| An explanation of the secondary ticket market and | | | | the face value of tickets lower than the market value, |
| how it affects ticket prices for consumers | | | | the producers insure that demand is greater than |
| The secondary ticket market is worth an estimated | | | | supply and all of the tickets sell. Since concession and |
| $10 billion. That's one trillion pennies being tossed into | | | | souvenir sales are a large revenue source for |
| the dark, murky wishing well of ticket scalping and | | | | producers, they err on the side of a lower face value |
| ticket brokerage. Clearly the market exists, but why? | | | | to make certain they have the most people possible at |
| The short answer is that usually, the demand for | | | | the venue. |
| tickets at face value is far greater than the supply of | | | | This conservative pricing scheme by producers |
| those tickets. On the other hand, people who buy | | | | creates an opportunity for brokers to buy the tickets |
| tickets with the intention of reselling them create an | | | | at face value and resell them for profit. Brokers take a |
| open market where the value of the tickets is more | | | | risk, in that the actual value of the ticket in the open |
| closely determined by the demand for them. | | | | market may be more or less than the face value. If |
| For a more thorough explanation, let's identify the | | | | the market value is higher, the broker makes a profit. If |
| parties involved, and explain their roles and motivations: | | | | the market value is lower, the broker loses money. So |
| A producer is the official source for tickets to a given | | | | what are the benefits of having Brokers? |
| event. This entity sets the face value for the tickets, | | | | When tickets go on sale months before a show, it's |
| controls the number of tickets released to the public, | | | | difficult for potential buyers to plan so far in advance. |
| and may make restrictions on how many tickets one | | | | When all of the tickets are sold in the first few hours, |
| person can purchase. | | | | brokers provide a way for people to buy tickets closer |
| A broker is an entity that believes the face value of a | | | | to the event, albeit for a higher price. For many people, |
| ticket to be far less than the ticket is "worth." In this | | | | this increase in price is worth the ability to wait until |
| case, the "worth" of the ticket is the highest price at | | | | closer to the event to buy tickets. |
| which a ticket will sell. The broker buys the tickets at | | | | Some economists argue that those fans willing to pay |
| face value with the intention of reselling them at a | | | | more for tickets should be allowed to buy them. That |
| higher price. | | | | way, the most enthusiastic fans are able to attend the |
| Let's suppose a Billy Joel concert at Madison Square | | | | event. Still, many fans are upset that tickets are being |
| Garden is announced two months in advance. The | | | | bought at face value by brokers rather than true fans. |
| producer of the show sets the face value of the | | | | Is there any way to stop that from happening? |
| tickets at $50. There are 50,000 seats in Madison | | | | Several models have been put forward to combat |
| Square Garden, but 500,000 people want to buy | | | | ticket brokerage, but none are feasible. The only way |
| tickets to the concert at $50. When the tickets go on | | | | to insure that the buyer of a ticket uses it to attend the |
| sale, there is a rush to get tickets, and the first 50,000 | | | | event, rather than reselling it, is to make the buyer |
| people get them. Everyone else is out of luck, right? | | | | enter the venue immediately upon purchase. Usually, |
| No. Some of the 50,000 ticket holders are Brokers. | | | | this is logistically impossible, as it doesn't allow for fans |
| They believe that, of the 450,000 people who were | | | | to order tickets in advance of an event or at any |
| too late to buy a ticket at $50, some of them will be | | | | location besides the venue of the event. |
| willing to pay $100 for a ticket. If they are right, they | | | | From a consumer's point of view, the best situation |
| claim a $50 profit on each ticket. | | | | exists when there is a balance between having some |
| So why doesn't the producer simply assign the ticket a | | | | tickets available from producers at face value when |
| higher face value? The producer has to cover the | | | | they go on sale, and some tickets available from |
| costs of the production, which include venue rental, | | | | brokers at market prices closer to the show. That |
| performer payments, and advertising spending. In order | | | | way, true fans have the choice of waiting in line to get |
| to make a reasonable profit, the producer wants to | | | | their tickets early or paying a little extra to get them |
| make sure that all of the tickets are sold. By making | | | | just in time for the show. |