Don’t outlaw scalping. Obsolete It. Teams should scalp their own tickets.

November 22nd, 2008 by Al Lewis (alewis)

a friend of mine (Jon Kingsdale in case he is reading this) once said, you can’t legislate that water should flow uphill.  Laws and regulations which forbid human nature, convenience, and free trade would fall into that category, and anti-scalping laws in particular are very high on that list.

 

Scalping is illegal in some states.  Where it is legal, regulations or team policies limit markups, or limit the number of tickets which resellers can buy, or something like that.  Whatever the degree of legality or not, all these interferences with the free market are usually easily circumvented.  Scarce tickets show up on eBay or ticket brokers at large multiples of face value often within minutes of when they go on sale.

 

The question we have at ThinkOOB is, why don’t teams and theaters and concerts scalp their own tickets, “convenience-pricing” as one might call it?  Why isn’t some percentage of tickets reserved for sale to the highest bidders one week before, a few days before, and an hour before the event in question?   There is obviously a “convenience market” for scarce tickets just like there is for anything else.  The “convenience market” consists of people who want to walk up and buy a ticket right before the event, or want to buy it on line instead of standing in line. 

 

Though it has rarely if ever been done in event marketing, this is not such a novel concept.  It is exactly what the airlines do.  People who buy way in advance get one price and people who walk up to the counter get quite a different price.

 

Because the events marketing industry does not do this, a whole secondary industry has evolved which, — at considerable extra cost due to having to circumvent rules, and/or stand in line and then pay marketing expenses — arbitrages between the advance-purchase market and the convenience market.  Convenience-pricing accomplishes the same arbitrage but with almost no added inefficiency.

 

Why wouldn’t sports teams and theatrical/concert venues do this today?  We can think of no good reason.  Maybe they think it would generate bad PR.   In that case, donate the extra earnings to charity.  The money we pay either go to charity or a bunch of shady middlemen…the choice is the team’s.

 

A perfect example is the Obama inauguration, where “free” tickets were fetching $10,000.  That $10,000 could just have easily gone to a worthy cause than into the hands of a lucky or well-connected middleman.

 

How do you then regulate regular scalpers and ticket brokers?  No differently from today.  Many would probably go out of business soon enough, just like the introduction of state lotteries put the “numbers racket” out of business.  It’s hard to imagine that middlemen, with all their extra cost of acquisition and marketing and administration, could compete with the efficiency of one central market, which – for added security, as viewed by the buyer — happens to be owned by the team or theater.

 

A few will stay in business, and that’s not bad either.   A team or venue can learn from their success to refine its own self-scalping model.  

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11 Responses to “Don’t outlaw scalping. Obsolete It. Teams should scalp their own tickets.”

  1. econmajor Says:

    I read all these postings now and always have the same reaction, which is why isn’t someone already doing this? Is it illegal? If so, why? Could someone please argue against this posting? What am I missing?

  2. GoSox Says:

    it has to be illegal right now for teams to “convenience price.” It is hard to imagine that this one blogger has thought up something that no team or rock group has ever come up with. BUt why is it illegal? And should be it illegal? It seems like there are three dimensions in ticket value. The attraction, the quality of the seat and the convenience of buying the ticket. The attraction, well, good rock groups charge more than bad ones and no one complains. Obviously the better seats cost more money and no one complains. So why would anyone complain about paying mroe for convenience? We already do pay it, to middlemen who operate outside the law and don’t pay taxes

  3. alewis Says:

    If it is illegal that’s news to me and why haven’t the teams and concerts been lobbying to change the law? What could possibly be the argument for a market interference which simply creates a black market. It’s not the same as interfering in the market for prostitution of marijuana where the laws are designed to protect people from the consequences of their own behavior. This law — if there is one — protects nobody except black marketeers.

  4. andrews Says:

    I would go to many mroe events and games if I could walk up knowign there would be an orderly market for tickets. The entertainment and sprots people would not jsut make the moeny that the scalpers now make — I think they would do even better.

  5. fromvawithlove Says:

    It never occurred to anyone on the transition team to sell the tickets and haev the proceeds go right into the coffers of the government? the sales could be anonymous so there would be no influence-peddling. They need to demonstrate an understanding of basic economics for me to trust them running the country

  6. openmarkets Says:

    Tickets are a commodity. When people want to see the show, the price goes up (Wicked/U2/etc.). When no one wants to attend (Bengals/Mariners/etc.), prices fall. The truth of the matter is that 60% of all live event tickets go unsold each year. Brokers who re-sell their tickets often sell them for less than face value. And, contrary to Al Lewis’ initial posting, ticket re-sales are legal in 45 out of 50 states in the US.

  7. alewis Says:

    45 out of 50? 60%? I’m glad to see someone actually has data here. since I didn’t actually have data, I can’t disppute your points but I think it just makes my observation more of a head-scratcher. Why don’t teams scalp their own if it’s legal? Surely they can guess which events and games are likely to sell out (basically any that anyone would want to see). You seem to be saying that resellers take on risk because they sell tickets below face value sometimes but once again that doesn’t change the basic point: Seats are priced according to one dimension (proximity). Why not also price them on another dimension (convenience of purchase decision)?

  8. DJ Says:

    This isn’t a basic need, its a luxury item, and I am surprised how so many people get worked up by it. If teams did this, no regular fan would be able to afford a ticket to a hot event. And what happens to events where no one shows up, do teams price these at $1? About 90% of the fans at any event are there at face value, the other 10% got shut out or were busy during the onsale, so essentially they pay a convience fee for someone else to buy tickets for them. The system works, if you don’t get a ticket, turn on the tv or radio.

  9. joan Says:

    DJ, tell me how this is a functioning marketplace. Last week I went on craigslist to buy tickets for today’s Celtics game. the game today is sold out, of course, it being school vacation week. But a guy on Craigslist had four tickets for $200 less than stubhub. I said sure and he told me to meet him at the rest stop on Rte 128. He would be driving a Mercury Sable and he was 6′”, 230 pounds with a shaved head, and could I give him my cellphone in case there was as change of plans?

    DJ, I am a 110-pound woman. Would you recommend that I show up? Is this how your marketplace works? Why can’t the Celtics just leave a few aside for convenience-buyers like me.

    By the way, I DID show up and he didn’t — he sold the tickets to a higher bidder.

  10. Game Ticket Says:

    these comments, oh these comments. Just subscribed to your RSS. Was searching for “game ticket” when I found “outlaw scalping. Obsolete It. Teams should scalp their own tickets. | ThinkOOB”. Yeah, very true.

  11. How to Get Six Pack Fast Says:

    The topic is quite hot on the Internet right now. What do you pay attention to while choosing what to write about?

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