Why the concert ticket resale market benefits everyone

Artists, venues, concertgoers — no one likes ticket scalpers. But new research from Duke University’s Fuqua School of Business suggests a concert ticket resale market can be a plus for everyone involved.

Professor Victor Bennett found that when tickets could be resold online, prices rose for the most popular artists but fell for less popular acts. Promoters reacted by putting artists in venues they were more likely to sell out.

“It’s not that it’s good for the biggest artists and bad for smaller artists,” Bennett said. “It’s really about the match between the artist and the venue.”

The introduction of secondary markets gave concertgoers the option to resell tickets, which Bennett said increases their willingness to pay up front.

“You’ve got artists who are apoplectic about their tickets being resold, but if you know as a fan that you could resell a ticket, that’s going to make that ticket worth more to you,” Bennett said.

The research, “Cannibalization and option value effects of secondary markets: Evidence from the US concert industry,” was published online in the Strategic Management Journal. Bennett worked with Robert Seamans of New York University and Feng Zhu of Harvard University.

The researchers interviewed concert promoters and gathered Pollstar industry pricing and ticket data from more than 73,000 concerts across the U.S. between 2003 and 2008, including only headliners who played at least 25 shows during that period. They compared prices for concerts held in cities before and after the online classifieds website Craigslist expanded there. Craigslist, a popular site for fans to buy and sell concert tickets, was expanding rapidly during the period the researchers studied.

They found that after Craigslist entered a market, regardless of its size or location, prices went up for shows that were likely to sell out, and fell for shows that weren’t.

“It only helps if you sell out,” he said. “For shows that don’t sell out, those guys on the secondary market will sell them for below face value, just because they want to make something.”

The researchers found a similar effect whenever StubHub, the eBay-owned ticket resale site, opened in cities. The study was not based on the StubHub data because the company targeted cities where it could make money. But the findings were the same — prices for the most popular artists rose higher in cities after the resale market launched there, with the effect being most pronounced in areas with the most internet usage.

Bennett said while firms in some industries resist secondary markets, in many sectors of the economy it’s a given, and likely to continue spreading.

“There’s this concern about resale being a bad thing, but from the theoretical perspective it could be a good,” he said. “You wouldn’t buy a car if you had to keep it forever.”

This article is published in collaboration with Duke. Publication does not imply endorsement of views by the World Economic Forum.

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Author: Victor Bennett is a Visiting Assistant Professor at the Fuqua School of Business.

Image: Members of the public use their mobile devices to take photographs. REUTERS/Phil Noble.