The Live Nation scandal shows the concert industry needs to learn economics from Taylor Swift

Not messing around with scalpers.
Not messing around with scalpers.
Image: Reuters/Mike Blake
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Billboard magazine reports that Live Nation, the concert promoter and ticket sales company, has allowed artists to directly sell concert tickets on resale websites like Stuhbub.

It’s a peculiar scandal.

Artists were able to sell their tickets above face value and, as a result, generate more revenue. Live Nation told Billboard that “about a dozen artists” asked for tickets to sell on resale markets in 2016 and 2017. One of the acts who had their tickets directly sold on resale sites was Metallica. The popular metal band’s members claim they were unaware that the ticketing consultant they hired had made this decision.

The major impact of artist’s selling their ticket on resale markets is arguably a good one. Rather than letting scalpers earn money by marking up tickets for resale, performers were able to retain more revenue themselves. (The global secondary ticket market may be worth more than $15 billion in 2020, according to market research firm Technavio.)

How ticket resales work

Imagine tickets for a Beyonce show with face value of $100, and a scalper bought 10 tickets online, which eventually sold for $500 each on StubHub. The scalper would have made $4,000 on those 10 tickets, while Beyonce’s organization would have received just $1,000. In an actual recent case, the band Bikini Kill sold tickets to their show for about $40, but soon after the cheapest tickets on the secondary market went for three or four times that price (depending on the city).

So then what’s the problem with artists going directly to resale? There are two important issues. The first one is deception. A popular artist may choose to only sell tickets for $50 in order generate good will from fans, who will believe their performer is not trying to gouge them.  But if the artists are actually selling a lot of those tickets on resale, that’s kind of a lie. The other issue: Some of the tickets put on resale would have been purchased by real fans if sold at face value. Those tickets sold above face value are costing fans serious money.

Taylor Swift has a better way

The concert industry seems to be figuring out better pricing policies, with Taylor Swift leading the way. After a 2015 tour in which she lost about $150 million by selling her tickets below market value, according to an analysis by the Financial Times (paywall), Swift decided that she would no longer fight the law of supply and demand.

Swift wanted her biggest fans to get reasonably priced tickets and also wanted to make sure she reaped the benefits of the extremely high prices that can be garnered on resale. Swift used TicketMaster’s Verified Fan platform (also owned by Live Nation), which uses online data to make sure that people buying tickets are actual fans. The platform tracks whether buyers have purchased Swift tickets or merchandise before. For those who were not verified fans, ticket prices were hiked. The Financial Times estimates that Swift made an additional $1.4 million per show on her 2018 tour as a result of the changes compared to 2015.

Garth Brooks’ bold gambit

Live Nation tells Billboard that requests for secondary-market tickets has recently declined as artists seek other creative—and less morally questionable—ways to extract make money from performances. Among these are dynamic pricing, under which not every ticket is sold immediately and the cost of newly released tickets rises and falls as a measurement of initial demand.

Perhaps the boldest recent move to fend off the resale market was made by the country singer Garth Brooks on his 2014-17 world tour.  Brooks sold all tickets for about $70. If a show sold out, he would add another show at the same price. By making the supply of his tickets basically endless, it made it tough for scalpers. Every Brooks fan knew that as long as they waited, there would probably be a $70 ticket available eventually. (Without Brooks’s massive fanbase, it would have been difficult to pull this off.)

The lesson of the Live Nation scandal is that deception is not the way for bands to get the money they deserve. They just need to learn some basic economics.