That headline probably made you mad. “What are you talking about, jerkface? I can barely afford to go to shows as it is! And you say that we should pay more?”
Well, yeah, actually. Let me explain.
The natural hand of the market says that when something is in high demand, the price goes up. Uber has surge pricing. Tolls on highways are higher during busier times. Airline seats get more expensive the closer it comes to departure. If there’s a hurricane in the Gulf of Mexico that damages refineries, the price of gas goes up. And when tickets are in short supply for a big gig, scalpers and resellers will find a way to acquire tickets to sell them above face value.
None of us like that gouging feeling. We all hate to pay more. Rising prices in the face of high demand feel opportunistic, exploitive and downright mean. But look it from the side of the artist. They’re getting hosed even more than the consumer. This article in the New York Time business section looks at the situation.
When Bruce Springsteen decided to do a run of shows at a Broadway theater with fewer than a thousand seats, he appeared to reject the laws of economics — or at least what would seem to be in his financial best interest.
He limited ticket prices to between $75 and $850 and has been allocating them through a lottery that includes identity verification. His goal was to prevent scalping. Yet not everyone who sought tickets got them at those prices. The tickets that have leaked onto the open market on StubHub ranged in one recent search from $1,200 to $9,999.
It sure looks as if Mr. Springsteen left a great deal of money on the table and impeded the laws of the marketplace. After all, some people got tickets for $75 for which others were willing to pay four figures.
This is where my argument that concert ticket prices are too low. Scalpers and resellers can make tremendous margins on hot tickets, trading on the demand created by the artist. None of that extra money goes to the performer or the promoter. One of the few (only) ways to combat this is to charge more for tickets in the first place.
I know, I know. That sucks for the average concert fan. But if we’re going to accept the laws of supply and demand, shouldn’t the money go to the people who provide the labour and the talent? Back to the NYT.
But the strategy may be less irrational than the raw numbers suggest. And understanding the hidden logic behind concert pricing — or how Home Depot responds to a hurricane, or even how your neighborhood restaurant handles the Valentine’s Day crunch — can provide a guide to solving some of society’s biggest problems while satisfying people’s deep need for a sense of fairness.
Understanding this logic can also win you a Nobel in economics.