Published on October 18th, 2017 | by Alan Cross2
Is This the Solution for Pricing Concert Tickets?
[Earlier this week, I posted an unpopular view on concert tickets. I suggest that they’re priced far too low for the marketplace. This generated a number of emails, including this one from Chris Fievoli. He has a suggestion for settling the pricing of concert tickets once and for all. – AC]
With all the recent attention paid to bots and reseller markets, it is somewhat surprising that no one has tried to apply a Dutch auction model to concert tickets.
A Dutch auction is essentially the opposite of a traditional auction. Rather than starting with a low price and bidding up, a Dutch auction starts with an excessive asking price, which is gradually lowered until it reaches an amount that a buyer is willing to pay. Applied to concerts and other live events, this model has the potential to maintain the fair market value for tickets, but with the revenue going to the artists and promoters, leaving nothing in the pockets of the middleman scalpers.
Here’s how it could work.
Imagine that on the first day that tickets for a concert go on sale, they are all listed at a price of $10,000. That sounds ridiculously high, but that is exactly the point. Perhaps a few hard-core fans would pay that much for the best seats, but the odds are that most tickets would remain unsold at that price. From there, the ticket prices would gradually start to decline. The rate of that decline would be controlled by an algorithm.
The rate of that decline would be controlled by an algorithm. We’ll let some math wizard figure out the details, but the algorithm would set subsequent prices based on, at the very least, the volume of remaining tickets and time until the event. Potential ticket buyers could then watch the price reductions in real time, along with data on ticket availability, and then decide at what price point they want to pull the trigger. If you are willing to pay $200 for a ticket, then you simply have to wait until the price drops to that level. However, if tickets are moving quickly, you may have to jump in at a higher price, rather than run the risk of being shut out.
And it works the other way as well. If there are lots of tickets left close to the concert date, the algorithm would set prices low enough to clear the remaining inventory. Rather than selling out in a matter of minutes, ticket sales would then go on for a longer period of time, as the algorithm figures out what buyers are willing to pay at each point in time.
The one advantage of this model is that it potentially eliminates the reseller market. The whole point of buying tickets for resale is to do so at a higher price. But under this structure, that price point will have already passed. If you purchase a ticket for $100 hoping to resell it for $200, anyone willing to pay that price will have already done so. And because of the exorbitant original price, there is no advantage to scooping up tickets as soon as they go on sale, even if a reseller had pockets deep enough to do that.
What this model can’t solve is the problem of affordability, but it’s not clear how that problem can be rectified in any circumstance. If fans are willing to pay $500 to see U2, then there’s not much that can be done about that. At least this approach maintains a fair market value, gets the revenue to the artists and promoters instead of the scalpers, fills the concert venue, and eliminates those annoying bots from the equation. (If you want to come up with a program to subsidize the cost of tickets to a level below market value, then go right ahead, but I would suggest there are better uses for your money.)
It’s probably worth a try if some enterprising individual is willing to give it a shot.