I’m just getting started developing strategicecon.com as a wordpress site. Basically I’ll be building the initial site contents around webcasts and other resources associated with my 2011 lectures
Why are private ticket resellers (“scalpers”) for the Warrior’s big game on Friday [ editors note – this was written for an NRL final couple of years ago – but the message is timeless] being vilified by disgruntled fans, uncritical media reporters, and Warriors’ management?
Let’s go back to demand and supply basics. Ticket reselling in an open competitive retail market situation like Trade-me is a good thing for fans, not a bad thing. Every resale of an event ticket on Trade me is to the mutual advantage of both the buyer and the seller. There is no coercion. There is no monopolistic price gouging. There are no back door dealings between mates or ostentatious corporate party packages at wildly inflated prices involved.
Lets suppose there were 10,000 additional tickets made publicly available for Friday’s big game, at typical Warriors game prices of $25 to $60 (half price for kids). At these relatively low prices there apparently was huge excess demand – thousands more people wanting to buy tickets than the number of seats available at Mt Smart stadium. Tickets got allocated in the first instance to whoever got through to Ticketek on the phone lines or over the internet….and then they get reallocated through a competitive trading process on Trade me.
Imagine that these 10,000 tickets could be resold on Trade-me for prices of say $300 each. That’s 10,000 happy kiwis. A fan who bought four tickets for himself and his family at $25 each can , after resale, watch the game with his family on the new flat screen television and Sky Sport subscription he can now afford with the extra $1100 cash he has in hand. And the fan who paid $300 for each of the four tickets gets to go to a game that he and his mates really wanted to (where “really” is measured by their willingness to shell out even more than $300 to watch this live performance rather than walk down to the local sports bar to watch the games). Everybody’s happy.
So who is complaining, and why? Fans who don’t get tickets at the open market price on Trade me? Well, that’s the way a competitive auction market works. If you can’t pay the going market price in a Trade-me auction you don’t get the goods – whether the goods are resold cars, resold houses, resold clothes or…resold event tickets. What about fans who paid $300 on Trade-me, got their ticket, but are bitter because they weren’t fast enough off the mark (or in the right “mates rates” loop) to get the first lot of tickets at $25 each direct from Ticketek or the Warriors. Well, any buyer would like to pay a low price rather than a higher price. The problem is that there were lots and lots of would be buyers at a $25 price, far too many for the 10,000 available seats. In economics speak we call that a shortage, an excess of demand over supply, at a price of $25. Prices rise to clear the market, making demand equal to supply at the going market price. So if you are willing to pay more than $300 to take in the excitement of the big game and you got a ticket at that price consider yourself lucky – there are other people who would gladly take your place.
The idea that a “real fan” would never sell a ticket for the live game for a higher price than he/she paid is rubbish. Fan’s differ greatly in their personal situation or willingness to pay to see live performances by the Warriors. Consider the thousands of season ticket holders who suffered through the first half of the Warriors season. Dad and the kids can go to the game live – or resell their 4 tickets for $1000. Would you begrudge them that choice? Does it make them any less of a fan because they prefer $1000 in the hand to watching the game live? Ditto for the local league club that has been gifted say 25 tickets to the game. Of course it’s great (for the select few club members) to watch the Warriors live – but 25x$250 is $6,250. That buys a lot of uniforms for the kids, ground maintenance and improvement, new locker rooms, transportation, etc. Sure it would be nice to have both ($6,250 to spend on the club AND some live tickets) but when the choice is there many sensible club managers would, for the good of the game and the glory of the Warriors, opt for the cash in hand.
I’d like to ask the Warriors CEO Wayne Scurrah in particular, and the shareholdrs and management for the Warriors and Mt Smart Stadium – to reconsider their views on ticket reselling. Moralistic stereotypes of resellers as “scalpers” just doesn’t cut it. Competitive re-trading markets do. I’m not questioning the contractual right of the stadium owner and event providers to trade the seats they provide under whatever terms – such as no reselling – they negotiate. But would you consider the idea that permitting and legitimizing ticket reselling could be both profitable for the sellers and preferable to fans?
Major sports team-owners (baseball, basketball, football) in the US have taken a different attitude towards online, direct reselling. The teams and leagues have given up trying (ineffectively) to crush the growing trade in direct reselling of event-tickets online, estimated at $US3 billion annually. Nowadays they either have their own on-line reselling sites (and take a fee for this service) or deal with brokers like StubHub, an online re-trading institution where fans resell their event-tickets and where sports teams refer their fans to in order to resell their tickets. ALL fans benefit , and the providing clubs benefit by getting a revenue slice they otherwise wouldn’t have from referalls or brokerage fees (see a nice op-ed opinion piece on this by Jeff Jacoby and also a recent NY time article ).
Fraud, not price gouging, is the biggest problem in event-ticket reselling. Large, reputable, online trading institutions, with their coterie of specialist resellers and verification methods, and publicly accessible and transparent open auction methods, actually solve both problems. For example, StubHub provides guarantees of ticket legitimacy, tickets being in adjacent blocks, and refunds for cancelled events as a component of its online services, for a fee. Online sites run by team and venue owners use electronic-swipe ticketing methods to record and register transfers as well as to guarantee legitmacy of resold tickets.
Once you look at the issue of reselling event tickets in this way it opens up some new ways of thinking about allocating event tickets in the first place. Why no auction off a sizeable number of tickets for every game in the first place? Indeed, if I were a shareholder in either the Warriors or Mt Smart, I’d be asking some hard questions about why this wasn’t done for the pricing of public tickets for the playoff games in the first place. If 10,000 tickets are sold between $25-$60 each, ie, for between $250K and $600K ,and they could have been sold for $300 each, ie for $3 million, who is accountable for the last $2.5 million in revenue?
It’s not good enough to trot out a generalisation that the whole idea is to make the game affordable for fans. Which fans? At playoff time there are too many fans for the available number of seats. Some get in for a low price but many more don’t get in at all. Has the game been made affordable for those who lose out in the ticket rush? Even if the Warriors gave away 10,000 tickets for free to whoever they deemed worthy (past supporters, mates of past supporters, kids clubs, one ticket for every amateur league player in Auckland), those particular ticket holders will be made better off by having the possibility of being able to resell their tickets in a competitive marketplace.
The key is that team-owners, stadium owners, fans and policy makers recognize and invest in the benefits of competitive secondary markets in event-tickets. Is that too much to ask?