The Verge reports on new efforts from Lin-Manuel Miranda and New York Senator Chuck Schumer to crack down on those who use “bots” to quickly, and in bulk, purchase scarce tickets on primary sites to then resell on secondary markets at a mark-up. The story quotes Mr. Miranda saying,
“My concern is that our show [Hamilton] is about the founding of our country and if bots are buying up all the tickets and charging this insane secondary market price, most of the country can’t see it.”
I can see Mr. Miranda wanting something done about bots – he wants ticket prices sold at a lower rate than obtains in the secondary market.
But. There are a limited number of seats available to see a performance of Hamilton. All the shows are filled to capacity. That means, whether tickets are sold at face-value prices, or at a mark-up in secondary markets, or given away for free through some sort of lottery, most of the country can’t see it. The tickets are a scarce good. Legislation on secondary markets will influence who gets to see the show, and who profits from it, but it won’t get more people into the show.
If the producer of a concert, musical or festival wants to charge a face-value price well below the market-clearing price, they have a challenge. They can insist that buyers of tickets show some kind of identification at the venue, but that prevents what can be convenient and beneficial resale between people who have tickets they find they no longer want, and people who really want to see the show but didn’t manage to get tickets when they first went on sale. This is a difficult market to regulate, and it’s not clear whether one would want to regulate it, except against fraud and misrepresentation.
Legislation against the use of bots is reasonable if the primary seller has specified, with its terms of sale, that the buyer has to be a real human who is limited in the total amount he/she can purchase (i.e. bot legislation is anti-fraud legislation). But whether this will sort out the problem of very high prices on secondary markets is another matter.
Footnote: I reviewed the (UK) Waterson committee report on secondary ticket markets (which I thought was excellent in its analysis) for Cultural Trends here (sorry that it’s gated…)
UPDATE: The Stage reports on the number of people who bought tickets for Harry Potter and the Cursed Child being turned away because they bought the tickets on secondary markets.
In a statement to The Observer, which found that some sites were selling tickets to the play for more than £8,000, they said: “The secondary ticket market is an industry-wide plague and one which we as producers take very seriously.”
They added: “Our priority is to protect all customers and we are doing all we can to combat this issue.”
Friedman and Callender went on to say that they had been able to “identify, and refuse entry, to a significant number of people who purchased tickets through resale sites”.
How exactly is the ability to trade tickets after initial purchase “a plague”? How exactly are primary sellers “doing all we can to combat the issue”? Besides, that is, by taking it out on people who weren’t able to get tickets initially, since they were priced with a full expectation of very high levels of excess demand, and were thus only able to obtain a ticket through secondary markets?
UPDATE 22-10-16: Greg Mankiw writes that he paid $2,500 per ticket to see Hamilton, and that he was glad he could:
some people might object to this price. Terms like “scalping” and “price gouging” are pejoratives used to demonize those who resell tickets at whatever high prices the market will bear.
To be sure, most people can’t easily afford paying so much for a few hours of entertainment. That is indeed lamentable. The arts expand our horizons, and in a perfect world, everyone would have the opportunity to see a megahit like “Hamilton.”
Yet there is another way to view the situation. It was only because the price was so high that I was able to buy tickets at all on such short notice. If legal restrictions or moral sanctions had forced prices to remain close to face value, it is likely that no tickets would have been available by the time my family got around to planning its trip to the city.
High prices are a natural reflection of great demand and scant supply. In a free market, in which private individuals can engage in mutually advantageous gains from trade, they are inevitable until demand subsides or supply expands.
And he is correct. With no secondary markets, there is no way for those unable to plan far in advance to get a ticket, nor any way for someone who has bought a ticket early, but can no longer attend, of transferring the ticket. I don’t think anybody really wants to ban secondary sales (do they?), or to put an unenforceable limit on what price can be charged in that market.
The problem can’t be that “everybody should be able to see Hamilton, even those without $2,500 to spend on a ticket”, because with a limit on the number of seats, there is no way to get everyone to see it. There is no physical capacity for that to happen. So the real question, as I said above, is who gets to see it.
If the primary ticket sellers want the “who” to be “people who are not robots who are somehow adept enough with technology to get to the front of the (virtual) line in time” or “people who win in a lottery we will conduct for tickets”, they will still face the issue that some of these people will be individuals with an intent to resell should they get lucky and get tickets in the primary round. They could go a step further and require i.d., but again that would shut out people who really want to see the show but are uncertain about when they might be in New York with a free evening or afternoon.
Is Professor Mankiw’s advice to simply charge market prices (with calculated scaling of the house) really such a bad idea, compared to the alternative?
I think it’s actually two issues here: first, the secondary reselling market, but also the unfair advantage of bots that makes it almost impossible for human fans to buy tickets in the first place. The bots help greatly increase the shortage, leading to even higher prices in the secondary market.
You’re right that there is a shortage and no matter what, not everyone who wants to see the show will be able to, no matter the legislation or policy. But when bots essentially capture the market because they’re vastly more efficient at slurping up all the tickets, how is that a benefit to anyone other than the resellers? We could debate the role of the reselling market and whether it’s a good or bad thing for it to exist, but when the bots essentially monopolize the market, the parasitic reselling market is a cancer .
Thanks Doug. I think the secondary market is a good thing: it allows people who were unsuccessful at buying in the primary market a chance to obtain a ticket, and allows private sales by people who obtained tickets but who subsequently do not value them. As the Waterson report noted, a lot of the secondary market is in this kind of transaction. Also important to know that the very highest mark-ups that are reported in the press for the most popular shows are the exception rather than the rule: they tend to apply to the highest value seats (suggesting that greater price discrimination in scaling the house might be a good move by primary sellers), for the highest value shows, and those very high prices tend to decline as the date of the performance approaches (there is much empirical evidence on this), to the point of many tickets being eventually sold at below-face value prices.
Bot programmers are indeed profiting from the secondary market, though I don’t think it is because any single seller monopolizes the retail market – they are simply taking advantage of very high prices for a very scarce good (i.e., if I have two tickets to Hamilton in my possession, I can make a lot of money on resale, but I hardly have a monopoly in that market).
Anti-bot procedures are fine – Waterson suggests the efforts by primary sellers to restrict them have been less-than exhaustive – and primary sellers have every right to restrict the number of purchases per person. But they could possibly do more, especially when the face value price is *certain* to cause excess demand – primary sellers have to recognize they are laying the groundwork for mark-ups in the secondary market. And I don’t think coming down on secondary markets *as a whole* is sound policy, or serves arts audiences well.
Agreed – I appreciate the secondary markets when there’s something I really want to see. I guess what I’m arguing is that the bots make it impossible for non-bots to compete, thereby hijacking the market entirely. But it sounds like you’re arguing that primary sellers could solve this by programming tweaks that neutralized the bot advantage if they wanted, but aren’t doing so, and that regulation is a poor remedy. If that’s your argument, I’m not so sure that – just like for hacking – there’s a technical fix that can stay ahead of determined programmers.
I think it’s actually two issues here : first, the secondary reselling market, but also the unfair advantage of bots that makes it almost impossible for human fans to buy tickets in the first place. The bots help greatly increase the shortage, leading to even higher prices in the secondary market.