Pricing Scarcity in Media and Entertainment (338.521 GRIF)
It is an unpleasant fact of life to be priced out of goods and services we desperately want. It’s a lesson we learn as kids and should know as adults but for some reason many refuse to accept it.
While growing up I was given a moderate allowance, pocket money to buy trivial goods without bothering my parents. At first my tastes were limited to junk food and the odd G.I. Joe, and I never really encountered scarcity.
In my teens, my tastes evolved to weed and hip-hop albums. My parents had no desire to knowingly fund either. “Dad, you got 5 on it?” was not an option.
Some of my friends had parents with no problem handing out money or buying music. These kids always had the latest albums and smoked the most weed.
It was a valuable lesson in what it means to see people with more resources and to confront scarcity.
What Can We Learn From Scarcity in Physical Media?
I truly loved hip-hop in my teens and that’s when my love of collecting albums began. I would constantly visit HMV to browse the latest releases and sample anything they’d open for me. The other reason to visit was their binder listing the upcoming releases.
This was pre-internet and that binder was the best way for me to know what was coming out. I could check magazines but they were all U.S. published so not a reliable indicator of when an album would be available to me in Canada.
This binder was both a hype tool and a budgeting tool. Some months would be filled with releases I wanted to get and others there was nothing in sight to excite me. The months with lots of releases meant prioritizing and smoking less hash. The binder never listed prices in advance and even between HMV stores albums could be priced differently.
Budgeting meant being aware not only of desired releases but what was a Canadian release and what was a U.S./European import. My memory is fuzzy but the Canadian releases started at $9.99 while Imports were $25 and up (exceeding $40 for the more obscure albums). I could estimate roughly but until I got the shrink wrapped album in hand, I wouldn’t know the price.
Imports were a luxury item available in much lower quantities. They were exclusive and conveyed status among my group of album collecting friends.
Jay-Z’s debut, Reasonable Doubt, was a U.S. import and especially hard to get. It had been hyped in The Source and while we didn’t know it would be great, we knew it was something we wanted before it even reached us.
There were a handful of HMVs in my city and only one was going to stock it (with an Import classification), confirming it would be in limited quantities.
A friend of mine, with a bit more money and access to a car, was the lucky one to buy it. He ditched school at lunch and showed up in the afternoon with the album in hand. He said it was the only one they had in stock.
None of us thought it particularly unfair that he got it and those of us without a car and less money had to do without it.
We got to listen to it while hanging out with him so it isn’t the perfect analogy but the recent fuss about Oasis tickets in the UK got me thinking about it.
In the years to follow, online marketplaces altered the scarcity dynamic and facilitated the option for someone like my friend to buy the album and flip it on eBay or eventually Discogs. At a recent Sunn O))) show in London, they had a limited edition tour only vinyl which within hours of the show was listed on Discogs for 50% more than the band was selling it.
This dynamic is the economic foundation of the issue with ticket sales for popular events. It cuts across the physical and digital realms like many of the thorniest media problems today.
Mega Shows Are Luxury Goods
Nobody needs live music and even if you really crave it there are plenty of affordable options. Mega shows, whether Beyoncé, Taylor Swift, or Oasis are best understood as a luxury. They are hugely expensive to put on, they are exclusive, and attending one conveys a certain status.
They are also scarce for a reason. They are limited by the number of shows a band can physically play including availability of appropriate venues.
Beyoncé played 5 shows in London on her last tour, collectively selling 240,000+ tickets and grossing nearly $40 million. I’m sure if she added a 6th it would have sold well too, although likely with ever dwindling audiences. It is effectively impossible for these artists to meet demand without eventually playing to half empty venues.
We need to acknowledge this when discussing how the shows are priced, let alone that at this level these are commercial endeavours first. The idea that playing to 50,000 fans is just about the music is wildly naive. Countless people will make ends meet by working these events.
That they are massive and attended by huge numbers does not change that they are a scarce product. They are an experience eager fans are hugely excited to see and will go to extraordinary lengths to attend. It’s easy to fall for the narrative of community and fan appreciation but the economic reality does not change. These are luxury goods and priced accordingly.
Enter Dynamic Pricing
The source of the current controversy is that the Oasis tickets were dynamically priced, meaning prices are adjusted in real time to the level of demand. This is a natural consequence of our increasing connectivity and improved data analytics capabilities. We accept it with airfares and many other common online purchases.
While the face value for tickets were in the range of £150, fans were faced with multiples of that when they got to the front of the online queue. The press has focused on perceived price gouging; this side steps the benefits of dynamic pricing and why it isn’t inherently bad.
First, when a show is massively in demand and sold out the economic incentives invite sclapers into the mix. These individuals contribute nothing to the show and do nothing to ensure shows happen but they claim the economic excess created by the difference between supply and demand. These are the types that buy up limited albums at tour dates and flip them at a profit, while dedicated fans at later shows do without.
The question is who would we rather collect this surplus?
I’ve never met a fan that likes TicketMaster but they deserve some credit. As an executive at OVG (a venue developer and operator) put it to me, “they sell the shit out of tickets.” Partly because as a global ticket agent they have more data on pricing than anyone else. Just as a real estate agent knows the market and has the network to maximize the sale price for your home, the best ticket companies help bands make the most off their tours.
TicketMaster and their parent company Live Nation Entertainment have built a sales and marketing machine that should help bands maximize revenue. Bands are economic actors and will complain about their cut but they continue using TicketMaster and revealed preference is an important economic indicator, better than unattributed quotes in papers. Papers we should acknowledge thrive by stoking discontent.
Live Nation Entertainment also invests directly in building new venues for entertainment. They often partner with the likes of OVG, who built Co-op Live in Manchester. It is the best large scale live music venue in the UK despite what the press said about the opening handful of shows. The venue was designed with artist input and is a much better fan experience than seeing a show in a sports arena. The purpose built facility offers better acoustics and required an investment of £350+ million.
The other unadvertised service TicketMaster offers is taking the brunt of discontent while artists can feign ignorance, creating distance between themselves and the economics. If you get a chance, talk to someone on the business side of these activities and they’ll acknowledge this, just not publicly.
So while we might not like them, the existence of these big companies contributes to better touring infrastructure and, one can assume, help more world class entertainment make it to more markets.
Without them, large scale entertainment acts are either handling tickets sales themselves and/or using a different outfit for each jurisdiction. Some artists say they can do it themselves but I’m okay with musicians that focus on their craft while outsourcing logistics. Again, this is a business.
Live Nation also invests in smaller venues which creates a runway for up and coming artists to perform, grow their audience, and make a living.
With all this as context, it seems fair that the potential excess income accrues to those who have skin in the game. The split between band and promoter/ticket seller is a private negotiation, not relevant to the fan. I cannot imagine a fan that would prefer the economics accrue to a scalper or reseller instead of those who put on the show they so badly want to see.
A frequent retort to dynamic pricing is that it never seems to flex down. Ticket prices never seem to decrease when demand falls below supply is a narrative on social media. This is false. It isn’t in their interest to make it too well known, but unsold tickets are often available at steep discounts. Nothing kills the buzz like a half empty venue. There are stories of people getting to see a show for as little as $5. The catch is those tickets become available on short notice.
Fans should research these options and be aware of the outlets distributing them in their city.
Doing Better for Fans
Supporting dynamic pricing is not to say the ticket industry cannot improve.
The biggest improvement will be implementing systems that help the ticketing agents differentiate fans from wealthy interlopers and scalpers.
Bands want to profit maximize without the risk of turning off their core base and the current set-up does not let them do that. Nobody is boycotting the Oasis shows but for bands that are more active and/or earlier in their career this type of press could hurt them long term. The Gallaghers couldn’t give a fuck and that is part of their schtick.
Much has been made about web3 as a possible solution and I believe it is the most promising path currently available. I’ve covered the basics of what blockchains do so the following is a quick summary focused on ticketing.
A blockchain can act as a public information database. It is secured by a diverse range of economically incentivized actors who do not need to otherwise align or care about each other. They simply share security costs while making secure and integral data interoperable across entities and individuals. In this way, ticketing data can benefit from the resources securing an investment asset like Bitcoin.
To help with dynamic pricing, we could use the database to link an identity (private and pseudonymous) with relevant data. This means the ticketing agent could know if an individual has attended previous tours (anywhere in the world), bought music released by any band on the bill, been a significant streamer of the act’s music, and purchased merchandise at shows. They can effectively rank the attractiveness of people and favor those who contribute the most to the band.
All of the sudden, being in the top 1% of listeners who streams an artists is worth more than a cute graphic from Spotify.
If such information was readily available, secure, and accurate, primary ticket sellers would have better tools to distinguish fans from others. They’d have the information to move beyond first come, first serve queues. This would be a massive reward for the most loyal fans, just as airlines let frequent flyers jump to the front of baggage drop and board first.
Ticket sellers and bands could create different incentives and tiers to reward their loyal fans without having to worry about the complexity of different jurisdictions and operators or media types.
At scale, such a ticketing system would make dynamic pricing more sophisticated, more respectful of the fans, and ultimately more fair.
This will not stop scalpers and resellers. The economic incenvites will remain too strong so the goal is to maximize the benefit for fans and minimize the room for scalpers to operate. Focusing on the former is the best way to achieve the latter.
Interestingly, these types of systems also cut into the power of the large monopolies and oligopolies. As the data is freed from closed databases, competition will heat up and existing scale won’t be the only market differentiator. There will plenty of other ways to sell the shit out of tickets.
There is work to do for the underlying infrastructure to work securely, managing private data is difficult, but the path is clear. We shouldn’t punish businesses for cutting into the profits of scalpers. We need patience for the technology to mature because right now it is too blunt. To the extent the government wants to intervene in the market, they should allocate funding to the development of secure and interoperable data networks.
For my money, I’d rather see consumer protection watch dogs focus on staple goods like food/medicine/shelter and the dominance of a few platforms that monetize data we assume is private.
If you want to know more about web3, I recommend the UntanglingWeb3 podcast, especially beginning with their episode on digital identity.
Sg
