Scalping in the Live Entertainment Industry: Effects, Implications & Suggestions for Improvement
Over the course of the last year I completed an 8-month-long concert promotions internship with Anschutz Entertainment Group (AEG) Live, the second-largest live events and entertainment company worldwide. While interning at AEG, I was exposed to the ins and outs of the music business, including talent buying, show production, media planning, and grassroots marketing. One of the recurring issues I noticed during my internship was ticket scalping—individuals buying large amounts of tickets in order to resell them for a much higher price. This practice had serious consequences that affected both the company and the consumer in predominantly negative ways. For that reason, my group and I decided to do our MKT 431 Strategic Marketing Management project on Scalping in the Live Entertainment Industry: Effects, Implications & Suggestions for Improvement.
What is scalping?
Scalping is attempting to obtain the maximum financial benefit of the scarcity of an item by hoarding it. Alternatively, it means Spreading favorable but false information about a good or security to boost its demand and then unloading it (also called pumping and dumping.)
Why is scalping bad for the company?
Scalping is bad for the company because it causes tickets to sell above face value on the secondary market when they are already overpriced on the primary market, thus leading to customer dissatisfaction. It doesn’t help that according to Ticketmaster and StubHub, the two largest online ticket retailers, the company or person selling the tickets is solely responsible for making sure the tickets aren’t scalped. The bottom line is that scalping is a huge problem because it takes away potential profits and creates bad publicity for the company.
Why is scalping bad for the customer?
Scalping is a huge problem for the sports, music, and entertainment industry for several reasons. First of all, scalping leads to increased ticket prices. If ticket vendors suspect they are going to get scammed by scalpers, or if they know that buyers are willing to pay much more for tickets, it encourages them to raise the ticket price. Then, too, legitimate customers often get crowded out of the market by scalpers who buy tickets online in bulk. This also leads to scattered seats, since scalpers often buy tickets in rows, thus preventing people from sitting with their friends and family. These three things—increased ticket prices, overcrowding, and lack of available seating—ultimately contribute to consumer frustration and dissatisfaction. In short, the average fan simply cannot compete with scalpers.
Current prevention methods
There are many practices currently in place that are aimed at eliminating online ticket scalping. Having personally worked at a concert promotions company, I saw firsthand how closely my supervisors monitored on-sales, making sure tickets were moving smoothly from distributor to consumer via internet credit card purchases. However, with hundreds—or thousands—of buyers vying for tickets to popular shows, it’s nearly impossible to catch a flaw in the system before it turns into a major issue. In order to better manage ticket sales, promoters place quotas on the number of bulk tickets that can purchased for each show, but this makes legitimate customers frustrated because they can’t always get tickets for all their friends. Online purchase timeouts and use of CAPTCHA codes are two other methods for cutting down on the amount of scalping that goes on. While I worked at AEG Live, I was also given the daunting task of going through 6,000 rows of Excel spreadsheet data to find duplicate credit card numbers used to complete multiple purchase orders. Obviously, this is a less-than-ideal method for identifying ticket scalpers. A slightly more interesting concept is the idea of electronic tickets, where people swipe-in to an event using the credit card they purchased the ticket(s) on. However, scalpers have found a way to work around this by purchasing tickets on pre-paid credit cards—and the pre-paid credit cards couldn’t be used to swipe in!
Recommendations for improvement
Because our group feels that more can be done to address the issue of ticket scalping in the sports and entertainment industry, we have come up with the following suggestions for improvement:
1. More effective implementation of the credit-card swipe-in scheme. Although this concept is good in theory, scalpers have found a way to get around electronic tickets by purchasing said tickets on pre-paid credit cards that cannot be used to swipe-in to shows. As a consequence, the buyer loses the money he/she paid for the ticket and gets nothing in return. Rather than doing away with this scheme entirely, our group feels that this practice could be improved upon by working with Ticketmaster, StubHub, and other online retailers to develop a screening process that prevents credit card numbers with prefixes such as 370266 (prepaid American Express) from being accepted. That way, consumers with legitimate credit and debit cards can purchase electronic tickets with confidence, and scalpers would not be able to buy.
2. Convince Ticketmaster and other retailers to shoulder some of the responsibility. Under the current system, the business entity listing the tickets online is 100% responsible for ensuring that their tickets are not scalped. However, due to lack of advertiser control, frequent Ticketmaster crashes, and lack of proper monitoring technology, catching scalpers in the act is virtually impossible from the event promoter’s point of view. If everyone could work together to develop a system of shared responsibility, in which each key player is responsible for monitoring some portion of the sale, both the company and the ticket distributor would benefit.
3. Find other ticket distributors who are more willing to cooperate and offer assistance. In the event that no compromise can be reached, there is always the possibility that the company could take its business elsewhere. There are plenty of lesser-known ticket distributers out there who would love to land a contract with a major entertainment company such as AEG Live.
4. Improved technology for monitoring irregularities. From the advertiser standpoint, this is perhaps the hardest solution to implement. However, having your intern comb through 6,000 rows of data looking for duplicate credit card orders is definitely not the most effective way to catch scalpers, so clearly changes need to be made. If major ticket distributors won’t work with sports and entertainment promoters to develop-long term solutions for ticket scalping on their end, perhaps AEG should consider soliciting proposals from outside technology companies to create its own system for monitoring irregularities. As the second-largest entertainment provider worldwide, the company can surely afford to implement a system that would ultimately increase both profits and customer satisfaction while minimizing the effects of scalping on the live events industry.