Scalping Ain’t Easy

John Gruber recently wrote:

Peter Kafka, at Silicon Alley Insider, claims the “obvious solution”
to Hannah Montana ticket scalping—wherein $67 tickets are being
re-sold for upwards of $250—is to raise the initial selling prices
of the tickets, so that the money die-hard fans are willing to pay
goes to the artist and concert promoter, rather than to the scalper,
and then to reduce the prices after the initial high-priced demand
passes.

Good advice, I say. And, of course, it’s exactly what Apple did with
the iPhone. Except Silicon Alley Insider didn’t see it that way with
the iPhone, writing “To us, this move suggests the phone is not
selling as well as Apple had hoped,” and “[The real issue] is Apple’s
obvious misjudgment of the market for a flagship product.”

The problem is that concert promoters and the venues they book at aren’t
terribly interested in maximizing their revenue from ticket sales. Their
primary concern is filling up the venues. They charge a premium for
location and a premium for certain acts, but they don’t exactly go after
the scalper market because that market actually makes the process more
efficient.

If the venue were to charge scalper-level pricing, scalpers wouldn’t buy
the tickets in order to re-sell them. The people who buy the scalper’s
inflated ticket prices may or may not pay the same amount to the venue and
the concert promoters have no idea how much people would be willing to pay
or even what the size of the market might be for these tickets. So they
price the original tickets at a level that works for them.

Scalpers then speculatively buy those tickets in the hopes that they can
make some profit through arbitrage. If they can’t move the tickets, then
they’re out the money. So they only buy what they think they can sell. The
concert venue gets to sell out (and make money from the full audience through
concession sales, programs, t-shirts, and such) and the scalper gets the
chance to make substantial profits with little effort.

Scalping is a legitimate and useful service. People just don’t like paying
more than the face value for anything.

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