clearly is the potential of buying one – but then shouldn’t the onus be on the purchaser and (re)seller? In practice, does the first person who presents a barcode get in, and the second person with the same barcode gets turned away? That could lead to some nasty scenes! It would be very hard to haul presumed fans out of a seat in front of thousands to ask them to produce their ticket – which would in all likelihood be indistinguishable, hence there’d be no way to tell false from real. So what does happen? My hunch would be that the second person gets hassled but still gets in, as long as there are seats somewhere in the stadium. Or can the system be set to create a file that (somehow) can only be printed once? – you then need a backup process as a paper jam or empty ink cartridge could render what’s printed useless. Oh, and this would be important to the Yankees, but not so critical to teams with lots and lots of empty seats.

    It’s not clear to me that prices falling below box office “face value” is the issue in teams trying to prevent resales. It’s rather that the sellers want to exercise monopoly power to get profits into their own pocket – assuming that the counterfeit issue isn’t in fact quite serious.

    So how do you get a printed ticket to a Yankee’s game? You have to go to a physical box office?

    • I believe for most venues nowadays, one barcode can only grant one access. When you purchase season tickets for a team, they usually send you paper tickets, and also give you the ability to print your own. Some people would print their own, sell the paper ticket to a scalper outside of the venue, and already be inside by the time the scalper re-sold the ticket, which now it becomes the scalper’s problem. A friend of mine purchased a Rangers’ ticket a few years ago on StubHub and he was denied entry at the venue since the barcode was already scanned. They never figured out whether his ticket was a fake or not, but StubHub refunded him the cost and deposited an additional $20 for his trouble. It is definitely possible to have a website which tickets can only be printed once, but as long as we are still dealing with barcodes or QR codes, people can always find ways around them, such as photocopying the ticket after printing it.

  3. As a precursor to the comment I am about to make, I am not a Justin Bieber fan. And I am the only girl to comment thus far, but I am an avid Florida State football fan and season ticket holder who has witnessed these issues at play for one of the country’s best college football teams. But I am interested in finding out if the same StubHub/scalper issues applied above can be applied to popular music concerts. Justin Bieber plans to tour this spring and summer, and tickets sold incredibly quickly. My 10-year-old cousin begged for tickets as a birthday gift, ad my uncle spent an arm and a leg getting them for a June show. That show, in Jacksonville on June 29, is listed from $117 on StubHub. But a concert tomorrow in Glendale, AZ, is listed from $246. This leads me to wonder if the best time to buy is two weeks before for something like a concert. Further, these types of concert are almost always sold out, so why is StubHub still a viable option? In baseball, the capacity filled in a stadium plays a part, but does it here? I wonder if it doesn’t simply because ticket sales are not what pays for a tour, as we discussed in class earlier this month.

    • A lot of the discussion, including my earlier comment, has been directed towards sporting events, with the exception of the above comment, and I think you bring up a great point, touching on higher prices in secondary markets for sold out performances. How about at venues like Broadway, where ticket prices in secondary markets can reach figures as high as $2,000, when originally sold at the box office for an asking price between $67 and $477, depending on the seat?

      Take for example the runaway smash-hit, “Hamilton.” The Richard Rogers theatre – host venue to “Hamilton” – seats just over 1,300 people, the equivalent of less than an 1/8 of the number of people who attend a single New York Knicks game. Whenever new show dates are scheduled and announced, tickets sell out almost immediately. The buyer can sometimes be human. Or, as if often – and frustratingly – the case, tickets are purchased by an automated service that then resells the tickets for profit in a secondary market. Just recently, an automated service – or “bot,” as they are called – purchased 20,000 tickets to “Hamilton” shows, which is good in terms of providing “advance” revenue for future shows, but creates a problem with pricing.

      The show’s producer, Jeffrey Seller, was quoted in a recent NYT article, which aptly summarizes the problem created by the primary v. secondary market price differential:

      ‘The issue goes beyond “Hamilton” to, essentially, the legalization of what used to be called ticket scalping. For Seller, it presents an existential question. What is the true market value for a ticket to “Hamilton”? The free market, albeit the one being tilted by brokers, indicates that it is far higher than what he is getting. If he sold his tickets for, say, $800, there would be a bigger pot of money to divvy up. “But what would that do to the show?” he says. “What would it do to Broadway?”’

  4. Kinsey brings out a good point in that the optimal strategy (for both buyers and sellers) might vary depending on the type of event and the venue size. The best time to buy tickets will probably vary depending on if you are buying tickets for a music festival that seats tens of thousands and won’t sell out versus a pop musician playing at a stadium versus a collegiate or professional sporting event. While the entertainment industry hasn’t yet figured out what their best strategy should be in each case, I think in the near future we will see an organized move to a new standardized way to buy and sell tickets. Moreover, as evidenced by the recent policy change implemented by the Yankees, I think we can expect a shift away from paper trails.

  5. I think it is important to consider how teams attempting to restrict the use of these resell sites may affect their actual overall sales. More specifically I think that this restriction could potentially reduce the number of season ticket holders. When it comes to fan favorite teams like the Yankees, the issue becomes less relevant. However when considering teams like the Charlotte Bobcats, I think teams would be foolish to restrict an individual’s’ ability to resell their tickets. I have a number of friends from home who are season holders of both the Charlotte Bobcats and the Carolina Panthers. In the case of the Bobcats, a mediocre team, people commonly resell their tickets for less than they are valued on the market in order to make back some of the money they lose when they choose to not attend a game. However in the case of the Carolina Panthers, I have friends who resell tickets to “big” games in order to help foot some of the expense of being a season ticket holder. In either circumstance I think it is important for teams to consider how the customers, and not just the promoters, are using these resell sites to their benefit.

  6. Wow so much on Yankees and Panthers…I have been curious about how platforms like StubHub and people who professionally scalp tickets differ in the price discrimination process to maximize profits and how they manage to co-exist. I assume many of us have been approached by people in yellow or orange vests at parking lots of sports stadiums or music venue. One guy once told me the business is quite profitable and he travels from venue to venue regularly. So I wonder, if StubHub is not harming those people’s business as much as we would imagine, what does that mean for StubHub’s business model? Are the online platforms not as flexible as real people who can bargain on the prices? What if those platforms were to launch a new feature allowing real time bargaining instead of its current structure which puts the pricing power solely on the sellers? That is, until the sellers become desperate, namely a few hours before the event happens.

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