12:13pm

Thu June 6, 2013
Planet Money

NYT Excerpt: How Much Is Michael Bolton Worth to You?

In his latest New York Times Magazine column, Adam Davidson looks at the secret science of scalping tickets. Here's an excerpt:

...To an economist, the very existence of scalpers and companies like StubHub proves that tickets are far too cheap to balance supply and demand. Pascal Courty, an economist at the University of Victoria, in Canada, who has spent the better part of 20 years studying the secondary-ticket market, has identified two distinct pricing styles. Some artists, like Streisand and Michael Bolton, seem to charge as much as the market will bear — better seats generally cost a lot more; shows in larger cities, with higher demand, are far more expensive, too. (If you want to catch Bolton on the cheap, head to Western New York.) The second group comprises notable acts, like Bruce Springsteen and Pearl Jam, that usually keep prices far below market value and offer only a few price points. An orchestra seat to see the Boss in Jersey costs only about $50 more than the nosebleeds in Albany.

Springsteen's style might seem more altruistic, but performers who undercharge their fans can paradoxically reap higher profits than those who maximize each ticket price. It's a strategy similar to the one employed by ventures like casinos and cruise ships, which take a hit on admission prices but make their money once the customers are inside. Concert promoters can overcharge on everything from beer sales to T-shirts, and the benefits of low-priced tickets can accrue significantly over the years as loyal fans return. In part, this explains why artists like Springsteen and Petty are content to undercharge at the gate while others, perhaps wary of their own staying power, are eager to capitalize while they can.

Read the whole thing.

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