Ticket resale

Ticket resale (also known as ticket scalping or ticket touting) is the act of reselling tickets for admission to events. Tickets are bought from licensed sellers and are then sold for a price determined by the individual or company in possession of the tickets. Tickets sold through secondary sources may be sold for less or more than their face value depending on demand, which itself tends to vary as the event date approaches. When the supply of tickets for a given event available through authorized ticket sellers is depleted, the event is considered "sold out", generally increasing the market value for any tickets on offer through secondary sellers. Ticket resale is more common in sporting events and music events/concerts.

Ticket resale is a form of arbitrage that arises when the amount demanded at the sale price exceeds the amount supplied (that is, when event organizers charge less than the equilibrium prices for the tickets).

Purchase and re-sale methods

Ticket resellers use several different means to secure premium and previously sold-out ticket inventories (often in large quantities) for events such as concerts or sporting events. Established resellers often operate within vast networks of ticket contacts, including season ticket holders, individual ticket resellers and ticket brokers. They make a business out of getting customers hard-to-find and previously sold-out tickets that are no longer available through the official box office; recently, obtaining tickets through special presales has become more common. These presales often use unique codes specific to an artists fan club or venue. The advent of presales has allowed more individuals to participate in reselling tickets outside of a brokers office.

Ticket scalpers (or ticket touts in British English) work outside events, often showing up with unsold tickets from brokers' offices on a consignment basis or showing up with no tickets at all and buying extra tickets from fans at, or below face value with their own money on a speculative basis hoping to resell them at a profit. There are many full-time scalpers who are regulars at particular venues and even have a pool of loyal buyers. These full-time scalpers are often sought out by fans hoping for a last minute deal and are comfortable buying from a familiar face, expecting that they are less likely to be ripped off (i.e. with counterfeit or stolen tickets) than they would be by a stranger. However, there are plenty of scam artists that sometimes follow a concert tour from city to city selling fake tickets to unsuspecting buyers for whatever they can get. Another common practice is that scalpers would sell tickets that have already been scanned at the venue gate since entry is typically allowed only when a ticket is scanned for the first time. Since the tickets were authentic, buyers would have no way of telling if a ticket had been used or not.

Often, scalpers will wait for a specific time to begin selling the tickets, to maximize the profits associated with supply and demand. When scalpers wait until the final days before an event to resell tickets, it is sometimes called a scalp seeding.

Ticket brokers operate out of offices, and use the internet and phone call centers to conduct their business. They are different from scalpers in that they offer a consumer a storefront to return to if there is any problem with their transaction. The majority of transactions that occur are via credit card over the phone or internet. Some brokers host their own websites and interact directly with customers. These brokers are often able to offer additional services such as hotel accommodation and airfare to events. Other brokers partner with online providers that run independent e-commerce sites. These sites act as portals that allow users to purchase tickets from a large network of brokers. They also serve to validate the identity of individual brokers and provide additional service guarantees about the authenticity of tickets purchased through their networks.

Derivatives

Although derivatives was a practice in use mostly in the 1980s, some ticket brokers offer tickets even before the tickets are officially available for sale. In such scenarios, those ticket resellers are actually selling forward contracts of those tickets. One example is a company called TicketReserve, which is making money by selling "options" on future sporting events. This is often possible if the reseller is a season ticket holder. Season ticket holders generally receive the same exact seat locations year after year thus they can enter a contract to deliver on tickets that they own the rights to, even if those tickets have not even been printed or sent to the original ticket holder. This presale practice has fallen out of favor as ticket buyers are now accustomed to viewing online available inventory on broker sites and receiving their purchases the next day via overnight delivery.

Another company, Yoonew, provides a market by which sports ticket derivatives can be traded between users.

Online ticket brokering

Online ticket brokering is the resale of tickets through a web-based ticket brokering service. Prices on ticket brokering websites are determined by demand, availability, and the ticket reseller. Tickets sold through an online ticket brokering service may or may not be authorized by the official seller. Generally, the majority of trading on ticket brokering websites concerns itself with tickets to live entertainment events whereby the primary officially licensed seller's supply has been exhausted and the event has been declared "sold-out". This "sold-out" status increases the ticket's potential market value. Critics of the industry compare the resale of tickets online to ‘ticket touting’, ‘scalping’ or a variety of other terms for the unofficial sale of tickets directly outside the venue of an event.

The late 1990s and early 2000s saw the emergence of online ticket brokering as a lucrative business. U.S. corporate ticket reselling firm Ticketmaster developed a strong online presence, but had to make acquisitions to compete in the secondary markets. Securities analyst Joe Bonner, who tracks Ticketmaster's parent company New York-based IAC/InterActiveCorp, told USA Today: "You have to look at the secondary market as something that is a real threat to Ticketmaster. They missed the boat. StubHub has been around a few years now already. They weren't as proactive as they probably should have been."^[1] Ticketmaster launched fan to fan secondary ticket reselling site TicketExchange in November 2005. Ticketmaster acquired former rivals GetMeIn and TicketsNow,^[2] while eBay bought StubHub.^[3] In 2008, the Boston Red Sox chose Ace Ticket over StubHub to sell their tickets.^[4]

Eric Baker, founder and CEO of Viagogo.com, a European ticket resale website, has described the loosening of Ticketmaster's grip on the market as "the equivalent in the ticketing industry of the fall of the Roman Empire".^[1]

By 2008, Internet ticket fraud had emerged as global problem, when fake ticket websites defrauded millions of dollars from sports fans by selling Beijing Olympics tickets which they had no intention of delivering.^[5][6]

Criticism of re-selling

Individuals who genuinely wish to attend a popular event may find themselves unable to get tickets, as they have already been sold to ticket resellers. This practice enables the ticket resellers to sell the tickets at several times the face value, with no effective loss because they had no intention of attending the event in the first place. On the other hand, if the resellers buy the tickets and the tickets are not then sold out, then they risk a loss.^[7] Resellers also argue that there is a fine line between the individuals who genuinely wish to attend a popular event (and decide to sell their tickets later) and those that buy tickets in large quantities in order to resell their tickets for a hefty profit. The practice of reselling tickets may be defended on free market principles although some countries have outlawed the unauthorized resale of tickets (usually with exceptions where the reseller doesn't profit from the transaction).

Resale of tickets at sold-out events can also encourage those without tickets to turn up at the venue, in the hope of purchasing one. This can cause crowd control problems, with numbers in excess of the venue's limits approaching it, and the access of those with tickets being hampered by a sizeable number of those without.

By contrast, during the 19th century, the term scalper was applied to railroad ticket brokers who sold tickets for lower rates.^[8] Scalpers sell tickets for high rates because there is more demand for tickets at the low sales price than available tickets. Hence they resort to other forms or rationing like standing in line or lotteries.

Legal responses

A concern when buying tickets on the street from a ticket scalper or via an online auction, is that the tickets sold by ticket resellers may themselves be stolen or counterfeit. For many major sporting events counterfeit tickets are auctioned off in the months leading up to the event. These criminals and their activities are not to be confused with legitimate ticket brokers and individuals who abide by law to legally resell tickets on the secondary market.

It is controversial whether tickets are goods which can be privately resold. Some parties argue that the money paid to the organisers is actually paid for the service of attending the event, which a buyer cannot resell because the buyer does not have the service to sell. Other parties argue that tickets are paid for by consumers and should be transferable just like any other good. Typically private resale will contravene the original conditions of sale, but it's legally questionable whether the original conditions of sale are even enforceable.

United Kingdom

In the United Kingdom resale of football tickets is illegal under section 166 of the Criminal Justice and Public Order Act 1994 unless the resale is authorized by the organiser of the match. Secondary ticketing market StubHub have signed partnership agreements with Sunderland and Everton for 2012/13 season, whilst competitor viagogo hold partnerships with Chelsea and other clubs.

Other than in the case of football tickets, there is no legal restriction against reselling tickets in the UK.^[9]

Netherlands

A similar situation is applicable in the Netherlands where resale of football/soccer tickets is illegal unless through the official reseller Skelper.nl an official partner of clubs like Feyenoord, PSV, FC Groningen and N.E.C..

The first official secondary ticketing internet platform launched in the Netherlands in 2007 and by now there are several like viagogo, Seatwave, Worldticketshop.

United States

In the United States, ticket resale on the premises of the event (including adjacent parking lots that are officially part of the facility) may be prohibited by law. These laws vary from state to state, and the majority of US states do not have laws in place to limit the value placed on the resale amount of event tickets or where and how these tickets should be sold. Ticket resellers may conduct business on nearby sidewalks, or advertise through newspaper ads or ticket brokers. Some US states and venues encourage a designated area for resellers to stand in, on, or near the premises, while other states and venues prohibit ticket resale altogether. Resale laws, policies and practices are generally decided, practiced and governed at the local or even venue level in the US and such laws and or interpretations are not currently generalized at a national level.

Another issue in the US is that since ticketing laws vary by state to state, many ticket resellers use a loophole and sell their tickets outside of the state of an event. Therefore, a ticket reseller who is reselling tickets to an event at New York's Madison Square Garden is not subject to New York State's markup laws as long as the sale takes place outside of New York. The majority of ticket brokers in the New York metropolitan area have their offices in bordering states New Jersey and Connecticut for this reason. Many states such as California limit their definition of scalping to the resale of event tickets at the venue for above face value only. Note that many state and local laws prohibiting peddling on public property or local thoroughfares can effectively prohibit scalping of any kind.

Australia

Depending on the ticketing body's conditions of sale, tickets may be voided if they are resold for a profit. This is so with Ticketek tickets (Ticketek is an Australian-based ticketing company). Efforts to clamp down on ticket resale have included labeling tickets with the name or a photograph of the buyer,^[10] and banning people without tickets from the vicinity of the event to prevent the purchase of secondary market tickets.

In Australia, the secondary ticket market has been put under much scrutiny in the past few years as ticket scalpers dominated the resale ticket market. Scalpers would purchase tickets in bulk from the promoter hoping that the tickets would sell out causing an increase in demand for tickets and thus an increase in the ticket price. This caused event promoters to put restrictions on the number of tickets that can be purchased in one transaction, which has greatly reduced unfair ticket pricing. After many complaints from the community and event promoters the DFT (Department of Fair Trading) and CCAAC (Commonwealth Consumer Affairs Advisory Council) conducted a survey discussing scalping issues and released The Ticket Scalping Issue Paper for NSW.^[11]

Canada

In Ontario, Canada, re-selling the tickets above face value is prohibited by the Ticket Speculation Act and is punishable by a fine of $5,000 for an individual (including those buying the tickets above face) or $50,000 for a corporation.^[12]

Quebec put into law "Bill 25" in June 2012, making it illegal for ticket brokers to resell a ticket for more than the face value of the ticket without first obtaining permission from the ticket's original vendor. Brokers reselling tickets are required to inform consumers the tickets are being resold, and must tell consumers the name of the ticket's original vendor and the original face value price. The penalty to violating the law includes fines of $1,000 to $2,000 for the first offense, and as much as $200,000 for repeated violations.^[13]

Israel

In Israel, in 2002, The Knesset put into effect the 67th amendment to the Israeli Penal Code, enacting Section 194a, which outlaws ticket scalping. The new section states that unlicensed persons reselling tickets at above face value will be subject to fines. The new addition to the penal code enabled police to fight the ticket scalping of sports and music events (especially those scalpers that bought massive amounts of tickets for the sole purpose of resale), which were causing much distress to the public and enabled scalpers to evade paying taxes, but since no law strictly outlawed the practice, could not be legally fought prior to the new law.^[14]

Italy

For years in Italy ticket scalping was considered a "grey zone" in the judicial system, tolerated and punished only when the resold ticket came from illegal sources. However, since 2009 concerns about football hooliganism have led to the introduction of nominative tickets, issued only to people having a license proving they didn't previously engage in hooliganism-related felonies or misdemeanors, hampering the scalp market.

Selling tickets by ballot

Some promoters have ceased selling tickets in the traditional first-come-first-served manner, and require prospective ticket holders to enter a "ballot" — a competition with random winners — with the prize being the opportunity to purchase a small number of tickets. The ballots are intended to discourage re-selling by making it harder to purchase large numbers of tickets because being at the front of the queue does not guarantee the holder a ticket.

Events that have sold tickets by ballot include the Big Day Out in 2007,^[15] the Ahmet Ertegün Tribute Concert - Led Zeppelin reunion concert at The O₂ Arena in 2007 - and the 2006 Commonwealth Games.^[16]

A similar practice used among ticket resellers is to list an item as an online auction (such as eBay) - most commonly an innocuous item such as a collector’s card - and give the tickets as a bonus to the winning bidder; thereby not actually selling tickets in order to circumvent ticket laws. This does not actually get around eBay's selling rules, as they effectively state that the goods that the buyer receives are what the seller is selling, including any free bonuses.

Selling tickets at auction

Ticketmaster sells tickets in online auctions, which may bring the sale price of tickets closer to market prices. The New York Times reported that this could help the agency determine demand for a given event and more effectively compete with ticket resellers.^[17]

Online auction sites like eBay only enforce state ticketing laws if either the buyer and/or seller resides in the state where the event is taking place. Otherwise, there is no resell limit for tickets.

Personalized tickets

Glastonbury Festival, which sold out 137,500 tickets within less than two hours in 2007,^[18] introduced a system in the same year whereby tickets included photographic ID of the original buyer, to enforce non-exchangeability.^[19]

For tapings of Comedy Central's The Daily Show and The Colbert Report, tickets were free. However, identification of ticket holders is checked when entering and while standing in line, and most notably when progressing from the entrance queue into the studio space. These measures serve effectively as a means of preventing those reserving these sought-after tickets from selling them for a cash value upon reservation.

See also

• Ticket exchange
• Price discrimination
• Experience good
• Internet ticket fraud
• Tout

References

External links

• Ticket Distribution Practices: New York Attorney General Report on Ticket Resell
• The Market for Rock Concerts in the Material World PDF (385 KB): Princeton University Professor Alan B. Krueger April 12, 2004 paper on reselling tickets
• A podcast defending ticket resale Russ Roberts on EconTalk explores the economics of ticket resale, arguing in favor of the practice.
• Thank goodness for ticket touts James Lawson of the Adam Smith Institute argues in favour of ticket touts.
• A state-by-state summary of scalping laws in the United States.
• Ticket Distribution: Ticket Sales by Prime Ticket Ltd