Getting Scalped

I suppose it was only a matter of time before the whole online scalping business exploded. For some years now, companies that acquire large blocks of tickets from online sources (and sometimes telephone sales, too) have been creating a huge secondary market for tickets to concerts, sporting events, and anything else that required tickets for admissions – and driving the prices of these activities up dramatically as a side effect. Many cities and counties, and even a few states, have laws that prohibit scalping, but since the companies doing business in this fashion are based somewhere else, they’re effectively immune to these ordinances. Unless the Federal government becomes involved, there isn’t much anyone can do about this.

Up until now, the controversy has mostly surrounded businesses snapping at each other – concert promoters and agents who represent the recording artists claiming that they deserve a share of the money made in the secondary market by the ticket brokers, and the brokers pointing out that they are legally acquiring the tickets at the price the promoters are charging, and accepting all of the risks associated with selling those tickets. This is all perfectly true, by the way – a few years ago, one of my cousins and I were able to get $100 luxury skybox tickets to a baseball game for only $25, because the game was starting in half an hour and the ticket broker we went to had been unable to sell any of these super-premium seats at face value, or even half of face value. He eventually sold them to us for $25 each just so he wouldn’t have to eat the entire cost.

All of this appears to be changing now, thanks to the flap surrounding the ”Hannah Montana” concert series. For those who don’t follow such things, Hannah Montana is a fictional character on the Disney Channel series of the same name, played by Miley Cyrus, 14-year-old daughter of country star Billy Ray Cyrus. The show has been so popular that the Disney people have decided to field a 51-city tour, with the young star performing both as herself and as her television persona. Fans of the series and the singer (primarily pre-teen girls) have made this one of the hottest tickets in recent years, and parents all over the country have been promising to take their children to see the concert tour when it reaches their location.

Ticket brokers, sensing huge amounts of money to be made, immediately snapped up all of the tickets they could get their hands on, and started jacking the prices up to whatever the market would bear. A quick look at the Hannah Montana page on Stub Hub shows asking prices as high as $9,630 (for the Staples Center in Los Angeles), and well over $1,000 even for marginal seats in some of the smaller venues on the tour. Parents who had expected to purchase tickets at the $25 to $40 face values commonly charged have been left with the choice of laying out several months’ salary, or eating their words and breaking their promises. Needless to say, the outrage is spreading like wildfire.

From a business standpoint, it would appear that the brokers have not broken any laws. One could argue that charging whatever the market will bear is bad for their public image, but dealers in a commodity product generally don’t have a public image to begin with, and certainly not enough of one to impact their sales. No one is going to do business with a brokerage firm just because they like it, whether they’re brokering tickets or securities. And it’s hard to blame someone for selling something for the best price they can get for it; that’s how a free market is actually supposed to work. At the same time, this sort of markup is what generates situations like athletes charging $50 for an autograph and World Series Tickets that cost more than my car.

In this case, the Disney people could have stopped the whole thing right at the beginning by using the same online ordering system they use to sell tickets to Disneyland and the other parks. Disneyland tickets can only be used by the person who purchased them (and his or her party), and they carefully check identification before they let you into the park. Of course, making this work would have required Disney to operate the concert tour themselves (instead of using a promoter) and sell the tickets themselves (instead of using Ticketmaster), and do heaven only knows how much additional work. The question is, will the amount the corporation saved farming out those functions equal the amount of bad public relations they are going to incur over this?

And how bad does this industry have to get before the Federal government DOES decide to step in…?