Tuesday, December 06, 2005

Scalping U2

NEWSTALK ZB: The promoter for the sold-out U2 concert next March is angry about the speed with which some people sold on their tickets. Some tickets for the first gig were being offered on internet auction sites within minutes of being issued. They have since sold for as much as $2000. Promoter Michael Coppel says it is fair enough for people who change their minds or find they cannot go to look for a buyer. However, in this case, he says there is obviously some deliberate scalping.

Leaving aside that, in my view, people who like U2 deserve to be taken for a financial ride just as far as their musical taste has been, we have here a promoter - who you would think would have at least a modicum of financial sense - bleating about people re-selling their tickets, poor lamb, and whinging that the asking price for some is 'beyond their fair value.' The poor lamb is economically illiterate, and he doesn't understand a good thing when he sees it...

First of all, 'fair market value' for a U2 ticket is not what the promoter thinks it is, or what I think it is (personally, I'd pay to stay away if I had to): The 'fair market value' for a ticket is an agreement between the seller of that ticket, and the buyer of that ticket, if one can be found. Fair market price in essence is whatever a punter is willing to pay.

If some punters want to pay what you or I think is silly money, then that's nobody's business but the buyer's and the seller's. People pay good money for lots of things that you and I don't like; the market value for them is set by those who do like them.

'The market' is not some disembodied tablets in stone, upon which, for example "the market value of U2 concert tickets" is written: the ticket for a U2 show has no 'intrinsic value' whatsoever, they're just bits of paper making a promise -- their 'value' is what the buyer decides they're worth (if a buyer can be found).

If someone is idiotic enough to pay big money so they can stand in a tent in Auckland and hear Bono bellow over the top of some guitar effects and recycled melodies, then that's the lookout of the idiot. As long as he or she has money to spend on an evening with an superannuated Celtic blowhard, and that's the way they want to spend it, then the fair market value is whatever that punter is willing to pay. At the time of writing, you can pick up a brick and a used battery with U2 concert info on TradeMe for just a dollar ("a great Xmas present" is the tagline on the brick), or pay one dollar for a genuine ticket (only used once) or you can start the bidding at $140 for two tickets to the Auckland show, or you can watch the boneheads cirling around at prices with lots of zeroes (amazing how many 'new' TradeMe bidders are offering silly money trying to 'spike' the auctions).

But our promoter makes another mistake in his complaint about scalpers. An official ticket seller is just the chap who gets them first -- the market gives him no more special status than if he'd dropped down from heaven to announce the first trump.

In fact, the scalper offers a valuable service both to consumer and to promoter. To the consumer, the scalper offers the service of offering tickets that might not othewise be available, and on occasions at a price less than face value (as these tickets soon might be now that a second U2 concert has been announced).

Personally, I've been very happy over the years to take advantage of a scalper's offer of tickets to shows and sports events that otherwise would be unavailable. Wimbledon, the Proms and London's second Velvet Underground show might all have been off-limits to me if not for a friendly scalper -- boy, was I happy to find them.

To the promoter, the scalper offers the service of security, and financial stability. The promoter calculates what he needs to cover his money and to make his profit: the scalper takes the risk upon his shoulders of this figure meeting the market value. It's a form of basic arbitrage.

With the U2 concert, the scalpers win (but see the caveat above with the second concert now being announced). But there's many a concert and a sporting event which hasn't proved so popular with the punters, and where scalpers themselves have been scalped -- in that case they're giving financial support to the promoter that might just be a lifeline. I'm sure Daniel Keighley, for example, would have been very happy to have had his Sweetwaters tickets scalped before the show; at least that means some people might have paid to get in, and Keighley might have made his money back instead of losing it. Financial security is something he might be willing to pay for now.

Anyway, as David Slack says, there is some good news for people who haven't managed to snap up U2 tickets to either concert. "The wonderful news is that in fact that U2 is not the only band in the world. And as if that revelation isn't exciting enough, some of them will be coming to New Zealand! This summer! Exciting details here, here, here and here."

And if you can't find a scalper around for those, there's always Parsifal in March. :-)

Linked stupidity: Anger over U2 ticket sales

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5 Comments:

Anonymous Retired Scalper said...

From http://www.nzherald.co.nz/section/story.cfm?c_id=1&ObjectID=10358775 :

---

Although buying and selling tickets for profit is not illegal in New Zealand, it is a condition of sale imposed by U2 management that tickets cannot be on-sold.

"We will cancel the ticket and prevent people coming in if we identify the tickets," said tour manager Michael Coppel.

---

Seems pretty reasonable to me...

12/07/2005 11:38:00 am  
Blogger PC said...

As I've already said: "The poor lamb is economically illiterate, and he doen't understand a good thing when he sees it..."

12/07/2005 11:53:00 am  
Anonymous Nichlemn said...

It makes me wonder why the promoters don't just auction off the tickets in the first place. If the tickets are really worth a lot, they'd ensure they profited, right? It'd allow a market equilibrium. Almost no show would have unsold tickets - they might just simply be almost free.

12/07/2005 09:37:00 pm  
Anonymous Retired Scalper said...

You haven't addressed my argument. It was a condition of sale, and the ticketing agency had their reasons for making it so. So what's the problem?

12/08/2005 02:16:00 am  
Blogger PC said...

RS, thanks for your reply.

The argument you made was that the promoter has banned the re-selling of tickets -- not an argument by the way, but a pointing out of fact. He's quite entitled to set whatever prices and conditions he likes, of course, just as I'm free to criticise his decision, as I am.

As Coppel conceded himself in the radio interview with Newstalk ZB, there is no way he can realistically enforce such a ban, so in practical terms he hasn't set a good policy.

And as I've argued here, he hasn't made a good economic decision.

So he may have had his reasons for setting his policy, but what I'm questioning here is whether they're good reasons. As I've argued, they're not, either practically or economically.

12/08/2005 09:09:00 am  

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