Scalpers: Batman’s Real Bane?

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A bunch of Batman fans were not able to see the movie on its opening night because scalpers were selling tickets for 500% or even 800% more. 

As a consumer, naturally, I don’t like it. 

I don’t like this “secondary market” because I am forced to pay significantly more for something that I think I should be able to buy at face value. And this practice of course, is not limited to the US by any means. When you want to see a (over?)hyped movie in some countries, you go to the venue knowing that “scalpers” might be selling them for 2x or 3x their face value at the gate. Or here in the US, for sold-out concerts and such (add movies to this category now), you might check out StubHub or Craigslist to see if scalpers are selling them there. Or, if you live in certain states where ticket-scalping is illegal then you check out scalpers’ legal offices in neighboring states. 

But from an economics perspective,

I wonder if this is simply a question of the secondary market (scalpers) stepping in when the primary market (theaters and authorized resellers) is mis-pricing something that is in great demand.

When something is in great demand, as we know, it endows the seller or the supplier, with pricing power. The supplier (or all suppliers, in aggregate) can then raise prices to the point where sales are maximized (ignoring the MR, MR bit here, so economics majors and MBAs, please look away now). What this means is that a small percentage of the population probably doesn’t mind paying $80 or $90 to see a movie like Batman on opening night. Another segment will pay $50 to watch it the next day. Yet another segment will pay $13 (the face value) to watch it in a week. At the other end of the spectrum, when a movie is “past its prime”, 6 months hence, dollar theaters enter the picture and sell tickets for $1 each. 

So from a value creation and capture perspective (this blog’s favorite topic and its raison d’être), the secondary market is capturing the value that is being created by the one-price-always model that movie theaters use. In other words, theaters are giving away some of this value to the scalpers. 

If I were a movie theater (or an any entity selling a product that is in limited supply – think sporting events, concerts, highly rated plays), instead of fighting scalping, I would or perhaps, should, think long and hard about how to create mechanisms by which I can do that. 

The nice thing, I think, is that if theaters and the primary market gets into the game then its a “win-win-win” (yes, one more win over the standard consultant-speak “win-win”).

Consumers win because they know they are not buying fake tickets and they are guaranteed seats for something as long as they are paying the “going rate” (which they probably already do). Theaters win because they are able to capture more of the value than today from a product (the seat) that they are creating. And while legislation has created a weird kaleidoscope of laws regulating or allowing scalping across the US, local and state governments “win” in the form of increased taxes collected via “demand-based” pricing (which they do not, today. I doubt if many scalpers’ 1040 forms reflect their real earnings).

But any steps in this direction must be carefully thought through, tested and implemented lest consumers and fans are alienated. One would be wise to remember that without consumers’ enthusiasm and passion for a movie or an event, value creation would never occur in the first place…

One Response to “Scalpers: Batman’s Real Bane?”

  1. Ryan says:

    A few baseball teams in the US are experimenting with Dynamic Ticket pricing to capture the upside. I think I saw at least the Chicago White Sox and Pittsburgh Pirates are doing this. Might be worth looking into.

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