Opinion: Live Entertainment’s Demand Dilemma Opinion: Live Entertainment’s Demand Dilemma
by Charles Kaufman – Special to TicketNews I recently sold some tickets to Dead & Company at Madison Square Garden: Section 106, Row 1- terrific seats; did... Opinion: Live Entertainment’s Demand Dilemma

by Charles Kaufman – Special to TicketNews

I recently sold some tickets to Dead & Company at Madison Square Garden: Section 106, Row 1- terrific seats; did it for a friend of mine who had two pairs of tickets and wanted to part with one of them. I listed the tickets for $235 apiece on Seatslink and they sold pretty quickly. The listing price was actually quite high as compared to other seats in that section, but I figured we could ask a bit more than others were asking since somebody would likely pay up for first row in the section, and I was right. That having been said, it was a bargain based on the face price of the tickets which was $350 apiece. So, my friend lost a significant chunk of change here. After selling fees he ended up recouping only 60% of his outlay. So much for the idea that the resale market always operates at a mark-up.

That the tickets were $350 to begin with is a symptom of a disturbing trend in ticketing, and is the culprit in why my friend lost considerable money on the tickets he couldn’t use. It’s also a major factor in why certain marquee events have struggled at the turnstiles. The disturbing trend here is that the primary ticket market has started to assign secondary ticket market pricing to their inventory in an attempt to squeeze out the brokers and get a better payout on their tickets. Regardless of your opinion of the resale market in general, this practice of inflating the face value of the ticket does nothing to either entice or benefit the consumer and it’s counter productive when it comes to a ticket office’s primary job- which is selling tickets!

Now, the hefty markup on the face price of the ticket is not just some stab in the dark, per se. The teams, venues, concert promoters, and what have you utilize sophisticated analytical tools to determine price and study pricing for action and elasticity, so they’re fairly confident that the price that they end up stamping on the ticket is what the market is willing to spend.

However, all of this ignores one key tenet of the ticketing ecosystem which is DEMAND, and more specifically, where that demand is coming from.

The starkest example of this was seen in the recent Mayweather/McGregor fight, where the face price on the tickets were based largely on what Mayweather/Pacquiao tickets went for on the secondary market a year or so earlier. For that fight, tickets originally offered on the primary market at reasonable prices were resold at exponentially higher prices because a large percentage of the original buyers were brokers who flipped the tickets for a profit.

Fast forward to Mayweather/McGregor, which was a flop at the gate, despite being a commercial success in just about every other way, mainly because the promoters priced out the public, and the ticket price was too high for the brokers to get involved. By most any rubric, an event is a success if it sells out- the quicker the better. Not only is it bad optics to see even a single swath of empty seats at a concert, but the marketing and promotional leverage that comes with a sold-out show is solid gold. It’s gotten to the point where the stigma and financial ramifications of not being an instant sellout can pose major threats to a show’s viability. Of course this wasn’t the case for Mayweather/McGregor since it was such a cash cow anyway; but as we’ve seen, for example, with Jay-Z‘s well-publicized Fresno cancellation and the depressed prices on the resale market for his tickets, artists can take major hits if their tickets don’t sell. Besides, the Mayweather fight did indeed result in profound losses for many who bought tickets after all.

There are a few general principals that guide the ticket market, whether as matters of fact or as matters of understanding. Each one speaks to the connections made with consumers. Furthermore, whether these principals are considered or ignored will dictate sales and attendance. These principals are:

  1. Demand for tickets to any given event is not necessarily based on public interest. It’s difficult to gauge whether or not fans are truly interested in an event before tickets go on sale, and to what extent. Even events that are expected, such as the start of a sports season; or anticipated, like a concert tour following an album release, are not likely to garner overwhelming and instantaneous demand, especially in markets with a variety of entertainment options.
  2. One goal of ticket sales is to convey a perception of scarcity. This is not unique to ticketing and it’s not below board in any way. In fact, when have you not heard a sales pitch that wasn’t accompanied by catch phrases like “Supplies won’t last!” or “Limited Time Offer!”? The difference is, a car dealership, for example, can still find ways to move unsold inventory after the BIG “Limited Time” sale expires. But tickets have absolutely ZERO value once the event has passed and any remaining inventory is a complete waste. So, it’s often extra important for ticket sellers- both primary and secondary -to create an illusion of scarcity, desirability, and demand in order to motivate would be customers.
  3. Demand for tickets is driven by brokers, who aide the primary ticket sources by taking inventory off their hands and assuming the risk of unsold tickets. Take Major League baseball, for example: Each team has 81 home games and each stadium holds around 40,000 fans. That equals upwards of 3 Million tickets to be sold over the course of a season. Only rarely can a team fill that many seats. In fact, MLB attendance for 2017 averaged at about 31,000 fans per game (based on tickets sold), meaning that roughly a quarter of each game’s inventory was not sold. Even sports and other events that operate on much smaller scales can’t usually count on selling out most of the time. When you factor in that customers typically won’t buy tickets until the need arises, you have ticket sales offices waiting to sell tickets on an event-by-event basis to individual fans. If expectations for your team are low or if its season gets off to a bad start, the public may stay away in droves, and then what? What really moves the needle for ticket offices is subscription ticket sales, in particular full-season ticket plans, because those get the most inventory off of their hands in the fastest possible way. Since you can’t necessarily rely on corporations and high-net-worth individuals that have the liquidity to invest in ticket plans to step up in adequate numbers, the best friend of the ticket office becomes the resale market because the brokers are willing to invest in ticket plans in order to turn a profit on certain events, while understanding that they’ll likely take a loss on others. Such is the case, the tickets are sold from the primary source and the risk is then transferred to the secondary market. The benefit to the consumer is that they can often now find tickets on the resale market for less than they’d pay on the primary market.
  4. The public is accustomed to waiting out the market in hopes of getting the best price. Consumers watch the ticket market like they watch the stock market, which means that they’re often looking for the best time to get in. The plan as always is to find the most value on investment. Be that what it may, purchasing tickets the day they go on sale is a lot like buying an IPO: The price you pay is likely not what it will be over time and sometimes your best plan is to let the market play out a bit before deciding to buy. The ticket buyers know this and will usually defer to a time when the market for an event seems at least somewhat steady before they purchase.
  5. There’s no real urgency on the part of the public to buy tickets. Precisely when to put tickets on sale is an inexact science because besides as a holiday gift, there are few reasons why anyone needs to buy tickets in November for a concert in April. Yet, you can’t put tickets on sale too soon before an event because you need to provide at least a little bit of time to raise awareness and coerce your customers; plus your customers need time to plan. So, the strategy is to offer tickets early and promote the heck out of them! Hopefully you have enough fans in each city to sell out. Any way you slice it, it’s a daunting task to expect to move that many tickets in an instant. The object of the game then is to get into people’s consciousness early enough that they’ll eventually remember to buy tickets.
  6. For most events, a sellout is impossible and an unrealistic expectation. You can’t show me a business on this planet that has 60,000…40,0000….20,000…or even 5,000 customers walk through its doors every single day, each of whom have already paid before entering, and who will almost certainly buy something once they’re there! Such a business simply does not exist. But, a packed house is still what most people would like to see when they go to an event. There’s something disheartening about being at an event that’s only marginally attended. It may even cause you to reconsider your own attraction to the event if it seems unpopular. Especially in this era of publically funded stadiums that are designed to cater to as many people as possible in as many ways as possible, empty seats are particularly glaring. Funny, you can be in Bloomingdales with 500 other people on your floor, and you’d think the place was mobbed even if nobody else ever went into the store after you left. But in a stadium where the attendance is in plain sight, you get a better sense. The fact that the eye test for attendance is so critical for teams and performers, makes the need to sell tickets all the more dire.
  7. A ticket is only worth what someone will pay, not what it’s listed for. Critics of the resale market often react to the astronomical prices they see listed for certain tickets to particular events. But the truth is that sales prices are the actual barometer of where the ticket market is, not the list prices. Tickets that are listed at high prices will come down if the market rejects them, or they’ll be sold offline at fairer prices. The resale market has an advantage in the ticketing space in that prices can adjust more nimbly on an individual basis and if you don’t like the price of a particular listing, competing listings at other prices are presented to you all in one place. In this regard, consumers actually have much more sway over the market than typically thought because if a listing is too high, the tickets simply won’t get sold.
  8. Choice in the marketplace benefits everyone and the ticket market is no different. There are a variety of reasons why someone might buy something in one place rather than another. Price, convenience, location, tradition, customer service, a relationship of some sort- these are all just a few of the factors that influence where a purchase is made. By the same token we’ve seen companies benefit greatly by making their products as widely available as possible, such as when Apple switched from offering the iPhone exclusively through AT&T, to a variety of wireless carriers. A common misconception about online commerce is that many of the subtleties of shopping don’t matter to consumers since they’re all just purchasing on their smartphones or sitting at their computers. But if we assume that everyone would just be fine with the exact same ticket buying experience, then we assume that everyone buys tickets for the exact same reason. While there’s not much difference in the actual act of purchasing tickets from one source to the next, there are still differences between how information is presented, additional services, resources, overall on-site experience, as well as price that will be important to each customer depending on what the specific needs are. In some cases, conventional wisdom might dictate that having an exclusive one-stop-shop for whatever your needs are is a secure and convenient way to get tickets online. However, that would again assume that everyone buying tickets has the exact same needs. The risk to the consumer then becomes that with a lack of alternative, deference ultimately sides with needs of the ticket supplier. The bottom line is that choice not only benefits the consumer as a matter of preference, but that subsequently, competition will help keep suppliers honest and (hopefully) striving to meet their customers’ needs. Not to be overlooked, since many stadiums are publicly funded or subsidized in one way or another, there’s a responsibility to get the tickets out to as many people as possible. Simply put, if I’m a taxpayer, I want to see the best possible return on my investment, so I’m demanding that the supply of tickets is not limited to one or two outlets.
  9. Ticket resale is a natural reflection of our overall economy. There really isn’t anything in our economy that’s NOT resold. Perhaps this is not so much the case in agrarian societies where farmers and agriculturists rely on their own supply of consumables and trade directly with each other. But, in the commercial supply chain, where consumer items go from supplier, to wholesaler, to retailer, and finally to the customer, the fresh quart of milk that ends up in your refrigerator is really 4th-hand milk! Your sneakers are also 3rd or 4th-hand if you think about it, once they get from the manufacturing line onto your feet. These are not frivolous steps, but are necessary in ensuring even and adequate distribution. This dynamic is also a major part of our economy on a consumer-to-consumer basis. Certain websites are devoted to resale, such as eBay, Amazon, Letgo, and countless others, which are in addition to garage sales, antiques shows, flea markets, and bazaars, all of them allowing folks to sell used goods. The event ticket really is no different in this regard and with the need to sell seats being so crucial, it behooves the ticket market in general to have inventory and events broadly marketed. Not only does it work on behalf of the consumer by providing a competitive marketplace, but it helps the primary suppliers in exposing inventory in a truly holistic way, each of which are fundamental elements of our economy.
  10. Discounting is a dirty job… but everybody has to do it! Part of the misgiving that the primary ticket market has with the resale market is that resale is often the cheaper alternative for certain events. This is due to an aggressive tactic by ticket holders (whether brokers or consumers) to move their tickets, and is offset by the fact that they can take a substantial premium on tickets for other events. The obvious dilemma for the primary market is that it makes it much harder to sell tickets on an individual basis if consumers know that they can pay less for tickets elsewhere. Besides this, nobody likes being told that something of theirs that they consider to be worth $50, for example, might be only worth $35. This would suggest a drastic miscalculation on the value of your own product. Ticket offices often respond by initially pricing high and then systematically reducing prices, for example through dynamic pricing (pricing the same seats differently based on a presumed demand or desire for a particular event as opposed to another), or by discounting altogether at their discretion. One issue with dynamic pricing is that while certain events are priced differently as compared to others over the course of a season, year over year the prices on tickets increase in general more than 90% of the time. So, teams rarely take stock of fan engagement or even their own performance from the season that just ended and decide to actually lower prices for the upcoming year. Even in-season price changes will almost always skew higher rather than lower, meaning a team that finds itself in a playoff battle late in the season will often raise ticket prices as the season progresses, rather than lowering prices if it appears to be falling out of contention. In terms of more generalized reductions, teams will promote across-the-board discounts on seats of their choosing for events of their choosing, either through their own ticket offices or through third parties like Groupon or Goldstar. By discounting what they want, when they want, and how they want to, the primary ticket suppliers not only get to maintain some control over the discounting process, but it’s also a PR play in the midst of high prices to offer something at a discount for the benefit of fans who can’t or won’t pay top dollar. The irony here is that the resale market was already discounting the goods and promoting the product. To be fair, the measured approach to discounting helps the primary ticket source save some face as they meet demand, because to simply make your tickets cheaper and cheaper is just a standard race to the bottom, which completely devalues your product. So, there needs to be some effort to toe the line between digging in your heels on price and cutting some slack. While discounting for sports tickets is to be expected and accepted because certain games are simply less attractive than others over the course of a long season, the concert ticket is a trickier instrument just because of the less certain economics germane to live tours. The assumption is that a particular performer should be able to fill each venue they’re booked in for the one night they’re playing- or for however long the run may be. Such is the case when a concert has significant unsold inventory; it’s often presented as having seating that was reserved to be discounted, or that previously “unreleased” tickets are being offered as a special. The reality is that the concert simply didn’t sell as well as expected and the hope then becomes that the more casual fan will buy in on the cheap, still purchase t-shirts at the concert, and will have a good enough experience to become a more dedicated fan going forward. Regardless of how and where tickets get discounted, events for which tickets are sold at a premium across the board are the exception rather than the rule. The more opportunity customers have to pay what they feel is appropriate (within reason, of course), the more likely they will be to support the product in the future, both as attendees and in other ways.

Since 2009, ticket sales among the major professional American sports leagues has been mostly flat, with attendance increasing at a rate for 5% for NBA games, and less than that for the NFL, MLB, and NHL. MLS is the only outlier amongst the leagues, enjoying an explosive 35% growth rate over the 8 year period. With average attendance close to 22,000 per game, MLS is now the third highest attended professional sport in the US, surpassing NBA and NHL. Part of the rapid growth for MLS is due to a few teams, such as the Seattle Sounders, playing in NFL stadiums with much larger capacities than the soccer-specific stadiums- which typically hold between 20,000 and 25,000 fans -that most MLS teams call home. But, in its infancy before teams built their own stadiums, MLS teams played largely to sparse crowds in NFL stadiums.

So, obviously there’s something else brewing here. Perhaps it’s a formula that the other sports leagues and many concert promoters have all but abandoned, and that’s in connecting with your public. Truth be told, MLS struggled to build momentum for more than a decade from its founding in 1996, mainly because it was marketing to the wrong demographic. The initial opportunity was seen to be with the soccer moms who may not have been huge sports fans themselves, but were minivanning groups of kids to play soccer on weekends, so could then easily minivan those same kids to see the pros play, thus cultivating a fan base. That proved to be a tougher sell than originally thought because the moms footing the bill for the tickets were probably a bit too soccered-out to make a ritual of attending MLS games. The true success came when the MLS shifted the focus to hipsters and millennials who had some disposable income of their own and who loved to socialize. As the stewards of emerging culture, these folks have been able to carry the flag for MLS as the fresh face of live sports entertainment. The fact that the MLS is also still the organically cheapest ticket on the market certainly doesn’t hurt. The lesson here is that if you engage the right fans at the right price, and let them take some ownership over the product, you’ll see actual, growing demand! It’s no wonder then that MLS has now contracted with Seatgeek, a traditional ticket reseller as its official ticket supplier.

But now, the more traditional big-ticket events need to rediscover ways to stimulate demand while facilitating a secure and reliable outlet for fans to buy tickets. Unfortunately for everyone, the methods of control being forced over everything from pricing to distribution is proving to be the wrong way to foster demand and it’s hurting everyone in the process.

This post was originally published on LinkedIn.

Charles Kaufman is President and CEO of Seatslink, a New York based ticket resale source founded on connecting more deeply with its customers so that they have truly memorable event experiences. Visit Seatslink online at www.seatslink.com, message me on LinkedIn, email [email protected], or call 718-676-0504 for information and advice of tickets, events, and other services.

Thank You for reading. I welcome your thoughts and feedback on this article.