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nbayer

"Plenty of good seats still available..." (Misc. ramblings on prices, scalping, and the economy of live shows)

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The market for concert tickets has always fascinated me as a microcosm of the supply and demand economy.  Plus, as an avid music and sports fan, I wanted to understand how this economy worked, in order to optimize the opportunity to get the best seats possible without paying too high a premium. Given all the hand wringing over the E+I tour tickets, I thought I would share a few misc. ramblings on the topic here...

For many decades, many top artists undervalued tickets to their own shows. Whether you think the price set is "fair" or not, in the abstract, doesn't change the fact that that artists were leaving money on the table. If they sold a $30 seat, and it got resold for $150, then the true value of that ticket was paid to someone other than the artist. Someone else profited off their "art."  Whenever there was an disparity in the "face" ticket value and its true value, a market would spring up to profit of off the difference. Back in the old days, when was young, "scalpers" used to pay people to drive to different, out of the way Ticketmaster locations far from the venue where the show was to be played, and buy as many tickets as they could.  

Now, there is two ways to look at this. Some artists make a conscious decision to leave value on the table because they believe many of their core fans can't afford to pay the "true value," or shouldn't have to stretch and pay the "true value" from a scalper. This is the Pearl Jam approach.  Verified fan club members pick up their tickets on site at the venue, and there is no resale on the best seats, which go to the fan club members.  Just as important, the band handles tours itself, rather than signing with an outside vendor like Live Nation.  

The other way to look at it, is to funnel the actual "true value" of the ticket to the artist.  The basic principle is to beat the "scalpers" at their own game.  In other words, price the tickets from the outset at their "true value."  This is essentially what Live Nation (I specifically say "Live Nation" and not the band. Discussed below further...) has attempted to do here.  The tour management companies for other big acts, like the Rolling Stones, have done this unapologetically for years.  The risk in such an approach is attempting to guess what the actual "true value" is, before the tickets have actually gone on sale.  In the free market, with "scalped" tickets freely available, that equilibrium occurs naturally.  But here Live Nation had to guess. It ultimately decided that the ticket prices we have all seen for the E+I tour represent what the market will readily bear.  I think it is learning that their estimation may have been... a tad off....

Take a quick look at tickets in various markets, and especially in markets where a second show was added. I'll take Chicago, since that is one I bought tickets for. Make sure you eliminate the "certified resale" tickets, and limit it to "regular" tickets.  Plenty of good seats still available for night one.  I'm almost embarrassed for the band on night two.  It looks like half the venue is still for sale, and NOT through the second hand market.  Something has got to give there, and I doubt it will be a cancelled show. I predict it will  be reduced tickets to increase attendance.  To save face, Ticketmaster may switch them over to the "verified resale" section so it looks like someone else already paid face value and took the loss, but one way or another, U2 can't afford to play to a half full venue.  If you are going to Chicago 2, there is no incentive to buy a ticket right now.  Wait until they go down, and snag it later. It won't sell out either way.   

My next point relates to how little control the band likely has over ticket prices. I'm going to make some assumptions here, because I obviously don't have the Live Nation/U2 contract available to me, but I think I am right...  My understanding is that before U2 360 the band signed a 10+ year contract with Live Nation. My belief is that Live Nation guarantees a set amount of money to the band per show. In exchange, Live Nation handles logistics, booking venues, and setting ticket prices.  Any profit above the guaranteed amount plus expenses goes to Live Nation.  And as you all know, putting on a U2 show isn't cheap. One thing I've always admired about the band is that it tries to reach the top row in the back of the arena just as much as the front row.  (I wrote a review here of the U2 360 show titled "No One Else Tries This Hard.") But of course, U2's set pieces cost an exorbitant amount of money.  And the contract requires the band to perform a certain number of shows over the lifetime of the contract, be it in arenas or stadiums. (I'm convinced contractual obligations had at least something to do with the Joshua Tree tour, as Songs of Experience was delayed so long, but that is another topic for another day.) There obviously is pressure for the band to deliver on Live Nation's behalf. I believe that has translated into certain songs (i.e. "hits") in the U2 catalog never leaving the setlist, but again, that is a topic for another time and place... But the point is, I don't believe the band has any control over ticket prices.

Here are a few things to consider about the secondary market... First, I hear people complain all the time about "tickets being on sale on 'X' web site before even the pre-sales." Here is the truth: they don't actually have those tickets yet. There are people that essentially sell ticket "futures." Once the get an order for a ticket, they then attempt to go on the secondary market themselves and buy a comparable ticket to the one they sold to fulfill the order. They make money off the difference. I bet there are some here you have bought tickets on such sites only to get the "we cannot fulfill your order" email.  

Another thing to keep in mind is that because a ticket is advertised on a secondary market for a set price, does not mean in any way that it will sell for that amount. There also needs to be a distinction between a professional resale site, and the guy who puts $2,500 worth of tickets on his credit card and thinks he is going to get rich. When the credit card bill comes due 30 days later, and he can't pay the bill, dumping the tickets fast becomes a bigger incentive than paying 18% interest on a credit card.  (Check Craigslist about 30 days after the general on sale date. Deals to be had...)  Professional resale sites, on the other hand, make money by dealing in volume.  And to sights such as Stub Hub, the actual price that the ticket changes hand for is somewhat irrelevant to them. The reason is that they make money off the transaction itself.  Much of the transaction fees are the same regardless of the ticket price.  

I hope that helps put into perspective what I think we are witnessing: U2 fans being used as guinea pigs in Live Nation's experiment to try to beat the scalpers at their own game and sell, from the start, tickets at their full market value. But music is like sports; much emotion and feeling, less practical sense. Spending $300 or $1000 on concert or sporting event is a decision made with the heart, not the head or wallet. But ultimately, music is art, is it not? And I would argue that taking the Pearl Jam approach and leaving money on the table, handling their own tours, and hitting the road with a low key set, which allows keeping the focus on the music and varying wildly the set lists, has created a fiercely loyal fan base that has compensated the band very very well.  Further, that fan base will continue to do so for many years to come.  I hope U2's deal with LIve Nation hasn't damaged its relationship with its own base...  At some point, the market will only bear what it will bear...  

All the best.  

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Well explained Nbayer & pretty close to the truth, I have read a few industry articles & this is the state of the star & mega star concert industry today, well done! 

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Thanks for writing this out. It gives me a different (and less cynical) perspective on the high ticket prices.  

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Great write up.

17 hours ago, hicksong said:

Nice post, thoroughly enjoyed it. All I can say is.... someone fucked up big time..... big time ! 

As far as the prices go, maybe not. 

If they can sell say 50% of the seats at these crazy high prices, then lower the price some over the next five months before the show (maybe even have a couple price reductions throughout the five months),  they may make out better than if they just started out at the lower end prices.  I am guessing once there is a price drop, people will go back and buy the tickets (and I am sure it will piss off some fans that already paid the higher price).  

I can't imagine a U2 show not selling out.  As the price drops, I think they will all sell out.

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1 hour ago, U2FanInVT said:

I am guessing once there is a price drop, people will go back and buy the tickets (and I am sure it will piss off some fans that already paid the higher price).  

Yes, there would definitely be an uproar, I would think that would be messy to sort out . I can't imagine U2 not selling out indoors as well.

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36 minutes ago, hicksong said:

Yes, there would definitely be an uproar, I would think that would be messy to sort out . I can't imagine U2 not selling out indoors as well.

Agreed. The ones who suffer the most are the fans, especially the ones who live modestly, like myself. The "scalpers" are a lot of things, but they are not dumb. Over the years, the band/mgmt./ticket vendors have tried different things to outsmart them and each time the "scalpers" adjusted to the new measures that were put in place.

I waited in line--overnight--for Zoo TV tickets way back in late '91/early '92 and knew for a fact that there were guys in the line who were hired by scalpers to buy the maximum amount of tickets they could. They all carried cash and one of them was stupid enough to admit why he was there. And I remember distinctly him and his buddies with stacks of tickets. It bothers me (a little) to this day. This may be capitalism at its most basic form, but its seems unfair. The one with most money/personnel/resources is the one most likely to--in this case--buy tickets.

Fast forward 25 years and technology has made it so much easier for this same type of thing to happen. LV/TM tried do outsmart the scalpers and where it failed is in the execution. The strategy might have been good, but by the time it came to put plan into action, the outcome was far below expectations. They cannot admit this because their Verified Fan system doesn't apply only to U2. And they can probably say that they have also thwarted the scalpers to a certain degree, but how that can be measured is for someone smarter than me.

In regards to U2 tickets dropping in price, hopefully they will so that those who are pinching their pennies can afford to go. And yes, I also agree that I have not seen the band not sell out. The last time I saw them playing to anything less than a full house was PopMart '97. I remember during the Great Recession, I saw both shows of their 360 Tour in Anaheim, and even the nosebleeds seats were occupied.

@nbayer that was a great piece. I know that business-side of a U2 tour is more complex than my simplistic understanding of it. Thanks again.

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NBayer - I think a lot of your observations about the mechanics of ticket sales are correct.

Where I disagree, and this may be more of an opinion disagreement than a factual dispute, is in this section:

On 12/5/2017 at 4:18 PM, nbayer said:

My next point relates to how little control the band likely has over ticket prices. I'm going to make some assumptions here, because I obviously don't have the Live Nation/U2 contract available to me, but I think I am right...  My understanding is that before U2 360 the band signed a 10+ year contract with Live Nation.

Now, on the whole, that may be true.  But no one put a gun to U2's head and said "sign this deal" - they took a deal that offered them an obscene amount of money, as is their right.  But I also think that they are responsible for what is done in their name.  The prices are outrageous.  Perhaps they didn't set them on their own, but they sold their business to a company that did.

I just don't think it's reasonable to say that U2 are basically innocent bystanders in this, and that poor Live Nation just needs to do anything it can to earn back its investment.  I don't mean to put words in your mouth and I don't mean to suggest that you're cool with all of this.  But I think ultimately U2 are responsible for the deals they sign, and what they allow people to do in their name.

If they had never, ever made statements about respecting their audience, if they hadn't talked in the past about wanting to keep prices low, if they hadn't made fun of other bands who charged high prices, etc., etc., it wouldn't bother me in the same way.  There are performers I like, Sting for instance, who has never made a secret of the fact that he wants to be paid a lot of money for what he does.  He never talks about wanting any kind of fairness for fans or reasonable prices or anything.  So when he charges his high prices, it doesn't feel like hypocrisy.

Even on this tour, information on pricing before the tickets went onsale wasn't easy to come by and was often inaccurate.  There's a seating chart from Atlanta that's been making the rounds, on the Atlanta venue's official website, and it lists which sections are what prices.  The problem is, it's comically inaccurate.  It insists, for instance, that the top price on the upper level is $175.  However, when tickets actually went on sale, it became apparent that the majority of sections marked as $175 were actually $330.  Who benefits from this misrepresentation?  Not the fans.  We're denied the opportunity to make informed decisions about what tickets we're willing to buy and how to spend our money.

 

On 12/5/2017 at 4:18 PM, nbayer said:

And I would argue that taking the Pearl Jam approach and leaving money on the table, handling their own tours, and hitting the road with a low key set, which allows keeping the focus on the music and varying wildly the set lists, has created a fiercely loyal fan base that has compensated the band very very well.  Further, that fan base will continue to do so for many years to come.  I hope U2's deal with LIve Nation hasn't damaged its relationship with its own base...  At some point, the market will only bear what it will bear...  

I think this deal, and specifically how this tour has been handled (after the questionable handling of the 2015 tour) has left a bad taste in a lot of people's mouths.  I am not seeing every single show I could possibly see on this tour, and that's the first time in twenty years that I can say that.  The tickets were too expensive, and the value being offered wasn't there.

On the 2015 tour, with the same setup, there were plenty of tickets in the $100 price range that offered a full view of both the stage and the screen.  On this tour, there are no tickets at that price level that offer that view.  My $100 upper level seats from 2015 have been reclassified as $175 tickets on this tour.  My $100 lower level side stage/behind the stage seat from last tour has been reclassified to a $330 ticket on this tour.  Just think about that.  In the past, when U2 added technology to their shows, even as recently as the 2015 tour, the point of the technology seemed to be to bring the show to all seats, even seats which traditionally weren't considered good.  That upper level $100 ticket I had in 2015, it seemed overpriced before the show, but I was pleasantly surprised that with the screen and the double stages, it was a far better ticket than an upper level ticket normally would be.  So what happened between then and now to justify charging $75 extra?  It seems that the approach has flipped from "Let's use technology to make the seats in the back better for fans" to "Let's use technology so we can charge more."  After an entire career of approaching things from the former point of view, it's a bit shocking to see this reversal.

I think it's one thing to charge a super high price for what are obviously and undeniably incredible seats.  People paying $330 a ticket should have every confidence that they're getting some of the very best seating in the house, but that's not what's happening here.  Make the seats that are closest to the stage and with the best view of the screen, the best 5% or 10% of tickets, charge $330 for those and no one will complain.  But $330 for a high row of the upper level far away from the main stage?  How is that remotely close to being worth the same as a lower level ticket near the main stage and with a full view of the screen?

I'm kinda relieved that those high priced, far away tickets aren't selling.  The sales are way off on this tour compared to what they should be, and I hope that everyone involved in planning and pricing this tour looks at what's going on and adjusts for next time.  If prices are going to continue to consistently rise, with no relation to inflation and no recognition of the relative crappiness of some of what they're charging these prices for, there are many of us who won't be able to afford to attend next time.

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I can't argue with the statements made in the original post other than the comment about the setlist.  I'm sure the band has retained full artistic control over their shows, such that they're the ones deciding what songs they're playing.  Other than that, I'd say your general discussion about pricing is pretty spot on.

Biggest mistake they're making in the whole scenario, though, is that they continue to price GA tickets well BELOW what the market is willing to pay.  I'm pretty sure that this is a band decision, not a Live Nation decision. That forces some of the tickets for seats into the higher price ranges where the market is saying that they shouldn't be, as they're not selling.  To have tickets on the floor priced at $76-$80 while everything comparable around them (basically the whole lower level, except for limited view areas where the ticket holders can't see the screens) is priced at $330 or more clearly indicates that these tickets are priced way too low.  Those tickets, then, become the ones the resellers most want, as they present the greatest opportunity for good profit margins for their original "investments."  Thus the immediate situation where demand (both by real fans and by resellers) outstrips the available supply straight out of the gate at the onsale.  If GA's were priced at face values of $200-$250 initially, this problem wouldn't occur and probably all of at least the upper level seats could have been priced more reasonably.  Would there have been bitching and moaning from the diehard fans that are used to getting floor tickets at prices below Fair Market Value?  Sure.  But we wouldn't have been seeing what's going on now ---- overpriced uppers going unsold and diehard fans bitching and moaning because the only way they can get GA tickets is on the resale market at prices that are roughly 200-400% above "face" (where they should have been priced to begin with).  The end result is a scenario where the band is "trying to have it's cake and eat it too," because their shows are now overpriced in a lot of areas (making sure that the artist is not "leaving money on the table," as the original post describes) and yet still under priced for the tickets (GA floor tix) that get attendees closest to the stage and band (with the exception of the Red Zone tickets).

What we're seeing is proof that you can't do both.  Either you price your tickets such that the resale market has some opportunity for re-sellers to potentially make a profit, or you price everything high enough that re-sellers are really taking a risk when they speculate on their ticket "investments" by buying ticket inventory that is pretty much priced at market to begin with.  It will be interesting to see how this all plays out by the time the shows occur.  At the outset there clearly were some pricing mistakes made.  In my opinion the biggest is the continued "under market value" pricing of GA tickets and that can't be corrected, as those tickets are all sold.  As for the rest of the unsold inventory, yes, there will definitely be price adjustments taking place - whether "disguised" or obvious - or there will be empty seats at many of these shows.  I doubt the latter will be allowed to happen.

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Just for kicks I looked at Ticketmaster and the first 2 shows on the tour. I like it when you can see the available seats on the map represented by blue dots. Lots of Blue dots.... 

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