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Guest Commentary: The Future of Ticket Scalping Laws

Guest Commentary: The Future of Ticket Scalping Laws

By Brett Goldberg

Since 2007, New York state law has allowed the resale of tickets for profit; however, the law that legalized such resale expires this month, forcing the state legislature to reexamine the rules governing the secondary ticket market. While it is unlikely that New York will revert to an outright ban of the for-profit resale of tickets, further deregulation of the industry should be encouraged, both in New York and around the country.

Full disclosure: I am the founder of a secondary ticket marketplace, so I have a vested interest in the ability to resell tickets freely. However, deregulation is also in the best interests of consumers, venues, and performers, as we shall see.

Laws against ticket scalping create problems. Why? First and foremost, they inherently breed black markets, shady dealings, and illegitimate businesses.

The current law in New York says that a ticket reseller must be 500 meters away from the venue to sell tickets (or 1,500 meters for larger venues). Meanwhile, I have seen tickets sold inside the lobby of Madison Square Garden.

Under this system, if fans show up in person to a sold out show hoping to get in, they generally walk around with fingers in the air indicating how many tickets they’re looking for, while scalpers walk around pestering everyone they see to unload their tickets. To get any sort of transparency regarding what are “fair” prices (i.e., prices comparable to other tickets available for sale), fans need to deal with numerous sellers, frequently under pressured and shifty conditions, all the while worrying if they are getting scammed or will be interrupted by venue officials forbidding the sale.

Depending on the game or event that you are at, there could be over one hundred ticket scalpers working below the radar, making transparency next to impossible. (I refer to ticket scalpers as the people who sell tickets at the venue on the day of the show). By forbidding reselling, legitimate sellers and open dealings are blocked, yet for-profit resale goes on nonetheless, to the benefit of illegal dealers (who generally don’t pay taxes) and to the detriment of true fans who are deprived of a fair way to know their options and access to the event.

If you are looking to buy tickets the day of the event and it isn’t sold out, you can get tickets from the box office at face value. But who’s to say “face value” is fair? In the case of a show that isn’t sold out, face value most likely is not a fair price, since the supply of tickets has exceeded the demand at that price. Some primary sellers deal with this imbalance through discount resources, such as the TKTS Discount Booths for Broadway shows, and in most places fans or ticket brokers are able to freely resell tickets at or below face value. If the law allows for the market to accept a decrease in prices, why not an increase? If primary ticket sellers are allowed to profit from tickets that are initially overpriced, why can’t secondary sellers profit from tickets that are initially underpriced?

After all, ticket brokering is a gamble. For a broker who gets their hands on $50 Justin Bieber tickets, the bet is pretty safe, but for many events making a profit is not such a sure thing. So who wins in situations where tickets resell for less than face value? The fans that wait to buy tickets at the last minute definitely benefit, as do the artists and teams that sold tickets early before it became clear that demand didn’t warrant the face value price. For example, look at the recent Jason Aldean concert at MSG. This concert sold out in minutes, and the cheapest face value tickets were going for about $79. After that general on sale, there were more than 3,000 tickets available for resale. The day of the concert there were still 500 tickets available for resale online, and prices were as low as $30. Did Jason Aldean lose? Did the fans? Or did the ticket brokers who paid $79 or more for tickets that resold at $30, if they sold at all?

Putting more laws into place will restrict consumers’ options and freedom. Bans on for-profit reselling are intended to punish ticket brokers who would take advantage of eager fans, but in practice they fail to protect consumers or stop price inflation. Ten years ago, laws restricting the secondary ticket industry were much more prevalent, with virtually every event ticket marked “non-transferable” and for-profit reselling widely forbidden, yet the ticket broker industry thrived regardless. In fact, with for-profit reselling widely legal, profits for secondary sellers have decreased sharply: the average resale price of concert tickets has decreased by 10% over the last three years, while average face value prices have increased by 43% over the same period.

Much of this contraction is because primary sellers are responding to the secondary ticket market by adjusting their prices to more accurately reflect consumer demand: the legalization of for-profit reselling has actually benefitted primary sellers, by allowing them to see what fans are willing to pay and to price accordingly. Just as legality provides transparency for consumers looking for the best deal, it clarifies for primary sellers what their tickets are really worth—ultimately, through legalization, performers win, venues win, consumers win, and the only potential losers are the ticket brokers who can no longer profit from the exceptional circumstances facilitated by forcing the market underground.

I recognize that there are flaws and moral issues with the current system. The biggest sore points for those opposed to for-profit reselling are the resale of tickets for charity events and of tickets sold at low prices for high-profile events to promote the image of performers as caring about their fans. However, neither of these two issues justifies increased regulation of the market.

This December, after ticket reselling at increased prices for the 12-12-12 benefit concert to support victims of Hurricane Sandy caused widespread public anger, New York state senator Daniel Squadron proposed legislation to prohibit for-profit reselling of charity event tickets. While the idea of brokers profiting off a charity event may seem distasteful, it hardly harms the charitable cause: the 12-12-12 concert sold out, so organizers made just as much money as they were hoping for to help hurricane victims. In fact, since the secondary market ensures that as many or more tickets will be sold as will be used, it ensures that charity events will maximize their proceeds.

The problem of reselling intentionally low-priced tickets is somewhat trickier, but still not sufficient to require legislation. Without an open, legal resale market, $50 Justin Bieber tickets will still be equally difficult to get and potentially even more expensive to buy, because of the black market that will infallibly arise (not to mention that we would be revisiting the days of wondering whether a parent is breaking the law when he buys those above face value tickets as a gift for his child). If Bieber has 37 million fans on Twitter and only one million concert tickets to sell, high demand and high prices are inevitable, and making resale illegal will not deter those looking for a quick and substantial profit.

Fortunately, if artists, managers, and executives genuinely want to provide cheap seats for their fans, this is attainable: e.g., paperless tickets, real fan clubs, etc. In fact, fans should expect such approaches, as they are the most honest. The truth of the matter is cheap tickets are not about the fans. For most artists, they’re about strategically managing how to publicize the sale of cheap tickets while reaping the maximum profit from (other) higher ticket prices and VIP tickets.

It’s my belief that the secondary ticket marketplace will always exist and should always exist, as it provides options and freedoms that consumers deserve and have become accustomed to. As I discussed in my previous guest post, The Importance of Ticket Brokers, ticket brokers play an important and often unappreciated role in the overall ticketing industry. But even if the goal is to minimize the size of the secondary ticket industry, the only real way to do this is for the primary industry to become more efficient in determining fair ticket prices—a feat that a legal, above-ground secondary market enables.

Laws that are in favor of transparency are certainly good for the consumer, but history shows that laws restricting the resale of tickets are doomed to fail. The best way to benefit consumers and event organizers is through a free and open ticket market, where clarity can enable honest dealings so that fans know their options and performers earn what they’re worth. Whatever their intentions, regulations banning resale are detrimental to everyone—except those willing to subvert the law.

Brett Goldberg is an entrepreneur, live event fanatic and ex-investment banker. He is the Co-Founder of www.tickpick.com, a ticket marketplace that allows users to buy, sell and bid on tickets to sports, concerts and other live events. TickPick is the first bid-ask / two-sided ticket marketplace and strives to increase transparency and efficiency within the ticket industry.

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