Louis CK takes on Ticketmaster
Whenever there’s a big event or concert, there’s always people who buy extra tickets just to resell at a higher price because of scarcity. This obviously is ethically questionable at best and even illegal in some circumstances (scalping at the premises is usually illegal). Wouldn’t it be great if there wasn’t intermediaries that drive up the costs ? Comedian Louis CK is trying to do just that.
In the article it talks about how in ’94 Pearl Jam tried to keep their concert tickets at $18, in order to make it affordable for their fans. However, Ticketmaster, the dominant ticket sales company(~80% market share) would tack on various service charges driving the price up over $20. While the obvious thing to do would be to circumvent Ticketmaster with another vendor, Pearl Jam was locked in because most major venues have exclusive deals with Ticketmaster. Pearl Jam tried to fight Ticketmaster’s monopolistic practices, even taking their plea to Congress, but to no avail. The risk of trying to book major venues and use a different ticketing vendor was too great as Ticketmaster could/would pursue legal injunction with the only possible casualty being fans(whom the low price was for in the first place).
However, in present day Louis CK is managing to do what Pearl Jam couldn’t. His upcoming tour has tickets at a flat fee of $45(tax included) and distributed solely through his website(actual software on the back-end is provided by a 3rd party ticketing company). While he is still limited by Ticketmaster’s exclusivity with major venues, as a comedian., Louis has a greater range of venue options because he doesn’t have the equipment and other requirements that a band does. The truly interesting part of CK’s initiative is not his ability to actually circumvent Ticketmaster’s predatory policies, but his ability to guarantee the $45 price to his fans. When buying a ticket to one of his shows, the buyer agrees to CK’s policy of not allowing the ticket-buyer to resell the ticket for anything above $45, or risk having their ticket cancelled(with refund), in order to quell scalpers that try to resell without any intent to actually see the show. While, CK hasn’t revealed exactly all the measures that he is taking to stop potential scalpers, his plan appears to be working. He does have two shows on his tour that use traditional ticketing(good experimental design to have a control group), of which about 25% of those tickets are on stubhub, while amongst his new ticketing scheme less than 1% of the tickets bought are on any ticket scalping site(including stubhub), of which many are duplicate(the same ticket on multiple sites). CK has also addressed his fans to talk to them about the risk of buying a scalped ticket because it is possible that their ticket will be cancelled and they will get no refund.
We can use a lot of what we learned in class regarding game theory and trading networks to analyze what’s happening here. For both Pearl Jam and Louis CK, Ticketmaster uses their venue exclusivity rights to position themselves as the only trader available to the seller(Pearl Jam or Louis CK). We’ve seen that once a trader is able to position himself in this way he can consume the entire surplus( difference between the lowest price the seller is willing to offer and the highest price the buyer is willing to ask). In the case of Louis CK he cuts out the middleman(Ticketmaster) and sells directly to the end buyers to try to split the difference between himself and the consumers. However, as the commodity is very limited buyers have a strong incentive to become traders themselves and get the difference between what the consumer is asking for and $45. In order to stop traders from arising out of the buyer pool, CK has leveraged his position of power of being able to honor a ticket or not. So now not only does a buyer who buys from the trader pay more than the universally known standard price of $45, but he is risking that value if he is denied access to the good(the show). By making this risk of a high probability(or at least a high perceived probability), it drives away potential buyers from traders(after all if the seller is guaranteeing a price why would you enable a scalper) thus dissuading traders from even trying to buy a ticket for no reason other than to flip it for profit because they risk buying a good that will become void if they try to reap profit. This strategy is very good for an online age where scalpers don’t even need to be in the nearby location to an event (there can still be scalpers in person, but it’s unlikely that in a face-to-face meeting someone would overcharge when the price is so standardized). In effect Louis CK has made a ticket for his show worth exactly $45 to everyone, so the only people who will profit from having a ticket are people who can convert that ticket into what they deem the value of watching Louis CK (likely to be $45 or more).
This novel idea and execution could be a major step in changing the way ticket sales and scalping work. With the advent of the Internet, companies like Ticketmaster only have a competitive advantage from their monopolistic status while performing a relatively easy to do service, so entertainers have a huge incentive to cut them out and keep further traders(scalpers) out by backing anti-sclapign policies like Louis CK.
http://www.theatlantic.com/entertainment/archive/2012/07/the-humane-audacity-of-louis-cks-ticketmaster-flouting-tour/259315/
http://www.laughspin.com/2012/07/03/louis-c-k-addresses-ticket-scalpers-its-a-tremendous-risk-exclusive/
-FootballGuy