The Rising Battle for Ticket Second Market
If you’re an event organizer, it’s hard to decide whether the ticket second market is a bane or a boon to your existence. This article sheds some light on what was once a rather shady practice and how it currently affects the market.
The term “scalper” has never been a flattering one. In the 1800s, people who “scalped” unused portions of railroad tickets (railroad companies charged less per mile the longer distance you traveled) for highly inflated prices were likened to those who collected the scalps of their battle victims or those who derived money from the poaching of destructive animals.
Today, the ticket second market is no longer representative of shady deals done covertly in alleys outside of sports stadiums. It’s handled on the mainstream Internet through popular companies like StubHub, RazorGator, TickPick and others. According to Sports Marketing Quarterly secondary ticket companies have grown into a $15 billion industry in the U.S. alone.
While the secondary ticket marketers are no longer seen as con men, sports franchise executives, entertainers, and other event organizers don’t have a favorable opinion of these secondary outlets. The ticket second market may just be a necessary inconvenience the organizers live with because with all the undercutting it’s guilty of, it also drives demand by inflating value.
Supply and Demand: the Blessing and Curse of the Ticket Second Market
If we can harken back to our studies of economics, you might remember the effect of supply on demand. Scarcity drives desire. When ticket second market and its resellers buy event tickets in large quantities and then parse them out at higher prices, this means fewer tickets are available to individual purchasers. Scarcity increases price and allows the secondary market to control seating options. The consumer worries about missing out and buys tickets at higher prices because of a concern over scarcity and not having inventory “tomorrow.”
There are thousands of ticket resellers on the secondary market. For sporting events, 25 to 50 percent of total seat tickets are sold by these groups. Sometimes planners want the prestige that goes along with selling out an event in “hours” and so they transfer tickets from the primary market to the secondary one. Imagine a large name concert not selling out. This is something organizers don’t leave up to chance.
However, while quick sell-outs are expected from fans and drive emotional purchases, they do not always leave customers with a smile on their faces. Adele fans were outraged when her 2015-2016 concert tickets sold out in minutes after leaving many fans on lengthy online holds. Recently, the Cleveland Indians sold out the remaining World Series tickets in less than 15 minutes. But quick sell-outs aren’t just issues for sporting and concert events. Comic Con 2016 in San Diego and Pax tickets sold out in Seattle in under an hour.
Best Practices to Kill the Secondary Market
Axe the Profit
Some franchises have become so disenchanted with secondary ticket sellers that they work very hard to price tickets at what the market will bear. The Ultimate Fighting Championship (UFC), for instance, makes it difficult for resellers to turn a profit based on their ticket prices. UFC prices tickets high at almost the top point of what attendees will pay so there is no room for profit. This makes scalpers less interested in these tickets, it increases profits for UFC, but it does nothing to maintain economical ticket prices for the audience.
The secondary ticket market exists solely because attendees have valued these events much higher than what event organizers are charging for them. Price the tickets at the high end of what the market will bear, like UFC does, and eliminate the middle-man profit.
Ticketmaster and other organized secondary market players have been using their extraordinarily large data set to price tickets at the high range of what the market will stand, siphoning off what the artists leave on the table.
Limit Sales and Transfers
Another way to eliminate the secondary market is to limit the number of tickets purchased at one time but what is that perfect number? It’s also important to note scalpers have access to multiple credit cards, many more than an individual does. For the Dave Chappelle event in Ontario, tickets were designated “non-transferable” but that hardly stopped the secondary market.
Keep Sales Inside
In order to foil the ticket secondary market, Songkick sold 235,000 tickets through Adele’s website (about 40% of total ticket sales). This allowed them to better monitor and track who was buying what. Songkick estimated it blocked 53,000 requests for tickets this way and saved fans $6.3 million in markups.
Make Inventory More Transparent
Another way to combat the secondary market is by making it very transparent how much of the ticket inventory is held and for whom. Tickets are always held for industry insiders and fan clubs or in corporate events, like DreamForce, held for top customers. Allowing attendees to see what is allocated to what group will help them understand the ticket sale process better.
Legislate Against It
Perhaps the only true way to avoid it is through legislation. Prior to July 2015 when it was amended, Ontario, Canada had a Ticket Speculation Act on the books that made it illegal to sell tickets above face value. However, the attorney general of Ontario argued that the Internet makes it incredibly hard to enforce. The province was only enforcing about 25 cases a year.
Some artists have even tried to litigate against it. Who can forget Pearl Jam’s lawsuit against Ticketmaster and their fees?
However, is killing the secondary market something event organizers really want to do? With the growth of the secondary market, large-scale organizers have had less inventory to worry about. When you cut off the secondary market, you’re back to selling out your own event and getting (potentially) stuck with inventory. There are also no price inflations caused by the perception that tickets will be hard to get, which means the event itself must hold value. This places great risk on the organizers, many of whom gave that risk up years ago.
How the Secondary Market Continues to Change
Not all secondary ticket sellers are large companies. Many are individual entrepreneurs who buy low and sell high. Between credit cards and other special memberships, some groups get early access to tickets that they can then sell at higher rates once it’s announced tickets have sold out. These individuals used to assume great risk in buying early and hoping to sell but with Craig’s List and Facebook’s new Marketplace, networks are easily expanded from hundreds to thousands of people with very little overhead.
Secondary Ticket Market Aggregators
One of the things consumers found the most disconcerting about using the secondary ticket market companies was knowing when the price they were seeing on these sites was a good ticket price. Along came ticket aggregators that search major sites for the best deal, similar to how Kayak operates for the travel industry.
The Consumer Rights Act 2015
In the UK secondary ticketing is estimated to be a £1 billion industry, with about £40 million worth of ticket fraud associated with it. In order to combat this, the House of Commons accepted the Consumer Rights Act 2015. Under this, resellers and the secondary market must:
- Provide basic information on each sale including the location of the seat, face value, and any limitations or stipulations on the ticket.
- If you’re an organizer or an operator of the event, you must disclose this to the person buying the ticket.
- Event organizers cannot cancel a ticket or “blacklist” a reseller unless permitted to do so under the terms and conditions of the ticket.
- Secondary ticket sellers must disclose any criminal activity they see at their operation.
- Anyone who fails to comply may be fined up to £5,000.
This legislation is seen as a quiet victory for “Put Fans First” and a step towards transparency in a historically shady practice.
Across the ocean in January of 2016, New York Attorney General Eric Schneiderman called for the New York legislature to protect consumers and prevent secondary resellers from snatching up tickets before they can be purchased by individuals. This is the result of a three-year investigation by his office on the event ticketing industry.
Legislation of this sort would be a reversal of a 2007 state legislature repeal of “anti-scalping” laws that helped sites like StubHub grow. The thought at that time was to legitimize the larger agents to prevent fraud on the street with scalpers hocking tickets five minutes before a game.
Technology Helps Brokers
While an individual is held back by limits on personal credit cards and number of tickets allowed, large resellers use bots to purchase ticket maximums on hundreds of credit cards. New York law currently bans this practice but only imposes civil sanctions on violators. Perhaps with the threat of criminal charges, that practice will change. But then again, if there’s money to be made…maybe not.
The ticket second market holds interesting possibilities for event organizers and consumers. While it mitigates the risk for event organizers and keeps ticket prices high, it also creates inflationary demand, which drives immediate, emotional purchases. We will most likely continue to see legislation on both sides of the Atlantic and in other regions of the world as we all try to find the perfect balance between consumer protection and entrepreneurialism.
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