How to End Ticket Scalping
Most music fans know the feeling: You wait for tickets to a gig to go on sale, log onto a website the minute they do and can't complete the purchase. You try dozens of times in the next few hours, to no avail. When the website is finally up again, the tickets are gone. You've just competed with an army of bots -- unsuccessfully.
On Thursday, a measure that would ban this kind of unfair competition made it through the U.S. Congress. It aims to ban the use of bots to subvert ticket-selling systems. A similar bill -- based on existing regulation in New York -- was introduced in the U.K. in October. It subjected bot-equipped scalpers to penalties of up to a year in prison. There are plans to ban scalping bots in Canada, too.
It's hard not to rejoice. One doesn't even need to be technically proficient to use ticket-buying bots: You can buy them from a website and start scalping. Humans have no chance against this kind of software. Nor do the ticket-selling platforms. Even when they protect a purchase with a CAPTCHA -- a security system to tell a real person from a bot -- the botmakers work with CAPTCHA-bypassing companies that employ real people to pass the test. Some artists, such as Adele, fight this by canceling any resold tickets -- but that's hardly fair to people who buy tickets with the intention of going to the gig.
Legislation won't solve the problem, though. As Stephen Singam of Distil Networks, a company whose business it is to fight "bad bots," put it in a recent blog post: "Legislation is a useful additional tool to thwart scrapers, but it’s not a silver bullet. Scrapers generate too much revenue for legislation alone to be a deterrent." In the U.S. alone, the ticket resale market is estimated at $5 billion a year. As usual with malicious tech, this is a cops and robbers game in which malware developers are a step ahead. "You can only legislate against bots you can actually identify," Singam wrote.
But why can't this be fixed by the market? Why is there always space for the scalpers to resell the tickets at a profit? Theoretically, the easiest way to kill off the bots would be to introduce dynamic pricing, the way airlines do, recalculating the price in real time according to demand. Once the bots converge, the price should rocket, making it unprofitable for brokers to buy the tickets.
In practice, though some systems, such as Ticketmaster, have played with dynamic pricing, but the problem remains. In the last three years, Ticketmaster has moved into ticket resale itself, competing with eBay's StubHub and other specialized sites that have flourished at its expense.
Clearly, the primary market for tickets is failing systemically. One reason is that artists often want to keep up the appearance of fairness to fans. The French-born world music star Manu Chao has been known to hand out tickets to homeless people and set low prices for everyone else. But even if you're not an anti-globalist like him, it makes sense to exercise caution when setting prices. In 2007, Barbara Streisand tried to charge from just under $200 to $1,200 for tickets to a concert in Rome, at a 24,000-capacity stadium. Locals protested so vigorously that Streisand ended up canceling the show. Neither bands nor sports franchises want to be seen as trying to extract every last cent from fans: They want a relationship, not a one-time economic effect.
That's somewhat hypocritical, though, since the bands and the teams know what's going on with scalpers. The fans are being milked, anyway, just not directly by the artists and the teams -- though sports franchises in the U.S. are getting into ticket scalping, trying to get a percentage from the brokers or restrict them to their own trading venues.
With concert tickets, there are other difficulties. Tickets for the same gig may belong to the artist, the venue and any number of other people involved in organizing the show. They may sell the tickets through different channels and platforms. That makes it hard for any of the venues to figure out the supply and build an adequate dynamic pricing model. It also makes it hard for concert-goers -- but not for scalpers -- to find tickets.
I'd rather pay more money to the artist, or even the venue, than to brokers. Besides, the secondary market is full of fakes. Even platforms such as StubHub cannot always protect a customer from that plague, though that's their basic value proposition.
That might even be possible to arrange if concert organizers ever got serious. Earlier this year, Michael Waterson, a professor at the University of Warwick, wrote a report on the secondary ticket market for the U.K. government. He made a number of recommendations for the primary market sellers, including this one: "Organizers should seriously consider requirements for individuals to prove they are indeed individuals by means such as confirmed identity technologies."
Even identification could probably be bypassed by technological means, though. Paradoxically, the only surefire way to make the primary ticket market fair to consumers is for artists and sports teams to give up the pretense of fairness and attempt to sell at market-clearing prices -- at least to the general public, as opposed to die-hard fans. A combination of identity checks and airline-like dynamic pricing -- if all gig organizers can agree on a single selling channel -- would ensure people get tickets according to how early they order and how much they're willing to pay. After all, airlines don't have a scalping problem.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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