Free the ticket scalpers, for the good of the game

Ticket scalpers are often viewed as a scurrilous lot, cutting in line ahead of true-blue fans to scoop up sports tickets only to peddle them to the highest bidder. They are the enemy of Joe Sports Fan, so there ought to be a law to crack down on that practice, right? Wrong.

In 2007, four states (Minnesota, Missouri, New York & Pennsylvania) removed their pricing restrictions on the resale of tickets to sporting events, a move which was met with some (entirely reasonable) fear that prices would "skyrocket" once scalpers were allowed to charge whatever they liked for their wares.

Surprisingly, however, that has not turned out to be the case. Follow after the jump to review a new study on the subject, along with some very good reasons why this is a victory for sports fans everywhere.

Of course, no story about ticket sales would be complete without mentioning that OtF readers can use this special offer to save money on Nashville Predators tickets.

In an article (PDF) for the Cato Institute's Regulation magazine, David A. Harrington of Kenyon College finds that when a collection of states recently removed pricing restrictions on the resale of tickets to sporting events, there was no long-term rise in prices, but there was a tremendous increase in the quantity of tickets resold on the "secondary market". This conclusion came from analyzing the data for NHL tickets resold via StubHub, one of the leading online sports ticketing businesses, over the course of multiple seasons before and after the states mentioned above changed their laws.

That might sound counterintuitive, but when you walk through the mechanics of it, you'll see how taking the shackles off of ticket scalpers led to a big win for all parties involved.

How prices came down, despite caps being lifted

For any relatively free market, price gets set by an interaction of supply and demand. In this situation, what Harrington found was that once the restrictions on ticket resale were lifted, more sellers came into the market to make their spare tickets available. This led to a tremendous rise in the supply of tickets, which greatly outweighed any increase on the demand side of the equation, and ultimately reversed a short-term price rise.

Besides the simple "hmm... I might be able to get more for these" reasoning which brought more ticket-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.

Using just that StubHub data, Harrington attributed a 36-44% rise in ticket reselling activity for lower-bowl seats to the repeal of those pricing regulations. This, after controlling for multiple factors such as each team's on-ice success, league-wide trends in the resale market, and the face value of the tickets involved.

Pricing changes noted

One of the interesting effects of a more liquid ticket resale market is that pricing becomes more sophisticated. While a team's pricing for a given section (say, lower bowl) may be fixed at a single figure, the resale market, which typically relies on a bidding system, yields prices which more accurately reflect the value of the seats. For example, the lower rows in a section will usually fetch a higher price than those further up.

NHL teams have tried a number of different options in recent years to maximize pricing, such as using flexible rates depending on the day of a game (mid-week vs. weekend) or the opponent. One of the more unusual initiatives on that front is the Florida Panthers' move this season to cover up 2,000 seats in their arena, in order to reduce supply and try to regain some pricing pressure for the seats which remain.

For sports teams, pricing is a critical issue. Unlike other businesses, they can't easily add extra supply (seating) if business picks up. So whether it's getting the maximum revenue out of high-profile matchups, or adjusting the price structure to better match customer demands (Harrington notes the new practice of making "on the glass" seats significantly more expensive), teams are increasingly looking for ways to bolster their bottom line.

Everybody wins

The observed effects of flat prices with increased 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. If the team can get a cut of the action acting as middleman for the transaction, all the better.

According to Harrington, eight states still have price ceilings for ticket resale, including ones with NHL teams such as Massachusetts and Michigan. Should they loosen things up and allow the market to work more naturally? Business on all sides appears likely to pick up if they do, and in these times, that is undoubtedly a very good thing.

I'd share more examples of how this applies to sports beyond the NHL, but since I can't make Saturday's Preds game when the Washington Capitals come to town, I'm going to go put my seats up for sale...