Jun 23, 2009
Posted by: Hitsville

How to get screwed in business without really trying

Jon Landau, Bruce Springsteen’s manager, posted a missive yesterday responding to a contention that Springsteen’s organization had held back 95 percent of the good seats at a concert in New Jersey. The allegation was in this story in the NJ Star-Ledger.

You can read the story and Landau’s response and judge for yourself whether there’s a contradiction or not. After acknowledging that Springsteen, like every artist, holds back tickets for friends and family of an enormous touring operation, Landau seems to deny the story’s main contention:

The 2,000 to 3,500 tickets closest to the stage are on the floor and more than 95% of them go to the public, making the basic premise of the Star Ledger headline [“Springsteen withheld best tickets from the public at NJ concert, records show”] inaccurate. Secondly, with regard to seats held in the best sections on either side, we always blend guest seats with fan seats so that there are never any sections consisting entirely of guest seats.

I think there are some interesting things about the Star-Ledger story.

1) In my experience, Landau’s explanation rings true; comp tickets aren’t often or largely directly in front of the stage. There’s of course always a triple-A guest list, but the idea that some 90 percent of the best seats at a show at a Bruce Springsteen concert were turned over to VIPs doesn’t seem likely. In arenas, comp seats tend to be in the side areas closest to the stage; the Star-Ledger story seems to fudge this distinction.

2) The idea that 90 percent of the best seats at a show of a shittier, greedier artist might go to VIPs or to artist-scalped fans is, however, entirely plausible.

3) Note that the Star-Ledger didn’t do the story about a shittier, greedier artist. The one who gets targeted is the only top-tier figure who has dared to speak out against Ticketmaster and Live Nation.

4) Left unsaid is this very real distinction: It’s the artist’s show. Barring holding the tickets back for secret scalping, artists are welcome to keep all the seats back they want. It’s their show, and the money is coming out of their pocket. The issue is when parasitical organizations like Ticketmaster or Live Nation are doing the under-the-table shenanigans.

The story gets junkier from there, including this part:

And, ticket brokers say, [the Springsteen ticket holds] helped drive up prices on the secondary market. Although tickets sold for $95 and $65 in the initial sale, some tickets were selling for hundreds of dollars more on the secondary market.

“Simple economics 101 would tell you that any time you restrict supply the price will be much greater,” said Robb Kenison, a ticket broker from the Washington, D.C., area. “I would not be surprised if a seat in 109, 110, 120 or 121 was double if not triple what it would have been had they sold even 50 percent of the seats in the sections.”

Quoting a scalper complaining about high ticket prices is like quoting a car thief about high car-insurance prices.

Back in the 1990s, when Pearl Jam got drawn into its battle with Ticketmaster, the band, too, became the focus of similar criticism and second-guessing—much of it, as here, from news outlets that never bothered to write about the much-more-outrageous behavior of Ticketmaster before.

Apr 06, 2009
Posted by: Hitsville

Schumer goes after the scalpers

TicketNews reports that the NY senator is planning to introduce a bill that would … well, I’m not sure exactly what it would do:

New York Sen. Charles Schumer, a vocal opponent to the proposed merger of Ticketmaster and Live Nation, said he is planning to introduce a bill this week that would prohibit all sales of tickets on the secondary market until two days after the tickets initially went on sale to the public.

That seems to mean what it says—that scalpers couldn’t sell tickets for two days after they go on sale. Later in the story, though, we get this:

Supposedly, brokers would not be allowed to purchase tickets until two days after they went on sale, but how that would be monitored was not yet explained. However, his proposal would require brokers to register nationally with the Federal Trade Commission to help eliminate fraud.

The story says the bill would also outlaw presales, where scalped tickets are offered before the real ones even go on sale. It also says that Ticketmaster and Live Nation said they would support the bill.

Anything that messes with scalpers is a good thing,  but it’s hard to see how this would affect scalping at all, which is probably why the companies are OK with it.

The issue isn’t when the tickets are resold.  The issue is the corruption of the process of putting tickets into the hands of the public. If you allow scalping, it sets in motion a variety of efforts by the scalpers to amass the best seats.

This involves everything from paying off insiders for tickets or setting up computer programs to buy the tix automatically many times faster than humans can.

Hard to see what Shumer’s bill would do to stop that.

Mar 20, 2009
Posted by: Hitsville

Updated: An economist on scalping

A week or two ago I discussed a blog post on scalping by an economist named Eric Crampton.  I called him British; he’s actually a Canadian teaching in New Zealand. The original post is below.

he and a colleague were kind enough comment on a couple of issues. One was my precis of what he meant by the concept of “clearing.” I glossed it as ““everything selling for the top price people will pay for it.”

The colleague, Paul Walker, wrote:

Demand curves slope downwards so the market clearing price will be such that only the marginal person will in fact pay what they actually think the ticket is worth. All intra-marginal consumers will pay less than what they think the ticket is worth. That is, they will pay less than their maximum willingness to pay. Your statement would be true under first degree price discrimination, but we just don’t see that in practice.

(He also discusses this more on his own blog, here.

The really interesting question the original post raised was why tickets aren’t sold at market prices.

A British Canadian economist, Eric Crampton, discusses scalping here. When he talks about “market clearing” he means “everything selling for the top price people will pay for it,” and in his world that’s how things not only should work, but do, which is why scalping takes place and “clears” the tickets appropriately.

I respect that position but don’t agree with it. Some of these free market types: You’d think a little kitten dies if every goddamned thing in the world isn’t sold at top price.

But I do have some observations to make about other conundra he ponders.

For the first, there’s too much hand-wringing over why tickets aren’t priced higher than they are. Of course it’s because rock stars don’t like the image of charging $500 or $1000 for tickets.

[youtube]http://www.youtube.com/watch?v=E3GarT7yPSM&feature=related[/youtube]

That was 1963, and the idea has been a key part of the rock ‘n’ roll ethos ever since.

But it’s really a larger issue than that. Very few entertainment options in American life aren’t subject to scalping, from sports to Broadways shows, which means that few of these are priced appropriately outside of the broad tiered pricing we are all familiar with. (I don’t know how things are in England.)

In some venues, the practice has been scaled back: Not too many movie theaters have that pricier loge seating. More often, as in rock shows and on Broadway, though, there has been a move to monetize the very best seats.

Still, it’s been done fairly quietly; and the press, as Hitsville has charted variously, goes along with it for the most part, parroting producers’ claims that the price hikes are all about “flexibility” or “consumer choice.”  (Just as Ticketmaster execs use euphemisms like “dynamic pricing” for higher ticket prices or refer to scalping as “the secondary market.”)

In other words, the main reason entertainment tix in the U.S. are not all sold at their full market value is that there is a long-standing cultural distaste for that practice.

Secondly, again trying to come up with a sober explanation of why an artist would sell a ticket for less than its market price, Crampton postulates:

I can buy that the artist would want the most enthusiastic fans up at the front rather than the boring folks who can afford to pay $1000 per ticket. Giving an economics lecture is a lot worse if the students up front seem less interested than you think they ought to be, and I’d fully expect that the effect is greater for musicians. Why shouldn’t they trade off some monetary income for being able to put on a show that’s more fun for them?

As is explicit in Trent Reznor’s detailed explanation of how he tries to thwart scalpers, the issue is more rewarding one’s supposed “true fans” than trying to buy a little enthusiasm in the front rows, which is always there no matter what. With very rare cases, everyone in the front section of every show I’ve ever gone to is, if anything, too enthusiastic.

In those case, I’m the guy with the free ticket who just wants to watch the show, and I’m invariably surrounded by inebriated frat boys yelling “Roxanne!” or “Rosalita!” They are the ones who paid top price at the least and, at the most, several times top price to a scalper to get up front and holler.

High ticket prices have had the effect of making it virtually impossible for anyone to admit they saw a bad show—you’d feel like an idiot after having paid more than $100!

Mar 09, 2009
Posted by: Hitsville

Ticketmaster, Live Nation, and the “secondary market”

The Daily Swarm links to a post from Bob Lefsetz about how Live Nation is supposedly handing so-called secondary market sales, or what you or I would call “scalping.” Lefsetz:

I had a long conversation with a promoter who told me that with regard to a show he was promoting, Ticketmaster was guaranteeing the secondary market for the act.

Let me explain this to you. A certain number of tickets are pulled from the manifest and ultimately sold on TicketsNow. Ticketmaster guarantees a certain gross payment to the act for these tickets, far in excess of the usual payment per ticket.

If true, the idea shows a new level of sleaziness in this merger. Now, Azoff and Rapino were fairly honest about their vision of what they called “new flexibility” in pricing post-merger. That’s promoterspeak for a variant on auction pricing, where they could basically sell better seats at astronomical prices, a longtime industry desideratum.

I’m not sure though if I understand the process as described here. (And note that it seems to be part of the band’s deal with Ticketmaster, not Live Nation.) If TM is going to be kicking back some of the service fees to the band anyway, they cut a deal for a certain percentage and then, one would think, the company can sell the tickets how they see fit, right?

But maybe not. As Lefsetz says:

Does Ticketmaster pull tickets from the original on sale and sell them on TicketsNow, bypassing the traditional 10 A.M. free-for-all feeding frenzy?  I don’t know the answer to this.  But I suspect not.  Because Ticketmaster is a public company and the additional revenue would have to show up somewhere in the accounting.  In any event, I’ve got no confirmation/independent corroboration stating this occurs.

What I suspect might be happening is that this is just a twist of the process by which, in the tour contract, the promoter gives the acts a chunk of the seats. Here’s how Azoff described the process under questioning at the Congressional hearings last week:

Azoff:  Inventory control is not a perfect science.

Rep. Sherman: If there’s ten thousand seats in the area, are you selling 10,000 tickets?

Azoff: Never. On average we might see 80 or 85 percent of the seats.

Rep. Sherman: Are those the good ones or the bad ones you’re not getting?

Azoff: The vast majority of the best seats in the house.

This could just be Ticketmaster saying, “Hey, you know those seats you’re getting from the promoter? [Casually] Want us to handle scalping them for you? Let’s see, the nominal price is $100, we’re talking 1000 of the best seats in the house, you can probably get $400 each, we’ll give you $350 grand to save you the hassle. Win-win all around!”

Note that in Lefsetz’s scenario, he has TM pulling tickets before the sale. This is a more baroque (and even shadier) scenario, where in essence TM is saying, “Pssst—Hey, let’s scalp some of the tickets we’re selling for you and not tell the promoter.”