TICKET TOUTING

Ticket Touting

Ticket Touting

Introduction

Live music and sporting events generates $20 billion in primary market ticket sales in the U.S. each year. Reselling generates roughly $3 billion in revenue each year, and this number is expected to grow over the next several years (Mulpuru and Hult, 2008). An important distinction from other ticketed products, such as airline travel, is that event tickets are usually transferable, which is necessary for legitimate resale activity. In this study we focus on music concerts, which allow us to avoid the complexity that season tickets, a major component of ticket sales for sports, would introduce to the analysis.15 Concerts are organized and financed by promoters, but the artists themselves are principally responsible for setting prices.

Ticket Touting

Typically the artist and/or artist's manager consults with the promoter and venue owner to determine the partitioning of the venue and the prices for each partition. Promoters employ ticketing agencies to handle the logistics of ticket selling. The dominant firm in this industry is Ticketmaster, which serves as the primary market vendor for over half of the major concerts in North America. Ticketmaster sells tickets primarily online or by phone. Tickets usually go on sale three months before the event, and sometimes sell out on the first day. Choosing primary market ticket prices is a complex problem for producers. Venues often have over 20,000 seats, with significant quality variation, implying many potential price-quality menus based on different partitions of the venue. Rosen and Rosenfield (1997) provide a theoretical analysis of how to divide avenue and what prices to set.

TicketMaster has experimented with auctioning tickets in the primary market, but this is not yet common. The pricing problem may also be complicated by the possibility that artists have a preference for selling out the event, perhaps because artists obtain utility from playing to a full house, or because doing so enhances the experience for consumers.

These considerations may explain why artists seem to routinely underprice their concerts. It is also conceivable that concert tickets are complementary to recorded music sales and other merchandise, in which case the objective is not to simply maximize ticket revenues. Artists sometimes also cite a desire to be fair or assure access for all fans. All of these are interesting issues, but in this study we do not seek to model or explain primary market pricing.19 In our empirical model we treat primary market prices as exogenous. There is no federal regulation of ticket resale, but some states in the U.S. have laws forbidding or restricting ticket resale. For example, Arkansas, Kentucky, and Michigan prohibit reselling above face value. According to Fried (2004), as of 2004 there were 12 states with restrictions on resale, and 38 states without any restrictions (aside from limits on selling outside the venue).

However, as best we can tell, these anti-scalping laws are rarely enforced by government authorities, perhaps because they are regarded as victimless crimes.20 Nonetheless, in the U.S. there is a clear trend of deregulation: in 2007, ...