Introduction

Guess the year for the following: 

A world-renowned celebrity is touring the United States.  Tickets to see this luminary are being sold for ten times their face value price on the secondary ticket market.

This situation has fans irate.  They're upset that tickets are hard to find, and once they're found, they're very expensive.

So, what year is it?  Is it 2018, 2008, or maybe 1998?

If you guessed any of those years, or one close to it, you're not only incorrect, but you've picked the wrong century. 

We were referring to Charles Dickens' second tour of the United States in the 1860s! 

At the time, tickets to hear the English author read from one of his classics tomes were selling for $5 on the primary ticket market and $50 on the secondary ticket market. 

 

Ticket Speculators

Back then, ticket resellers were called "ticket speculators."  They were also dubbed "sidewalk men."  That's a reference to where these speculators frequently resold tickets.  The industry was fierce in the 19th century, and to keep the best corners, some speculators resorted to murder.

To acquire tickets, speculators used "proxies" to buy from theaters and other venues.  Much like they do today, theater managers, artists, and other players within the primary ticket market allowed speculators to sell tickets directly on the secondary market.

In the 1800s, ticket reselling was not limited to theater productions and live events.  Speculators also resold train tickets.  While this sounds shady, it was a legitimate business.

These resellers organized a group called the American Ticket Brokers' Association.  The association's aim was to eliminate disreputable resellers from the business.  At one point, the faction had 150 members.

While the above stories are from the 1800s, the buying, and then reselling, of tickets to live events goes back (like most everything else) to Roman times. 

For as long as tickets have been sold, they've been resold.


The Internet

Of course, the internet took the secondary ticket market from the street corner to the board room.  E-commerce allowed the industry to organize, become legitimate and grow. 

Today, the secondary ticket market is a multi-billion-dollar industry. 

Websites belonging to secondary ticket resellers allow fans to shop for tickets with much more confidence then they ever had when buying from a stranger on a street corner. 

Despite what some detractors claim, the secondary ticket market is built on security and trust.  The market also aims to give ticket buyers a positive buying experience.


Interactive seating charts, a feature found on many secondary ticket market websites today.

 

Why Is There A Secondary Ticket Market?

Why are tickets resold in the first place?  Is it simply that certain people, the previously mentioned "ticket speculators," are better at buying tickets than the public?

Certainly, there are some who are better at acquiring tickets then others—getting the best seats and getting them for the most popular events—but that reason alone doesn't keep resellers in business.

When it comes to concerts for instance, the secondary ticket market exists for two major reasons.

One, music artists want to perform in front of sold out crowds.  Two, they want to keep prices low so as not to appear greedy. 

For those reasons, the primary ticket market sells concert tickets for less than what they're worth—less than what most fans are willing pay.  It's like selling a one-dollar bill for fifty cents.

This discrepancy, the difference between the face value price and the ticket's actual value, allows resellers to make a profit.

This is especially true for top tier concerts like U2, The Rolling Stones, Dave Mathews Band, and Bon Jovi.  And it's often done intentionally.

The secondary ticket market for concerts can easily be eliminated if artists play as many shows that are needed in each city they visit to accommodate everyone who wants to see them, and increase ticket prices to match their true market value. 

 

Ticketmaster

In order for there to be a secondary ticket market, there needs to be a primary ticket market.  For the last four decades, the most dominate player in the primary ticket market has been Ticketmaster.

Ticketmaster was founded in Phoenix, Arizona in 1976.  It's first ticketed event, an Electric Light Orchestra concert, occurred in 1977.

Before Ticketmaster, venues handled their own ticketing.  It sounds easy but selling tickets to an event is quite the feat of logistics.  In the 1970s, before the proliferation of the computer and the internet, selling tickets to a live event was especially difficult.

Ticketmaster's technology makes the process easier, but what really makes their services attractive is money.  Ticketmaster pays venues to sell their tickets.  For these arenas, theaters, and pavilions, giving Ticketmaster the keys to their box office was a no-brainer.

The company entered the secondary ticket market in 2003.  Then, in 2008, Ticketmaster purchased the secondary marketplace, TicketsNow. 

The company operates TicketsNow as an independent subsidiary.

Ticketmaster has a poor reputation and is universally derided by fans. Much of this anger stems from the service fees they charge customers.  

It should be noted that Ticketmaster doesn't have a monopoly.  Venues can have any company they want sell their tickets.

View our Ticketmaster Major Milestones Timeline

 

Stubhub

Today, the one secondary ticket reseller most consumers know is StubHub.  The ticket exchange was founded in 2000 by investment bankers Eric Baker and Jeff Fluhr.  Three years later, their company was turning a profit. 

StubHub allows users to sell event tickets at any price.  The company takes a commission after the sale is completed. 

While anyone can sell event tickets on StubHub, an overwhelming majority of users, around 70 percent, are professional ticket brokers.

StubHub is the most popular player on the secondary ticket market, but they are far from the only one.  Many reputable companies, of varying sizes, resell tickets.

In 2007, StubHub was acquired by eBay.

 

Secondary Ticket Aggregators

Another major component of the secondary ticket market are aggregators.  These are basically search engines for concert and sports tickets.

Prospective event-goers can use an aggregator to compare tickets from several vendors on the same web page.  It's like how a user can observe numerous links to web pages after conducting a search on Google.

Secondary ticket aggregators help event-goers find the least expensive tickets.  Some aggregators also provide analytics to help users buy tickets at the most advantageous time.

Some of the most popular secondary ticket aggregators are FanSnap, SeatGeek, and Tickex.

Secondary Ticket Market in the Future

It's been predicted that the secondary ticket market will be a $15 billion business by 2020. 

While event-goers all over the world are buying tickets from secondary sellers, the United States accounts for 45 percent of the market.

Despite ardent detractors, fans all over the world use the goods and services provided by the secondary ticket market.

 

Definitions of Primary Ticket Market and Secondary Ticket Market

The primary ticket market is the original retailer of tickets to an event.  The most famous primary ticket seller is Ticketmaster.

The secondary ticket market is where tickets, originally purchased from the primary ticket market, are resold.  The only exception is when artists purposely keep tickets from being sold on the primary ticket market, so they can sell them directly on the secondary ticket market for more money.

 

Difference Between Ticket Resellers and Ticket Scalpers

Detractors of the secondary ticket market use the terms "ticket reseller" and "ticket scalper" interchangeably.  They may do this because "ticket scalper" is a pejorative term.

The two terms, however, are not synonymous.  A ticket reseller, also known as a ticket broker, is a legitimate business person that legally resells event tickets. 

A ticket scalper is generally a scofflaw that illegally resales tickets at, or near, the event site.

 

The Secondary Ticket Market and Sporting Events

The secondary market place for concerts is like the secondary marketplace for sporting events with a few differences.  One, sporting events produce far more tickets than concerts, and two, franchises employ dynamic pricing. 

Dynamic pricing allows teams to alter the face value price of their tickets, either higher or lower, based on perceived changes in demand. 

For example, a MLB franchise may increase the face value price of Saturday's game if two quality pitchers are starting or the game has playoff implications.  The franchise may decrease prices if the weather is expected to be poor or a star player will be out with an injury.

Changes in pricing can occur on a daily, or even hourly, basis. 

What all this means is it's easier to find tickets for an overwhelming majority of sporting events and to find them below their face value price on the secondary ticket market.

 

Season Tickets

The secondary ticket market has had a big influence on the sale of season tickets too.  With tickets to just about every game available on the secondary ticket market, fans no longer need to purchase large blocks of tickets to see their favorite team.

To compensate, some franchises have included perks and amenities with the purchase of season tickets. 

Franchises have also installed guarantees that dynamic pricing will never drop below the face value price of a holder's season tickets.

 

Paperless Tickets

To thwart the secondary market, some primary ticket sellers have instituted paperless tickets.  Ticketmaster calls the practice "credit card entry."

As the name suggests, the purchaser enters the venue not by showing a ticket, but by revealing the credit card used to buy their ticket(s).  This also means that everyone in the purchaser's party must enter together.

Paperless tickets cannot be sold or given away unless certain and specific conditions are met.  That means if you're unable to attend the event, because you bought tickets months in advance and your schedule has changed, you'll lose your investment. This is one reason some people don't like paperless tickets.

 

Benefits of the Secondary Ticket Market

What is the benefit of the secondary ticket market if the tickets they sell are always more expensive? 

Well, not all tickets on the secondary ticket market cost more than they do on the primary ticket market.  Due to falling demand, tickets are frequently sold below face value price on the secondary market by sellers looking to recoup a portion of their initial cost.

Thus, one of the major benefits of the secondary ticket market is finding tickets priced below what they would have been sold for on the primary ticket market. 

Another major benefit of the secondary ticket market is tickets are frequently available regardless of the event's popularity.  This includes events that are sold out on the primary ticket market.

Often, tickets on the primary ticket market are sold weeks, sometimes months, in advance.  It's not always possible for event-goers to know if they'll be available to attend an event that far out. 

The secondary ticket market offers the convenience of buying tickets closer to the event date.

A large part of the primary ticket market is conducted online, but tickets are still sold at physical box offices.  The secondary ticket market allows fans to avoid waiting in line.

Finally, the secondary marketplace affords ticket holders a place to sell tickets they can't use.  If you do buy months in advance, and your schedule changes, you'll be able to recoup your costs by reselling your tickets on one of the many secure secondary marketplaces.

 

Criticism of the Secondary Ticket Market

Many of the complaints lodged against the secondary ticket market fall under the category of avarice and corruption.  Those are the same problems you'll find in any other secondary market. 

These ails include forged tickets, real tickets that only allows access to the original purchasers, and primary sites that cleverly redirect users to secondary sites where tickets are selling for higher prices. 

All these problems can be avoided if you buy tickets from reputable and venerated brokers.

It should be said that the secondary ticket market offers more protection to its customers than other secondary markets.  That's because secondary ticket brokers need their customers' trust.  It's a major component of their business model.

Perhaps the most frequent criticism lobbed at the secondary ticket market is the notion that it keeps tickets out of the hands of "real fans."  While its frustrating not to be able to buy tickets to an event you want to attend, fans must remember that attending a concert or a sporting event is a luxury, not a right.

Besides, what constitutes a "real fan?"  Shouldn't someone willing to pay two, three, or ten times the face value price of a concert or sporting event ticket be considered a "real fan?"

Others deride the secondary ticket market for gobbling up all the inventory.  This leaves fans without tickets or forces them to possibly pay higher prices on the secondary market.

The number of tickets on the secondary ticket market is low when compared to the overall tickets sold.  A 2017 study by the New York Attorney General found that about 46 percent of tickets are made available to the public. 

The other 54 percent are saved for privileged groups and/or released directly to the secondary ticket market.

Even if every single ticket was released to the public, the demand for concert and sports tickets is usually far greater than the supply.  While exceptions occur—poor performing sports franchises and music artists that have outlived their popularity—there are usually more people who want to buy tickets then there are tickets.

Another complaint consumers often have about the secondary ticket market is that the tickets come with a markup or service fee. This argument fails to take into account that all goods and services come with a markup or service fee, or they wouldn't be in business.

 

Ticket Resale Laws

In the United States, the legality of reselling tickets depends on where you live.  While many states have laws pertaining to ticket resale, the practice is widely permitted. 

Some states have passed legislation regulating ticket resale, but these laws are either easily circumvented (thanks to the internet) or rarely enforced.

Several states prohibit the reselling of tickets near the venue—what we called, earlier in this article, scalping.

Here are other examples of ticket resale laws:

In Arkansas, it is illegal to sell tickets to any event where the proceeds benefit charity.

In Colorado, resellers must guarantee a full refund if the event is cancelled.

In Delaware, you cannot resell a ticket above its face value price on the day before, or the day of, an event at the Bob Carpenter Sports/Convocation Center on the University of Delaware.

In Georgia, ticket brokers must maintain a permanent office within the state.

In Louisiana, tickets cannot be sold for more than their face value price unless they're sold on the internet.

In Mississippi, you cannot sell tickets to any collegiate or university athletic event for more than the face value price of the ticket.  Wisconsin has a similar law but it's for events at, or "under the auspices of" the state fair park.

 

New York City has a ticket resale law that dates all the way back to 1880.  The ordinance required ticket speculators to acquire a license and pay a fee.

In 2016, President Obama signed the Better Online Ticket Sales Act or BOTS Act.  The act outlawed the resale of tickets purchased by bot technology. 

Bot technology is software used by a small number of unscrupulous resellers to buy large quantities of tickets from primary outlets.  The software fills out the necessary forms, and submits payment, faster than a human.

It should be noted that the law prohibits the resell of tickets purchased by a bot.  It does not prohibit using bots to purchase tickets for one's own use.

The Bots Act is enforced by the U.S. Federal Trade Commission.

 

Sources

https://iea.org.uk/publications/digit al-resellers-the-case-for-secondary-ticket-markets/
https://iea.org.uk/themencode-pdf-viewer-sc/?file=/wp-content/uploads/2018/01/Ticketing-paper-web-FINAL.pdf
http://www.aei.org/publication/ticket-scalping-a-market-that-only-exists-because-musicians-under-supply-and-under-price-tickets-to-their-concerts/
http://scholarship.shu.edu/cgi/viewcontent.cgi?article=1210&context=student_scholarship
https://timesmachine.nytimes.com/timesmachine/1881/07/13/98565114.pdf
https://www.ticketmaster.com/about/our-history.html?tm_link=abouttm_history
http://help.ticketmaster.com/what-if-i-m-getting-in-with-credit-card-entry-but-my-card-was-lost-or-stolen/
https://www.squirepattonboggs.com/~/media/files/insights/publications/2017/07/secondary-ticket-marketplace/2017_us_ticket_resale_law_guide.pdf
https://www.cga.ct.gov/PS98/rpt%5Colr%5Chtm/98-R-0382.htm

 

 


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