What is Ticket Scalping?

There’s been lots of talk about ticket scalping following the recent CMA report and various recent articles like this one from DJ Mag. Let’s step back and cover some basic questions – what is ticket scalping? Why does it exist? Can it be prevented – and is that really desirable or even possible?

Scalping is the act of buying up tickets as they go on sale with the aim of reselling them for profit. They may call themselves traders or brokers, but you and I know them as scalpers or touts. This can be a very profitable endeavour if you’re good at it.

It’s a big business. Event ticketing was estimated to be worth around $28B globally in 2019. The secondary market was an additional $11B on top of this. This is revenue that’s currently being missed by creators and event organisers and instead pocketed by scalpers and secondary platforms.

Some artists have gone so far as to cut deals with secondary platforms and issue them tickets directly in order to participate in this upside (even ones that are vocally anti-secondary). This is not a good look for them when word gets out about it.

Scalping operates with varying degrees of legality from market to market. Some countries like Italy and Ireland have banned for-profit reselling, but the degree to which this is actually enforced is questionable.

Scalpers have all sorts of ways of getting hold of tickets. Some have direct relationships with promoters and venues, but many just use specialised software ‘bots’ to get through the ticketing checkouts quicker than the average punter can. Many have swathes of registered accounts with multiple credit cards under their control to get around purchasing limits (i.e. “maximum 4 tickets per customer”). This is obviously fraudulent activity.

Once tickets are offered up for resale they’re known as being on the “secondary market”. Some dedicated secondary platforms exist purely to facilitate reselling such as Viagogo, StubHub, etc. These platforms are what the recent CMA report was about.

Some “ethical” platforms only allow resale for face value or thereabouts e.g. Twickets. Artists will often encourage the use of these rather than Viagogo, StubHub, etc. (Scalpers love to point out that artists and their managers sometimes own a stake in these platforms.)

Increasingly primary sellers also facilitate ‘fan to fan’ resale. You could buy a ticket from e.g. Ticketmaster, only to then resell it through Ticketmaster again. Some tickets can only exist in ‘closed ecosystems’ and can’t be traded elsewhere e.g. DICE.

Reselling isn’t inherently evil. As refunds are rarely allowed for tickets (except when events are cancelled due to extenuating circumstances) fans need some way of getting their money back if they can no longer make an event after buying a ticket. Reselling facilitates this.

Event organisers also have a complex relationship with the secondary market. Scalpers buying up tickets as they go on sale provides a level of insurance and quick return on investment for promoters who shoulder the financial risk of putting the shows on. If tickets ultimately don’t sell then they’re the ones in the red, the artist will often have made their money from an upfront ‘guarantee’ payment.

And to be clear, not all resold tickets make money. Scalpers (and regular punters) regularly lose money on tickets. Have you ever been to a ‘sold out’ show and seen plenty of empty seats? The chances are scalpers took a punt on buying up these tickets and weren’t able to resell them.

But for scalpers the aim of the game is to make more money than they lose overall and generate profit. 

So why don’t artists/promoters just initially price their tickets according to market demand and capture this revenue themselves?

As with all commerce, ticketing is a matter of supply and demand. There are only so many tickets to an event, and there will be a market clearing price for each ticket. Amongst a crowd attending an event there will be varying levels of willingness to pay.

However, unlike most other ticket based commerce (e.g. airline, theatre, etc.) concert tickets are rarely dynamically priced (Ticketmaster Platinum being the exception to the rule – something to be covered in a separate post). This means that most buyers will pay the same primary market ‘face value’ price for their tickets regardless of their willingness to pay.

Additionally, artists often know they could charge more for their tickets, but choose not to so that fans from all walks of life can see them play. This is especially true of newer acts trying to cultivate audiences for the long haul rather than maxing out their immediate revenue opportunity.

If Adele was to charge the true market value for every ticket she put on sale she’d end up with rooms filled with only her richest fans, having priced out those with less disposable income. This is less of a consideration for someone like Elton John at the tail end of their career than an artist who expects to tour for a while yet.

Artists may try to capture the higher willingness to pay from wealthy super fans by providing expensive VIP packages, but this doesn’t solve the issue of regular fans fighting it out over the more affordable basic ticket inventory with scalpers.

A show that sells out quickly is also a preferable “look” for an artist than one that better matches supply and demand but takes 3 months to do so. Being able to share a tour poster with “sold out” plastered across it a week after going on sale is very desirable and valuable signalling.

The resultant discrepancy between willingness to pay for tickets and their market price provides an arbitrage opportunity for scalpers to exploit. 

So what are the options for artists that want to get their tickets into the hands of true fans at a price that they determine?

They can try putting T&Cs on tickets that don’t allow tickets to be resold. If tickets are then seen on secondary sites they can be cancelled and put back on sale on the primary market. Sadly this is tough to police and not ideal for consumers (they’re now stuck if they can no longer attend an event and want to get their money back by selling their ticket on).

They can try to ensure real fans get first dibs on tickets. This can be done via presales locked down to mailing lists, social media, etc, but scalpers are wise to this and can game most of those systems to get access. Credit cards, telcos, etc. also often pay for presale rights which means not all early tickets can be controlled (e.g. O2 Priority Tickets).

They could use a closed ticketing ecosystem like DICE that doesn’t allow resale and takes away the scalper’s incentive to buy in the first place. This is effective but ticketing deals (and vertical integration) mean tickets often have to be sold through certain providers. “Free market” proponents will also argue that locking tickets down to closed ecosystems like this is anti-consumer as once a ticket is purchased it should be up to the user what they do with it. (N.B. I personally think this is a load of old horseshit.)

Then there’s the promise of NFT ticketing. As we’re seeing in the current NFT art boom, one of the interesting aspects about NFTs is that they allow the original creator to participate in resale upside. If NFT tickets can reliably allow artists to capture the true market value of their tickets rather than scalpers then they will be a game changer.

There are lots of people making headway in this space including Get Protocol , True Tickets, YellowHeart, etc. As with all ticketing startups, their challenge will be getting hold of desirable ticket inventory in the first place – not easy given the vertical integration of incumbents.

Ultimately scalping will continue until all participants in the value chain are truly incentivised to see it eradicated and/or artists are given tools to ensure that true fans are offered tickets first rather than the ‘first come, first served’ system that currently pervades.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s