Hacker News Reader

Comment by londons_explore | Hacker News Reader

Actual cash income the moment the tickets go on sale.

Removes all the uncertainty and risk and puts it on the scalpers.

This was my theory but there is a problem with it: Unless there is a constant churn of scalpers failing to turn a profit, the scalpers are presumably selling off their tickets at a profit. This means the market demand from individual purchasers exists, and the ticket sellers are just leaving money on the table by not raising their prices.

1. The initial price of the ticket serves as advertisement to get more people interested in the event than if it was advertised at the scalped price. Some fraction of the people will end up paying the higher price anyways, even if it was more than they intended to spend. The chance of "getting lucky" and getting a ticket at the low initial price is a powerful draw, especially if each buyer gets lucky a few times.

2. Are you sure the scalpers and the agency selling the original tickets are independent? Even if they are on paper, in many locations there is evidence of a local cartel.

3. The initial sales provide revenue up front to pay for the costs of the event, vendors, etc. This reduces the amount of cash reserves the seller needs, sometimes very dramatically.

4. Many scalped sales (used to be, not as much anymore) were cash transactions. This used to be used as a pretty significant tax dodge: Sell tickets for $50 face value to your affiliated scalper, pay tax on this sale, scalper sells tickets for $200 and does not pay tax on this secondary sale, or underreports the number of secondary tickets sold. Lots of shenanigans here to make your profitable scalping business look like it's making a small loss on paper.

5. Especially in the context of a local or regional cartel, each ticket sale represents the opportunity to move capital between entities. Physical tickets can be an effective vehicle for small-medium scale money laundering: Dirty money/entity buys the tickets, clean entity resells them.

Basically as soon as you drop the assumption that the ticket sellers and scalpers aren't related in some way, there are a lot more profitable reasons for the ticket sellers to "leave money on the table".

Bidding for tickets would cut out the scalpers and maximize revenue for the performers (and ticket agencies). So, if you want to go, pick your ticket class (rough area) and specify how much you’re willing to pay. The ticket seller orders bids by value, taking the top ones first, and then allocates tickets. Anything unsold is offered as usual on a specified day. People that really want to go get to go and the performers benefit rather than the scalpers.

My understanding is that performers have shied away from this model because it results in less affluent fans being excluded. Lotteries are generally preferred. You could theoretically eliminate lottery scalping by making the tickets non-transferable, but I’m not sure how feasible that would be.

Yep, but that’s not working out for them very well. The only thing that will eliminate the scalpers is reducing the amount of money they can make such that they decide that it isn’t worth it anymore.

It's a hedge. Performers are not in the business of optimizing ROI, they're in the business of performing. Scalpers provide a service: guaranteed income for a fee. There are many analogous examples in other markets where both parties happily take their respective sides of this deal, even though technically one of them is leaving money on the table.

Then there is the slightly more insidious incentive: selling out quickly is in and of itself valuable for a performer: it makes them look popular and exclusive. That alone might just make it worth it altogether.

> Performers are not in the business of optimizing ROI, they're in the business of performing.

I have to disagree; performers are absolutely in the business of optimization. Bo Burnham was singing about metrification destroying art 10 years ago. Every standup comic is using social media as a sales funnel to figure out exactly which cities they have an audience in. Even if the performers themselves are not concerned with gaming these numbers, they almost always have someone working for them who does.

So I still don’t quite understand why the scalpers are the ones getting to eat the free lunch.

> selling out quickly is in and of itself valuable for a performer

This one seems like a more likely explanation, but the pattern with a lot of these ticket sales is that the demand is already there organically without scalpers entering the equation. I don’t really follow the space so I really don’t know, but I’d imagine the shows that get targeted the most are the performers who were going to be playing a sold out show regardless of the scalpers.

hedging is a tried and true financial strategy. Transpose this to any producer of commodities and it becomes the most normal thing in the world to take guaranteed cash at a discount for guaranteed delivery of the product. It’s the exact same thing.

Reply on news.ycombinator.com