Tinker, TAYLOR, Soldier, Spy
Why aren't concert tickets auctioned?
Taylor Swift is the biggest act on the planet.
And rightly so. While it’s not the kind of music I choose to listen to often, her genre-breaking catalogue is impressive. Michael Jackson and Elvis Presley are probably the only individual artists that would do her justice as comparators.
It was 97 minutes into 10 second updates in the Ticketek ‘lounge’ — and what a beautiful euphemism that is, a better description would be the Ticketek ‘purgatory’ — that I started to wonder: if 800,000 people are queuing to buy up to 4 tickets each for three Sydney concerts with a total of 250,000 seats, and by the way only a slice of the tickets were available on pre-sale … why are the tickets so darn cheap??? My attention to the question was only heightened when 20 minutes later my daughter began weighing up the pros and cons of breaking her legs in order to request accessibility tickets.
Okay, with tickets ranging from $79 for G Reserve to $379 for A Reserve and in the midst of a cost of living crisis they aren’t objectively cheap. And that’s before we even get into VIP packages.
But with asking prices of $2000 a ticket in the (probably illegal and certainly unreliable) secondary market, they are being sold in the primary market at a price way below what would clear the market.
Full disclosure: I have secured concert tickets for my daughter — who is a thoroughly-obsessed Swifty — so there ain’t any bitterness behind this post, nor any broken legs. Quite the opposite. It is motivated by curiosity.
Before we get into auction design we need to talk about …
LIVE PERFORMANCE IS THE MUSIC INDUSTRY
Back in the day, the purpose of concerts was to promote album sales.
Napster broke that model around 1999. Once high-quality digital recordings could be shared easily, the recorded music market collapsed. Napster was shut down by authorities in 2001, as many trailblazers have been in the past and will be in the future, but the genie was out of the bottle. If video killed the radio star, digitisation killed the entire recorded music industry.
THE CD SIDE OF TOWN
Global recorded music sales since 1999, US$ billion, nominal
Source: IFPI Global Music Report
Okay, streaming has picked up some of the slack, but Spotify pays the artist between 1/3 and 1/2 a penny per stream, and the company is still running at a loss. Their business model is to stream legally and conveniently, amid illegal and inconvenient streaming that is also available.
Now compare those numbers with World GDP. Whereas almost $1 in every $1000 earned was spent on recorded music in 1999, that figure is more like 30 cents per $1000 earned today.
RECORDED MUSIC IS PRACTICALLY FREE
Global recorded music sales as a per cent of World Product
Source: 1hand calculations based on IFPI and World Bank.
Meanwhile, live music is only growing. Concert revenue exceeded USD30 billion in 2022.
To make this more concrete.
Elton John, who has spent a majority of his past two decades performing in Las Vegas, is by most estimates worth a half a billion US dollars and a chunk of change more.
Conversely, Amy Winehouse had one successful album and a second hugely successful album, but was never able to tour, and died too young with an estate of a couple of million pounds. Yet, she died as the ‘go to’ artist for charity performances in the UK.
WHY NOT GO DUTCH?
Auctions are useful for revealing what buyers are willing to pay.
In a Dutch auction, used in initial public offerings of shares and sale of government bonds, for example, buyers submit bids and the seller counts through the bids until all the tickets/shares/bonds are fully sold with the lowest successful bid setting the price.
[The reader may ask: why not use a sealed-bid auction where every successful bidder pays the price they bid down to the lowest successful bid? The outcome for the seller is basically the same, on average, but it is a hassle for the buyer because then they need to guess what the value of the ticket is to the last successful bidder instead of merely bidding what the ticket is worth to them. And it means that the person sitting next to you at the concert may have paid a lot more, or a lot less than you did … which seems deeply unfair, though it is an inequity we accept every time we board a plane.]
It means a lot more revenue to the ticket seller. And it becomes harder for scalpers to make money because most of the buyers that are willing to pay a high price for a ticket have already secured tickets in the auction.
And yet concert promoters almost always post fixed price schedules instead.
SOME VERY BRIEF REFLECTIONS
This is where we leave static economics and enter psychology.
My guess is that scarcity is part of the experience in two important ways.
In terms of the concert itself. You get to tell your friends you have Taylor tix. You get energised for the performance, possibly buying an outfit for it. And of course you are going to buy and wear the merchandise you procure at the venue on the night, because you were one of the lucky few to get that chance. So there will be more money spent at the venue on the night because people feel it is a once in a lifetime event.
In terms of long-term celeb value. How much bigger a star is a star that you can’t even pay ready money to see perform??? They shine so bright from so far away. That’s a lot of specialnesses (to quote Michael Palin in eulogising George Harrison … NSFW, but the reader can google ‘concert for george monty python’ if they wish.)
More to follow in a longer and less timely post.
SUMMING UP
At face value, Taylor Swift has grossly underpriced her concert tickets. But maybe the economics make sense in the long run? Maybe the hours in ticket purgatory increases Taylor’s star value in the long run? And sure as hell she is going to deliver one heck of a show!