Ray Waddell’s cover article in this week’s Billboard magazine is called “Ticketonomics,” and covers the topic of concert ticket pricing. It questions whether the principles of yield management (differential pricing) that are used in the airlines and other industries should be applied to pricing concerts. Ray and I had a chance to chat and he was nice enough to include some of my comments in his article.
The concert industry is spending much time and attention on how to better price the premium seats for tours (code for raising face value prices). It is not an easy task. Price too low and the artists leave money on the table. Price too high and chase away fans. The concert industry’s fascination with the topic is partly driven by the prices, or at least the asking prices, they sometimes see on the ticket resale market.
When a show sells out, and there is still strong demand, the resale market really kicks in. Those left out, who still really want to go, can offer a premium to those lucky ones who have the tickets to persuade them to part with them. Real fans do sell – every fan has their price. Of course, these market-driven prices fluctuate with supply and demand.
Some fans are willing (and able) to pay higher prices to get access to great tickets that they otherwise could never get, unless they were a friend of the band. These fans are the ones that artists and promoters covet. However, a big part of the reason fans will pay a premium on the resale market is for the convenience of buying tickets “on demand.” The same reason that iTunes and Tivo are popular. Fans want to control when they receive and consume their entertainment. A virtual line-up at 10AM on a day weeks or months in advance of the event just does not cut it for many fans. We are a generation that runs on “Twitter time.” More complicated pricing schemes at the “on-sale” date will never address this need. That’s why the resale market exists, and why it is booming.
While the industry and press fixate on the quick sell outs of Bruce Springsteen tickets and such (can you say the upcoming U2 concert tour?), the key point I made in the article was that the industry should instead be focused on their huge unsold tickets problem. Executives at both Ticketmaster and Live Nation have noted that at least 40% of the tickets they offer are never purchased. Since most costs of putting on a show are fixed, it would seem that selling these tickets would be very profitable. These proceeds, plus the extra parking, food, drinks, merchandise, etc., would certainly provide great returns for promoters, and ultimately the artists.
Yield management principles might suggest that these tickets were originally overpriced and should be discounted at some point. I think it is premature to come to that conclusion. When asked, many fans say that the primary reason they missed a show is that they were not aware it was being held. That suggests a marketing problem, not a pricing problem.
By offering really useful ticket search and working with lots of fan-focused partners, we hope to help fans find out what is going on more easily, so they can go to more events. Fans going to more events should make promoters happy. And artists happy. Oh yeah, and fans will be the happiest.