In defence of ticket touts

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The BBC reported this week on the live music industry's latest attempts to crush the saboteurs ticket touting industry (or ticket scalpers to our readers on the other side of the pond).

The artist in question was snooze-fest specialist Ed Sheeran, who has taken several measures to stop the secondary market for his latest tour. Via the BBC:

Ed Sheeran has taken an aggressive stance against touts by cancelling more than 10,000 tickets for his upcoming stadium tour.

After the tour went on sale, the star's team identified purchases by known touts and revoked their tickets.

Tickets being sold via secondary sites, such as a Viagogo, were also cancelled and refunded. All-in-all, the total cost of returning the money came in at “more than £240,000”, or around £24 a ticket.

Yet are ticket touts really immoral parasites, as they are often portrayed?

To examine, let's go back to the classical economic principles of supply and demand. Concert tickets for popular acts such as Ed Sheeran are scarce. Artists only play a handful of shows, in a small number of cities, leading to a situation where demand often overwhelms supply. In other words, there are simply not enough tickets for available for every fan.

Touts exploit this mismatch, profiteering on the gap between the inefficient price -- what the ticket is sold at -- and the price the market is willing to pay.

Arbitrage is an age-old business model which was practiced as early as 600 BC, and exists today in the form of investment strategies like merger or convertible arbitrage. So it is surprising touts receive so much flak for a practice often considered savvy in other business circles.

Arguably, by charging the price a market will bear, touts are in effect weeding out the casual fans, and selling the tickets to only the most ardent Sheerios (as the super fans are styled), who are willing to pay top dollar to worship at the altar of easy listening.

To be clear, we're less enthused about touts utilising dodgy methods get the tickets in the first place. A Guardian feature from 2016 features one tout who uses multiple credit cards to get around limits on ticket sales. Thankfully, in a rare moment of competency, the British government recently cracked down on touts using bots to circumvent these rules, following a recommendation from the FairFan Alliance.

Promoters, such as Live Nation or Kilimanjaro Live, perhaps chastened at watching lost profits slip through their fingers, have come up with several ways of culling the arbitrageurs. Methods include limiting the numbers of tickets than can be purchased, requiring matching ID on the door and channeling fans through official re-sale sites, such as Twickets.

Readers may notice that Twickets business model, somewhat ironically, charges a fee of 10-15 per cent on top of the ticket price. Official channels and touts alike need to take their cut, it seems.

So what else could promoters and artists do to curtail the secondary market?

One option would be to raise prices. Hardly a shocking idea if demand is outstripping supply. Mancunian favourite Simply Red demonstrated the potential recently, charging £675 for two tickets to their reunion gig at the 02 Arena. There has been acute consternation at touts re-selling tickets to charitable events, such as last year's Teenage Cancer Trust show. But isn't it a bigger problem that artists and venues are under-charging for charity concerts?

One idea to address pricing worries is to sell the tickets through a Dutch auction, as opposed to the current mouse-destroying server-crashing method.

For the unfamiliar, a Dutch auction is where the price starts high and falls until there is a bidder. A Dutch auction would clear out the super keen fans, and those with the deepest pockets, and set a price for what most fans would seem acceptable. Seating allocation would have to be thought through, but it would go some way to alleviating worries over scalpers charging multiples of face value.

There is a simple solution for the supply side as well: play more gigs. Ed Sheeran will no doubt point to the fact he is playing 4 nights in London and 3 in Manchester, but it's nothing on the 21 shows that Prince [Editor's Note: RIP] strung together in London in 2007 and Los Angeles in 2011.

Whether artists will be happy playing more shows is another question. They may rail at the touts on behalf of fans, but plastering Sold Out and 'Extra dates added due to demand' all over posters is a pretty good FOMO generator for future gigs.

Ticket touts have long been a welcome source of liquidity for last-minute cancellations or forgetful buyers. Much like banks, they are deeply unpopular apart from those moments when performing a useful service. Unless they are breaking the law, or egregiously rent-seeking through exorbitant pricing, maybe we should accept their market-making role, no matter how annoying it is to pay above face value for a night out.

Related Links:
Let's end the persecution and give ticket touts a break - FT
Analysis of the Secondary Sales Market for Tickets for Sporting, Cultural and other Events
- Europe Economics

  1. WeWrite-down
  2. No deal Brexit is not a hedge fund conspiracy
  3. Europe’s digital infrastructure issue
  4. Let’s give a helping hand to Andrew Yang
  5. Anatomy of a malware scam
  6. ARK Invest’s Tesla model gathers dust
  7. A delirious defence of Uber
  8. WeLiquid: Adam Neumann pockets $700m
  9. Yesterday, in efficient markets
  10. The warm fuzzy feeling of indirectly owning Tencent
  11. The best of Morgan Stanley's Adam Jonas
  12. Apple/Tesla: M&A and heartbreak
  13. Did Beyonce make $300m from Uber's IPO?
  14. Bitcoin is the 10-year Treasury of our time
  15. High resolution music is a solution looking for a problem
  16. Amazon is furious about this negative review
  17. Missing: $500bn of American savings
  18. Blockchain for Brexit: a wonderfully terrible idea
  19. The Bank of Hodlers [sic] (sigh)
  20. Behind the curtain at China Ding Yi Feng
  21. An answer to Mark Cuban's question
  22. Crumbs! It's CRYPTO: the movie!
  23. National Beverage Corp loses its fizz, and its mind
  24. Amazon won't spin-off Amazon Web Services
  25. Mensch! Dan McCrum is innocent, ok?
  26. Europe's $1 trillion tax gap
  27. Why online propaganda mobs are an investment red flag
  28. Davos has produced an amazing new guide on precisely how not to think about risk
  29. When the public relations industry does PR for itself
  30. Who wants to be crippled by student debt?
  31. The bitcoin price is wrong
  32. The warm fuzzy feeling of Goldman debt
  33. “Cryptoassets” are crashing again. Is it time to start calling them cryptoliabilities instead?
  34. Puff the tragic cryptowagon smokes out the Mumsnet demographic
  35. Don't write off the public sector
  36. Initiative Q: an elementary pyramid scheme with grandiose ideas [Update]
  37. Moral investments aren't outperforming
  38. No one is killing it in crypto (not even Woz)
  39. Too smooth: the red flag at Patisserie Valerie which was missed
  40. No, the housing crisis will not be solved by building more homes
  41. Sorry Civil, 'crypto-economics' and 'constitutions' won't save journalism
  42. 'Short-termism' isn't a thing, say Fed economists
  43. Coinbase wants to be “too big to fail”, lol
  44. Regulation and innovation don't have to be enemies
  45. Retailers get so lonely around the holidays
  46. Folli Follie: $1bn of fake sales, and what to learn from the debacle
  47. The new green evangelism
  48. Tilray, how low can it go?
  49. The ICO behind the tragic Everest stunt is now “airdropping” tokens from rockets
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  51. The broken conversation about financial regulation
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  54. Wages and growth and honestly we just give up
  55. Britain's first blockchain-enabled co-working space isn't blockchain-enabled
  56. There is a FIRE that never goes out
  57. The WeWork Garden of Eden
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  64. The chance of an inflation shock may be higher than you think
  65. Sorry Tim, the humanity is not being drained out of music
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  68. Sirius Minerals: money for a hole in the ground
  69. The Bank of England has a strange idea of what QE achieved
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  85. How to make a living in the cult of meritocracy
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  87. Oh, the digital humanity
  88. Sports are not markets, predictions ain't investment
  89. Spot the difference, Steinhoff edition
  90. Larry Robbins, a cautionary tale
  91. The node to serfdom
  92. Carney is down with the crypto kids
  93. Samsonite: inventory, excess baggage, and unresolved questions
  94. It might be a long wait for “the equivalent alternative to ICOs”
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  96. In corporate America, brands develop you
  97. One in ten dollars of US housing were anonymous
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  100. Let’s not try make 'crypto chicks' a thing
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  132. These hedge fund numbers can't be right
  133. The Vomiting Camel has escaped from Bitcoin zoo
  134. Lies, damn lies, and charticles
  135. The world doesn't need more Elon Musks
  136. No, Facebook should not become a nonprofit
  137. Sell all crypto and abandon all blockchain
  138. Immutable ledgers meet European data protection
  139. Amazon is not a bubble
  140. Japan's economic miracle
  141. Have you ever meta crypto joke you didn't like?
  142. Delaware should change its rules to let the light in
  143. Who needs the labels anyway?
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  146. No one needs to buy Tesla
  147. How to win a debate in the cult of meritocracy
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  150. The “academic’s cryptocurrency” is an elegant waste of time
  151. Cigarettes are the vice America needs
  152. Well that’s one reason to buy yen…
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  161. Someone is wrong on the internet, government employee pensions and passive investing edition
  162. Someone is wrong on the internet, possibly fragile
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  164. Someone is wrong on the internet: tontine tokens [Update]
  165. Someone is wrong on the internet, road economics edition
  166. Someone is wrong on the internet, wages and the stock market edition
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