Need two?

Story by Chris Graham

If you’ve ever been to a major-college or professional sporting event or A-list music concert, you’ve undoubtedly passed by at least a few people engaging in commerce related to the secondary-ticketing industry on your way to the host venue.

“Who needs two?” is their bark – but increasingly the bite is being felt by consumers who get stiffed with counterfeit or otherwise invalid ducats that, perhaps not surprisingly, don’t come with a money-back guarantee.

“This is really a new issue in Virginia. Until relatively recently, we haven’t really had big-time sports here,” said Dave Nutter, who represents Christiansburg in the Virginia House of Delegates – and who this year introduced legislation in the state General Assembly that would have made the resale for profit of tickets to sporting events, concerts and other public performances a crime.

Nutter, a Republican, said his interest in the topic of ticket scalping was piqued by reports at Virginia Tech regarding the sale of counterfeit tickets to Hokies football games by organized criminal gangs that use the practice of reselling otherwise legitimate tickets as a cover for their illegal operations.

“What they’re doing is they’re scalping tickets and then mixing in these very authentic-looking tickets that are actually fakes. The scalping is a vehicle to disseminate the fake tickets,” Nutter told The Augusta Free Press.

A key concern with the legislation that Nutter introduced to deal with this – which was tabled in a House committee earlier this year – is that it could end up impacting negatively and substantially on what has become a multibillion-dollar industry nationwide.

That’s right – secondary ticketing, ticket reselling, scalping, whatever you want to call it, is big business, so big that even schools and pro-sports teams and concert promoters themselves are angling to get a piece of the action.

“You’ve got two trends with this taking hold in the past four or five years,” said Stephen Happel, an Arizona State economics professor and author of several studies on ticket scalping.

“You’ve got the teams now charging different prices for different teams – whether it’s a weeknight or weekend or that sort of thing. They’re price-discriminating by the quality of teams, the time of the week the games are played. There’s a lot more differentiation in prices. The second thing is that they’re getting more involved with the StubHubs of the world and getting a chunk of the secondary-resale market,” Happel told the AFP.

The San Francisco-based StubHub works with college and pro-sports teams to provide the teams and their fans with a secure marketplace for the resale of tickets.

The company, founded in 2000, was initially a provider of secure technology that teams across the sports spectrum used to establish their own secondary-ticket programs.

“We continue to work with teams in a sponsorship mode – essentially striking a marketing deal where we obtain access to their season-ticketholder base in exchange for providing our services,” company spokesman Sean Pate told the AFP.

The West Hollywood, Calif.,-based Ticketmaster is becoming a player in the industry as well – offering services in the traditional resale arena as well as organizing so-called dynamic-pricing auctions that are designed to help promoters and venue owners better determine the actual value of house seats.

“Auctions through Ticketmaster are actually tickets sold in the primary market. This isn’t a resale of the ticket – like you’d normally think of when you think of an auction. It’s a ticket sold in the primary market – so it’s an original ticket – and the consumer actually determines the price that they’re willing to pay for that particular ticket in that location,” Ticketmaster spokesperson Bonnie Poindexter told the AFP.

“When fans get the opportunity to purchase a ticket at a price that they’re comfortable with, they determine the face-value price of the ticket – and that helps our clients to understand what the market pricing is in that particular market for that particular show. And when an event is priced correctly, at market value, there’s less likelihood that these unauthorized resellers are going to be able to inflate the price of tickets,” Poindexter said.

“We’re seeing more clients using auctions for a greater percentage of the house. By doing that, they know that the fans are able to determine how much they’re willing to pay for tickets in this location, and they can look at reducing the prices for tickets farther back in the house. “Someone who might not be willing to go to a concert if they had to sit in the last section for $40 might be willing to go if they can sit in the last section for $20,” Poindexter said.

“That helps our clients actually get more butts in seats,” Poindexter said.

And that has always been the primary focus of concert promoters and athletics directors and general managers.

“Studies showed that maybe 60 percent of the revenues from a game are concessions – so they had a bias to price their tickets low to get people in, and then make their money on concessions,” Happel said. “But along come the brokers, and they know these people who only want to go to one or two games a year, and they want to have great seats – and so they could turn around and sell these tickets for very high prices to these individuals.”

From a pure economics-world perspective, “ticket resale is just a market at work – and a market that is reallocating some asset or some commodity, in this case, a ticket to a sporting event or a concert, from people who don’t value that asset as highly to people who do value that asset highly,” said Brad Humphreys, a sports-economics professor at the University of Illinois.

Efforts to criminalize scalping often have focused on issues of fairness or equity involving the profits that can be made by resellers who have nothing to do with putting on the events that are valued by consumers. But Humphreys and other economists see secondary ticketing as being similar to selling a used car or selling something on eBay.

“Ticket resale works the same way. People who place a very high value on attending a sporting event are willing to pay a lot of money to get a ticket to that event – and for one reason or another, because of the tickets are originally allocated, they can’t buy them through the normal channels, so they buy them from a scalper,” Humphreys told the AFP.

“If you turn that around and think about that based on our used-car example, people wouldn’t have that problem with someone selling a used car or a memorabilia item on eBay. There’s something intrinsically different about a used car or memorabilia item and a ticket to a live event like a concert or a sporting event,” Humphreys said.

Whatever the moral objections to scalping might be, “you’re always going to have a secondary market in tickets – as long as the tickets are sold in advance,” Happel said.

“The laws across the country have been loosened, by and large. Most states have backed off. The reason is that the problem that you’re going to have is that there is always going to be a secondary market – and if you’re going to try to stop it, you’re going to have to pass more and more onerous laws,” Happel said.

The good news is that it seems that the marketplace is taking care of the issues that have been raised by Nutter and others regarding problems with counterfeiting and the sale of invalid tickets.

“As consumers and as clients become more familiar with these offerings, you’re going to see less in the unauthorized secondary marketplace, and you’re going to see more transactions taking place in the authorized marketplace,” Poindexter said.

“That’s a really important distinction. Because why would you buy a ticket from an unauthorized reseller and expose yourself to risk when you know that you can purchase through an event-authorized site and know that your ticket is going to get you into the show?” Poindexter said.

Nutter, for his part, is committed to researching what other legal remedies there might be to address the issues raised at Virginia Tech and elsewhere in the Commonwealth with respect to the influx of counterfeit tickets into the market.

“Because of the issues that I’m seeing here, I still want to try to work on it and work with the attorneys who represent the ticket resellers of the world to look at some ways to come at this,” Nutter said.

“I recognize that there’s some concern that we’re getting in the way of free commerce – that if Uncle Joe wants to sell his ticket to some guy, and he makes $10 on the sale, what’s the problem with that? That’s the hard part. That’s the innocent aspect to what happens – but then there’s the more criminal aspect of abusing people and frankly taking advantage of people,” Nutter said.