BUSINESS
Ticket touting
Free-market fleecing
Jan 5th 2006 |
From The Economist print edition
The high price of fandom
Reuters
THE last-minute victory of the Texas Longhorns in this year's Rose Bowl??America's college football championship??was the kind of thing that stays with fans forever. Just as well, because many had paid vast sums to see the game. Rose Bowl tickets officially sold for $175 each. On the internet, resellers were hawking them for as much as $3,000 a pop. ??Nobody knows how to control [this],? observed Mitch Dorger, the tournament's chief executive.
Re-selling tickets for a profit, known less politely as scalping in America or touting in Britain, is booming. In America alone, the ??secondary market? for tickets to sought-after events is worth over $10 billion, reckons Jeffrey Fluhr, the boss of StubHub, an online ticket market. Scalping used to be about burly men lurking outside stadiums with fistfuls of tickets. Cries of ??Tickets here, tickets here? still ring out before kick-off. But the internet has created a larger and more efficient market. Some internet-based ticket agencies, such as tickco.com and dynamiteticketz.com act as traditional scalpers, buying up tickets and selling them on for a substantial mark-up. But others like StubHub have a new business model??bring together buyers and sellers, and then take a cut. For each transaction, StubHub takes a juicy 25%.
Despite its substantial commission??far higher than those charged by other online intermediaries including eBay or Craigslist??StubHub is flourishing. The firm was set up in 2000 and this year's Rose Bowl was its biggest event ever. The Super Bowl in early February will bring another nice haul, as have U2 and Rolling Stones concerts. Unlike eBay, which is the largest online trader in tickets, StubHub guarantees each transaction, so buyers need not worry about fraud. The company's revenues, now around $200m, are tripling annually (despite its start in the dotcom bust). And there is plenty more room to grow. Mr Fluhr notes that the market remains ??highly fragmented?, with tiny operations still flourishing and newspaper classifieds not yet dead.
But there are risks. Some events are boosting prices to cut the resale margins; others are using special measures to crack down. This summer, tickets to the soccer World Cup in Germany will include the name and passport number of the original purchaser and embedded chips that match the buyer to the tickets.
Then there are legal worries. In America, more than a dozen states have anti-scalping laws of various kinds. New Mexico forbids the reselling of tickets for college games; Mississippi does so for all events on government-owned property. Such laws are often ignored, but can still bite. In Massachusetts, where reselling a ticket for more than $2 above face value is unlawful, one fan brought a lawsuit last autumn against 16 companies (including StubHub) over his pricey Red Sox tickets.
