Today, December 10, 2007, StubHub announced that the ten millionth ticket was recently exchanged through the site. The company said that the exchange involved a pair of tickets to next Sunday’s game between the Green Bay Packers-St. Louis Rams in St. Louis. In a pattern perhaps typical of many exchanges on StubHub, a fan of the visiting Green Bay Packers acquired the ticket from a St. Louis fan/season ticket holder who faced a conflict preventing his use of the tickets.
The ticket resale market has motivated a few theoretical economics papers, but usually very little data is thrown into the mix. Now that is changing. A couple of Stanford economists, Alan Sorensen and Phillip Leslie, have developed a great dataset on ticket resale based on data from Ticketmaster, StubHub, and eBay for a sample of more than 100 concerts during the summer of 2004. Overall they have records for over 1.7 million tickets sold or comped in the primary market – data from Ticketmaster – and almost 69 thousand tickets resold via eBay and StubHub (data provided by StubHub; eBay data scraped from the site – aren’t research assistants great? StubHub was acquired by eBay in February 2007). The economists speculate that about half of ticket resale occurs through one of those two sites, so perhaps a total of 140 thousand out of the 1.7 million tickets were resold in the secondary market.
The data is described in an unfinished paper, “The Welfare Effects of Ticket Resale.” While the analysis is incomplete, some interesting preliminary results emerge from their data:
- Total revenue received by resellers at eBay and StubHub is averaged 6% of the primary market revenue; the maximum for any single event in their dataset is 37%.
- Resellers are obtained an average markup of 40% over the face value, and a quarter of resold tickets obtained markups above 66% – but 28% of tickets were resold below face value.
- Resold tickets were more likely to be tickets with higher face value, and more generally high quality seats were more likely to be resold than lower quality seats (even for tickets of the same face value).
- Indeed, the authors conclude that unpriced seat quality was a significant driver of ticket resale activity.
- Total profit (markup) obtained from ticket resale in our data is slightly over $1.5 million, or about 1.14% of total revenue in the primary market. Given that they observed an estimated half of resale activity, the actual values for their sample of concerts was probably closer to $3 million and 2.3% of the total.
A useful point for promoters and venues that want to discourage resale: price tickets better in the first place. Typically a particular concert will offer a variety of price points; the concerts ranged from 1 to 12 price levels in the Leslie and Sorensen dataset. With sometimes thousands of seats offered at a single price point, the authors observe that the variation in seat quality at a particular price can be dramatic. With variation in quality and a fixed price, an economist would expect relatively higher excess demand for the higher quality seat. Professional ticket resellers rely upon these high quality underpriced tickets to obtain their significant markups.
If primary ticket sellers were better at pricing tickets in the first place, they could squeeze most of the professional resellers out of business. (This is my conjecture, not that of Leslie and Sorensen.) No doubt an analysis of data from Ticketmaster and StubHub could help venues identify underpriced seats, and help them redraw their pricing regions.
I have no particular interest in driving professional ticket brokers out of business, but it seems to me that consumers don’t gain a lot in the long run from the economic surplus that flows into brokers’ hands. As a consumer, I benefit more in the long run when profits are captured by suppliers, motivating supply-side competition among musical acts and concert venues to serve me, rather than when profits are captured by ticket brokers, which motivates an ‘arms race’ competition to obtain the best tickets first.
But lest this last argument be taken as an anti-scalping position, I hasten to add that I have a stronger short run interest in easy-to-access resale opportunities when a conflict arises and I can’t use a ticket. (Or, for example, when my team was leading the league at the end of the MLS season, so I bought MLS Cup tickets, then they didn’t make it through the post-season tournament, so I resold the tickets via StubHub rather than witness the Houston Dynamo repeat against the New England Revolution.)
My mantra remains: Online Secondary Ticket Markets can be Good for Teams and Fans (and musicians and venues).
NOTES: My most recent previous post on ticket resales is: NFL wants to support secondary market for tickets, New England Patriots want to punish ticket resellers.
(By the way, StubHub reports that Miley Cyrus was the highest grossing concert on the site this year based on StubHub volumes and exchange prices. Cyrus tix averaged a resale price of $258; only Celine Dion and Elton John tickets saw higher resale values, while resale prices for Eric Clapton, Bon Jovi, Bruce Springsteen, and The Police, among many others, fell below the Cyrus ticket average.)
See a related story on online ticket resale from The Economist: If you can’t beat ’em, join ’em.