FanPost

Will the Predators Lose if the Legislature Punishes Scalpers?

The Fairness in Ticketing Act of 2012, introduced in the Tennessee House and Senate by Rep. Ryan Haynes (R-14th) and Sen. Mike Faulk (R-4th), is currently weaving its way through the legislature in downtown Nashville. The bill is the second of its kind in as many years to emerge in the State House, as Rep. Mike Stewart (D-52nd) attempted (and failed) to pass a similar measure last year.

Designed to curb price gouging by ticket scalpers, the bill's proponents (including Ticketmaster, Bridgestone Arena, the Ryman Auditorium, the Nashville Predators, and country superstars Kenny Chesney and Garth Brooks -- according to The Tennessean) argue that forcing scalpers and online resellers like StubHub to "register with the state, post their refund policies and disclose the a ticket's face value to would-be buyers" would "protect consumers from unscrupulous scalpers who use automated methods to scoop up tickets in bulk, then offer entrance to 'sold-out' events at inflated prices."

Music City, USA is no stranger to protecting the performance rights of entertainers, so it's not surprising to see this issue come up in sequential legislative sessions. Follow after the jump to find out if the Preds would actually benefit from the new law....

Does the bill make sense?

The Cato Institute (disclosure: I worked for Cato from June 2010 to June 2011) released a study (PDF) in the Fall 2010 edition of its Regulation Magazine, in which Kenyon College economist David Harrington used an evidence-based approach to measure the effects of deregulating ticket sales in four states: Minnesota, Missouri, New York, and Pennsylvania. So, in states that had capped ticket prices to prevent the same sorts of "unscrupulous scalpers" in Tennessee from gouging event-goers, Harrington examined what happened when those ceilings were lifted.

Harrington's findings would probably shock Garth Brooks (emphasis mine):

Many opponents of repealing price ceilings on secondary ticket markets predicted that prices would "skyrocket" if the ceilings were repealed. This article tests their prediction using three seasons of data on the sale of tickets to National Hockey League games that were traded on the Stubhub website. The evidence is clear: resale prices to NHL hockey games did not skyrocket in states that repealed price ceilings compared to states that did not change their pricing laws. Indeed, the evidence implies that repealing price ceilings on secondary ticket sales had no persistent effect on the resale price of lower bowl seats to NHL games and no more than a small effect on the resale price of upper bowl seats.

What's the point, Harrington concludes, in passing a bill like this if there's no significant price increase in resold tickets, whether a state has a law on the books or not? He adds that, in addition to legislation being superfluous, unintended consequences may manifest in policy implementation (emphasis mine):

Even if price ceilings have little effect on prices, they still send a message about what society thinks is an appropriate resale price. What is the harm in that? The potential harm is that unenforced price ceilings create unnecessary costs and may have unintended effects. Agencies are assigned to enforce and monitor unenforceable price ceilings, using scarce resources that could be better spent elsewhere. More importantly, unenforceable price ceilings may have unintended effects, such as creating empty seats in the lower bowl of hockey arenas.

This is a hockey-themed blog, so I won't delve into whether or not a bill like this makes sense for Tennessee law enforcement agencies as a still-relatively-new governor attempts to overhaul state budgets.

But does it make sense for the Preds?

Dirk also weighed in on Harrington's article back in October 2010, noting that already voluntarily-adopted procedures for reselling tickets benefit a number of people, including the ticket holder/reseller, the fan who purchases the ticket, and the team (emphasis mine):

Besides the simple "hmm... I might be able to get more for these" reasoning which brought more ticket-[re-]sellers into the secondary market, the teams themselves became actively involved, legitimizing the practice of ticket resale, which had typically been viewed as an under-the-table endeavor. While Harrington's results came from utilizing StubHub data, I imagine the effect would be even more pronounced if he were able to examine the Season Ticket Holder Exchange, a venture between NHL clubs and Ticketmaster which allows season ticket holders to easily sell their tickets for games they can't attend.

That exchange is very easy to use (having done it myself a few times). It uses the same interface that a season ticket holder works with in managing their account, making it not just insanely easy for someone to resell their tickets, but they get the added validation that their team approves of the practice. As Harrington notes in the article, in some markets season ticket holders could lose their privileges if the team found that they were reselling tickets.

...

The observed effects of flat prices with increased [ticket reselling] activity, as found in this study, represent a victory for a number of different parties: the season ticket-holder is better able to recapture some of their expense for a game they'd not attend anyway, a fan is able to purchase a ticket that would not otherwise be available, and the team itself gets a live body in that seat, along with ancillary revenue opportunities such as parking & concessions.

In short, by making it easier for people to resell tickets, absent price gouging (which Harrington believes is a fictitious phenomenon), the Preds stand to gain from a deregulated ticket sales market. The Preds also changed their $10 game day ticket policy earlier this year, voluntarily switching to an on-site raffle for discounted tickets, making it more difficult for scalpers to swoop in and buy in bulk, only to re-sell them at higher prices when ticketless fans descend on lower Broadway looking for a deal.

I spoke with Preds executive vice president and chief sales and marketing officer Chris Parker at the beginning of the season, a conversation in which he highlighted several of the team's financial goals (emphasis added):

"...We are equally as focused on driving [attendance] as we are the bottom line. If you drive enough bodies, you drive demand and revenue, which increases investment in the team, in the product on the ice, and greater financial stability. We're in a great position — from the talent on the ice and our building, to our booking of off-night entertainment. We've got permanent relationships like the CMT Awards and the SEC [Women's Basketball Tournament]. We're in a very advantageous position in terms of our business," he said.

On its face, this effort to stymie the resale of tickets to Nashville Predators home games, as well as to other entertainment events at Bridgestone Arena, thereby risking empty seats at events, seems to be counterintuitive to the team's stated goals. Additionally, it's worth pondering to what extent a measure like this would affect season ticket holders. The Tennessean says that the new legislation would not effect persons "who resell less than 60 tickets a year, or who use sites such as Craigslist to offer tickets they originally bought for personal use."

But as anyone who pays close attention to lawmaking can tell you, the finished version of a bill can be wildly different from the version a legislator introduces. The voluntary measures the team has already adopted to stop price gouging on the resale market appear to be working, and it's no surprise that they sold out a record 25 home games this year. Nashville real estate mogul Ted Welch agrees.

The Nashville Predators have declined to comment on the Haynes-Faulk bill as of this writing.

Will the bill pass?

"I understand that people who purchase tickets in bulk and artificially inflate the price make it very difficult for average fans to purchase tickets, and as I understand, this is what the bill was attempting to address," said Tennessee House Speaker Beth Harwell (R-56th) in an email to OtF. "We do, however, want to ensure we are not too heavy-handed in our approach. The Senate has decided to study the issue further, and I think that is a good course of action. Interested members will continue to work on this issue." Ticket scalping has been legal in Tennessee since 1989.

A spokesperson for Lieutenant Governor (and Speaker of the Senate) Ron Ramsey (R-2nd) did not return a request for comment on the measure.

Admittedly, the Haynes-Faulk bill seems to be less heavy-handed than the hard price ceilings placed on resold tickets in Harrington's analysis. Requiring resellers to register (with the Predators? with the state?), disclose the face value of tickets, and publish refund policies would probably annoy more people and discourage any kind of reselling whatsoever than guarantee a face value price for consumers on the open scalper market. However, a provision that would enable Ticketmaster to revoke a ticket holder's license to attend an event without refund for reselling or giving tickets away as gifts should give pause to existing Preds fans and to a team who wants to woo first-timers. Fans and ticket holders will also want to watch for paperless ticketing language in the bills; this practice would require the original purchaser to show up to an event with the credit card used to purchase the ticket in order to gain admission.

The current legislative session ends in mid-May, so a sustained playoff run by the Nashville Predators, complete with sellout crowds, additional playoff revenues, and record concession sales could give the team's management an opportunity to reevaluate its position on the proposal if they so choose. For now, the House and Senate have tabled the bills to more thoroughly explore the rift the measures have created. If the bill does pass this session, it's not likely that Governor Haslam would veto it.

We will update this story if and when the Preds have a comment for us.

George Scoville is an independent political consultant in the Washington, DC area.

This FanPost was written by an OTF reader, and does not represent the views of the editorial staff. Got something you'd like to share? <a href="http://www.sbnation.com/admin/entries/new?community_id=208&entry_type=FanPost" target="new">Post your own</a>!

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