All week, season ticket holders at Liverpool Football Club have been up in arms at a denial of their “right” to a ticket for next week’s European Champions’ League Final. Yesterday, meanwhile, Prince sold out tickets for seven London gigs in twenty minutes (and crashed his booking system to boot).
For most events, ticket prices are fixed (at least until touts/scalpers get hold of them) and supply limited. Demand has to be restrained by rationing – ballots (skewed by points for loyalty) for football; chance (and the willingness to hammer away at F5) for music.
But all this begs questions that should (and probably do) bother economists. Why are ticket prices kept so far below what people are prepared to pay? Why do event promoters (irrationally) allow so much revenue to leak away to touts? Why aren’t auctions, or other market mechanisms, used to equalise supply and demand?
In theory, auctions are perfect for events. With fixed prices, there will almost always be too many or too few ticket buyers. Neither case is good for promoter or performer. Ticket holders win in the former case: they’ve underpaid and can sell for a profit if they so desire; but lose in the latter, as not only have they paid too much but their experience is diluted by a loss of atmosphere.
The loss for musicians is particularly pressing. As digital rights for music become ever more leaky, the future rock star may be forced to follow the pioneering example of the Grateful Dead. Use recordings to build a following and relax about making money from copyright. Instead, make money from the live performances that the following now demands.
I can think of three reasons for stopping auctions from being used more widely – none of them totally convincing:
- Liquidity – not enough buyers will turn up to bid. True in 1970, sure. But surely not in the era of the online auction (and all its potential to maximise returns).
- Regulation – governments may not have explicitly prevented auctions, but promoters fear they’ll step in as prices rise. True perhaps for football – but not for last generation popstars.
- The fan effect – the most passionate fans generate vital buzz/atmosphere/credibility; promoters/performers want the loyal, not the rich in the front seats. Again, true for sport and true for a band building its career. But not for those like Prince milking a cash cow (after 28 gigs in London, he plans to ‘take time off’ to read the bible). And does anyone think this argument applies to Formula 1 or golf?
A hybrid model would further dilute all three of these objections. Take your average premiership football game. Continue selling 70 or 80% of the tickets in blocks to season ticket holders (itself, it should be noted, a property right that people at many clubs must now queue for) and then auction the remainder (those most likely to end up on a secondary market) to the highest bidder. That way you still get the ‘real fans’ in the ground, head off government regulation, and bank plenty of money at the beginning of the season.
So – a prediction. We’ll see some high profile auctions sometime soon, probably in partnership with eBay, which already sees millions of pounds of grey transactions for most major events. Expect late career musicians (or possibly a charity event) to be first off the mark. And that once the taboo is broken, event auctions (diluted by loyalty schemes) will quickly become the norm. At first, people are going to hate it. But it has to happen before too long…
