JOHNS HOPKINS / U. MICHIGAN (US) — Concert organizers can profit by embracing ticket resellers rather than fighting them, researchers say.
While primary ticket sales in the United States earn about $20 billion annually, some resentful promoters see the estimated $3 billion made each year in the ticket-resale market as revenue that got away.
That’s the wrong perspective and ignores consumer behavior, business researchers from the University of Michigan and Johns Hopkins University argue.
“This can be a win-win situation for everyone involved: the promoter, the entertainer, and the consumer,” says Ozge Sahin, assistant professor at Johns Hopkins’ Carey Business School and co-author of a recent working paper on the issue.
“With the existence of the resale market,” Sahin says, “consumers are more willing to buy fixed-price tickets well in advance, and pay more for them, because they know they can always resell them through Stub Hub or another broker if they find later they can’t attend the event.
“This benefits the promoters and performers,” Sahin says, “because it enables them to sell a higher number of advance tickets, and at higher prices.”
The paper was presented at this year’s MIT Sloan Sports Analytics Conference in Boston and INFORMS Revenue Management and Pricing Conference in Berlin by Sahin and by professor Izak Duenyas and graduate student Yao Cui of Michigan’s Stephen M. Ross School of Business.
Learn to love resale
StubHub, Razorgator, TicketsNow, eBay, and other Internet outlets have fueled the growth of the resale market over the past decade. StubHub, which is owned by eBay and claims to be “the world’s largest fan-to-fan ticket marketplace,” has formed direct ticket-selling partnerships with more than 50 major sports organizations at both the professional and collegiate levels, from Major League Baseball’s Arizona Diamondbacks to NCAA football’s Wisconsin Badgers.
The market’s emergence has led to battles in Washington, DC, and various state capitals over ticket resale legislation. Despite the efforts of lobbyists for primary sellers, a number of states have ended curbs on reselling, a trend that has helped drive the secondary market’s growth.
Sahin and her colleagues say event promoters could learn to love, or at least co-exist with, the resale market by adopting new methods.
One is dynamic pricing, in which the cost of advance tickets might fluctuate according to demand. Under this pricing model, the presence of a secondary market can prove beneficial, especially when demand is high, because the flexibility of dynamic pricing enables promoters to charge more to customers who are less afraid of having to eat tickets they cannot use.
Another approach is the sale of ticket options, Sahin says. Under this arrangement, a customer pays a fee of, say, $15 for the right to purchase a ticket later at full price. If customers decide by a specified deadline not to attend the event, they lose the option fee, but that’s only a fraction of the full price they otherwise would have paid up front. The promoter can pocket the option fee and sell the ticket to another buyer at full value.
“Ticket options should be part of every event organizer’s portfolio,” Sahin says. “They would reduce the organizers’ risk and give consumers another buying alternative.”
More news from Johns Hopkins: http://releases.jhu.edu