As CEO of Veritix™, I can appreciate the challenges for venues and teams as they try to understand how the secondary market affects the primary market and fits into their overall ticketing strategy. I’d like to offer some thoughts for you to consider as you assess the impact of the secondary market on your business.
There are five decades of financial market data showing that a secondary market ALWAYS enhances a primary market IF THE PRIMARY GOODS ARE PRICED AT MARKET. This is true for commodities and futures that have fixed “event” dates just like concerts and games as well as less-perishable inventory.
Here’s what the data shows:
- If prices are equal, buyers prefer to buy from the original seller because their confidence is increased. Even a marginal increase in purchase confidence is enough to determine the choice of seller. If prices are not equal, then price considerations will dominate.
- This means that if your primary tickets are priced at market, buyers will prefer to buy them from you. Assuming you have a secondary market that imposes fees (~25% is common), your primary sales should have a considerable price advantage when fees are factored in.
- However, if the primary tickets are priced above market, then the secondary prices (at market) will be sufficiently below primary prices to motivate secondary purchases even though buyer confidence is lower.
This is the point – real fan behavior through actual purchases (not hopeful intent) reveals the market price. That’s the definition of a “market price” – the price people are willing to pay. If your primary ticket prices are above market, you won’t successfully sell them to most fans. It’s a fallacy to think that because 1,000 tickets sell in the secondary, that the same 1,000 tickets would have sold in the primary at above market prices.
[Please don’t take my word for it – libraries of data are available dating back to inception of the modern exchange era in the middle of the last century.]
Third-party marketplaces like brokers, scalpers, and online markets reveal market prices to fans regardless of what you do. You can’t swim upstream against that, and you can’t hope for consumer ignorance, especially in the Internet era.
The good news is that secondary markets enhance primary markets. Why? They give primary prospects MORE CONFIDENCE – confidence that, if they can’t use the good or service, it can be resold to someone who can put it to use. Since consumer confidence is a key decision factor for market-priced goods, the result is substantial. Secondary markets always increase primary market sales volume and transaction rate.
What to do?
If you accept that third-party markets exist (they do), and that consumers therefore have easy access to market prices (they do, now in real-time on mobile devices), then what becomes critical is for ticket sellers to understand the MARKET PRICE in REAL TIME, and to use it to MAXIMIZE PRIMARY TICKET SALES. To do this, you need what all modern electronic markets EXCEPT ticketing have – a “Bloomberg Terminal” – the modern equivalent of a stock ticker. You need to have real-time information on how fans value a given event so that you can maximize your yield by setting (and adjusting) pricing appropriately.
This has happened in all other electronic markets EXCEPT ticketing because the industry has been dominated by one ticketing provider. However, technology marches on for both consumers and businesses. Teams like the Rockets and Cavaliers recognize this and have hired people with specific expertise in analytics and yield management, arming them with data from their branded marketplaces. Artists like Billy Joel, Elton John, Britney Spears, and Roger Waters recognize that it is far better to embrace the secondary market and its data than to pretend a secondary market doesn’t exist.
This offers many opportunities and has many implications:
- Having your own ticket marketplace gives you the “Bloomberg Terminal” necessary to maximize yield.
- Having your own branded ticket marketplace means your fans have a single connection point with the venue or team.
- Your branded ticket marketplace offers higher consumer confidence because you are the issuer, so it has an advantage over other secondary marketplaces.
As a result, you could opt to charge higher secondary fees, or to charge market fees and take a disproportionate share of the secondary market share for your inventory.
- Pre-sales take on a whole new function in this era – by seeding the market with select inventory, they provide critical data necessary to appropriately price later, larger “public” releases. This means that pre-sale inventory should be chosen with an eye toward informing market pricing of the rest of the inventory.
- Ticket marketplaces don’t need to be secondary-only. Releasing inventory at market prices is acceptable to the public as long as it isn’t a hidden practice. It is the natural evolution of the baby-step that “dynamic pricing” represents.
Based on the empirical evidence available, there is only one logical conclusion: Embracing the secondary marketplace is necessary to maximize revenue and margin.