Scalping Inefficiency
From Flickr user basykes
In a recent post for the American Enterprise Institute, Mark J. Perry argued that concert and sports fans who get upset at ticket scalpers have it all wrong.
“Everybody seems to despise them: musicians, music and sports fans, promoters, sports teams, and concert venues,” he wrote. “You would think they were talking about Osama bin Laden, Hitler, or Jerry Sandusky, not a seller engaged in a voluntary, market transaction with a willing buyer, sometimes for a ticket selling below face value!”
Emphasis his. The real villain, in Perry’s view, is those “really, really, truly evil bad guys and ticket-selling monsters … the evil, anti-competitive, anti-fan ticket monopolist” Ticketmaster. And he has a point! As anyone who has dealt with Ticketmaster knows, it is a company that charges an unreasonable amount of money to provide a minimal amount of service and is bent on maintaining its own market share at customer expense.
I hesitate to disagree with Dr. Perry within the realm of economics if only because he can run rhetorical circles around me. But let’s not get carried away with praise for the scalpers. Saying that scalpers are fine because Ticketmaster is terrible is like saying Hitler wasn’t so bad because Mao killed 50 million of his people. These things are true in their own way—but they are by no means the whole story.
It’s one thing when a “scalper” operates in a true marketplace and sells tickets for a higher-demand game at a higher price and a lower-demand game at a lower price. Sports and concert fans see this dynamic at work all the time on StubHub and Craigslist: season ticket holders and hard-up concertgoers are either looking to unload or profit off of their merchandise in a way that benefits everyone. Markets at work!
It’s another thing entirely when scalpers purchase huge numbers of tickets they have no intention of using solely to corner the market on a show or a game and make a few quick bucks off of people who were otherwise locked out of the system when tickets went on sale.
This is a frequent occurrence at Bruce Springsteen concerts, where scalpers use sophisticated computer programs to snap up a huge portion of tickets in order to later resell them at a higher price. Fans, meanwhile, can’t even log on to purchase tickets. Scalpers profit; the artist sees nothing; and average fans are screwed out of their hard-earned dollars. Hardly a ringing endorsement for capitalism.
Other times, such as at Boston Red Sox games, the market breaks down entirely. Mired in a slump, demand for Sox tickets had fallen. Scalpers—who spent years getting fat off of popular Red Sox teams and now have a harder time unloading their wares—refuse to budge off their prices and fans refuse to meet their outrageous surcharges. Seats go unfilled and the team loses out on concession sales; scalpers take an unneeded hit; and fans fail to find Fenway accommodations.
Sometimes the market adjusts on its own. Jack White, the impresario behind The White Stripes, The Raconteurs, and The Dead Weather, realized that whenever his studio issued a limited release LP resellers would pay the homeless to wait in line and purchase one of the rare releases only to sell it at a huge markup on eBay later on.
“If 300 is what it’s worth, then why doesn’t Third Man Records sell it for 300? If we sell them for more, the artist gets more, the flipper gets nothing. We’re not in the business of making flippers a living. We’re in the business of giving fans what they want,” White said.
The disgust at “the flipper” is the heart of the anti-scalper movement, and it strikes me as a fair one. Sometimes the middle man serves a key function—record studios providing capital and a recording space for a young band or a book publisher shelling out for a large print run of a potentially popular book. But there is something hugely distasteful, if not quite unethical, about scalpers locking regular customers out of the purchasing process through various underhanded schemes in order to then sell more expensive versions of the tickets right back to the same customers who couldn’t buy them in the first place.
To be clear, I’m not calling for legislation to shut down scalpers. Fortunately, we don’t need legislation: The market is reacting in its own imperfect ways, from White’s price hikes to Ticketmaster’s absurdly onerous paperless ticket process, to StubHub’s fan-to-fan resales, experimentation is settling on better and better ways to lock scalpers out of the market. If it means leaving a few extra bucks in Ticketmaster’s pockets to ensure I don’t pay one hundred extra bucks on the street? Well, that’s a trade I can hold my nose and make.
Sonny Bunch is managing editor of the Washington Free Beacon. He blogs about culture and politics at SonnyBunch.com