Are Robot Scalpers Ripping You Off? Do We Need Government To Stop It?
from the outlawing-our-robot-overlords dept
Ticket scalpers have a bad rep. Critics deride them as "malicious" and "bad actors" and sometimes even deem them the primary cause of a purported nationwide "bot epidemic." Responding to fan complaints about the paucity of tickets, de facto monopolist Live Nation Entertainment points to the scourge of "bots" – software that allows scalpers to buy tickets en masse and resell them on secondary-market sites like SeatGeek and Stubhub.Instead of finding a solution on their own, ticket sellers want the federal government to do their policing for them. In July, Sens. Jerry Moran and Chuck Schumer introduced the BOTS Act, a bill that promises "equitable consumer access to tickets." The most recent Senate hearing on the issue featured compelling personal narratives about fans who weren't able to get cheap tickets to popular shows, such as the hit musical "Hamilton."
But closer analysis of the legislation's details cast doubt on whether it truly would benefit fans. Indeed, it clearly misses several crucial pieces of the puzzle.
A solution in search of a problem
The first question is obvious: are ticket-harvesting bots actually a significant problem? To be sure, those who seek to outlaw them are armed with anecdotes. Research from New York Attorney General Eric Schneiderman finds "at least tens of thousands of tickets per year" are acquired using bots. But given that Live Nation's Ticketmaster service sold 147 million tickets in 2012, even if bots acquired 100,000 tickets a year, that would still be significantly less than 1 percent of all tickets sold.
For its part, Ticketmaster estimates that "60 percent of the most desirable tickets for some shows" are purchased by bots. Leaving aside the profusion of qualifiers needed to make even that claim, it probably shouldn't be surprising that high-demand and underpriced tickets are the most likely to be resold. But this ignores that venues contribute to the problem by not making tickets available to the general public in the first place. For example, analysis of a 2013 Justin Bieber concert in Nashville, Tennessee, revealed that 92 percent of tickets were presold for credit-card promotions, to fan clubs, to VIP programs or to the artist. Even if bots bought 60 percent of the Bieber tickets released to the general public, it would represent only 4 percent of the show's seats.
'Unfairness' is in the eye of the beholder
The BOTS Act would punish digital ticket scalping as an "unfair and deceptive" practice. But the way tickets currently are sold is neither fair nor transparent. Schneiderman's report acknowledged that ticket sellers are complicit in limiting the general public's access to tickets. The investigation found a majority (56 percent, on average) of tickets are presold or put on hold for the most popular concerts. Given that managers and artists often resell these tickets to the highest bidders, it's clear why industry insiders support a crackdown on bots. They compete directly in the resale market.
The culture long ago evolved to regard scalpers with moral repugnance, similar to the opprobrium reserved for price gougers, speculators and arbitrageurs. Indeed, Nobel laureate economist Alvin Roth has identified ticket scalping as a market in which repugnance discourages what would be otherwise efficient market activity. But norms can change. Usury – that is, charging interest on loans – also was once widely deemed morally repugnant, but modern financial markets could scarcely exist without it.
Writing in The New York Times, Harvard University economist Gregory Mankiw notes of his recent experience spending $2,500 for tickets to "Hamilton" that it "was only because the price was so high that I was able to buy tickets at all on such a short notice." Mankiw's tale illustrates a frequently forgotten fact – namely, that tickets purchased by bots do end up in the hands of genuine fans. By making tickets available closer to the event date and by raising their perceived cost, scalpers also help ensure that venues fill.
When scalpers buy and resell tickets, they bear the risk of stale inventory so that primary ticket sellers don't have to. Like any investment, scalpers can lose money. When scalpers guess wrong, they have to sell tickets at below face value. This allows the market to clear and allows consumers to buy at a price that better matches how much they value the experience. Tightening controls on ticket resellers would expose primary ticket outlets to a liquidity and seat-inventory risk.
Scalpers also help provide crucial market information both to venues and to consumers. The prices paid in the secondary market signal to venues when tickets are underpriced and concerts are undervalued. Secondary-market vendors such as SeatGeek, for example, collect and share data on past ticket transactions to provide ticket cost analysis to vendors and fans. These services create value for consumers and shouldn't be suppressed.
Because it would raise the cost of using bots, the BOTS Act would leave fewer tickets available through services like Stubhub and even Ticketmaster itself. It wouldn't kill the secondary market, but scalpers likely would raise prices to account for the higher risk that any given ticket will go unsold. It also would change the distribution of tickets to favor those willing to stand in line the longest, those who have the fastest internet connections or even just those who happen to have good timing or good luck. It's hard to see how any of this benefits fans.
Another expected effect of legislation like this would be to reduce innovation in ticket sales. Fueled by the demand for tickets, investors continue to fund new entrepreneurs in the event space. For example, the app Pogoseat allows existing ticket holders to browse and purchase potential seat upgrades from their smartphones while they are in the venue. Sites like SeatGeek provide information on the going prices of tickets, helping consumers gauge whether they are getting a good or bad deal. Punishing digital ticket resellers probably would scare away capital investments in apps that better match consumers with tickets, leading to worse outcomes for everyone.
The case against federal regulation
There are some subtle differences in the two versions of the BOTS Act currently wending their way through Congress. The House version – H.R. 5104, sponsored by Reps. Marsha Blackburn and Paul Tonko – would make the purchase and use of bots to acquire tickets a federal crime. The Senate bill is vaguer, prohibiting the "circumvention of control measures used by Internet ticket sellers to ensure equitable consumer access to tickets." The Senate version also could affect a broader range of user activities – for example, allowing primary ticket outlets to bar season-ticket holders from reselling their seats.
The law would empower the Federal Trade Commission to police compliance with the terms and conditions of private contracts. That sets a dangerous precedent. Under Sen. Schumer's vision, the FTC would target websites that assist in selling digitally scalped tickets, issue cease-and-desist orders and level fines in the millions of dollars for unfair trade activities. In practice, the law would grant the entertainment industry a hammer to smash its competition in the resale market.
But little effort has been made to explain the case for federal involvement in an area in which state enforcement long has proven more than adequate. More than 30 states have scalping laws and 14 states ban the use of bots in ticket purchasing. Furthermore, ticket fraud and other coercive activities are already illegal under criminal law. A federal criminal statute would be both redundant and excessive.
For that matter, the industry appears perfectly capable of handling this issue on its own. Venues and primary ticket sellers can and do recover tickets from individuals who purchase them in violation of the terms and conditions. In 2007, Ticketmaster successfully sued software maker RMG Technologies for $18.2 million over programs designed to circumvent anti-scalping measures. Companies also spend big sums hiring machine-learning experts to outwit the bots. The BOTS Act would shift these enforcement costs to the federal government, and ultimately, to the taxpayers.
There are simpler solutions
Basic economics dictates the easiest way to minimize scalping is either for venues to raise ticket prices or for artists to have many more concerts. The secondary market for tickets exists only because venues and artists routinely underprice and undersupply tickets. If artists truly want their fans to have access to lower ticket prices, they can hold concerts over consecutive nights or schedule them at larger venues. Increasing supply for the most popular concerts will shrink the secondary market.
Country singer Garth Brooks chose to add concerts to cities based on demand. His decision to disrupt the way concerts are scheduled made him the highest-paid country performer in 2016. Ticketmaster has also begun to price tickets based on supply and demand, and holds its own auctions. Major League Baseball instituted dynamic pricing in 2013. The Ultimate Fighting Championship circuit also uses dynamic pricing, making it more difficult for resellers to make a profit. These are much more direct ways to overcome inefficiencies in the ticket market.
The BOTS Act would lock the industry into its current practices, effectively protecting insiders' business models at the expense of competitors and consumers. Live Nation controls about 85 percent of the primary ticket market. Without competitive pressure from other ticket sellers, secondary markets or customers, the firm has little incentive to improve how tickets are supplied.
Efforts to criminalize bots draw attention away from the larger conversation about how venues misallocate tickets in presales. It also detracts from important policy questions about the role of government in enforcing private companies' terms and conditions. If Congress is genuinely interested in benefiting fans, it should allow entrepreneurs to find better ways to match consumer preferences and empower fans to choose how tickets are sold.
Anne Hobson is a technology policy fellow at the R Street Institute. Christopher Koopman is a senior research fellow with the Project for the Study of American Capitalism at the Mercatus Center at George Mason University.
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Filed Under: bots, competition, congress, economics, scalping, tickets
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We should never be in the business of criminally enforcing a one sided agreement provided by a entity under the terms that just by reading or clicking the user is now legally bound to their terms.
This is like putting the cart before the horse. In reality these types of EULA should be removed from any aspect of contractual law. Instead these people seek to criminalize violating the terms of their collective fantasies.
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Re: Why provide security
The reason ticket scalpers do what they do is that the price the tickets are being sold at by the primary source is below the actual market price.
These guys aren't stealing tickets and selling them cheap, they're buying them at full price, then adding a markup. Because there are enough people still willing to pay the higher price.
Its the same thing retailers do all over the world. Nobody gets pissed when a wholesaler like Costco sells to the guy running your local convenience store. Nobody screams that the convenience store buying up all the cigarettes is why they can't get them cheaper at Costco.
All you need to do to get rid of scalpers is raise the price of the tickets until there's no margin to profit from reselling.
That's it. No need for laws at all. The customer is not affected, indeed helped by this - he pays the same price he would have from the scalper but doesn't have to find a scalper to buy from anymore, just gets his ticket from the website. And it puts more money in the pockets of the acts and venues.
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Re: Re: Why provide security
The entertainment industry is already price gouging fans.
The CPI of entertainment cost have risen much higher than
the general average and on par or higher than medical costs.
No, if you are an artist like Brooks, you simply add one show after another, unit the market is fully diluted.
So it's not the pricing mechanism but volume which
determines the price action.
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Re: Re: Why provide security
Charge what the market will bear because the market is self regulating, scalpers are just providing a needed service to these thankless people who do nothing but complain.
Thanks, but I'll pass on what ever the event is.
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Re: Re: Why provide security
So where is the service provide now? Why is buying it from some scalpers website instead of the ticket sellers website worth the extra cash? It's not for a service, it's not for saving me from standing in line.
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Regulation in a nut shell
Maybe TD does get it?
Naw... let's keep cheering for regulation. It's the American Way! Time to phone my representative!
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Re: Regulation in a nut shell
You seem extraordinarily confused about Techdirt. We tend to view regulation as very much a last ditch effort, and only in special circumstances. We supported net neutrality rules after years of being against it, mainly because it was clear what had happened to the broadband market, which had gone from competitive to not competitive, and where you had key players openly discussing how they were going to abuse that monopoly power.
We've also supported regulation that curbs surveillance.
Either way being "for" or "against" regulation as a general principle is kind of dumb. It depends on the situation, but we've long taken the general position that regulation only makes sense in cases of market failure.
What site did you think you were reading?
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Re: Re: Regulation in a nut shell
This is what is terrible about you. It is SMART to be against regulation as a general principle and DUMB to be for regulation as a general principle.
Look, we both know that words in the english language are highly bastardized for expediency even when they should not be. Example, Regulation is just another term for Law. Yes, I know full well that a certain amount of it cannot be avoided. However, people do not view the word regulation exactly like that. Most people view the term regulation as meaning the general process of Government telling people especially businesses what to do, how to do it, and when it has to be done.
I fully admit to talking this way because even here at TD the average knowledge of the population is exceptionally low. People almost never direct associate Regulation with Law even though they all subconsciously know this. So therefore regulation is being used as a shorthand term for government sticking its nose into everyone business TOO MUCH!
If you want to get into a detailed discussion that is fine, but we first need to agree on some definitions, otherwise this turns into the regular stupidity that is so common on the internet and daily life.
I subscribe to George Washington's way of thinking when it comes to government. Avoid quick and frequent desires to change government. It turns it all into a fucking tyranny. Every problem America has today was essentially foretold by George Washington, and yet despite our First and Best President ever is even paid any mind.
Every nation gets the government it deserves. And TD is not helping improve this one by much. Just watch the next couple of election cycles, I am sure they will be every bit as entertaining as this one. And even with the mounting of historical proof on why I am generally right will still not matter. People have their agendas/parties to attend to, the country and/or countrymen be damned!
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Re: Regulation in a nut shell
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Re: Re: Regulation in a nut shell
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Re: Re: Re: Regulation in a nut shell
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Ticketmaster knows there are bots out there buying tickets but how much do you really think they care if bots are buying tickets from them? Not too much. The tickets still get sold. Think about this, Ticket master still gets to gouge the purchaser of 8 dollars for their "service fee" whether you are a human or a bot buying tickets.
Now you think about the facility a concert or event is at in your city and how many seats that venues holds and do the math, Ticketmaster makes out like a bandit.
Ticketmaster and other ticket brokers know that bots have been buying tickets for a long time and as much as they profess to want to eliminate bots and make sure purchaser have a fair shot at buying tickets do you really believe they care that much, I sure dont.
Ticket master and other ticket brokers make more than enough cash to invest in the technology IT wise to clamp down on the issue but why do they want to spend the money when they are making bank regardless? Do they care if a customer complains to a point yes, but if you protest and say well I ain't paying to go to that show or event, they arent worried they know they will still get the money from elsewhere.
Not only that but Ticketmaster started their own ticket broker site to help buyers sell tickets called TicketsNow. That is a re-seller site, so the very company that sold you a ticket that you couldn't use (or never planned to) is more than willing to help you scalp that ticket for some fees to the seller and buyer, so talk about irony!
The concret promoters like Live Nation and the rest are not exactly innocent wither. The Promoters are the ones that strike deal with Credit Card Companies like American Express for example that allow the folks who have an American Express to get Tickets pre-sale in say for example the first 8 rows on the floor of a concert and the promoters strike that deal for a percentage.
The promoter and the artist/band or Team also does this with the packages that go to fan clubs that your average joe pays to be a part of to enable them to get those fan package for so much cash.
So there is plenty of people with their hand in the pocket of the ticket buyer well before a fan buys that ticket, everyone has made sure to get their share before you even pay for a ticket, and it is always and will always be this way because of the demand some events have by the purchaser.
Christ even the mob must be envious at times of the way that average Joe is getting his pocket picked by everyone
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First, if tickets were being sold at the market clearing price then being a scalper would be an unprofitable occupation. A reasonable market price would be the one that would result in perhaps 80-90% of the tickets being sold. Anybody who wanted one would be able to get one, provided he was willing to pay the price.
That's obviously not the world we live in. For whatever reason the show producers sell seats (especially the premium seats) for much less than this mythical market clearing price. It is presumed that the reason is to gain some good will with the ticket buyer, which the producer (often under some pressure from the performers) feels is worth more than the amount of money left on the table. This good will does not accrue to the producer by an agency that buys the ticket at the good will price, then re-sells it at the market clearing price. That is fundamentally the problem: the producer/band is paying for good will, but isn't getting what they paid for.
Being the unreconstructed State's Rights reactionary that I am, I find it very hard to see how protecting this business model is a Federal problem. Besides the fact that the correlation between (Chuck Schumer) and (bad idea) is very close to 1. But let's assume for a moment that we agree that it is in the public interest to enable an artistic act to enhance their public image in this way.
It seems to me that it would involve making sure that the person who bought the ticket at the cut rate actually is in the seat. That would say that the show producer could stipulate no re-selling of the ticket. The license to attend the show would have to be to a named individual, not the bearer of the piece of cardboard. (Or printed out bar code.) I'd say they're perfectly within their rights to do that already. Might be a hassle to check IDs at the door, but airlines somehow manage. There might be other ways. LIke we email you a pass code four hours before the doors open. Who is going to pay 3x face value for a ticket when there’s no assurances that the ticket will actually be any good?
But then there's the "what if I can't go to the show" problem. I'd say that in that case the show producer would not want to anger the person that they just spent all that money on to engender good will, there should be some way for the purchaser to sell that right. And there's really only one way for that to be fair: the original producer has to buy it back. At full price. Now think about that. The producer is spending all that money to gain good will, and they get it twice: once when they buy the ticket back, and once when they sell it again. How can they pass up such a deal?
So I’m not inclined to support any sort of ticket scalping solution that doesn’t include such a mandatory buy back. Without it there’s no way to know that the concert promoters are really serious about anything besides profit maximization.
Of course, the underpinning of my entire thesis gets very rickety when one considers that our hypothetical concert promoter who is trying to gain good will through below market prices is handing his customers over for the mandatory ass rapin’ with a rusty cattle prod that comes free with every encounter with Ticketmaster. So it's possible that I'm just full of crap.
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Re:
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Getting scalped
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First come first serve model just isn't sustainable with bots and easily distributed bots in line. Also require a very small verification phase(perhaps cc you will use to pay for ticket) so bots aren't overly rampant.
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I now only watch smaller, affordable bands, at more intimate venues (and often ticket cost is less than "service" charge on a big name ticket purchase).
So it's a win for getting me to see acts that might otherwise pass me by & costs me a lot less.
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Horrible
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thirty years and Ticketbasters and the
NY AG are full of crap.
90% of events I attend, tickets are sold
at a discount. This is the case for many
events for office brokers as well.
The real scalpers are Ticketbasters and their
high fees. They do this to every unit sold and
as much as 50% on lower priced tickets.
They also operate in a monopoly environment, wherein
part of their fees goes back to the venue operator whom
had their arena paid for by the taxpayer!!
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Re:
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Great Article -- Common Sense
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The arguments you make are so weak, so removed from anything even close to reality, that you come off as nothing but industry shills scraping the barrel to try to get people riled up. Admittedly what you're saying seems like a good, solid example of modern economic theory, which I hope says something about modern economic theory.
Here's one hint, I'll leave the dozen others as an exercise for the reader: "scalping is good because it lets rich people go to see Hamilton wherever they want" is NOT a winning argument. I'm guessing the people you hang out with loved it, most people won't.
Again, I started out reading this saying "ugh, perfect, the government wants to regulate tech at the behest of industry again." I came away from this article thinking that might not be a terrible idea. Take what you will from that.
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Re:
You are so concerned with "how" the message is delivered that you missed the boat. You are the type of person that buys a BMW that looks good on the outside but rattles and backfires down the road cause... appearances are SO IMPORTANT!
If a Fool utters Wisdom, I begin to listen to the Fool. If the Wise begin to sell out, I consider their counsel not!
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Funding for this article was provided by...
The Mercatus Center, where Christopher Koopman works, at least has an admirable policy against its scholars doing work for hire and against anything which smacks of conflict of interest. Of course, they're ALSO a 501c(3), so... Trust and don't verify?
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Aaaand... My final thought on the matter...
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Re: Aaaand... My final thought on the matter...
Uh, we're not getting paid to post this. If we were, it would be announced as a sponsored post. As it is, I asked people at R Street if they were interested in writing on this topic for us, and they sent this over. I've done work with R Street in the past, and I find they do very good work on a variety of tech policy issues.
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Bizarre Item
First, the legal side looks more like a hammer in search of nails. I am reminded of a news item a few years ago - a major storm brought down power lines all over the southeast; some fellow bought a truckload of generators up north, drove down to the affected area and tried to sell them. he was arrested for profiteering, and his entire inventory seized. Yes, if Home Depot had enough stock, were not sold out, he would not be sitting in their parking lot selling them for twice list price. Is that where America is going?
Does America really need to criminalize every activity? We've already seen that selling fake Rolexes gets you jail time, failing to follow terms of service click-through could get you charged with illegally accessing a computer system, and so on...
People already complain the price of tickets is too high. Seriously, do you need your pre-teen daughter whining for a month or three that you would not shell out $1500 list price so she could go see Justin Beiber from the second balcony because Britany's dad the corporate lawyer did? Do you really think she'd understand your economic situation? Some performers try to keep ticket prices within reason for their general fans, not gouge the market to the fullest extent of the richest 1%. IMHO the solution to scarcity while keeping prices low is a lottery. proper filtering of lottery entries should prevent most of the bots from participating.
The most recent example was when the NHL Winnipeg Jets returned to Winnipeg; 15,000 season tickets sold out online in 20 seconds. Despite claims that bots were the problem, in fact it wa a classic scarcity case - up to 1 local million fans tried to buy less than 15,000 available tickets. Significant tech efforts ensured the people buying the tickets were the end users; they could sell individual tickets from the bundle, but only at face value - scalping for a profit is illegal in the province; and if you tried, any vindictive customer could turn you in afterward. Scalping would lose you your tickets. To transfer the full season tickets, a lot of paperwork had to be done. Basically, the team spent a lot of effort to ensure people were not gaming the system to make a profit, while keeping price within reach for fans. Not a lot of bot gougers.
The only times I've bought on StubHub (Yankees and Mets) the price was below cost, it appeared to be people with legit season tickets unloading ones they were not going to use anyway - so why not make $30 or $40 they would otherwise flush away?
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The answer would appear to be to get rid of the middleman. But that is not correct. There is nothing wrong with an artist selling their tickets to middleman as long as the middle man assumes the market risk. In the current setup, I'm not sure that the middlemen (Ticketmaster) even does that. I suspect that they stick the artist with the cost of unsold seats.
An analogy would be agriculture future options. A farmer knows he need $100K to grown a crop of soybeans. So he sells an option for those beans for $150k which guarantees that he will not lose money. The option buyer is betting that he can sell the beans for more than he paid. But if he loses that bet, it is the option buyer, not the farmer, that takes the loss.
That is the proper use of these middle men in the ticket industry. And the scalpers do this far better than the official ticket brokers.
An artists doesn't need to sell their risk. Very successful artists should be able to auction their tickets and keep the money themselves. In other words, they could bet on themselves.
Artists are being swindled by believing that they are buying "goodwill" with their fans by agreeing to sell seats at fraction of their market value. The reality is that these cheap seats always get taken by middleman and resold at a huge mark up.
Bottom line. This industry is as corrupt as it can be, and now they want the government to condone and protect their scam.
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The Illusion of Ticket Prices
The farce is, there are basically no tickets available at that price.
It's all a scramble to try to capture the "Consumer Surplus" by price discriminating above that face value.
How dare the scalpers find that market disfunction and try to arbitrage when Bieber needs a new Ferrari!
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You can't legislate tech
True statement:
"Efforts to criminalize bots draw attention away from the larger conversation about how venues misallocate tickets in pre sales"
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The Problem with Scalpers
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