Ticket Scalping: A Repugnant Transaction

The notion of a "repugnant transaction" suggests that consumer distaste for certain kinds of transactions may ultimately hinder the growth of a market. Alvin E. Roth's 'Repugnance as a Constraint on Markets' [pdf] looks at historic markets such as slavery, dwarf tossing, or the sale of human organs where repugnance effected changes or restrictions on markets through laws or negative public sentiment.

Follow conversations on social media or informally poll ticket buyers, and it is evident that event ticketing includes three forms of repugnancy through the perception that:

  • Consumers are subject to "price gouging" through ticket scalping in the secondary market.
  • Service fees are excessive and unfairly add to a ticket's cost.
  • The domination of very few companies fosters monopolistic practices.

Ticket scalpers surreptitiously hawking tickets outside venue doors are relics of the past, but an entire industry has sprung up to replace them. Websites such as SeatGeek and StubHub offer a secondary market for premium seats at factors many times over prices paid. Powerful automated systems allow the new "scalpers" to quickly purchase top seats closing the door to average consumers to purchase tickets at face value. Notwithstanding the argument that these new players benefit consumers by offering everyone an opportunity to purchase highly sought seats, the high ticket resale prices add a veil of repugnance to the ticket purchase process.

In equal measure, frustration over high service fees added to a ticket's cost has blossomed to anger aimed at the giants in the ticketing industry. The root cause lies in consumers' view that fees are excessive and provide profits inconsistent with a fair market. Virtually all tickets for major concerts and high profile entertainment events sold through the secondary market include fees that may add as much as 30% to the cost of a ticket.

Finally, the 2009 merger between the largest ticketing company and its purported 83% market share, Ticketmaster and the largest concert promoter, Live Nation, brought forth concerns about antitrust violations, higher fees, and a monopoly in the ticketing industry. The merger was approved in early 2010, but not before raising ire among consumers and competitors alike.

Attempts to Control and Regulate Ticketing

With laws that once made illegal the practice of ticket scalping now off the books in most states, the growth of the secondary market has exploded. In turn, the associated discontent brought on by perceived high profits has consumers calling for legislative action or new methods of protection from primary ticket sellers.

There is a growing trend in the primary market to use "paperless tickets" for non-transferable sales with the hope of discouraging profiteering by the secondary market. Now, recent talks have either attempted to force the transferability of tickets by requiring a minimum number of paperless tickets or put constraints on ticket sales by secondary sellers. In turn, the secondary market players are crying foul over an intrusion to their businesses, and their public relations campaigns ironically take stabs at the very ticketing companies that serve as the cornerstone of their business.

The Future of Event Ticketing

Consumer backlash has created openings in the industry for new ticketing service providers that offer reduced service fees or subscription based models that allow venue owners to handle all aspects of ticketing including the choice to optionally add and collect ticket fees. The growth of the new providers will almost certainly rise in tandem with the frustration level of consumers.

As Mr. Roth points out, repugnant "transactions are seen as distasteful, inappropriate, unfair, undignified, or unprofessional". The ticketing industry must work to change the perceptions of the ticket buyers. Venues, the end beneficiary of ticket sales, will increasingly feel compelled to review their ticketing processes and find dignified, appropriate and professional solutions that align with consumers' sense of fair play. Once that is accomplished, the world of entertainment will be wholly positive.

To Fee or not to Fee. That is the question - A ThunderTix guide to ticket fees

Your customers will appreciate the fact that no fees are added to your ticket price. ThunderTix offers a flat monthly license based on the number of tickets sold annually. The only cost outside of the license fee is the cost of credit card processing. You can sell tickets online with no fees.