In Defense of Scalping

Nick Gillespie | October 18, 2007

Ticket scalping, that is. Denver Post columnist and Nanny State author David Harsanyi explains why ticket scalping shouldn't be a crime:

Scalping involves two adults, voluntarily agreeing on an acceptable price for tickets. If lucky, folks find themselves close enough to faceoff, tipoff or first pitch to engage in a fierce negotiation, allowing one to snag tickets at cost or less.

In fact, I am free to buy almost anything in this country then turn around and sell it for a profit. Why not tickets? Jim Caple wrote on the topic a few years ago at ESPN.com:

Scalpers generally are portrayed as a seedy bunch of grifters only a few steps up the food chain from child pornographers, fantasy football participants and Pete Rose's circle of friends. I don't see it that way, though. Rather than a bigger blight on society than the Backstreet Boys, the scalper is a humble businessperson and a fan's best friend, next to $1 Heineken Night.

More here.

Harsanyi is the author of reason's November cover story, "Prohibition Returns!" If you were a subscriber, you'd already have read that excellent piece about how "teetotaling do-gooders attack your right to drink." So subscribe already (only $19.97 for a year's worth of reason).

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grant|10.18.07 @ 8:06AM|#

My problem with scalping is not the private sale of tickets per se, but rather the fact that "professional" scalpers purchase huge blocks of (desirable) tickets on first day of sale, making it impossible for us regular Joes to get decent seats through regular channels. Many ticket sellers attempt to limit number of tickets purchased by any individual, but such schemes are easy to defeat. Between industry/venue insiders pre-reserving all the best seats, and scalpers grabbing huge blocks of tickets, it often seems impossible to just buy a decent ticket for just about any event.

Aside from going the route of the recent Led Zeppelin reunion (where tickets had the purchaser's name printed on them, and were only valid if presented at the door with ID), it's pretty much impossible to prevent scalping. Making it illegal to scalp the tickets is just about the only control that actually limits scalping.

|10.18.07 @ 8:20AM|#

The problem is: people can't say "No" to concerts/sporting events.

|10.18.07 @ 8:25AM|#

Could one not make the argument that when you purchase a ticket, you agree to the leagues rules about scalping?

If you then do scalp your ticket isn't that breach of contract?

Making it illegal to scalp the tickets is just about the only control that actually limits scalping.

Scalping's already illegal in MA, but you'd never know that if you were a block or so from Fenway.

jimmydageek|10.18.07 @ 8:31AM|#

Scalping's illegal? I go to Lightning (NHL) games and to Bucs (NFL) games fairly often, scalpers do their business right across the street from cops directing traffic! Someone should inform the cops that it's illegal :)

|10.18.07 @ 8:32AM|#

Scalping is a benefit to sports leagues that sell ticket packages, because it is a way for customers to mitigate risk. Otherwise, those package deals would likely have to come down in price.

For concerts, it's a different story. Scalping exposes a poorly thought out pricing model. There would be a much smaller market for concert ticket scalping if promoters would raise prices to the level dictated by demand.

edna|10.18.07 @ 8:37AM|#

oliver, that's how it strikes me, too, but that would suggest that scalping be handled as a civil matter, not a criminal one.

|10.18.07 @ 8:38AM|#

It's totally a free marketplace. Try scalping an extra ticket outside of Fenway sometime and see how fast the cartels come down on you. But on the bright side a Fenway Frank, marinating in that delicious 70's era swampwater, is still gummable so teeth really aren't that necessary.

The Artist Formerly Know as Tr|10.18.07 @ 8:39AM|#

Oh yea? Tell That to Hanna Montana.

|10.18.07 @ 8:41AM|#

Yankee Stadium is the scalping wild west. I've got a friend that does it and makes some decent money.

|10.18.07 @ 8:54AM|#

And here I thought this was going to be about old-school scalping involving a tomahawk...

jimmydageek|10.18.07 @ 9:04AM|#

I tried scalping Devil Rays tickets once :(

(they were really awesome seats; right behind home plate!)

*/kicks self in taint

|10.18.07 @ 9:06AM|#

Scalping is fine, but brokers are using software from RMG technologies to all of Ticketmaster's inventory. The "average Joe" has little opportunity to get tickets when 80% of all online tickets requests come from brokers.

jimmydageek|10.18.07 @ 9:08AM|#

(BTW...the only time you might be able to get a decent price scalping tix is when the Yanks or that lame ass team from Boston come down here).

Episiarch|10.18.07 @ 9:11AM|#

Making it illegal to scalp the tickets is just about the only control that actually limits scalping.

Except that it doesn't, just like the WOD or anything else where you have victimless crime. People want the tickets and will pay for them; so people will get them and sell them.

If the customers don't like scalping then it would be in the interest of the venue to come up with schemes to mitigate this, not the government. Such as the Zeppelin name-printing idea.

If a concert has a tremendous demand, then prices will be high, even if you try to use the law as a hammer to mitigate this. That's just the way it works.

|10.18.07 @ 9:12AM|#

|10.18.07 @ 9:14AM|#

I thought that scalping was no longer illegal in Florida, jimmydageek.

ed|10.18.07 @ 9:17AM|#

This one is easy. A term denoting an act of violence has evolved to mean a voluntary exchange of property between individuals. This demonstrates our continued ambivalence toward--if not ignorance of--the concept of capitalism. But there's more to it, of course. Political pull, favoritism, outright bribery play a part in keeping "scalping" tightly regulated.

|10.18.07 @ 9:19AM|#

Sulla|10.18.07 @ 9:19AM|#

Do the margins on scalped tickets allow for artificial inflation of prices? It seems to me that scalpers can only charge what the market can bear - in a way it's merely shifting the risk from the sports team or concert promoter onto the scalper. But I am open to the idea that scalpers can corner the market and raise prices so that even if they don't sell all of the tickets, they still make a lot of money. Is anyone aware of studies about that?

|10.18.07 @ 9:23AM|#

scalpers make a profit on those who didn't plan ahead. A lot of people come into a city and figure out that they want to go to a play or sporting event, and they didn't even know that it would be available to them before they arrived. Scalpers are vital to lazy people.

|10.18.07 @ 9:27AM|#

As MP pointed out, scalpers in large part are taking advantage of inefficient prices at the source, and running a (more) efficient auction in a secondary market.

I have recently been hearing some sob stories about concert tickets (viz, the Neil Young tour), which seem to be a special case; people wait for tickets, only to see the "sold out" sign go up in minutes.

|10.18.07 @ 9:28AM|#

Scalpers can also be evil scum who counterfeit (MY) tickets and make me go to a special security office to prove that I actually bought the tickets I possess. Happened to me in Chicago.

jimmydageek|10.18.07 @ 9:28AM|#

I think you're right, PL, at least based on some quick googlesearch. I guess that would explain the scalpers' disregard for the cops :D

|10.18.07 @ 9:31AM|#

Actually, I just noticed that if you subscribe to Reason, you pay 19.97 for "season tickets" as it were. But if you buy it at the news stand every month, it'll set you back about 44 bucks. Is Borders scalping reason?

|10.18.07 @ 9:35AM|#

If I were managing an act that was popular enough for scalpers to be making any money from reselling our tickets, I'd move to an online auction model to sell them.

-jcr

|10.18.07 @ 9:36AM|#

"Scalpers can also be evil scum who counterfeit"

Fraud is a crime, and it should not be confused with arbitrage.

-jcr

x,y|10.18.07 @ 9:38AM|#

Touche Randolph Carter.

|10.18.07 @ 9:42AM|#

Scalpers can also be evil scum who counterfeit (MY) tickets and make me go to a special security office to prove that I actually bought the tickets I possess. Happened to me in Chicago.

Those aren't scalpers.

Russ 2000|10.18.07 @ 9:47AM|#

"professional" scalpers purchase huge blocks of (desirable) tickets on first day of sale, making it impossible for us regular Joes to get decent seats through regular channels.

That professional scalper would be TICKETMASTER. Without scalpers, the ONLY channel to get tickets is thru them (unless you have season tickets). And they add a "convenience fee" which could only be considered a scalping fee.

The fact is concert promoters and sports teams LOVE scalping. They ENCOURAGE it. The only pay lip service to the illegality, but they are ecstatic to have all the ticket inventory sold. All the risk is then assumed by the scalper. (Note that Ticketmaster assumes absolutely zero risk for unsold tickets.) The Police concerts this summer were a perfect example - a dead ticket that was going for under 20 bucks a few days before the shows. The promoter sold every damn ticket, the only people who lost money were the scalpers, and most of them probably made enough on the early re-sale that they lost little if any.

ed|10.18.07 @ 10:00AM|#

I thought that scalping was no longer illegal in Florida

http://academic.reed.edu/economics/course_pages/201_f06/Cases/Ticket_Case/Florida.htm

Mike Laursen|10.18.07 @ 10:01AM|#

The fact is concert promoters and sports teams LOVE scalping. They ENCOURAGE it.

Furthermore, if they really cared, they could simply require their customers to make reservations for the event rather than selling paper tickets.

New World Dan|10.18.07 @ 10:02AM|#

Concert (and sporting event tickets) should be sold via Dutch auction -- start with an absurdly high price and gradualy lower it until the day of the show/game. That, I figure, would pretty much maximize profit while eliminating scalping, which is just a symptom of inefficancy in the marketplace.

The other way to kill scalping (and those greedy ticket brokers) is to allow a little time in the schedule to open an additional show. Despite the printed price on a ticket, they're still subject to supply and demand.

|10.18.07 @ 10:08AM|#

I have recently been hearing some sob stories about concert tickets (viz, the Neil Young tour), which seem to be a special case; people wait for tickets, only to see the "sold out" sign go up in minutes.

Well, at least they saved some fans the disappointment of actually seeing Neil Young...

|10.18.07 @ 10:11AM|#

Concert (and sporting event tickets) should be sold via Dutch auction

I said it before, but I'll repeat...the issue with sporting events is that tickets are typically sold as a package deal. Only a limited number of tickets are available on a game by game basis. Thus, you can't optimize those prices in the same manner as you optimize concert ticket prices, because the majority of consumers are buying in bulk.

The whole season ticket market would collapse if it wasn't for scalping. Do you think that season ticket buyers actually plan on going to every game? Hardly. More often then not, they are fronting the capital to guarantee availability. Then they re-sell what they choose not to attend to friends/relatives/other.

|10.18.07 @ 10:33AM|#

Thanks for the correction on my counterfeiting story; I had just assumed the tickets were counterfeited and then scalped.

Anyway, this would all seem moot with the existence of StubHub.

|10.18.07 @ 10:36AM|#

I said it before, but I'll repeat...the issue with sporting events is that tickets are typically sold as a package deal. Only a limited number of tickets are available on a game by game basis. Thus, you can't optimize those prices in the same manner as you optimize concert ticket prices, because the majority of consumers are buying in bulk.

Are you saying that the sports teams are selling wholesale and the scalpers are selling retail? Like so many other businesses?

What do you propose to do about this outrageous pracice? Sheesh!

|10.18.07 @ 11:01AM|#

What do you propose to do about this outrageous pracice? Sheesh!

I never claimed this was a problem. Sports teams sell season tickets because it is efficient and it guarantees the revenue.

The only people who object to scalping are people who whine about how much things cost while completely ignoring the hard economic facts of supply and demand.

VM|10.18.07 @ 11:04AM|#

of course, the two best cities for scalping baseball tickets: Atlanta and Cleveland...

|10.18.07 @ 11:13AM|#

a few steps up the food chain from child pornographers, fantasy football participants and Pete Rose's circle of friends.

By the time the "fantasy footballers" get through their interminable rehashes on Monday mornings, I'm willing to place them on a MUCH lower level than child pornographers.

Event tickets represent a fascinating revenue optimization problem. The sports & entertainment industries could probably learn a lot from airlines and hotels, who have been leaders in yield management. Much of their success depends on non-transferability, which pre-empts a secondary market, allowing first-degree price discrimination.

One of my MBA professors was a leading expert in this field. Needless to say, he made much better money from consulting than he did from teaching.

|10.18.07 @ 11:22AM|#

I'm confused.

How exactly is scalping illegal?

I know that there are rules against "scalping" in front of most stadiums, but last I checked ticket brokers are selling tickets to just about every event at huge markups. Even craigslist has tickets being offered at a premium.

The Chicago Cubs actually own a subsidiary company whose sole purpose is to resell their tickets at higher than face. (Wrigley Field Premium Tickets Inc. is owned by Tribune, and the cubs sell the tickets to their brokerage firm, which then marks up the tickets -- not the team -- and they do that to compete with other ticket brokers)

thoreau|10.18.07 @ 11:34AM|#

There's actually a good libertarian argument against scalping: The theater or arena or whatever is the property of the owner, and the owner (or whoever is renting the venue) can decide whom to admit, and can decide to only admit the people to whom they sold tickets, not people who gave money to people who bought from the owner of the venue.

So if the owner of the venue (or artist renting it, or whoever) decided to keep a list of people who bought tickets, and only admit people on the list, that would be a perfectly acceptable action. "But I gave money to a guy on the list!" wouldn't be a valid reason to get in.

But if venue owners don't maintain a list, if they just admit anybody who shows a ticket, then they are making the tickets transferable in practice (if not in principle). If the venue owner hasn't taken any minimal steps to actually make the ticket non-transferable (beyond just saying "don't transfer this") then the state shouldn't stop the transfer either.

|10.18.07 @ 11:36AM|#

Don't teams have an interest in making sure the stadium is fill rather than having a scalper standing out front with tickets? While the risk of unsold tickets falls on the scalper, the team will lose money by not selling $5 wieners.

It comes down to pull. Sports teams and large venues have a lot of sway with local and state politicians. They'd rather have something outlawed than have to enforce a contract on their own dime. Better to have the police do it. Not sure that's good, but I suspect that's how it'll be.

MP, I humbly apologize for my 10:36 am snark. Please forgive me.

Ticketmaster does auctions for 'premium' tickets...why is what they do (market pricing) any different than what someone buying the ticket and selling it on stubhub does?

|10.18.07 @ 11:40AM|#

ChicagoTom,

Here's the Massachusetts law. Reselling sort of ticket (without a license, of course) is illegal.

|10.18.07 @ 11:46AM|#

VM @ 11:04 wins the thread!

|10.18.07 @ 11:47AM|#

If ticket sellers wanted to minimize scalping, they could simply raise their prices, leaving the scalpers little or no margin for doing so. But, as has already been pointed out, the original sellers are minimizing risk, and letting the scalpers take the risk for unsold tickets. Instead of arresting scalpers, they should be legitimized--doing so would allow for better controls, more flexibility in handling ticket sales, and would help minimize other problems like counterfeit tickets (which is just fraud, not scalping).
But you guys have already beat me to most of my points. Darn! ;-)

|10.18.07 @ 11:58AM|#

Here's the Massachusetts law. Reselling sort of ticket (without a license, of course) is illegal.

The best part about the Mass. law (if I'm reading it correctly) is that it is illegal to give away your tickets.

|10.18.07 @ 12:12PM|#

"they could simply raise their prices, leaving the scalpers little or no margin for doing so."

And add: the point might be to pack the place and make money on beer, food, merchandise, etc. The economic analysis shouldn't stop at the market for tickets. There is a lot of money made on a full crowd.

squarooticus|10.18.07 @ 12:24PM|#

Scalping wouldn't be an issue if the venue owners would simply sell the tickets at fair market value in the first place. Then, ticket brokers buying up huge blocks of tickets simply wouldn't be an issue, because there would be no profit to be made: raising the price would mean selling fewer.

ToWind|10.18.07 @ 12:25PM|#

Ticket brokers are legal in Illinois. I've been a season ticketholder of the Chicago Bulls for 20+ years, and until this year, the way the Bulls tried to limit scalping was to say that "any season ticketholder whose tickets are discovered being sold in excess of face value is subject to having their season tickets revoked." It didn't matter who was selling them, the original owner or a ticket broker--the threat still applied. So during the dynasty years, the fear of losing season tickets kept a lot of people from re-selling their tickets, which made the few available go for even higher prices. Still, that's a solution I didn't have a problem with--the Bulls were attaching a condition to the primary sale of their tickets that prohibited resale markup.

But in an interesting about face, starting this season, they've gone in with Ticketmaster on a service that allows us to re-sell our season tickets at any price we choose (well, up to 99 times face value.) With sites like Craigslist, eBay & StubHub making ticket resale so much easier, maybe they finally decided to get a piece of the action. (I assume they get a nice cut from the TicketMaster sales, allowing them to collect an additional premium on tickets they've already sold once.)

As for the "thinly veiled subscription pitch" at the end--I was a subscriber for over 10 years, but when I started seeing articles from the magazine here online before I received my copy in the mail, I let the subscription lapse. Whether the time lag was caused by the notoriously poor Chicago mail service or the quicker online publication of articles doesn't matter--I wasn't going to pay extra for later articles.

Dr. Kenneth Noisewater|10.18.07 @ 12:25PM|#

The scalping that occurs around Fenway Park is a wonder to behold. It occurs right under the noses of the police. I've personally seen several instances of the professional scalpers harassing and threatening regular folks that try to sell their tickets to other regular folks. The pros also appear to be organized to the point where it looks like they're all part of the same syndicate -- they cooperate on sharing their supply so that any sort of seat is available from any scalper.

I suspect there's a corrupt relationship with the Boston Police Department and this scalping syndicate. The cops will make a big show of one anti-scalping operation during the course of the year, which likely coincides with negotiations over kickbacks between the BPD and the syndicate.

|10.18.07 @ 12:31PM|#

the point might be to pack the place and make money on beer, food, merchandise, etc

Good point, Lamar, but unless the original ticket sellers are charging too much to start with, the scalpers aren't going to be minimizing attendance to the event. It's in the scalpers' interest to sell every ticket they can.

|10.18.07 @ 12:35PM|#

Lamar,

If anything, I would say scalping has become more acceptable over the years, not less. Again, it's in the teams best interest to maximize revenue by selling all their tickets first. Yes, a packed stadium will net quite a sum on food sales, but you assume falsely that scalpers are preventing a huge amount of people from going to the game.

If those tickets weren't bought by the scalpers, the team might well lose money on the tickets and the food sales. Simply put, if people want to go to the game they will find a way to go, either through a scalper, ticket broker, stubhub etc.

I would say that the times I've been to a sporting event where the stadium hasn't been full or very near full are only the times when interest in the team is very low, not because scalpers are keeping the prices high. After all, selling those last three dozen tickets at a loss is better than not selling them at all.

|10.18.07 @ 12:46PM|#

I suspect there's a corrupt relationship with the Boston Police Department and this scalping syndicate.

That's why you're the doctor.

|10.18.07 @ 12:59PM|#

I'm down with scalpers trying to make a buck and stuff, but that doesn't make them magically not be opportunistic assholes.

|10.18.07 @ 1:24PM|#

I prefer the term "Native American".

Mort|10.18.07 @ 1:25PM|#

As for Massachusetts one of the most popular ways around the law is to bundle the ticket(s) with a limo ride. $150 of event tickets + $500 worth of limo time turns into +$1000 bundle. The law is now easily and legally bypassed since the contract limo price is unregulated.

As said by others, it's not the scalping but the initial, uneven distribution of tickets. Maybe Ticketmaster et al need to adopt some limits on bulk sales. Besides, if the Commonwealth can restrict tickets resales they can do it for cars, property, etc. Not good but I'm just "preaching to the choir".

Keep the the excellent work guys.

|10.18.07 @ 1:27PM|#

Jim Bob | October 18, 2007, 12:59pm | #

I'm down with scalpers trying to make a buck and stuff, but that doesn't make them magically not be opportunistic a******s.

Last year's "opportunistic a*******s" are this year's Forbes cover story.

*Apologies for the bowdlerization, but my employer has filters on the computer looking for "naughty words".

|10.18.07 @ 2:59PM|#

"you assume falsely that scalpers are preventing a huge amount of people from going to the game."

I'm not assuming anything. All I am saying is that the issue is broader than just a free market for tickets. I suspect that there is regulation and prohibitions in place because somebody is losing money, and I suspect that somebody is venues or promotion companies that lose out when a concert isn't well attended.

As a consumer, I expect to pay market value whether from a scalper or authorized outlet.

|10.18.07 @ 7:45PM|#

I suspect that there is regulation and prohibitions in place because somebody is losing money, and I suspect that somebody is venues or promotion companies that lose out when a concert isn't well attended.

Actually, I suspect there is regulation and prohibition in place because politicians are happy to screw with the free market in situations that cause "outrage" for an economically ignorant public. (See: gas "gouging")

|10.18.07 @ 8:26PM|#

That too!

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