Fans continue to vent their anger online about being unable to get face value tickets for many concerts, sporting events and popular shows and most of their disdain is directed towards scalpers (or ‘touts’ for our UK readers). However, is it fair that professional scalpers selling tickets in the resale market should be singled out for criticism by the fans?
Face Value Is Not Market Value
Firstly, it should be noted that the concerts, sporting events and shows that have a big secondary market initially sell face value tickets that their promoters know are below market value and underpriced. Most fans automatically assume that face value tickets represent fair market value but this is simply not the case. As most economists would tell you, the secondary resale market is simply displaying the characteristics of basic supply and demand – the tickets are priced too low in the first place given the demand that exists to buy at much higher prices and the promoters know this.
The disconnect between demand and supply in the primary ticket market is so widespread that it is estimated that the secondary market will be worth $4.5bn in 5 years time. So, if they know their tickets are underpriced relative to market demand why don’t the promoters, artists, teams and/or venues increase the price of the face value tickets and make more profit?
Why Not Match Face Value Ticket Prices To Estimated Market Value?
Well, many have tried this approach and been burnt by a backlash from the fans. For example, Barbra Streisand tried to charge over $1000 for some of her seats in her Rome concert and created so much anger that the show was canceled. Could those tickets have fetched $1000 or more on the secondary market? Probably as they had done so before but for the artist herself to demand such a high price was too much for most fans. Streisand and some other artists like Michael Bolton continue to price their tickets at the maximum price they think they can get but they are largely in the minority due to the negative reaction of fans.
The Reality Of Ticket Prices & The Resale Market
The reality is that concerts, sport events and some shows are intentionally priced below their market value by venues & promoters who make up the shortfall by increasing prices for items within the venue (i.e. merchandise, food & drink) as well as getting involved in the secondary market themselves which most fans have no idea about.
Performers, teams and shows who consciously undercharge their fans are not doing it out of the goodness of their heart. They have worked out that they will get more profit overall by filling the venues and then maximizing the money per customer whilst they are inside the venue. It’s a very similar strategy to the one employed by casinos and cruise ships which take a hit on admission prices but over charge on other items.
There is also evidence that many artists (i.e. Justin Bieber) are now also very active in the secondary market as they want a bigger piece of the pie without letting fans know it is them bumping up prices. They can sell their own tickets on the secondary market anonymously rather than annoy fans by increasing their face value tickets to the prices they know they can achieve. An economist or business person may say this is fair and smart but many fans are likely to feel let down that the artist or team they want to see is actually a big player in the secondary market.
Andrew Parry is an entrepreneur, sports fan and founder of www.ticodo.com – a ticket search engine that allows users to compare and buy concert, sports and theatre tickets in the United States, Canada, Australia, the UK and most of Europe. It shows face value and resale ticket prices.