Time to Nationalize Ticketmaster
I balked at purchasing some tickets this weekend because of the rapacious service charges of Ticketmaster. The cost of the tickets was already pretty high, at $38.50, but that just seems to be the going rate these days. Generally, I do not begrudge the escalating cost of live performances because artists make most of their money this way, and the advent of widespread file sharing has undermined record sales (even on actual record sales, artists only get a small portion). See this working paper by Alan Kreuger, Rockonomics, for some interesting research on this topic.
What I do object to is, first a $1.50 venue fee added onto the $38.50, a figure that really should be part of the ticket price to begin with. Next comes a Ticketmaster service charge of $7 – seven dollars!! – which means Ticketmaster is making almost five times as much as the host venue. To add insult to injury, I was looking for five tickets, so that is $35 to Ticketmaster. I was purchasing on-line, so Ticketmaster’s marginal cost of selling me the tickets was close to zero (the cost of electricity to move a few electrons around plus some small amortized amount related to the purchase of hardware and development of ticket-selling software). And on-line this marginal cost is the same no matter how many tickets I bought.
In the face of such monopoly pricing, my rational utility-maximizer goes out the window to be replaced with an irrational ball of rage willing to go out of my way to deny Ticketmaster its greedy cut. But I am not sure if I can get tickets from the venue itself, so I may well not go at all. Ticketmaster is a horrible monopoly; others, including some rich bands like Pearl Jam, have tried to create an alternative ticket vendor, but failed. Because Ticketmaster is so entrenched (a lock-in effect), we need to find remedies to ensure fairer (and arguably, more efficient) outcomes.
How to remedy this situation? There are a few options:
1) Nationalize Ticketmaster. Nobody calls for nationalization anymore these days, so I figure this one is that would appeal to everyday people who like to go out to shows. The new Crown corporation would be a ticket-dispensing utility that would charge a service fee equal to marginal cost.
2) Use the Competition Act to break up Ticketmaster into three or four smaller companies, and forbid them to re-combine.
3) Regulate the market for ticket sales by capping service charges at, say, $1-2 per ticket.
I’m against nationalization, but I would be more in favour of promoting competition. Hoever, I think the problem with this situation is that it is hard to develop a market where you have one seller for a concert. That is one company gets the rights to selling tickets for lets say Pearl Jam. You would need another company that would also have the rights to Pearl Jam to bring down the service fees through competition. But this poses alot of problems in my mind, so I think the only other route would be to regulate their service fees.
I went to the Rolling Stones concert at the last minute with some friends, probably less the half an hour before the show started, paid for tickets at the event, not from a scalper, and got lower bowl seats right beside the stage for $115.
Hey I worked on a unionization campaign for ticket amster about ten years ago. What an uphill battle. Management had almost omnipresent information. Needless to say we lost. How about better legislation for those who want a union? Sure would beat top down nationalization; no?
My point was that I had no contact with a worker at all and was expected to ante up big for service fees. I think the software-driven model is what they are seeking as profit-maximizing company. No union problems if there is no one there to unionize.
Unionization may well be a positive for workers at Ticketmaster, but the company in its existing monopoly would simply pass those extra costs along to consumers to maintain its profit margin.
I confess to being more tongue-in-cheek about actual nationalization, although given that ticket distribution is essentially a utility, nationalization is a credible candidate. Because of the size and damage resulting from this particular monopoly, the simplest solution would probably be regulation of their fees.
This is linked to a side project I am doing on the relationship between competition policy and regulation. To wit: when market forces lead to sub-optimal outcomes, like monopoly, policy interventions can improve those outcomes. The competition solution (breaking up the company) is advocated by folks such as the OECD, but may not lead to better outcomes because we would need to create a lot of smaller entities to generate true competition; an oligopoly of two or three companies will not necessarily lead to much lower prices. Regulation is a much easier way of getting to a solution that “works”.
Don’t worry there are lots of workers at ticket master and every key stroke is monitored. How about regulation and unionization? As an aside you seem to be quite enthralled with the perfect versus imperfect competition distinction. If Debreau is anything to go by perfect competition applies to a null domain. As such there is a prima fascie case for regulation in any market no?
There is always a case for regulation in the sense that regulations are the ground rules of commerce. Whether there is a case for price regulation (or fee regulation in this case) is what is at issue.
My point was that imperfect competition would be the outcome of a competition-based remedy due to the nature of this market. Perfect competition, as we see in textbooks, is a rarity — this is the essence of the problem as groups like the OECD have idealized markets in their heads when they recommend more competition as a remedy while being hostile to regulatory solutions.
BTW, I’m all for much higher rates of unionization in the service sector, as this would improve wages and working conditions.
I agree that competition would be alot better in this case, but the problem is that Ticketmaster gets exclusive rights for certain bands. You really couldn’t compete against that, unless the band was looking for a distributor with the lowest service charges. I have also read the legislation regarding unionization, and I think it is fair. I don’t see how organizing efforts durning work hours etc… is fair for the employeer. I know from personal anectodal expirence the opinions of some workers on unionization. A friend of mine had a union drive at his work, and he and the majority of the workers were against it. They had good reasons for their choice, and they are happy with their decision. I don’t think unionization is the anwser to everything, and some people prefer that. With respect to ticketmaster, their labour demand is probably inelastic, and I agree with marc that they will just pass those new costs onto the consumer.
I’ve had to clear out some of the latest comments from Molson and canadianobserver that digressed into an argument about unionization. I have encouraged canadianobserver to continue the discussion at his blog: canadianobserver.wordpress.com
Comments on the original topic still welcome!
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