Saving Our Scalp(er)s

June 13th, 2014 by Leave a Comment

By Tom Giovanetti

Markets are almost always the best way to deal with economic problems, including the problem of not wanting to go out to watch the Atlanta Falcons play a preseason football game in 90-plus degree heat.

TOM GIOVANETTI President, Institute for Policy Innovation
President, Institute for Policy Innovation

So what do you do if you are a season ticket holder and are sitting on tickets for a game you don’t want to attend? Since it’s a preseason game, you might just toss them in the trashcan. But if those tickets were for a game during the season, they would be worth big bucks.

Hence the “secondary market” for tickets.

A ticket is sort of quasi-property. It’s not really property – it’s more of a license, since the venue almost always attaches conditions to the ticket, and can revoke your “right” to attend the game for many different reasons. But, with a few exceptions such as for airline travel, tickets have largely been considered a transferable good.

The advent of information technology has turbocharged the already-profitable secondary market for tickets. Once the domain of scalpers, today tickets are resold on the Internet through markets like eBay and eBay’s shiny new possession, StubHub. But the increasingly profitable secondary ticket market has spawned a fight between the venues themselves and secondary marketplaces, and this fight is moving into the legislative arena.

It seems that venue owners would like to be able to enter into legal contracts wherein they designate a single legitimate secondary marketplace for their tickets, such as TicketMaster. Any unauthorized transference of tickets would be, well, unauthorized.

On the other side are vibrant secondary marketplaces, which don’t want to see any restrictions at all on the free exchange of tickets.

It seems to us that markets are equipped to solve this dispute without legislation. Both ticket purchasers and venue owners are able to freely enter into contracts as they see fit. If venues want to sell tickets that can only be resold through restrictive channels, and the ticket buyers agree to those restrictions, what objection is there?

On the other hand, it may be that customers will rebel at such restrictions and force venue owners to return to less restrictive rules.

What neither venue owners nor ticket exchanges should do is go running to the government to legislate their particular business model – but that’s exactly what is happening.

Legislation is circulating in several places that would either (a) prohibit venue owners from restricting resale except through a particular vendor, or (b) severely restrict secondary markets in tickets.

The first legislative approach would legally advantage the business models of eBay/StubHub to the disadvantage of venue owners. The second legislative approach would virtually outlaw such secondary markets to the advantage of the venues themselves or their designated sellers, such as TicketMaster. Both approaches are wrong.

There are obviously important interests and “rights” on both sides of this issue. Undoubtedly it is in the best interests of consumers to have a vibrant marketplace for secondary tickets. But the bright lines must be drawn at the point of principle, and the principles at stake here are property rights and the right of contract. Policy-makers who dare to tread into this issue must be careful that any legislation or restrictions they seek to impose on the secondary ticket marketplace do not erode either the property rights of the venue owners or their right to set the terms of contract for ticket sales.

So long as their are no legislative restrictions on secondary ticket markets and no legislative restrictions on the right of venue owners to set the terms of their ticket contracts, the secondary market for tickets should function optimally.

Now, if only I could find a taker for these tickets …

Tom Giovanetti is president of the Institute for Policy Innovation (IPI), a public policy research organization based in Dallas, Texas. He is also the author of the study, “Protecting Secondary Markets for Tickets.”

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