C&B Notes

T-Swift is playing Chess

Taylor Swift recognized that an immediately sold-out show, like a stock price pop on the day of a company’s IPO, meant that she was leaving money on the table for someone else to capture.  Trying to optimize for average ticket price rather than the number of tickets sold — the allure of a “sold out show” — got her much closer to maximizing revenue and profits for her tour.

It is an accomplishment that one might expect for a star of her stature.  But the feat seemed in doubt several months before, when thousands of tickets remained up for grabs at each of the venues she booked across North America and the UK.  The slower pace of sales was in part the result of an experiment that Ticketmaster, the world’s largest ticketing site, is pitching as the entertainment industry’s model for the future, in a push to recapture the $8bn a year lost to ticket resellers — also known as touts or scalpers.  After missing out on an estimated $150m in sales to touts on her 2015 tour, Ms. Swift, equal parts musician and entrepreneur, hatched a plan with Ticketmaster to stamp out resales.  For the tour supporting her latest album, Reputation, she initially only sold tickets to those who registered weeks ahead of time through Ticketmaster’s new technology, called Verified Fan.  Ms. Swift added an additional hurdle to potential touts, unveiling a points system that gives fans who watched her videos or bought merchandise a better chance at buying tickets.  Later, tickets were released on general sale but at steeper prices, with the best seats running into the thousands of dollars, slicing the arbitrage opportunity for touts.

“A certain amount of patience is required for an industry that for the past 40 years measured success by: ‘how fast can I sell out?’  The goal was to write ‘Sold Out’ on the marquee,” said David Marcus, head of music for Ticketmaster.  Now, however, he said, sold-out tours are a sign of “underpricing” tickets below what people are willing to pay, drawing the eye of touts. Instant sell-outs have become a rite of passage for big stars, as scalpers use software to buy up tickets the moment they are available online.  Louis Messina, Ms. Swift’s tour promoter, boldly predicted that by mid-December he would be “celebrating Taylor’s birthday with a cocktail in my hand and sold-out concerts all over the world”.  Yet none of her shows had sold out.  By January Gary Adler, director of the National Association of Ticket Brokers, dubbed the tour a “total disaster”.  But as the tour draws to a close this month, the strategy appears to have paid off:  Ms. Swift has captured about $1.4m a show that had been lost to resellers on her previous tour, as measured by a Financial Times analysis — recouping more than $50m.  By August, she had already broken her own record for the highest-grossing tour for a woman in North America.  Thirty days before her shows in September and October, 3 per cent of her tickets were listed for sale on StubHub, the dominant resale site, the FT found by tracking ticket volumes.  By comparison, 12 per cent of Bruno Mars’ and 6 per cent of Ed Sheeran’s tickets were listed on StubHub over the same time.

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After selling about half of her 2.5m tickets to fans through a Verified Fan presale last November,  Ms. Swift raised prices for a wider general sale in December to match their “market value”.  The cheapest seats were $50, while a front-row seat without VIP perks cost $899.  Three years ago Ms. Swift priced tickets for her 1989 tour at between $40 and $225, according to Pollstar data…

The question remains whether others will follow.  In the past year music acts such as U2 and Harry Styles, and even speakers like Michelle Obama, have tried the Verified Fan programme.  But Ms. Swift’s unsold tickets unnerved other artists, making it an industry-wide talking point.  Even though she ended up breaking attendance and gross sales records at several concerts, many of the stadiums did not sell out.  The FT found that on average, 668 empty seats were available through Ticketmaster an hour before each of Ms. Swift’s shows.  In addition to sacrificing sold-out dates, artists risk being accused of greed.  Technology has made it easier to pinpoint exactly how much people are willing to pay for certain seats, say for a Saturday rather than a Wednesday performance, but some acts have been hesitant to charge higher prices for fear of a backlash.  Regardless, Ken Davenport, Tony-award-winning producer of Broadway hits including Kinky Boots, said dynamic pricing was “absolutely becoming the industry standard”.  “The airlines have mastered this, so why not do the same thing?  Give us a couple years,” he added.

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