Wednesday, May 24, 2006

Concert Ticket Pricing

It seems that Ticketmaster is going to change their ticket pricing strategy and start auctioning off prime seats to select concerts, according to USA Today. Tip of the cap to Freakonomics, where Steve Levitt argues:
But the economics of the music industry are changing. There is less money to be made in selling CDs, so bands are no longer willing to underprice live shows to support record sales. Rather, the concerts themselves have become the cash cow. Consequently, the artists want to squeeze as much money as possible out of them. Combine that with technological advances that make it possible to carry out online auctions, and you now have a much more efficient market. More efficient in the sense that the people willing to pay the most end up in the expensive seats, and those extra revenues go to the artists (and the promoters and Ticketmaster), rather than scalpers.
However, as I've posted about before, playing around with the numbers don't support the argument that "under-pricing" was an effective tool to subsidize CD sales. Rather, I think this quote from the end of the USA Today article sums it up about right:
Auctions "move the concert market even further from its roots: music for the people," says Gary Bongiovanni, editor of trade magazine Pollstar. "Concerts are supply and demand, and the person with the most coconuts gets the prize."
The internet, and sites like StubHub and RazorGator have made it really easy for fans to become ticket brokers, and those fans that might have previously been in the front rows have shown that they'd rather cash out. (While I don't think there's an argument that a link between under-pricing and CD sales makes sense, I do think you could argue that "under-pricing" was about creating a long-run bond between the band and its fans... i.e. "music for the people"). If you are no longer able to provide "music for the people" because the people have decided to sell their tickets to the highest bidder, better for you to do it yourself. That seems to me to be a more likely reason we're seeing this response.


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