Why Don't Sell-Out Concert Tickets Cost More?

Here's a riddle to consider - why don't concert promoters charge more for concert tickets? Here's the thing; concert tickets for artists like U2, Coldplay, The Rolling Stones, Kate Bush, etc are snapped up in a matter of moments*. On the exact minute of the sale start time, eager buyers will be by the phone hitting 'redial' or on the Internet hitting 'refresh' desperately trying to get through and purchase tickets. Concert tickets are sold out in double-quick time with many disappointed fans losing out, which means demand is astronomically higher than supply.

 

In ordinary circumstances, prices would match that demand. Take the recent announcement that Kate Bush is doing some live shows for the first time since 1979 - that is literally a once in a lifetime chance for many fans, yet ticket prices will not reflect that at all. Whatever price they go on sale for could easily be quintupled, so why aren't concert promoters, managers, venue facilitators and ticket agencies hiking up the prices when they know that they'd still sell out?

 

I have a few ideas. Clearly, promoters, managers, venue facilitators and ticket agencies want to make as much money as possible, but that doesn't' mean it will necessarily be reflected in higher ticket prices. Hiking up ticket prices would constitute a short-term gain, but I'm supposing it would involve a concomitant long-term disadvantage, although I'm not sure what.

 

Perhaps the artists and associate colleagues don't want to incur negative publicity by giving the impression that they'll rip off fans.

 

No, that doesn't satisfy - the term 'rip off' usually occurs when there are captive buyers under monopoly power, or when buyers pay for things that are not worth the money. Highly sought after, rare concert performances do not fit either one of those descriptions. Plus, an artist that can generate such high price sales for tickets undoubtedly has lots of good publicity as a result.

 

Perhaps prices are kept artificially low in order to ensure that really keen fans attend those concerts.

 

It's possibly a factor. Lowering the price creates a demand overload, which means it is very hard to acquire tickets, which means most of the people who successfully bought tickets had to be very dedicated in order to get them. But that doesn't wholly satisfy either. There are other events (theatre shows, cinema releases, comedy acts, plays, and so forth) that sell out really quickly too - in fact, in the case of theatres performances the most expensive seats at the front usually sell out first. Incidentally, if you attend the theatre after having bought one of the less expensive seats and find that there are spare unsold seats in the most expensive section you are not allowed go and sit in them, even after the interval when it's clear that no one is turning up to obtain them.

 

Besides, don't be fooled into thinking that paying over the odds is not commonplace - you do it all the time, particularly when demand is high and supply is finite. When the new phone or tablet or gizmo comes out, prices are extraordinarily high until demand lessens and there is a price drop. Consumers are used to thinking of expected prices in terms of reasonable or ordinary prices, and lower prices in terms of discounted prices. The truth is, that's only one lens of perspective - you can just as easily think of the discounted price as the reasonable or ordinary price and the initial expected price as being unreasonably high to capitalise on demand. When you see a DVD or a piece of jewellery or a shirt at a discounted price of 70% off, you can be glad that you're paying only 30% of what you would have paid when it first came into retail, but you could equally be bothered by how much profit the store was making when demand was higher.

 

But maybe it really is the case that the kind of artists who can sell-out that quickly are the ones who can instil enough control to see that fans pay a reasonable price.

 

It could well be true in many cases. The world of capitalism has a lot of 'Winner-takes-all' success stories which contributes to the rich getting rich phenomenon. I don't see why that wouldn't be the case in the music industry too. I'd wager that the wealth gulf between the top music sellers and those on the periphery is more stratified than at any time in the past five decades.

 

But the magnanimity of The Rolling Stones or Kate Bush doesn't extend right throughout the market, because if prices are artificially low then often goods are not procured by those that want them the most. In an ideal market, prices and wages should adjust to ensure the equality or balance of supply and demand. But this doesn't always happen - sometimes it's harder or more trouble to adjust prices than to leave them as they are, and sometimes sellers are slow to realise the increase in demand.

 

But generally an efficient market matches supply to demand with price equilibrium to match. So when prices of goods with fixed supply don’t rise quickly enough to meet demand, those most in demand do not end up paying the highest prices. Some people don't like it when this happens - pejoratively referring to it as price gouging, but it often isn't a bad thing. If centre court tickets for an Andy Murray vs. Rafael Nadal Wimbledon final were the same price as a second round match on court seven between two unknowns it would not be a good thing for consumers overall. If diamonds were the same price per gram as coal it would not reflect the scarcity of diamonds, just as if the Wimbledon final was the same ticket price as earlier matches it would not reflect the demand, or the scarcity or the love of tennis that aficionados have. So, while fan-consideration might be a factor, it doesn't wholly solve the issue for me.

 

EDIT TO ADD:
One thing is clear; that there is such a highly competitive secondary market for popular concerts tells us quite clearly that when put on sale originally the tickets are being sold well below their actual market value. The secondary market of tickets could be quite easily discontinued by selling these very limited supply of tickets at the market rate through an auctioning process, which would naturally permit re-sale of these tickets if they became surplus to requirement. Evidently, though, sellers clearly do not like the idea of die hard fans paying very high amounts of see artists they love, so they keep prices artificially low.

For big names like The Rolling Stones and U2, concerts are a secondary form of income behind album sales (CDs or downloads) so the concert ethos is seen as a kind of added saleable treat, and there is selection pressure not to unilaterally raise the price bar. Possibly radically new ideas for the good (or the bad, but thought to be for the good) are not implemented because while they would work in a multilateral scenario, no one wants to start the ball rolling unilaterally because if others didn't follow suit they would disadvantage themselves or possibly even danger themselves.

Given that touring usually promotes a new album plus makes artists money in sold merchandise, it is quite understandable why ticket sales are profitable but not excessive. There is generally no need for concert sales to be that excessive, even if they could be sold for more: the big names don't need to make huge profits on ticket sales, and the smaller names are doing smaller gigs so wouldn't charge as much anyway, and have to remain competitive if they don't have the luxury of guaranteed big album sales like The Rolling Stones and U2.

One other factor in rock concert ticket pricing is that a lot of artists (most actually) are from working class/lower middle class backgrounds, so it probably feels right to the artists to not be ramping up prices that only well off people can afford. For many of these bands their working class roots have been important in their songwriting and in their fanbase.

  

* I don't mean that this applies to all artists, of course - only the biggest names. I went to a Metronomy gig a few weeks ago, which was about 3/4 full. If the ticket prices were doubled I'd wager that the numbers would have dropped by somewhere between a third and a half.

** Photo courtesy of www.getmein.com