this calls for some tuneskies
An economic view on Radiohead Scalpers
This morning, tickets for Radiohead’s first Australian tour in eight years went on sale, and, as predicted, were snapped up by a few lucky members of society. It is easy to argue a case for Radiohead being the biggest band in the world these days, and it’s no wonder that so many people were jumping for tickets. It seems that in the aftermath of the shows being labeled ‘Sold Out’, the biggest news is that of the ticket scalpers on eBay.
Ticket scalping has been around for years, and every September it becomes a huge talking point with the AFL Grand Final, the main issue. For those new to the game, scalping is the intentional on-selling of a ticket for a profit. In Australia, there is rarely much of a problem with scalping but it is a much bigger deal in the US. Scalping companies will purchase substantial numbers of tickets for events and try to re-sell them. Often it is at a profit, but sometimes companies could suffer substantial loss if there is an unprecedented low demand for tickets. It’s all part of the game for these companies. When a band like Radiohead announce a tour, with a relatively small number of dates, it is an easy target for scalpers. As witnessed this morning, tickets sold out within minutes, and a number of which are now available on eBay at much higher prices.
So here’s a bit of economic background. Australia, more-or-less, is run on a market economy.It comes with the capitalist democracy that we all flourish under. The majority of pricing in our country, from fruit and veg to shares and the stock market, is determined by how much of the item there is, and how many people want that item. You can influence the amount of people who want the item by changing the price. At the point were the supply of the item equals the demand for the item, we have what is known as equilibrium, and this price level is known as the equilibrium price. Ideally, we want all items to be at equilibrium. Whenever there is a change in the supply or demand of the item, there will be a change in price to re-balance the equilibrium. Do you remember when Cyclone Larry destroyed Innisfail and all the bananas? Well there was less of a supply of bananas, but still the same demand from the community, or what is known as excess demand. To correct this, the price of bananas went up, meaning fewer people were willing to pay the new price, which led to a decrease in demand. In similar way, when tickets went on sale this morning, there was an excess demand for Radiohead tickets at the price offered. So once the tickets were released into the public, there was always going to be an increase in price. And it is this price increase that has left fans outraged.
But let’s look at the positives of scalping tickets to this event. Importantly, it allows a secondary market to buy tickets. Imagine you’re the world’s biggest Radiohead fan and willing to pay $1000 for a ticket but due to unforeseen circumstances you were unable to purchase in the general sale. The scalpers have allowed for you to now buy a ticket and die happily. With a general sale like this, there’s no way to distinguish between fans. The 16-year-old who only knows Creep from Guitar Hero manages to get a ticket, while the world’s biggest fan misses out. To add to this, we should assume that MOST people missed out on tickets. So ticket scalping actually helps the fans. Secondly, by using sites like eBay, we can determine the equilibrium price of the tickets. Those who are willing to pay more are able to pay more. It is apparent that the price set by the various parties for the concerts was too low. It’s a bit of a Catch-22 situation. You sell the original tickets at a higher price and eliminate scalping but lose credibility and fans, or you sell the tickets at a low price and suffer the back-lash that we have at the moment. I believe the real problem with the current scalpers is the set-price they are offering. This completely removes any potential the market would have at pricing the tickets. If these tickets were up for auction, the public could determine how much they were willing to pay.
It seems the best way to prevent scalping is to announce more shows. When LCD Soundsystem’s Farewell gig at Madison Square Gardens gig was abused by scalpers, they responded by announcing a further 4 gigs, to devalue the scalpers tickets. It is highly unlikely for Radiohead to do the same, so the fans will just have to grin and bear it.