For good luck, Schuster wore her “Tramps like us” t‑shirt (“’cause tramps like us, baby, we were born to run”). Bots don’t rely on luck; they rely on science—computer science. Schuster hoped to grab a couple of tickets for herself; the bots, to grab a boatload of tickets for scalpers.
The dash was over by 10:10 a.m. Schuster banged her fist on the desk. The bots tugged their winnings off to the scalpers, while Schuster was empty-handed. Still fuming, she swore not to pay scalpers “$300 or $400 for tickets in the nosebleed seats.”
Congressman Bill Pascrell (D, N.J.) agrees, lamenting that secondary markets ask fans to pay a “king’s ransom” to see Springsteen, AKA “the Boss,” in concert. He argues that the “average” fan can’t compete and worries that soon “only people who can afford a $10,000 ticket [will] be able to see the Boss.”
Schuster wrote that she would like to “take a wrecking ball to the [bots].” New York already has, recently making it “unlawful for any person to utilize automated ticket purchasing software to purchase tickets.” Congressman Pascrell hopes to have the federal government swing its wrecking ball at bots as well, recently announcing plans to reintroduce the Better Oversight of Secondary Sales and Accountability in Concert Ticketing Act, nicknamed the BOSS Act, a not-so-subtle nod to Springsteen. One of its new provisions would explicitly outlaw “computer software” designed to buy up tickets as soon as they go on sale.
The BOSS Act would do more than just outlaw bots; it would shackle secondary ticket sellers. The act would prohibit brokers who resell more than 25 tickets a year from buying tickets in the first 48 hours they are on sale. According to Pascrell, the goal is to “reel in” secondary ticket markets—the act is a net designed to scoop up large-volume scalpers while letting die-hard fans and small fish swim on. With fewer scalpers in the water, Schuster would have a much better chance to snag some tickets.
Average Fans Can’t Compete?
We are fans of Bruce Springsteen, but not die-hard ones. We first heard about the Wrecking Ball Tour long after tickets first went on sale, but immediately agreed, “We gotta go.” After a 100-click meander, we bought a couple of tickets in the secondary market to see him perform at Gillette Stadium near Boston. We got great seats, ones that are on the field, 55 rows from the stage.
Listening to Schuster and Pascrell, you’d think we paid thousands of dollars for our tickets. We actually paid $124 per ticket, only $11 over the face value. How is that possible? Our short answer is, “The internet.” Our longer answer is that the internet has made secondary ticket markets more competitive by moving most of the trading from parking lots to online resale marketplaces where consumers can more easily compare the ticket deals offered by different sellers.
Secondary ticket markets have evolved from local, isolated trades characterized by a woeful lack of information to a national market with hundreds of thousands of participants who have their fill of information. From an economist’s perspective, it’s been an evolution from primitive markets to advanced ones, moving closer and closer to the ideal of a perfectly competitive market. The evolution has not been steady, instead marked by periods of rapid change initiated by important innovations in technology.
The most important innovation was StubHub, founded in 2000. Suddenly there was an online marketplace where thousands of people could resell their tickets to concerts, plays, and sporting events. For a while, the market stayed static because, while StubHub made it easy to compare seats within sections, it was harder to do so across them. Another pivotal innovation, SeatGeek, which was founded in 2009, solved that problem. For every ticket listed, SeatGeek predicts its market value and uses that prediction to produce a “deal score,” supplying the consumer with information about prices conditioned on the quality of the seat. SeatGeek not only rates tickets, but also aggregates them, collecting and displaying tickets for sale on the websites of brokers and online marketplaces such as StubHub.
Foot-tappers and head-bangers | This evolution of secondary ticket markets has been squeezing out the profits arising from poorly informed consumers being out-bargained by scalpers. But these improvements don’t eliminate the potential profits from sellers’ attempts to reward their most strident fans, who make performances more exciting for everyone else. Musicians often want to put their most enthusiastic fans up front because their enthusiasm is contagious. It’s like a virus but a healthy one, creating spillover benefits as it spreads from person to person. We are foot-tappers, not jump-and-jivers—and certainly not head-bangers—so it may be efficient to relegate us to sections farther from the stage.
Markets often unravel attempts to favor one type of fan over another. The problem is that foot-tappers often have the money to buy seats up front, creating profit opportunities that attract bots. Hence, it is possible to tell stories that rationalize legislation like the BOSS Act as repairing a market failure.
The BOSS Act was first introduced in 2009 but died in committee. It seems like a no-brainer that if it were enacted, different people would be sitting in the best seats at Springsteen’s concerts this year—more die-hard fans like Schuster and fewer foot-tappers like us. But while enacting the BOSS Act would have changed who first got their hands on tickets, it might not affect who ends up with them. If die-hard fans are rational and markets are frictionless, the hands of die-hard fans will be slippery and the tickets will still end up in the mitts of foot-tappers like us. But the hands of die-hard fans may be sticky, so endowing them with a head start in the race for tickets might succeed in changing who sits in the best seats.
The danger of the BOSS Act is that it’s a wrecking ball that swings too wildly, harming consumers by knocking down structures that have evolved to make secondary ticket markets more competitive. The happy ending to the story of how we got our tickets resulted from the recent evolutionary progress of secondary ticket markets and might have been wrecked by unnecessarily aggressive public policies. Nonetheless, we will explain how the spillover benefits of enthusiastic fans justify attempts to reward them, how markets have evolved to do so, and how government policies might help—but probably will hinder—markets.
SeatGeek: An Evolutionary Jump in Competition
We first heard about the Wrecking Ball Tour from a Red Sox announcer, who mentioned that the Boss would be performing at Fenway Park in August. Within minutes we were on Ticketmaster, where we discovered that the only concert that fit into our schedule was at Gillette Stadium in Foxborough, Mass., on August 18.
After entering our request for two of the best available tickets, Ticketmaster asked us to type “genest wrexham,” a hurdle designed to thwart the bots of ticket scalpers. It’s a test that humans can pass more easily than bots can. In computer science lingo, these sorts of tests are called CAPTCHAs, or Completely Automated Public Turing Tests to Tell Computers and Humans Apart. Put simply, CAPTCHAs are automated systems used to distinguish other automated systems from flesh-and-blood ones.
In response, scalpers have hired bot-complements, commonly known as humans, who sit in boiler rooms and specialize in passing CAPTCHAs, lending their human hands to lift the bots over the hurtle.
By the time we got to Ticketmaster, the race between the bots and die-hard fans was over, having been run months earlier. Hence, we were being tested by a CAPTCHA that was standing guard over a nearly empty castle of tickets. The best tickets available were in Row 15 of Section 303, just 11 rows from the top of the stadium. “They are just like the ones that my mother bought for me and your aunt to see the Beatles at Philadelphia’s JFK Stadium,” David told Emma. “We could see the Beatles—they looked like little bugs on a faraway stage—and heard them singing, but couldn’t make out the lyrics.”
We left Ticketmaster’s website and went to SeatGeek’s, leaving the primary market and entering the secondary one without ever leaving our seats. On the day we bought our tickets—May 28—SeatGeek displayed tickets offered on StubHub and the websites of 51 other secondary ticket sellers. Slightly more than 50 percent of the tickets displayed were from StubHub, including the ones we eventually bought. In the parlance of the Internet, SeatGeek is a ticket aggregator.
One of the best known aggregators is Kayak, which compares the prices of flights offered by different airlines. Kayak sorts airline tickets by price because most consumers just care about getting from city A to city B, making airline tickets nearly a homogenous commodity. People don’t feel the same way about tickets to concerts and sports events, preferring to sit near the action rather than far away in the upper deck. In this case, sorting by price isn’t as helpful because cheap seats in the upper deck aren’t necessarily preferable to expensive ones near the stage.
SeatGeek sorts tickets by their deal score, which reflects the gap between the asking price and the predicted market value of the ticket. How does SeatGeek predict the market value of tickets? It starts by estimating each seat’s quality. This requires that it answer questions such as, “Is Seat A in the last row of the lower deck better or worse than Seat B in the first row of the upper deck?” SeatGeek lets the fans decide by looking at occasions when the seats were offered for sale at the same price. If more fans chose Seat A than Seat B, then A is deemed better than B. By looking at these sorts of choices throughout the stadium, SeatGeek creates a function that summarizes the quality of different seats. It then adjusts the function for a particular event using information on the seats already sold to produce an estimate of the market value of the seats. These are then compared with the asking prices, and voilà, deal scores.
Tickets are then tagged as “best deals,” “great deals,” “good deals,” “okay deals,” “so-so deals,” “bad deals,” and “awful deals.” On SeatGeek’s seating chart, the “best deals” are marked with a large green dot, screaming “Go, buy me!” while the awful deals get a small red dot, whispering “Stop, don’t get swindled.”
Looking at SeatGeek’s seating chart of Gillette Stadium, we eyed a pair of tickets five rows from the stage in Section A2. We drove through the Stop sign and clicked on the tickets. When we saw the asking price of $1,085 per ticket, we slammed on the brakes and backed up into our price range.
We next checked out a Go 40 rows farther back but still in A2, speeding toward what we thought would be the finish line. The price was $194 and we were itching to buy. A glance at the seating chart revealed other green dots a bit farther back. After some investigation, we settled on a pair of tickets for $124 apiece, 50 rows back from our dream seats, but a whole lot less expensive. They were only $11 above face value. No swindling here.
Before we entered the secondary market, we agreed that we would spend up to $200 per ticket for good seats. We expected to have our resolve tested, never dreaming that we would snag good seats for $124. Lift your hands and praise markets!
And praise SeatGeek! After driving through the first Stop sign, we obeyed SeatGeek’s traffic signals, clicking only on tickets earning high deal scores until we reached our destination. We ignored tickets that earned lower scores because their prices were higher than those of similar seats. Normally, we would have worried that the low price of our tickets indicated low quality. With the aid of SeatGeek, we knew that its low price was an indicator of a great deal, not bad seats. If most people behave like us, sellers who set prices higher than the market price will lose all their customers, meaning the demand curve they face is very elastic.
Ticket aggregators like SeatGeek also offer the potential of making the demand for listing tickets on StubHub more elastic. Many people view StubHub as the “place to go” to resell their tickets, giving it some market power in setting its fee, which is currently 25 percent of the selling price. Prior to ticket aggregators, potential competitors would have to incur significant costs to get their names “out there.” Now they can get exposure via SeatGeek and other ticket aggregators, putting pressure on StubHub to reduce its fees.
Graphing great (and awful) deals | Looking at SeatGeek’s seating chart for Gillette Stadium, we knew that we wanted seats on the field. We had no interest in the front-and-center “pit area,” which sounded vaguely dangerous and certainly exhausting. We also had little interest in the border sections—we wanted to be safely in the center of the action. To illustrate the idea behind SeatGeek’s deal scores, we created a data set of the 86 packages of tickets that satisfied our criteria. Regressing Price per ticket on the inverse of the number of Rows from the stage produced the predicted price curve illustrated in Figure 1. The dots represent our best and worst options according to SeatGeek.
All of the great deals identified by SeatGeek are below our predicted price curve, and all but one of the awful deals are above the curve. That makes sense: great deals are less expensive than expected given the row and awful ones are more expensive. The tickets we bought are represented by the grey dot circled in orange—they are in Row 55 and cost $124 per ticket. There were other great deals closer to the stage, but we opted to go with one that was stunningly less than our price cap, which to us was the best deal.