Opinions expressed in this piece are solely those of the author and do not represent the views of SNL Kagan.
After decades of paying a lot more for a lot less selection of live entertainment and sporting event tickets, frustrated consumers received some help this week.
The Better Online Ticket Sales Act, which became federal law on Dec. 14, is aimed at making it easier for fans to purchase event tickets at face value when they go on sale. Nicknamed the "BOTS" act, the bipartisan legislation pushes back against online robotic technology that snaps up large blocks of tickets the moment they go on sale with the intent of reselling those tickets at highly inflated prices on the growing secondary market.
Everyone agrees the ticket resell market has been soaring, although specific estimates vary. I counted 135 secondary ticket vendors on a 2012 list posted by seatgeek.com. While many on that list are probably not operating any more, a slew of new, nearly identical secondary vendors have almost certainly replaced them, with more on the way. Even e-commerce titan Amazon.com Inc. is getting into the ticket-selling game.
The global secondary market for event tickets reached more than $6 billion last year and could surpass $15 billion by 2020, according to market research firm Technavio.
Up until now, the largely unregulated economics of ticket reselling have been compelling, especially for robotic savvy scalpers who effectively control 60% of tickets for the most popular events (an estimate by Live Nation Entertainment Inc.'s Ticketmaster division, as reported by The New York Times).
To the right is my estimate of what traditional resell brokers and the new generation of bot-driven scalpers do to the price of a $100 face value ticket. My estimates are based on findings in a January 2016 published comprehensive study of the resell market by New York state Attorney General Eric Schneiderman.
After a variety of vendor and venue fees, the ticket might cost 21% to 33% more from a primary vendor for a high-demand event. On average, a traditional broker could resell that same $100 ticket for $149, or a 49% mark up, and for more than $900 including fees in some cases (as noted in the "extreme case" section of my table).
A bot scalper might mark the primary ticket up 72% on average to close to $200 with fees. An extreme example could jack the price up to nearly $900 including fees. You can find average primary ticket prices for various events in my Feb. 17 blog post "The biggest game in entertainment and sports."
It is easy to see why tickets for the award-winning show "Hamilton" are nearly impossible to find on the primary market and why Hamilton scalpers are reported to be pocketing $240,000 weekly. Scalpers have been so successful that "Hamilton" producers felt forced to hike the price of their tickets to curb ill-gotten scalping profits.
The newly passed BOT act makes it illegal to use software to robotically purchase tickets to events in quantities above the limits stated by the event's ticket sales rules. It also specifically prohibits robotic efforts to bypass security hurdles such as the "CAPTCHA" window.
The BOT act will be enforced by the Federal Trade Commission with fines of $1,000 per incident (or theoretically $1 million on a 1,000 ticket BOT transaction). At that penalty level, I suspect the law could indeed help to deter scalping. How much remains to be seen.
Scalping, however, is not to blame for all the supply constraints on primary tickets. Artists, promoters, vendors, and venues limit initial releases of primary tickets an average of 54%, according to the Schneiderman study: 38% for specific promotions such as preferred seating by certain credit card members and 16% for holds of seats to VIPs.
Despite the populist move to curb scalping, some economists think scalping creates a greater good. Consumers can obtain tickets, albeit at inflated prices, when they want them without having to compete in a primary offering.
Scalping also allows event promoters to generate revenue immediately via a sold-out primary offering, while ticket brokers bear the risk if an event proves to be of lower demand than anticipated. In addition, the laws of supply and demand help to lower the mark up in that the more scalpers for an event, the lower the secondary price via competition.
I'm not sure that pricing rational applies to mega-events like the Super Bowl, which has seen the average price per ticket climb an average 23% annually from $410 in 2003 to $5,100 in 2015, according to data from Technavio's December 2015 report.