Monday, October 08, 2007

Got your redhots! 

A very good friend of mine talked to me about the use of software to buy up scads of tickets on TicketMaster and then resell them at higher prices. I'm fascinated, by the way, that Hannah Montana tickets on StubHub are averaging $5 more than Springsteen tix. It seems we are willing to pay more to impress our children (or nieces) than to treat ourselves to a rock concert and trip down nostalgia lane. There's a principal-agent story in there I think, but that's not my point here.

My friend wondered if this would lead acts (or their promoters) to raise their prices to capture back some of the profits that these sophisticated market-makers were earning. Via Mark Perry, StubHub is sharing its earnings with Major League Baseball. Now in sports the incentives may be different. One baseball executive notes that StubHub as a legal market will increase the demand for season tickets, as excess tickets from an 81-game package are more common but also more easily moved. But more to the point:

StubHub ... reports the average price of a ticket being sold on its site for games at Chase Field in Phoenix was $105. Some tickets sold for as little as $22.

But back at on the Northside of Chicago at the friendly, but pricey confines of Wrigley Field, a larger fan base and more limited supply of tickets had driven the average resale price up to $334, with some tickets selling for as much as $2,177, and standing room tickets going for $100.

The difference made it worth it for Cubs fans to catch a plane rather than the Chicago L to a game, especially if they could cash in frequent flyer miles. So about 11.3 percent of the Arizona tickets being purchased on StubHub were going to Illinois buyers, while only 0.5 percent of the Wrigley tickets were being sold to fans from Arizona.

...The fact that there are services like StubHub only increases the supply of tickets that can be sold on the secondary market, thus lowering the price.

The tickets are thus delivered more efficiently. One may whistle to himself as someone bags the $6000 per ticket for another potential Red Sox-Yankee cataclysm next week (that's not a prediction, and not even a desire from this Boston fan), but the market moves resources from those who value them less to those who value them more. The Sox-Angels game yesterday had perhaps 20% of its attendees as Red Sox fans, because the tickets were cheaper and Sox fans are more intense as a one-team city. (Even Red Sox-Yankee tickets, though, sometimes go for decent prices.)

My friend's question is a good one, though: What differs between the sports and music industries that might make scalping good for one and bad for another? If I'm missing something here, put it in comments please.

Worth a listen: Russ Roberts' podcast on ticket scalping.

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