The Godfather opens with the apprehensive undertaker Bonasera asking Don Corleone to commit murder for hire, to which the Don replies “Why did you go to the police? Why didn't you come to me first?” Translation: when the natural order of things fails, thugs like me are happy to step in and make a market serving the needs of mankind. And if Don Corleone were alive today he would be making a market in ticket scalping.
Let’s be honest. It’s called ticket scalping. Dump the apologetic “secondary market” corporate speak. Ticket scalping is as old as ticket selling. I remember experiencing this as a kid outside Madison Square Garden in the 1970’s, watching sketchy characters hondle Knick and Ranger tickets until the price bottomed out minutes after the game started. The only difference between those days and the StubHubs and eBays of today’s digital world is that the transaction now takes place online by credit card rather than on Seventh Avenue for cash. And scalping will continue due to a disconnect in the natural order of things.
That disconnect is a disturbance in the law of supply and demand. In a free market prices move based on the availability of goods and the demand for them. The same is not true for concert tickets where prices are static from the on-sale and artists routinely price tickets lower than the market will bear. Bless them for this but it creates a gap between face price and what fans are willing to pay that cannot be remedied due to static pricing. So the natural order of things fails and the sketchy Corleone-like thugs step in with bots, apps and websites to make a market. But they have no skin in the game and take money out of the artists’ economic ecosystem every night at thousands of venues.
In the UK, the House of Commons tried to stop scalpers through a Select Committee designed to expose their increasingly damaging impact on artists and consumers. That didn’t stop StubHub, for example, whose European legal rep responded that his company “was under no legal obligation to police users of our site." Corleone, anyone?
Similar efforts are being made in the USA where about a dozen states have laws that ban ticket bots. New York State Attorney General Eric Schneiderman commissioned a special report on this topic to support his efforts to control scalpers who he says charge an average 49% premium over face price. The U.S. Congress passed the BOTS Act banning the use of automated ticket purchasing software and enabling the Federal Trade Commission to prosecute violators.
Good intentions aside, these regulatory efforts will not succeed. The opportunity is too lucrative for scalpers not to move their bots and servers to places outside the reach of the law, like Russia and China. Also, tickets can be scalped on rogue websites and BitTorrent systems.
Yet there are some solutions for artists to correct the imbalance in the natural order of things, please their fans and get back what is rightfully theirs. The solutions rest with restoring the law of supply and demand. One newer way of doing this is dynamic pricing, which airlines have used for years and is being rolled out in parts of the NFL and MLB and for some concerts. Dynamic pricing to the demands of the market certainly fixes the imbalance that created opportunity for the thugs, but pricing could reach levels artists historically have not wanted.
A second tool we are seeing is paperless ticketing used on shows by One Direction, Red Hot Chilli Peppers, Iron Maiden and announced for the fall opening of Hamilton in London. While electronically tying the mobile phone and ticket bar code of the original purchaser works to vet out secondary purchasers, the process of requiring ID and credit cards does creates longer wait time for venue entry.
A third way for artists to control the scalpers is to claw back the best seats and carefully control their sale as part of VIP ticket packages enhanced with premium content and exclusive experiences that only the artist can offer. VIP packages include a great seat, exclusive VIP merchandise, special laminate and once-in-a-lifetime experiences like a backstage meet-and-greet with the artist, attending a sound check or backstage party. VIP packages create real value for the fan well above the free market (formerly, scalper) price point.
Scalpers do not have access to the official goodies to include in their own packages and they can’t profit selling what’s available in the third balcony so they stay away. Hundreds of artists across genres now contract with VIP program providers to beat back scalpers on their tours by offering premium VIP packages to their fans.
Dynamic pricing, paperless ticketing, VIP efforts and more are needed to expand industry-wide on every feasible tour and should not stop until all those Corleone thugs take their final bow in the tomato garden.
Andrew Tenenbaum is co-founder of the VIP ticketing company Future Beat.