Lawrence White, an economist at NYU wrote a commentary on Huffington Post in support of ticket transferability and the State of New York’s recent renewal of a law, “that allows venues to sell non-transferable paperless tickets only if buyers have the option of a transferable alternative, including the right to resell their ticket above or below face value as they see fit…”

The gist of White’s position …if you buy the ticket, you should own it, and be able to do with it as you wish — use it, resell it, or give it away. That is where a secondary market comes in… [t]hese developments give flexibility to a first-instance ticket buyer, whether because the buyer cannot attend an event because of changed plans, or because the buyer wants to sell some of a multi-event series of tickets such as a season ticket. They also benefit the late-instance buyer whose plans change so that attending the event is now a possibility.

I agree with notion that a ticket should be transferable. There are too many inconveniences and short sighted outcomes when tickets are restricted from resale. However, the law should not dictate transferability, especially when the secondary ticket market is largely driven by profit motivated resellers. A comment posted by Ejay McCarthy in response to Professor White’s article claimed, “I tried to buy Justin Bieber tickets for my nieces, but it was sold out in a matter of minutes. Go to ebay right now and you can find them from 200 per ticket all the way up to 3500 per ticket.” That experience has been shared by more than enough average consumers to fill Madison Square Garden to capacity. The secondary market still has too many options for crowding out the public from primary ticket sales.

Public policy that dictates ticket transferability is unnecessary. Why not have laws that regulate the number of tickets resellers can acquire from the primary market? They do not exist because laws like that would interfere with the free market.

Earlier this afternoon, a panel discussion at Ticket Summit in Las Vegas entitled, ‘The Merger” was held to discuss the Live Nation / Ticketmaster merger that was approved by the Justice Department earlier this year. The panelists included Jeff Kline of Veritix, Doug Lyons of Tickets.com, and Don Vaccaro of ticketnetwork. For ticket brokers, the timing of the panel discussion could not have been better as almost simultaneously, Live Nations stock price is being hammered by news of a revenue dip and slow summer concert sales. This made harping on Live Nations business model very easy.

While Live Nations stock price tumbled, the panel got to the root of a key issue from the ticket resellers perspective and that is the issue of control. If a fan buys a paperless ticket, why can’t they sell it or gift it later? Why can’t someone in California buy a pair of tickets for a friend in Florida? Because Live Nation / Ticketmaster wants to keep those tickets out of the hands of resellers. Huh? wait. So inconvenience millions upon millions of fans because you want to control who can sell a ticket? Essentially, yes, though Ticketmaster usually veils the explanation. This discussion leads to the issue of ‘fans rights’ which is relatively new talking point in the ticket resale community.

For ticket resellers, fans rights are a convenient platform from which to argue that less control of tickets is better for the fan. This is of course because less control also means there are more opportunities for the secondary market. And that is really the point that this panel and industry leaders, including Chris Tsakalakis of StubHub wants to get across to consumers and industry players. Let the market run free and everyone can win.

A good question raised by the panel discussion is why can’t ticket resellers be viewed as just another distribution channel? What is the problem with presenting options to a diverse customer base? In recent years, major league sports have begun to partner with resellers (Ace Tickets and the Red Sox in Boston and StubHub partnering with the MLB, for example), so why can’t concert promoters and Ticketmaster do the same?

More to come from Ticket Summit 2010.

New York City is an exceptionally vibrant market for secondary market ticket sales. In the U.S. the Big Apple is nearly head to head with Las Vegas in scalping activity and high resale prices.  It is no secret that New York has sought to curb ticket resale through various forms of legislation over the years. In June 2007 the states position changed when then Governor Eliot Spitzer opened ticket resale to the free market. The bill is presently extended through June 2010.

Despite the expected benefits of a free market in New York, legitimate issues persist. A report recently presented to the Governor & Legislature of New York State sought to evaluate these issues in considerable depth. The report offers some background on ticket resale issues in New York and answers some specific questions placed before the Department of State. Though it raises valid and highly relevant points, its conclusions are seriously flawed. The most concerning is the absence of valid data used to reach conclusions about primary and secondary market ticket sales activity.

The report, which was commissioned by the New York State Department of State, initially claims that ”[T]he Department conducted a comprehensive analysis of ticket prices and their availability for popular events on both the primary and secondary markets”. Based on that statement, I expected the report to contain an empirical study of primary and secondary market ticket sales. However, three paragraphs later, the report states that “These recommendations are the product of an analysis that was hampered by the Department’s inability to compel any segment of the industry to produce valuable ticket sales and availability information on either the primary or secondary markets.” Notwithstanding that these two statements conflict with one another, how does one make any empirical claims about primary or secondary market ticket sales activity without data?

In defense of the State Department, I know first hand that some ticket sellers are unwilling to share market data for any reason. However, the claim that no one would cooperate did not make sense. In my own experience, StubHub, one of the leading ticket resale market places, has always been willing to provide data to valid research efforts. In checking the Departments claim, I asked StubHub if the New York Department of State had approached them for data. A representative for StubHub confirmed that the Department of State met with them in December of 2009, but according to Joellen Ferrer, a spokesperson for StubHub, “We were not approached by the [Department] for data”.

So, what data did the Department use to support the key findings of the report? Turns out the data were gathered by browsing select ticket prices posted on primary and secondary market ticket seller websites. This may sound like an acceptable method for gathering ticket price and sale data, but it is actually open to a great degree of error. The reason is that ‘offer price’ and ‘sold price’ are not always the same. Sometimes ticket resellers will offer a ticket for $500 that is simultanously being offered somewhere else for less. In other cases, someone may call the reseller and pay $400 by negotiating. Clearly, there is no way to know what tickets sell for or how many are for sale without having the transactional data. Therefore, claims such as  ”[T]he Department failed to establish any causal connection between the existence of price caps and the availability and cost of tickets on the primary and secondary market” cannot be supported by research that is not based on actual transactional activity.

The lackluster manner in which this report was prepared is unfortunate for two reasons. First, New York is an exceptional case for ticket sales and there is a legitimate need to empirically evaluate and address unique market conditions. If those issues are going to be properly addressed, the solutions need to be based on facts and not casual observations. Second, the quality of this report pales in comparison to one that was produced ten years ago by the Department of Law titled, Why Can’t I Get Tickets?, which is one of the best in-depth analysis of ticket scalping produced by a state office.  The Department of State should look to that report as an example on how to approach this difficult issue and make a more substantial effort in doing their homework.

In a future writing, I will highlight some of the relevant issues raised by this report and propose how the state should approach the issues.