Yet Another Take On All This Ticket Talk

In 2015, when I was the news editor at Pollstar magazine and ticketing issues were in the news, like they seem to be every few years, an Arizona paper interviewed Dr. Stephen Happel for his view on whatever that problem du jour was (Springsteen vs. scalpers). Happel was a champion of free markets who thought that a ticket should be worth what people were willing to pay for it. It was an interesting take and I filed that name in my mental Rolodex for the next ticketing concern. A few months later, the NBA and Ticketmaster got into a conflict with StubHub. It inspired a Pollstar interview with Dr. Happel that got a lot of traction, with reactions coming from all angles. It was so controversial that it created a follow-up article compiling the various reactions.

Jump cut to 2023, with Congress again holding a hearing regarding ticket sales, this time with Taylor Swift as the focal point. Meanwhile Springsteen has embraced dynamic ticketing and Garth Brooks at the Pollstar Live! conference questioned why scalping was allowed at all. There have been dozens of voices sounding. That motivated me to contact Dr. Happel, not knowing what his take would be, or if it would be a popular one, yet expecting that he would have something unique to say. And, in that regard, he succeeded.

As emeritus professor at Arizona State University, he along with Dr. Marianne Jennings of the W.P, Carey School of Business have spent decades arguing for a robust secondary market, or at least for allowing tickets to be sold for what they are worth even if the fan gets priced out of the onsale. In 2010 they published a comprehensive paper called “The Eight Principles of the Microeconomic and Regulatory Future of Ticket Scalping, Ticket Brokers, and Secondary Ticket Marketsa study that can only come from economic professors that makes the case that scalping has been around since Shakespeare and isn’t going anywhere.

One of Dr. Happel’s suggestions has been the Dutch auction, where tickets are priced exorbitantly high at first, then priced lower as each new week arrives. The buyer, not the promoter or the artist or the agent, is the one who decides when the price is right.

The interview took place prior to the Super Bowl and, thus, prior to the Pollstar panel composed of Irving Azoff, Garth Brooks, James Dolan and former US Assistant Attorney General Makan Delrahim. Happel and Jennings are preparing an op-ed inspired in part by the panel.

It should go without saying but, to paraphrase the disclaimers on television, the following does not necessarily represent the viewpoints of NACPA members nor NACPA as a whole; it is only offered to inform and further discussion. That’s not only a boilerplate statement; it is a fact with NACPA members have divergent viewpoints on this issue and it’s in the realm of possibility none of them fall lockstep with Dr. Happel’s.

For those who are unfamiliar with you, can you please give us your bona fides?

I’m Stephen Happel, emeritus professor in the economics department at Arizona State University. I started teaching at Arizona in 1975. in the late ’80s my colleague Marianne Jennings and I got interested in secondary ticket markets, and we have written professional journal articles, newspaper articles, testified in front of state legislatures, and do work with the National Association of Ticket Brokers. Basically, what we do is try to defend, for want of a better term, free market ticket scalping. We’ve been doing that for close to 30 years.

Right off the bat, looking at our previous interview, something passed right by me. You mentioned twice and say all the time to your students and journalists that scalping is good from an economic standpoint.

Well, of course, as we’ve talked about in the past, the real issue why there are so many secondary ticket brokers is that the initial ticket prices are set too low to clear the market, so there’s a demand. And there is a variety of reasons why they’re set so low. One, of course, is simply that the price is a loss leader to get you into the venue and then they make up for it with concession sales and things like that.

There is a very famous article in economics about why popcorn costs more at the movies. The essence of that article is that theater owners are selling a package that includes a ticket price for the movie and the concessions along with it so they had different alternatives on how they can price that package.

Another reason why tickets are so low is that they might want to achieve a quick sell out. Another is certainly from the ’50s and ’60s and the negative image of price gouging. That indeed is why Ticketmaster stepped into the market and started wearing the black hat with their fees deflecting the higher prices from the owners and promoters.

First of all, I want every seat to be occupied, if possible, whether it’s Rolling Stones, Bruce Springsteen or Taylor Swift. But I want people in there who really want to be in the venue. Lately, Springsteen has caused quite a stir with his dynamic pricing and from what I understand many of his fans are now deserting him because they feel he sold out. So, you know, to me if you have a law that says prices can’t be sold above a certain level, it’s a price control, and price controls in the end always hurt consumers. There will be some beneficiaries but, overall, the marketplace is hurt.

With Springsteen, for years he tried to hold prices down and fought the scalpers like crazy and now he’s announced that for his special seats he will charge very high prices. And his argument, which I think is a legitimate one, is why should the profits go to the scalpers? Why shouldn’t I be able to pay my band members and road crew and others higher prices? That way I can make them happy, I can tour more.

So, from my perspective, any attempt to control the price of tickets is going to be harmful in general to the economy.

Regarding Taylor Swift, did you follow it from the start, and what was your reaction?

I think it’s very similar to Hannah Montana and Miley Cyrus when she was doing it and people were screaming about scalpers and how only the rich could go. And then you see this whole thing with Taylor Swift and, again, how much you want to believe Ticketmaster managed this. From what I’ve seen by way of testimony they were simply overwhelmed. They didn’t anticipate such an onslaught. Not that they are innocent by any means but I think it caught them off guard.

The other thing is – and I don’t know the extent of it – you have the bots coming in and buying up tickets before they reach the general public. So, you know, it’s a nightmare for Ticketmaster and they’re now being raked over the coals in investigations.

But I would say two things. First of all, you should separate Ticketmaster from Live Nation to begin with. I think they’re separate entities and Live Nation, having control over all the major venues, or most of them, is a real problem. Second of all, and this would be a harder one to implement, but I don’t think Ticketmaster should be involved in secondary ticket sales. As I said in our last interview, I don’t care if Ticketmaster has a monopoly in primary ticket sales as long as there are vibrant secondary markets.

And the issue to me, one of the big issues right now, and this has been going on for years and years, is whether tickets are bearer instruments or whether they are licenses. According to almost all state laws that I’ve looked at, if they’re licenses, then Ticketmaster, the promoter or anyone can do anything they want with the ticket. It’s their license. They can control it. They can set maximum prices; they can go after brokers who are trying to buy tickets. They can do whatever they want with them.

If it’s a bearer instrument, once you buy that ticket it’s no different than buying a Chevy or a Ford. You can do what you want with it. Resell it, whatever.

So, Marianne and I have argued that tickets should be bearer instruments but at the moment they’re basically licenses, so that’s a huge issue.

In our initial interview, you suggested the Rolling Stones do a Dutch auction. I was wondering how much you have seen your suggestions be implemented?

Hardly at all. Again, I’m not sure the reasons why. It would seem, as we talked about, that it puts tremendous pressure on secondary ticket sellers.

Let’s just take the Stones as an example. And just as a quick background, for years and years the Stones charged the same price for every ticket for every seat in every venue. When they came to Arizona State each seat was $67.50. Well, Mick Jagger went to the London School of Economics. Is he stupid? No. He isn’t stupid at all. Apparently what the Stones would do is come into town, or representatives would come in advance, and would cull together ticket sellers and say we’ll sell you packages of tickets at higher prices than $67.50. The Stones were price discriminating but covertly rather than openly.

But I don’t see why you don’t have a Dutch auction: Tickets for the first week will be $5000. Next week will be $4000. And so on.

I think probably the biggest issue would be PR, that if the first set of tickets were $5000 and they immediately sold out then you’re going to get screams from people that only the rich can go to the concert. That’s always a strong emotional issue that plays well with politicians that say we’re going to stop this; we don’t want only the rich going to these concerts. But I don’t see why you don’t have more Dutch auctions. There must be some logistical issues but I don’t see what they would be.

Well, politicians might say that but why would regular consumers not say the same thing, that only the rich can go?

Yeah, all right. So, I’ll give you an example. Suppose I just love Mercedes Benz. Let’s just say I was enthralled since I was able to drive with that car. I know the configurations of every Mercedes Benz that was ever produced. I’m an avid fan.

Does that mean I should be allowed to buy a Mercedes Benz at a lower price than what they’re offering to the general public? That’s stupid; of course not.

How different is that from the ticket? Yes, I’m a fan. I’ve been there many times and I love them but why should I be allowed to go now? As you and I have talked about in the past, there is a way to get in low-income consumers to concerts if that’s your concern. It was in the previous discussion we had which is, you can tell people they can start lining up at any point in time, days in advance, whenever, but an hour and a half before the concert we’re going to open this line and we’re going to charge a really low price.

Or if you really want to help low-income consumers, don’t charge them a price at all! And you say, all right, you’re in line, you get one ticket, you get on your hand a stamp where you’re going to sit. You must go to that seat and sit there. You cannot trade the ticket to anybody else. You can’t buy more than one ticket for one person and if you don’t go to that seat, you lose control of it and we put somebody else in it.

And that is, from my perspective, the only way you can guarantee your true fans will be there. Some will say, well, there’s another way. Just give your true fans tickets. Give them away. Well, shoot, now a true fan becomes a scalper. Well, yes, I’m a true fan but this broker offered me a thousand dollars for this ticket so I think I’ll just sell it and pass on the concert.

It’s a situation where you’ll always have people complaining prices are too high if they don’t have the resources to buy those tickets at least without taking a major hit to their bankroll. I mean, there is an element to it. It’s just the nature of the whole thing that ticket prices are going up considerably.

On Sunday here for the Super Bowl the cheapest price is $4,500.

 Yeah, seems to work for every other genre of entertainment.

Yes, it does. But, you know, it’s this loyalty thing. I’ve been a loyal fan and of course that’s what drove Springsteen in the ’80s to fight scalpers and try all kinds of things. You’ve got New Jersey legislature to pass price controls. You’ve got the New Jersey legislature to limit the number of tickets you can buy individually. You can only buy four if you’re standing in line because you want to help his true fans. But I stand in line for five hours, I pay $50 for a ticket and soon as I buy four of them and step out of line there’s a broker there saying I’ll give you a $1,000 for two of them. Suddenly true fans become secondary ticket traders. Not all, but many.

In 2015, the Grateful Dead returned post-Jerry with a reunion in Chicago at Soldiers Field that holds 73,000 or so. They did everything possible to prevent brokers from buying tickets. I’m not sure if you’re aware of this but they had a committee that kept track of every ticket they had sold and who bought them over all their venues. You would have to send in a particularly sized postcard giving some kind of background. “I’ve been to every Dead concert over the past 10 years” or whatever, and “I want two tickets.” And the committee would decide.

They would try to prevent brokers to get the tickets. At Soldiers Field the cheapest tickets (which began at $59.50) was $125 right behind the band. You couldn’t actually see the band.

Ticket prices just exploded on eBay and other places. Stubhub prices were going through the roof. So, they get a tremendous backlash from people in California saying “You’re from California so why are you doing your last concert in Chicago?”

The band agrees and announces a show at Levi Stadium. This also holds 73,000. Then the Dead did something interesting, which Marianne and I would endorse, which was to bypass the committee and sell the tickets to the public, first-come first-served. Buy a bunch of them if you want.

So, who bought up all the tickets? Brokers. Let’s say the price was $50. Brokers thought this was great. They put them up for higher prices but they weren’t selling as fast as they thought they would and so here’s a broker who paid $50 and trying to sell it for $500 thinking, you know, if I charge $490, I will only lose $10. Soon you were in a free fall where each broker is now racing to the bottom. At the time of the concert there was such an abundance of tickets that there was a chain link fence that you walked by into the concert and people were sticking tickets there, and you could simply grab one and get in for nothing.

So, my buddy here, Tony Beram who runs Western States Tickets said, you know, Steve, if you really want people to get into the concerts for cheap, have brokers buy all the tickets. They always overestimate the pricing. Let the market operate that way.

One of the oddities that the public misrepresents is that a broker can buy a ticket and put it up at any price, which causes the public to balk, but it’s not necessarily the price the ticket sells for.

Right. That’s exactly right. Who cares what they put them up for? They may sell one or two, who knows? I sell stuff on eBay and I say to my wife I want to sell it for a price equivalent to other items and she’ll say, “Are they selling? Or are they just listing the price that they want them to sell for?”

To me it all comes back to whether a ticket is a bearer instrument or a license. That will have profound implications. This has happened with various sports teams, especially the New England Patriots who were awful in the early ’90s: they’d actually go to brokers and ask them to please buy our tickets. When they became successful, they said brokers couldn’t sell them and took the season tickets away from them. You have that whole dynamic there, where if it’s a bearer instrument you can do whatever you want with it.

To me that’s been the issue for decades.

I’ve clashed with the owner of the Phoenix Suns over this for years. He says it’s a license; I say it’s a bearer instrument.

I was going to go over to Glendale, Ariz., to see the secondary ticketing market but I hear it’s a nightmare. When the 1996 NBA All Star game was here, Marianne and I wrote an article where we said you ought to have a designated area right before the event where anybody wanted to buy or sell tickets would go. We did that. Well, the city of Glendale did it for the Super Bowl last time it was here, on a street between the hockey stadium and the football arena that was roped off with a sign above it saying “Tickets.”

I called the city of Glendale last week to see if they would do it again and they said they thought they would. The person I talked to said it would happen. If it does, I guarantee prices will be a lot lower than $4,500.

So, there will be inventory left over.

Always. There will be brokers stuck with tickets. I don’t know how many tickets each player in the NFL gets but maybe they don’t want to go. Maybe someone very wealthy bought four and the kids don’t want to go. At some point they need to let you get rid of them or the tickets will be worthless.

I go back to a day when I was working at Pollstar and a tour manager wanted to bring a young artist and her guitar to the office to play some songs on our couch in the breakroom. They couldn’t make it so he offered tickets to the show that night instead. I offered the invite to the whole office of 50 people and only one said yes. That artist was a 15-year-old Taylor Swift. There are always inexpensive ways to see artists; you just need to see them early.

Same thing happened with me and Bonnie Raitt. I’m at Duke doing graduate work. It’s like 1971 and it was in a very small theater on campus. Here comes Bonnie Raitt. I’ve never heard of her. But the ticket price was about $2 so I went and watched her. What the heck.

It happens over and over in hindsight. “I should have gone.” Well, you should have.

Anyway, this whole Taylor Swift thing. Even back in 1998 some congressman proposed a national law on ticket scalping trying to control it and it never got out of committee. It didn’t even get to a floor vote.

But every once in a while, someone wants a national law. The states and municipalities have their laws and all kinds of rules depending on the city you’re in. I’m not in favor of a national law except for two things: that the law says the tickets are bearer instruments and that for every venue the promoter or owner has to state explicitly how many tickets are being held back on initial sales, how many holds are on the events taking place. To me, that will add greater transparency to the market.

But I don’t think you’re going to have that happen.

Marianne and I were going to go up to Ottawa when the Canadian government was thinking about doing this but they changed their mind.

I do think this Taylor Swift thing could possibly lead to some major changes. I think Ticketmaster and Live Nation have a lot of lobbying money but if they broke them apart it would be a good thing.