Online Ticket Reselling Helps Consumers, Study Says; States Disagree

More than 20 states have anti-scalping laws, some that target Internet resale, said the study by Kevin Hassett, director of economic policy studies at the American Enterprise Institute. Earlier laws barred scalping in general, largely to prevent bulk buyers from reselling at a premium. Later measures have created licensing regimes for resellers -- in sports games, leagues or teams often control resales -- or capped resale price, the study said.

The latest restrictions are driving up secondary ticket sale prices by more than half, the report said. Hassett used eBay data from its online sales of NFL tickets July 2005 to December 2006 and July to August 2007. The final sample size was roughly 500,000 auctions and 3.4 million tickets at an average sale price of $266. Hassett used data on games and teams, location, seller feedback rating, stadium capacity, per capita income, and household Internet use in a given state to trace the demand curve. He used “dummy variables” to control for state oversight, such as licensing, on-site resale bans and markup restrictions. The analysis shows that in free markets, resold tickets cost an average of $145 less than in regulated markets in general. In states that license resellers, resold tickets run $200 higher than they would with no regulations. In resale-restriction states, resold tickets cost $50 more. On eBay tickets sell for 30 percent on average above face value, the study said.

Auctioned on the Internet, tickets to concerts by Hannah Montana, the Disney character played by Miley Cyrus, have jumped from roughly $60 to as high as $600, said Steve DelBianco, executive director of NetChoice. After a Rhode Island concert sold out online in four minutes, lawmakers pushed a bill to criminalize online purchase of tickets by Rhode Islanders with “intent” to resell, he said. NetChoice and others lobbied the bill enough to get it tabled, DelBianco said. But other states are eyeing similarly draconian measures. Nebraska is proposing to cap resale price at 2 percent above face value and let promoters sue illicit resellers for up to $10,000, he said.

Gary Adler, counsel to the National Association of Ticket Brokers, said Missouri relaxed its secondary-sale law until the Hannah Montana juggernaut hit, but now is again among the strictest in the country. Adler has been called the leader of the “National Association of Hookers,” so bad is resellers’ reputation, he said. But he noted a recent Forrester Research finding that 40 percent of resold tickets go for less than face value.

Reports of automated software being used to corner the market on tickets before individuals can buy them online has incensed lawmakers, but that phenomenon is mostly theoretical, DelBianco told us. In 2007 the Colorado Rockies Web site temporarily blocked World Series purchases after a rush of ticket-buying via software circumvented the site’s ZIP code-based rules (WID Oct 26 p2). Big online sellers’ terms of use bar using such programs and sellers aren’t afraid to enforce the rules, he said, adding that Rhode Island is considering a ban on using “bots” to buy tickets. Adler said a California judge had entered a preliminary injunction against the groups behind the World Series incident.

There may be no easy way to lend concerts the resistance that sports games enjoy in regard to online ticket price spikes, Hassett said. Game tickets show less volatility, since buyers get many chances to see the home team, but “Dad’s a fink for life” if he doesn’t get his daughter a Hannah Montana ticket, he said. And venues’ economics differ. Game tickets often are priced artificially low to ensure sellouts and get broadcast carriage, while Hannah Montana tickets are priced artificially low because Disney “would rather be the friends of the parents” and let resellers take the heat for spikes, he said. Online resale markets almost vanished for other recent concert tours priced closer to market demand, such as Phil Collins and The Police, Hassett said.