Ticket Wars

Why the Ticket Industry Is So Hated and How That's All About to Change

The ticketing industry consists of two main players, which spend a lot of time fighting each other. Now they both may suffer.

There's Ticketmaster, of course. And then there's eBay-owned StubHub, the world's largest secondary ticket marketplace. By Ticketmaster's view, StubHub encourages scalpers to buy in bulk and force fans to pay more. By StubHub's view, Ticketmaster is a shark mostly focused on killing competition. The truth seems to lie in the one thing both sides agree on: The whole thing's a mess. "Unlike most industries, this industry doesn't price the product at the intersection of supply and demand," says Ticketmaster's North America president, Jared Smith. Instead, performers use prices as a tool—to trigger quick sellouts, to steer fans toward the sections that are shown on TV, and so on—which causes events to make less money than they could and produces a secondhand marketplace that is ripe for abuse. But a couple of economists at Northwestern University have developed a scheme to change everything. It's surprisingly simple, and, if it spreads throughout the industry, it could control the very thing that makes the industry so frustrating. Ticket prices will finally make sense.

Problem #1

Trouble starts early: Teams and concert promoters "do not do sophisticated financing where they borrow short-term," says Northwestern University economist Jeffrey C. Ely. They need all tickets to sell fast—encouraging lower-than-marketvalue prices and an economy of scalpers—though some try to earn more through Ticketmaster's pricing options.

Pricing #1:

Traditional Teams or artists set prices the same for all events.

Pricing #2:

Variable In sports, all prices are set at the beginning of a season, but hot games are priced higher.

Pricing #3:

Dynamic Prices fluctuate even after tickets are on sale, based on demand; half of sports teams on Ticketmaster do this.

Beware: bots!

Brokers often use computer programs that have snatched up to 60% of tickets for hot events. Ticketmaster tries to detect and halt the bots, but it admits it can't catch them all.

Demand won't always match supply

That's expected. Large venues have between 20 and 40 price points, and a promoter won't drop the price low enough to fill all the seats. That only devalues the product. Rather, their goal is to upsell: "It's to get that fan who was going to buy the $30 ticket to say, 'I'll spend the $5 extra for the better seat,'" says Barry Kahn, CEO of the dynamic-pricing firm Qcue.

Unsold! 30% of all tickets go unsold.

[Illustrations by JeremyVille]

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9 Comments

  • brando@cashortrade.org

    TicketMaster has reported that over 200,000 tickets A DAY get scooped up by hackerbots... A DAY! ~ New York Times posted that. In an effort to be the change this industry so badly needs...I decided to join http://CashorTrade.org. CashorTrade.org helps fans score tickets at FACE VALUE while avoiding scalping. It is a a movement...over 36,000 members! Fans are coming together and its awesome!

  • Ian Cannell

    " bots snatch 60% of the tickets to a venue" I know, lets make up a figure that will outrage people. If 60% of tickets to an event were on the secondary market, the ticket price would collapse not increase. Who wrote this uneducated pile of shite?

  • jdaniel

    Not necessarily...commanding any large block of tix and properly timing sales to max out price would ultimately create upward price pressures that would support -not collapse - the pricing structure.

  • Randy Nichols

    Ian, I agree 60% is most likely a high estimate of tickets bought by bots. Regardless it is still a major problem for ticket buyers which the majority of scalpers try to ignore because it helps them.

    It's tough to trust a group of people who hide behind an organization called Fan Freedom when it's sole goal is to extract as much money from fans for tickets.

    You and your scalper friends are the problem, not the solution.

  • Randy Nichols

    Interesting article but way to over simplified with some poor assumptions. The thought that "They need all tickets to sell fast--encouraging lower-than-marketvalue prices " is wrong. Artists look to price their tickets at the lowest price they can charge while still maximizing their profits. It's not that they want to sell quickly, it's that they want all their fans to afford a show not just the richest fans.

  • Joseph Finn

    Fast Company, would it kill you to not have the majority of your article on images that we have to click every one of them to read?

  • Ike Ahnoklast

    The ticket biz is small potatoes, a distraction. What's needed is some way to wrest the real estate market from the NAR and their Monopoly Listing Service. Since their inception (according to their own publicly available records) the NAR have been in the top 5 (ahem!) "contributors" to Congressional interests and are frequently number 1 or 2. Coincidentally (miraculously?) the Congress-critters have always been too busy to examine the stranglehold and de-facto monopoly the NAR have over the business of listing and selling real estate. And the NAR are good at their game; they have many people convinced that it's some sort of metaphysical law of the universe that a Realtor(tm) is somehow naturally entitled to six percent of every transaction when if it weren't for the barriers to entry (the primary one being the Monopoly Listing Service) that cost - effectively a tax, tacitly supported by Congress - would be dramatically lower... The key here, as with tickets, is information. Here's my proposal: the current system is left in place but Congress mandates that any real estate offered for sale must be listed on a bare-bones (government operated?) WWW server that serves as a clearing house where only the basic info about each property need be provided: location, seller's contact info, basic property description (size, acreage, age, etc) Then, anybody who's looking for property is allowed to contact the seller directly without having to pay the NAR's tax. If the seller also wants to list with the NAR, that's OK, but anybody who finds the property via the clearinghouse is allowed to enter into a transaction with the seller. Anyway, something like that...