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June 2009

Ticket Scalping and Revenue Allocation

A ticket with a face value of $50 selling for $250—a 400% markup—what’s happening?  Not only that, but this escalation in price happens within minutes of the commencement of ticket sales, through postings on eBay, craigslist, and other sites.   But with our insatiable appetite for live entertainment, new acts or older ones on revival tours, this has become a low risk, high return endeavor for scalpers.  Should those fortuitous souls who were quicker with a mouse click, be the ones who should profit by $200 or more?  Not by my view—they’ve contributed little, if any, value.

What is interesting, however, is that scalpers, unwittingly, perform an ongoing economic exercise, helping to determine an equilibrium price for event tickets, one based on supply and demand.  And, the anecdotes in our newspaper confirm that some people are willing to pay exorbitant fees for the privilege of attending these events.  Then the real question is:  can we use this new equilibrium price and allocate the revenues differently or more appropriately?

There are potentially some other options:

  1. The performers and their management group could offer tickets at these inflated prices, pocketing the excess profits, dreaming deliriously of the pools of money they could be swimming in.  As the performers actually entertaining us, a case could be made for them deserving the excess funds, but the public may view them a money-grubbing so-and-so’s;

  2. Again, tickets could be offered at the inflated price, but the holder of record, who actually attends the event, could use their stub to submit for a rebate.  This would force scalpers to lay down more capital to acquire tickets and bear more risk related to their ability to markup the tickets and successfully sell them, hopefully dissuading them from doing it at all.  This option has all kinds of logistical and cost issues from lost ticket stubs to the cost of cutting checks to individuals;

  3. Finally, we could take a page from some charities.  They offer a gala dinner and dance with an individual price of $250, but the payee also receives a tax receipt for $125.  This would provide event goers with an additional benefit, while forcing scalpers to, again, assume more risk, and it could benefit local charities.

The underlying assumption I’ve made is that all event patrons are willing to pay the $250, which we know is not true, but wouldn’t it be great to eliminate the scalpers who add no value and continue to ratchet up the cost of attending these types of events.

Ryck Marciniak

Guest Blogger


Health Care Effeciency: The VA System Outperforms

I chuckle when I hear someone say "Everyone knows that _______".    And if you repeat it enough times and send it in enough chain emails it must be true?   

Here's one: 'The government cannot run anything well".   Then comes out this report.  Turns out the VA delivered health services with cost increases of .3% annually per enrollee .  Medicare's increase was 4.4% per year.   And how much have your insurance premium's been rising?  Employer's went up 5% last year.   Worth a closer look.

Here's another one: "Healthcare in Canada is so bad, a large number come to the US for treatment".   Turns out that isn't true.

Before you make assurtions take the time and go through multiple sources.   You will make better business decisions.  Getting to the root causes and solutions is time consuming, but well worth it.


The Trick to Low Price High Volume Businesses

With Cloud Computing, cheap computer and easy merchant services it doesn't take much to start a business.   Making it a successful business is a whole different thing.

The first mistake people make is confusing price with value.  The trick here is to deliver a high value product / service, but at a low price.   If your competitor charges $6 and you charge $5.50 that doesn't mean you get the business.  At some point price becomes irrelevant.   What do you get for your six bucks?

The first and most important place to start is service. 

  • Can your customer figure out what you have?
  • Can they get answers quickly?
  • Can they buy it easily?
  • Are there no surprises?
  • When something goes wrong can they get help?

Aa You must stand behind what you have.   I have been using a hosting service for the last 10 years.  They got good reviews, I signed up. I got an email from them the other day inviting me to check out some new goodies they offered.   Turns out by clicking a button they would install a copy of SugarCRM for you.  (this is the open source equivalent of Salesforce.com.) 

I pushed the button.

It installed and I logged in.  The first question was to confirm a time zone.  I did and the system crashed.  Horribly.  So I filled out a trouble ticket.  And here was my reply:

Hello Bruce,

I have tried logging in the Sugar CRM application and noticed that the issue you are facing is with scripting. We suggest you to contact the application vendor and fix the issue from your end.

If you have any further questions, please update the Support Console.

Sincerely,

Stan Harper
Technical Specialist


Nice.  So they will have 100% installation failure and I'm supposed to fix it.

Let's just say I won't be recommending these guys to anyone soon.  

So make sure you walk through every offering you have from end to end from the customer's perspective.  And that will serve you well.


DTV + RCA Box = Success

It works great.  We hooked up the old TV in the kitchen with the $40 RCA box and a single rabbit ear antennae.  Hit scan to get the channels.  And everything comes in loud and clear.  

The best part is the remote.  By coding the TV remote, one remote integrates both the TV and the box.  Great design.  And it works.

So glad we're close enough to the transmitters to not require any fancy reception.  For those of you in fringe areas, best of luck.