Society and Culture

Simon Jenkins is wrong. Non-transferable concert tickets are perfectly legitimate

The government is currently considering responses to a submission on whether it should take action on ticket touts. We do not live in an under-regulated country and it does not seem to me that the government should be determining ticket resale rules for Adele’s next concert or criminalising activity which clearly should not be criminal.

What exactly is the issue here? To take an example, a pop star (or agent, or concert producer) may take a decision that they wish tickets to go not just to those who can pay the most but to the widest possible fan base or to fans who have particular characteristics (for example, those who have joined a fan club). In other words, the star, through their promoter, is willing to sacrifice immediate income in order to perform to a particular audience. This may be done to maximise income in the longer term (by building a more loyal fan base) or it could be an act of altruism or reciprocity: we don’t have to worry about the motivation.

An original purchaser of the tickets might then sell them to somebody who is willing to pay a higher price and, in doing so, make a huge profit. This might be on ebay, hand-to-hand or through some other method. In some situations, it might be possible for businesses or motivated individuals to acquire a lot of cheap tickets and sell them on in this way. There are reports of tickets with a face value of tens of pounds being sold for thousands for Adele concerts.

Simon Jenkins takes an unusually (for him) utilitarian view on this matter, arguing that allowing a secondary market ensures that tickets will go to those who value them most and that the pop stars who are complaining should give free concerts to the most avid fans or require fans to queue on the day for tickets that are set aside for them. If the pop stars think that low ticket prices help the poor, he argues, they should sell at a higher price and give the money to charity.

But, this misses the point. Pop stars and promoters are entitled to price their tickets as they wish and distribute them how they wish: it is a private event. If Simon Jenkins invited 100 people to a party at his home, he would not expect one of the invitees to sell his free invitation to a rich person – the invitation would be non-transferable. If pop stars wish to make tickets non-transferable, that is their right. That is the “free market position” – you can set up your concert as you wish, invite whom you wish, sell tickets to whom you wish and sell them for what price you wish. There may be all sorts of reasons why an institution such as a football club or a pop star want to have a diverse audience rather than the highest-paying audience. Indeed, we don’t need even to enquire about the reasons. A free economy does not just lead to a “value maximising” position as defined by the greatest amount of revenue raised, it provides an institutional framework within which people can pursue their aims and objectives whatever they may be. Being loyal to a fan base might be one such objective.

However, if you are a rich pop star or well-endowed football club putting on an event, what you cannot do is expect the government to do your work for you by making the act of selling on a ticket a criminal offence or investing resources in enforcement or in developing some kind of regulatory code. There are perfectly reasonable forms of enforcement that the promoters can use themselves. For example, ID checks or credit card checks can be made on entry. It was reported inThe Times recently that a new iPhone app might be able to do the same job without the costs involved with ID checks.

Quite simply, it appears that promoters do not want to bear the costs involved. But, it is their event; it is their problem; the technology exists to solve it; they should deal with it. Apparently, Leicester City fans are being charged up to £15,000 a pair for tickets for their final home game. It is a relatively simple job to ensure that, if it is what Leicester City wants, those who are buying tickets on the secondary market are turned away (and those selling the tickets lose their privileged membership status). But it is the job of one of the richest 50 brands in world football to do this and not the government’s job.

Sometimes, touts operate in a slightly different situation and banning them would seriously disrupt the market. In order to reduce marketing costs, a promoter may sell tickets widely and at a price that will ensure the success of the event through various agents. If the event turns out to be a great success, tickets might resell for several times their face value, but, if the event bombs, the distributors might have large numbers of tickets on their hands. It is completely unreasonable for producers to complain about secondary markets in these situations. They have sub-contracted the job of marketing the tickets and the touts are part of the distribution network. By aiding the distribution of the tickets they are likely to increase the average price that the promoter can charge and everybody benefits. The distribution network helps everybody.

Rich pop starts and football clubs have no right to expect the state to police the marketing of their private events and, if they did, as with all regulation, there are likely to be serious unforeseen consequences.

Prof Philip Booth is the IEA’s Academic and Research Director and Professor of Finance, Public Policy & Ethics, St. Mary’s University, Twickenham. This article was first published by CapX.

Academic and Research Director, IEA

Philip Booth is Senior Academic Fellow at the Institute of Economic Affairs. He is also Director of the Vinson Centre and Professor of Economics at the University of Buckingham and Professor of Finance, Public Policy and Ethics at St. Mary’s University, Twickenham. He also holds the position of (interim) Director of Catholic Mission at St. Mary’s having previously been Director of Research and Public Engagement and Dean of the Faculty of Education, Humanities and Social Sciences. From 2002-2016, Philip was Academic and Research Director (previously, Editorial and Programme Director) at the IEA. From 2002-2015 he was Professor of Insurance and Risk Management at Cass Business School. He is a Senior Research Fellow in the Centre for Federal Studies at the University of Kent and Adjunct Professor in the School of Law, University of Notre Dame, Australia. Previously, Philip Booth worked for the Bank of England as an adviser on financial stability issues and he was also Associate Dean of Cass Business School and held various other academic positions at City University. He has written widely, including a number of books, on investment, finance, social insurance and pensions as well as on the relationship between Catholic social teaching and economics. He is Deputy Editor of Economic Affairs. Philip is a Fellow of the Royal Statistical Society, a Fellow of the Institute of Actuaries and an honorary member of the Society of Actuaries of Poland. He has previously worked in the investment department of Axa Equity and Law and was been involved in a number of projects to help develop actuarial professions and actuarial, finance and investment professional teaching programmes in Central and Eastern Europe. Philip has a BA in Economics from the University of Durham and a PhD from City University.

9 thoughts on “Simon Jenkins is wrong. Non-transferable concert tickets are perfectly legitimate”

  1. Posted 21/04/2016 at 12:31 | Permalink

    Interesting! In addition, Philip you may be interested in this blog post of mine, as may other IEA readers…

  2. Posted 21/04/2016 at 15:34 | Permalink

    I have always felt that ‘anti-discrimination’ laws may be justified where there is a state monopoly; but that where there is freedom for competitors to enter the market, discrimination by producers (or indeed by consumers) should not be outlawed. Real human beings are not always out to ‘maximise profits’ (whatever that means in the long run) — if they were you might find fewer people becoming teachers. It is possible to support free markets without assuming that everything that matters to people can be bought and sold on a market.

  3. Posted 21/04/2016 at 16:35 | Permalink

    I think this all boils down to who owns the ticket. What Booth is implying is, that just because you’ve paid for something, that doesn’t make it your property.

    I’m not sure that is fair. I agree with Jenkins, that if an artist wants to favour special groups, they should make provisions. But to set conditions on who sits in a give seat, after you’ve already sold that right seems like an infringement of property rights.

    BTW, I think the same thing applies right across the board, from letting property to copyright.

  4. Posted 22/04/2016 at 12:15 | Permalink

    @anonymous but, surely, you can sell the ticket on whatever terms you wish. To restrict contracts to full and complete, non-contingent rights to something would prevent a lot of beneficial contracts. I might sell my neighbour a plot of land in my garden as long as they agreed not to open a fish and chip shop on it – and there are many other examples too.

  5. Posted 24/04/2016 at 14:24 | Permalink

    @ philip

    yes of course, but conditions of sale is not the point. It’s to whom does the value of the ticket/plot of land belong? It’s the resale of the ticket into a secondary market that created it’s value, not the original seller.

    Created value = property rights.

    The term you cannot, or rather should not be able to enforce is the claiming of value of something above the price after you’ve sold it. But then, as above, I don’t believe that intellectual property is legitimate either. Discovery doesn’t confer property rights, only using that discovery to create value does.

  6. Posted 24/04/2016 at 15:35 | Permalink

    Let’s say I buy a nice painting that goes up in value. To whom does that value belong?

    Ironically, there are EU Laws now in place that say that increases in the value of art belongs to the artist/ his/her family after they are dead. This is the same as putting attachments on the conditions of sale, as per anti-ticket touts.

    Where will this madness end?

    Truth is, we have got our framework of property rights, completely wrong. I blame the Neo-Classical Economists who founded the Chicago School for the horrible mess we now find ourselves in.

  7. Posted 25/04/2016 at 08:58 | Permalink

    @anonymous – I am being quite specific and promoting freedom of contract. Let’s say i paint the new mona lisa. I can sell it on a number of bases. I can sell it on the open market for the highest possible price. I could sell it for a discount to a UK buyer because I want it to stay in the UK and then not put any restrictions on resale. I could sell it to a UK buyer at a discount and put in the terms of the contract that it cannot be sold for more than (1+i)^n*original price where i is a reasonable interest rate and n is the time to resale. Of course, that creates the ticket tout problem – there will be a “queue” to buy it when the time comes. I could sell it to a UK buyer at a discount with a clause saying that some part of the capital gain must be returned to me on resale. The key thing is that all these things are private (conditional) contracts – no state interference (unlike these terrible EU laws – I agree with you on those) and, secondly, I am saying (quite strongly) that we should not expect the state to help enforce the contracts by having its own regulation (only by giving access to the state’s courts).

  8. Posted 25/04/2016 at 16:19 | Permalink

    @ Philip

    Its an interesting and deep subject, and until recently would have agreed with you 100%. All I’d say is, when it comes to who owns value, ethically, things become more opaque. I’m not confident that just because contracts are free, they maximize our stock of wealth and economic welfare. If contracts operate in a framework of sound property rights then all should be well and good. Should companies be allowed a ban on resale? You say yes, I say I’m not so sure.

  9. Posted 26/04/2016 at 10:29 | Permalink

    a good debate and a good rhetorical question with which to end it (for now)!

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