Ever since the movie "Groundhog Day" came out in 1993, that term has been used to describe events that happen over and over. And that is a perfect description of the practice of ticket-scalping. So it is entirely fitting that the big controversy over the scalping of Bruce Springsteen tickets began on the morning of Feb. 2.
That fight ended last week with Attorney General Anne Milgram announcing a settlement in which Ticketmaster will pay the state $350,000 and agree not to link its main ticket site to its other website in what is known as "the secondary market" -- the polite term for scalping.
But the actual scalping continues as surely as events of Groundhog Day repeated themselves for Bill Murray in that movie. If you doubt that, I invite you to visit TicketsNow, the site at the center of the controversy. There you will be asked to pay as much as $1,070 for a ticket that some lucky soul bought for $95.
To Springsteen fans, this looks like a ripoff. But to economists, it looks like a classic case of supply and demand.
"Among economists, the fundamental argument is that if there are long lines, the price is too low," says Steve Happel. "So why do venues not raise prices when they see long lines?"
That question has been amusing Happel for years now. He is a professor of economics at Arizona State University who is an expert in the market for tickets to entertainment and sporting events. He's been watching Springsteen struggle against scalpers for more than two decades. The problem, says Happel, is that the Boss wants his true fans to see him play at a reasonable price. But the fans don't always play along.
"If I stand in line for four hours for that $50 ticket and it's value is going up to $400, I might stop being a true fan and become a scalper," he says.
On this past Groundhog Day, thousands of Springsteen fans emerged from their burrows and saw a shadow website. After logging onto Ticketmaster they encountered a "no tickets found" message along with a message telling them to try TicketsNow.
"They didn't know it was a resale site," said Milgram when I spoke to her the other day. "There's so much time pressure and Ticketmaster was taking advantage of that."
The A.G. is still investigating just how all those tickets got onto TicketsNow so quickly. Some tickets even appeared on the secondary site before the box office opened, said Milgram.
"When we looked at the tickets that were on sale before 9 a.m., we saw seats that didn't even exist," she said.
Apparently the scalpers would take the money and then try to come up with a reasonable substitute for the ticket sold. As part of the agreement, TicketsNow will no longer list tickets for sale prior to the official box-office opening.
But that won't stop scalpers, said Happel. The only way to do that, he says, is through what economists call a "Dutch auction." This is the reverse of a regular auction. Instead of rising, prices drop. A ticket that starts at perhaps $400 might drop $10 a day until all are sold. Scalpers won't invest in a product that is declining in value, Happel said.
No one has tried this yet, said Happel. But the first such experiment may now be underway courtesy of the man they call "the Boss." Not Bruce Springsteen -- George Steinbrenner. The Yankees have priced seats for this season at a level that would make a scalper scream. Seats behind home plate home in the new Yankee Stadium are going for as much as $2,500. That's for one game, not the season. Seats along the baselines are selling at $350 a pop -- but only in a 20-game package.
Why so high? Happel theorizes that the Yankee management is thinking, "We need more revenue so we can buy more players and finish third again." You can tell from that quote he's no Yankee fan. I am, however, and I can recall that the first game I went to as a kid cost $3.50.
I sure won't be paying a hundred times that much to go to a game. A lot of others will feel the same way, Happel predicts, and as an economist, he's having more fun watching this market than most fans have watching a baseball game.
"This will be a good one if the Yankees have to come off of this," he said. "Maybe you'll see a really heavy Dutch auction. Those tickets may be dropping fast."
The Yankees aren't commenting. But I for one can't wait to see what the price for a single seat will be this season. Somehow, I can't imagine some guy in an alley offering to sell a $400 seat for a regular-season game at $500.
So that's the big difference between George Steinbrenner and Bruce Springsteen. The man they called "the Boss" on the other side of the river may not have solved his pitching problems yet. But he sure has solved his scalping problem.
Monday, March 2, 2009
New York Yankees find free-market way to stop scalpers
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