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Featured Column: StubHub and the Overly Free Market

There was some weirdness involving the recently played Super Bowl [1]. Like most of these games, tickets were exceedingly difficult to come by. However, the secondary market did what it does. Tickets were available on the usual scalping sites before the teams were finalized. Fans bought their passes there and then flew down to Arizona. That’s when things got weird.

Most reputable scalping sites these days guarantee the tickets you purchase from them. If you don’t receive them, they’ll first try to get the seller to pay for similar (or better) seats. If that doesn’t happen, you’ll get your money back; some force the seller to give you a significant payment on top of what you paid. All of that is designed to make people be honest about what supply they have. Of course when honesty competes with greed, you don’t have to be a genius to know which one will win.

To a large degree modern capitalism is built around gambling. Stock prices go up and down based less on the value of the company and more on the expected news that will inspire people’s emotions. Between short selling and combining loans and selling them as investments and other modern tools, more and more layers of abstraction are piled on top until investments are three or four levels removed from any actual product that someone might want to buy. With that model, it’s hardly surprising that some people wanted to try to hack the ticket model and short sell it.

The idea is simple. Place a ticket listing for a large amount right at the time tickets go on sale (and immediately sell out). For those who follow ticket sales, that tends to be the highest point of sales. People are frustrated and really want to commit to going, so they jump at high prices without considering what could happen down the road. So if you get someone to buy your tickets, you just wait a few weeks, buy replacements at the inevitable lower price, and send those to the customer. Sure you’re a middleman on top of a middleman, but this should work. There’s only one problem. What happens if the price doesn’t go down?

For some reason, the Super Bowl was mobbed with would be short sellers. The past few years saw prices drop close to the game, so they figured this would be easy money. Unfortunately for them, what happened was that there were too many second tier (and depending on how many people were doing this, perhaps third and fourth tier) scalpers chasing too few actual tickets. Instead of prices falling, they jumped. Once that happened, the market became skewed. As tickets rose to five figures, the earlier players figured it was easier to pay the penalty than to try to absorb that kind of loss.

While it’s great that fans got their ticket money refunded, many of them found themselves out the price of a plane ticket and – depending on when they found out – their hotel reservation and car rentals. When ticket sites let you speculate on top of the speculation already happening, this can be a result. The good news is that events that would have this kind of demand are low. Being an old school Deadhead, I can’t say that I ever would feel quite right buying a ticket to a concert on StubHub, but at least it would be rare that I’d ever get shut out due to a last second upward spiral. Unfortunately there is one event that just might have this happen: Dead50.

It’s still unclear just how extreme the demand for this event will be. Sure, a lot of people want to go, but there are still three concerts in a football stadium. When the ticket rush settles down and people remember that High Sierra and other July 4th events exist, there might be a return to sanity. However, in the off chance that the mail order rejection rate is foreshadowing something insane, there are a few ways you can protect yourself if you choose that route.

Gravitate towards electronic tickets. Many of those will be sent immediately, so you will have it in hand. Although that comes with the fear of people overselling the same ticket, the counter to that is to get to the show early and make sure that you’re the one who gets theirs scanned first. The second is to always try to deal with a more “reliable” ticket company. Ultimately, anyone can screw you over and leave you with nothing, but at least the bigger ones will make sure that you get your money back. It might not be seeing the concert, but it’s better than being out the ticket fee too. Never trust any sale that requires Western Union as a payment method. That is the preferred method of scammers everywhere and should not be trusted.

In an ideal world this column would never be written. Alas the world where I was raised, one where scalpers were to be hated has been replaced with one where many people are amateur speculators on the side. I never have and never will do this; I’ve had tickets to many a sold out concert and they’ve all gone to friends (or strangers in some cases) for face value. The relationship that builds is always more important to me than the small amount of extra money that could be pocketed. Too often, the Internet lives off of the mentality of I’ve got mine, screw you. The best way to stop that would be to not ever buy a scalped ticket (or at least not to an event like Dead 50 that’s supposed to be as much a celebration of a community as a rock concert), but those arguments have fewer and fewer supporters, especially when the band itself gives tickets to another company to sell at a markup. If you’re someone who ends up getting shut out, let me wish you all of the luck in the world getting in. If – on the other hand – you find yourself in possession of an extra, let me at least suggest that you offer it up for face value. The relationship you make is one that could last you long past the time you blew through the extra money.

[1] And no, I’m not referring to the fact that somehow I have no memory of anything that happened after my beloved Seahawks had 2nd and goal with 20 seconds left. I’m assuming the game just got suspended or something.

*****

David Steinberg got his Masters Degree in mathematics from New Mexico State University in 1994. He first discovered the power of live music at the Capital Centre in 1988 and never has been the same. His Phish stats website is at http://www.ihoz.com/PhishStats.html and he’s on the board of directors for The Mockingbird Foundation. He now tweets and has a daily update on the Phish Stats Facebook page

His book This Has All Been Wonderful is available on Amazon, the Kindle Store, and his Create Space store.

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