Scalping the Scalpers
Ticket scalping – buying tickets to sought-after events and
re-selling them for a profit – is nothing new. It’s happened for as long as
tickets have been sold.
Today scalpers use networks and software to profit on an
unprecedented scale from online ticket sales, raising the ire of event-goers
and organisers alike. It’s a big deal, just take a look at the media it
generates.
Yet modern networks and software also give event organisers
the means stop online scalping, as this article explains.
_ _ _ _ _ _ _
Scalpers are abhorred for their ability to use sophisticated
computers, software and networks to purchase all available tickets to sought-after
events minutes after they go on sale. These tickets quickly find their way onto
ticket re-sale sites, often at multiples of the original ticket price.
Event organisers, who make tickets available at what they
consider a reasonable price – reasonable for them seeking a return on an event,
and reasonable for event-goers seeking to be entertained – seem at a loss for
an effective means to deal with online scalping.
In response, here is a simple market-based mechanism for online ticket sales, a derivative of a ‘Dutch auction’, which effectively
rules out online scalping:
The Solution
The solution rests on a single self-evident premise: that
the prices event-goers are paying scalpers for tickets are the prices event-goers
are prepared to pay for those tickets.
Concept:
Start selling tickets at a high price, then lower the price of tickets until they are all sold. Because the price of
tickets is always going down, re-sellers make a loss.
Implementation:
1. Before
selling any tickets to a sought-after event, set a ‘reserve ticket price’.
2. When
first releasing tickets for sale, set the ‘on sale ticket price’ well above the
price any event-goer will pay.
3. Lower
ticket price incrementally over time until tickets begin to sell.
4. Once
tickets are selling, hold the ticket price at that level.
5. After
an interval during which no tickets are sold, again lower ticket price
incrementally until tickets again begin to sell.
6. Repeat
steps 4 and 5 either until tickets are all sold or until ticket price reaches
the ‘reserve ticket price’ set earlier. (A yardstick for the ‘reserve ticket
price’ is the price the organiser would set using a conventional sales
mechanism.)
7. In
the case where tickets remain on sale once the ‘reserve ticket price’ is reached, continue
to sell tickets in a conventional sales manner.
The outstanding consequence of this approach is that event
organisers take all proceeds from ticket sales. Scalpers can no longer profit
from arbitrage between the sale and re-sale price of the tickets, since as time
passes the re-sale price will move lower, in line with the sale price.
An economist will tell you that using this solution, all
else being equal, event-goers will pay the same amount for tickets as they do
when the scalpers intervene. In practice some variability will intrude, but not
so as to inhibit an end to scalping.
Practically speaking
Online ticket sellers can invite ticket-seekers to place a
bid for tickets in advance of sales going live. Tickets are then automatically allocated
to them when the ticket price falls to that of their bid. This ensures
ticket-seekers get tickets only at the price they value them.
Sensibly, ticket-sellers will use data from previous events
to predict the likelihood of a bid succeeding. Sensible for two
reasons: because doing so will help the market to approach an equilibrium (ie. fewer
way high or way low bids causing disappointment), and because if they don’t do
it, someone else will.
One criticism of this market-based response to
scalping is that only the wealthiest fans can be sure of getting tickets. Note that this is already
the situation under current conditions, when it’s the scalpers who make off
with the loot instead of the organisers.
However, if organisers control the value of the tickets,
they can allocate that value as they see fit.
For example, an organiser could determine in advance just
how much money it wanted or needed to recoup from ticket sales for an event.
Once ticket sales reach that amount, it could halt sales and instead raffle off
the rest of the tickets for free, amongst those who bid at least a minimum
amount for tickets – based perhaps on the ‘reserve ticket price’.
Of course raffling tickets this way invites rorting. It’s
not a method that could be advertised in advance (if at all), nor one that
could be used regularly, else events might be overwhelmed with lowball bids
from those hoping to score a golden ticket. However, it is a method organisers
could use to assuage guilt about inequitable ticket allocation.
Alternatively, organisers could keep the premium from ticket
sales and use it to subsidise other less sought-after but nevertheless worthy
events.
Another criticism is that some people will pay
over-the-top for their tickets. However, here again, with the ticket proceeds
in their pockets, organisers have the power. Those ticket-seekers who pay the
most will get the best seats, that is obvious. In addition, organisers can arrange
special opportunities or rewards for the few highest bidders – the chance to
meet star performers, or a selection of prized one-off merchandise, and so on.
Once the mechanism is implemented, benefits and opportunities will quickly
accrue.
_ _ _ _ _ _ _
Online ticket scalping causes considerable angst to event
organisers and fans both. The solution given here returns control over the
capital generated by an event to those who generate the event. It’s a simple
solution that can be implemented at low cost with existing technology and
infrastructure.
And will earn kudos for whichever event
organiser takes the initiative.
___________________________________
Nice proposal. Another way for the organizer to return the "consumer surplus" (i.e., the amount collected which exceeds venue capacity times reasonable ticket price)would be to give every person who attends the function a refund. This refund could be uniform (equal to "consumer surplus" divided by tickets sold) or proportional to the price paid.
ReplyDelete