goinggoingGONE to the guy in plaid!

Planet Money has informed me that Ticketmaster, tired of watching so much surplus go to scalpers, has decided that they have seen the enemy and it is them:

Ticketmaster wants in on the action. So later this year, the company will introduce variable pricing. For shows where everybody wants a seat, the price of a ticket may rise. When there are lots of unsold tickets, the price will fall.

This is all well and good but:

But putting this into practice could be complicated.

“When you’re talking about a concert ticket, it’s about an artist,” Marie Connolly, an economist who has studied the music industry, told me. “There’s this weird emotional relationship that comes into play here.”

A concert ticket isn’t a cold, calculated exchange between two people who are never going to interact again. It’s one transaction in what is typically long-term commercial relationship between the musician and the fan.

So in the long-term, it may be in the musician’s economic interest to sell tickets at a price that’s lower than the absolute maximum the market will bear, Connolly said. That way, fans still have warm, fuzzy feelings about the musician — and keep coming back for more.

I am sympathetic to this in my own warm, fuzzy feeling nodes but the cold, hard critical analyst in me says that never again will such a model be sustainable. As it happens buying tickets to your favorite band consists of:

  1. Go on the ticket-selling website a few minutes before the tickets go on sale.
  2. Hit CTRL+R a whole lot.
  3. Try to buy tickets at the stroke of 10:00AM.
  4. Fail.
  5. Vent.
  6. Buy tickets on StubHub.

So it’s not like the status-quo really works.

Anyway I happen to have a great way to fix this problem – concert tickets should be digitally auctioned. On sale day any individual can make a bid of $X for 2-4 tickets. After the auction closes later that day the highest bidder gets their tickets, then the next highest, and so on until the event is sold out. Perhaps you could suggest a “target” price that you expect to be the median. Here’s why this would work:

  • Most people would bid, presumably, something close to the maximum they would want to pay to see the show, tempered by not wanting to drastically overpay. This would allow for demand-sensitive pricing, with the surplus captured by the original seller.
  • Scalpers would have no angle. If they outbid the field and get a monopoly on the tickets they’ll be outbidding the maximum everyone was willing to pay to get the tickets in the first place, and be stuck selling them for a loss.
  • This would be good for the sellers because I suspect the mean and median price of the auctioned tickets would be higher than the set price they would have charged otherwise.
  • It’s less time-sensitive, and thus far less stressful and arbitrary.
This would work especially well with general admission venues where every ticket is of equal value. If you had leftovers after initial bidding you could sell the remainder at the median price of the auction. I think this would work especially well if you were transparent about what shares of the ticket price went to the venue and the band, because people would probably be less inclined to feel ripped off if they knew that most of the money was going to their favorite band or venue as opposed to the various middlemen (whether or not that’s the “right” way to think about it). On StubHub it is painfully clear that the scalper is in fact claiming a scalp so anything is probably better than the status quo.