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

Comments

[bruce fryer]

And if you go to the event and wait 10 minutes after it has started, you can get great seats at face value from the scalpers who haven't unloaded their tickets.

[Ryck Marciniak]

Bruce, you are so right! However, our experience locally is that demand is far outstripping supply, so the chances of waiting till the event starts and purchasing the ticket at face value is very limited.