When there’s no more up….what happens to ticket pricing in a recession?
Fall is here. We are heading to harder times. The temperature is dropping and ticket prices may follow. There are lessons to be learned from Billie Eilish, The Black Keys and Jacqueline Novak.
Stay with me, this first part is hard but, on the plus side, we’ll be discussing a $12,000 blowjob later in the article. Seriously.
I woke up this morning wondering just how many people currently employed in live event ticket pricing are too young to have been working during the last recession. That recession began in late 2007 and ended in June 2009, more than 10 years ago. Assuming that a 4 year college degree is common for most people who work at Live Nation, StubHub, AEG, EventBrite, SeatGeek or other companies which price and distribute tickets, that would mean almost no one under 33 years old has ever had to make pricing decisions during a recession. Let’s stop and consider that. There is an entire $20+ billion industry of people pricing and distributing event tickets who only know what an economy looks like when it’s going up. They’ve never seen the downturn. I have. Trying to sell something in a recession is like pushing on a string. It requires strategy, patience and multiple distribution channels. And, it usually means you sharply cut prices.
Here’s why I’m thinking about recession:
1. Almost every ticket pricing model I see today assumes that people will continue to pay more than ever for access to live events. There’s a massive shift to capturing the most possible money from consumers during primary distribution of tickets. Tickets are sold with dynamic pricing software immediately raising prices if demand appears strong, through a split strategy of selling some tickets at “face” value but limited supply while opening more supply up for “Platinum” tickets which are just tickets marked up as much as 500%, and using drip pricing in which supply is artificially constrained so buyers think they’re lucky to be getting one of the last tickets, unaware that there are thousands more held back to be released for sale later. And, in a new twist, tickets sold to secondary market speculators are being canceled and returned for sale at Platinum prices while the original buyer forfeits the 30% fee paid to the primary market.
2. Tariffs, trade wars and political instability (like impeachment) are never good indicators for continued economic growth.
3. Knowledgeable insiders from eBay to executives at publicly traded companies are beginning to sell assets, whether it’s the entire StubHub secondary market or blocks of their own company’s stock.
4. We are currently in the longest period between recessions in U.S. history. The last recession ended in June, 2009, which is 10 years and 4 months ago. Previously, the longest period in United States history between recessions was 10 years from March 1991 to March 2001. Since the end of World War II, the average period between U.S. recessions is 6 years and 5 months.
If the economy continues to slow down, as many experts are currently observing, then money gets tight and people become more careful about their discretionary spending. Here’s simple overview of discretionary spending items: Tickets, fashion, fancy restaurant meals, Yeezy shoes and $24 cocktails. In other words, the stuff that’s really not necessary to survive.
So, what happens then to live event prices? Well, basic economics is that when demand falls, prices follow. There was a time when T. Boone Pickens was my neighbor. His fortune rose and fell based upon the price of oil and natural gas, another one of those supply/demand items. When times are good everyone buys big trucks and SUVs, no matter how much gas they burn. When times are bad, it’s back to the small cars with good fuel economy. Boone used to say that there was worldwide demand for 100 million barrels of oil a day. If there were only 99 million barrels for sale, prices went up quickly. If there were 101 million barrels for sale, prices crashed. It’s really similar to the musical chairs game kids used to play at birthday parties. Everyone fights for a chair when you know there’s one fewer than the players. And, that’s really the true metaphor for pricing models. It’s a one chair difference. Eight kids and seven chairs is anyone’s game. There’s no fight at all when there’s eight kids and nine chairs.
If you’re wondering what prompted me to write this article, the answer may surprise you. It’s Billie Eilish. I first saw her perform at Coachella Weekend One this year, and made certain to see her again at Weekend Two. She ate the stage with her energy, and the crowd loved her. In some ways she reminded me of the way Lorde came out of nowhere in 2014. Billie Eilish’s new tour onsale may be the first warning sign of the end of the endless pricing increase era for touring acts. Her Verified Fan sale was a mess, stranding fans in endless waiting rooms only to find when they finally were able to select seats that the system errored out sending them back to start. Intense demand for her tickets was easily predicable. Systemic technology failure was bad, both for Billie Eilish and for the primary markets which ran her on-sale. To their credit, Ticketmaster publicly apologized to Billie Eilish fans for the problems incurred during the sale.
Regardless, the usual games were played with pricing of her tickets. Waiting rooms required a Verified Fan code. Tickets were dynamically priced. Platinum tickets were available at very high prices for fans who failed to acquire tickets through the Verified Fan sale. Essentially, Billie Eilish consented to scalping her own tickets at the same time her distribution mechanism failure rate was so high for consumers uneducated in the ways to work through ticketing system errors that professional buyers from the secondary market got around 3,000 tickets per show. And, unsurprisingly, the current prices on the resale markets are often lower than the Platinum priced tickets which were made available to fans.
This is a very strong signal that people who have their own money at risk believe the value of Billie Eilish tickets is less than the price which her primary distributor is seeking for the remaining inventory which was held back. If you believe, as I do, in the wisdom of crowds, this indicator is flashing yellow.
While Billie Eilish may have been one of the last acts to get out of the gate to overwhelming demand price be damned, Teagan and Sara are an entirely different story. Their shows haven’t been instant sell-outs. In fact, demand is so slow in certain markets that the tickets on the secondary market are at risk of wasting for lack of demand.
As a result, Teagan and Sara are taking a new and curious step. They are experimenting with the idea that any seats which remain open 15 minutes after the scheduled curtain time for an event are abandoned and can be resold. Their theory is that there were some 200 seats unsold on the secondary market for their show that evening. So, they announced rush tickets would be available shortly after the show began, rather than letting those tickets go to waste. I suppose this follows the airline theory that a plane about to depart can sell the remaining seats to anyone of the standby list. Of course the difference is that once an airplane departs, there’s nothing left for a late arriving passenger to board. With a ticket, you can decide to have one last drink at dinner and still arrive in time to see the headliner, while skipping the opening act.
But, it opens an interesting point. Teagan and Sara are upset that “unethical” secondary markets, a metaphor for “scalpers,” got a lot of tickets. They’re not quite right. What happened was a number of people who buy tickets to resell them made a bad bet. They bought tickets which most likely would not have sold, which is why they were still for sale minutes before the show began. This demonstrated the twin benefits of the secondary market which are rarely acknowledged by artists and primary ticket markets. First, Teagan and Sara got paid for the tickets which likely would have never sold otherwise, thereby earning more money than the market believed their show is worth. Second, those people who did get their Teagan and Sara tickets from the secondary market likely paid a price lower than face value — thereby saving themselves some money as their ticket price was subsidized by the seller who lost money.
What happens when there is a mistake in estimating demand by either the act or the ticket brokers who speculate on the future value of tickets are the topic of the next two sections of this article: The Black Keys and Jacqueline Novak.
Last month I wrote extensively about The Black Keys’ mistake at The Wiltern theater Los Angeles in which they directed Ticketmaster to invalidate any tickets to that show which were resold on any secondary market other than Ticketmaster. This stranded hundreds of people who bought tickets the way everyone buys tickets now, wherever they could be found and potentially undercut the value of StubHub which is currently being shopped for sale by eBay. The Wiltern is a small theater, and it was the first Black Keys’ show in five years, so demand was high. But, there are alternative ways to get up close to the band. That very weekend they were playing the Life Is Beautiful festival in Las Vegas which offered a variety of weekend and single day tickets. VIP festival passes are the single easiest ways to get close to a band. They cost the same or less than a Platinum ticket and offer you close access to the stage all day or all weekend.
After my article was published, it turned out that The Black Keys’ indignant complaint the secondary market had manipulated their offer of $25 tickets to reward loyal fans neglected to mention the band itself had set aside premium seats for that show which sold at $500 apiece.
It also appears the band failed to mention to anyone who bought the $25 tickets when they went on-sale that tickets would not be transferable.
I often talk about two simple concepts when I write these stories. First, it is really important to be honest when doing business. Half-truths and falsehoods are never good for business. That’s a concept straight out of All I Really Need To Know I learned in Kindergarten. The second thing I like to discuss is the law of unintended consequences.
I’m sure The Black Keys thought they were fighting the bogeyman of ticket scalping, while they justified scalping some tickets themselves for 20 times the $25 they were publicizing. But, the thing is, no individual can control a market. That power only exists for governments, and even they can’t keep prices completely in check. Here’s the unintended consequence for The Black Keys: their arena tour is not doing well. When I wrote this article on October 5th, their next show was in two days, on October 7, 2019 at the PPG Paints Arena in Pittsburgh, PA. There are currently 710 tickets for sale on StubHub, beginning at $17.10 before fees. Looking at the blue dots on the Ticketmaster map representing unsold tickets, there is about half of the lower arena unsold. Ticketmaster’s prices start at $28 plus fees. So, here’s a good example of two things: First, when a band goes into an arena which is too large, the fan experience is terrible because you might be the only person sitting in your row, which itself is in a mostly empty section. Second, the secondary market prices are about 40% lower than what the band itself is charging. This is supply and demand at play. No one wants these tickets, so the speculative buyers who bought the tickets are dumping them at a loss, and the consumer is getting a great deal. In fairness, this is a Monday night show, it’s in Pittsburgh and the arena is 20,000 seats. Attached are photos of both the Ticketmaster map and StubHub’s sell page.
Now, finally my story about the $12,000 blowjob.
I read a lot of different sources looking for ideas about which new shows or artists might be interesting. One day, while reading through a Rolling Stone email list of articles, I saw a story about a small show which had just moved from one off-Broadway theater to another for a short 4 week run. This show, Get On Your Knees, was a one woman show by comedian Jacqueline Novak which ostensibly covered many topics while being centered around the idea of the blowjob. I thought it might catch hold like The Vagina Monologues did many years ago. Get On Your Knees was favorably reviewed in The New York Times.
So, I took a position in the show. It all made sense. The show was only running for four weeks. It was playing at the Lucille Lortel theatre which only has 299 seats. It had buzz, moving from the smaller theater where it ran previously to sold-out crowds. Mike Birbiglia, a big name in comedy was the executive producer. The subject matter of the show was the right balance of edgy and interesting to everyone.
We bought tickets for each Friday and Saturday night show — 264 tickets in all. I spent nearly $20,000. My team put the tickets up across all the secondary market platforms at very modest price increases. And, right away, the tickets started to sell. This looked like one of those times where I was in the right place at the right time. But, then that law of unintended consequences struck me. Sales stopped and I didn’t know why, until I did.
Perhaps as part of an existing plan, or just maybe because my buying 5% of all tickets offered for sale inspired it, Jacqueline Novak added 28 more shows. Each Saturday now had a matinee, and there were three more weeks of shows. The universe of available tickets doubled and my investment crumbled. Ultimately, between discounts and tickets left unsold, I wound up losing $12,000 on a show which I would never see as it was in New York and I am in California.
But, as we often discuss, my loss was someone else’s gain. Those people who got wonderful orchestra seats from my inventory at a sharp discount saved money. Jacqueline Novak and her team got $20,000 for the tickets which I bought. And, if in fact my large purchase helped inspire the show being extended, then Ms. Novak and the entire production team had the chance to earn twice the money they expected before adding all the additional shows. Let us never forget that Hamilton, the most popular musical of all time, nearly failed when it first opened in New York. It was the boost the show got from speculative ticket buyers that gave the show enough time to find its audience. Absent the secondary market, Hamilton likely would have disappeared as one more show that just couldn’t penetrate the tough New York market.
There was one more curious lesson which came from this Get On Your Knees. Typically, people buy tickets in pairs or more for theatrical events. A show is a nice way to share an experience and then have something to discuss later over drinks. A show with a slightly controversial topic is even more likely to attract couples, friends or dates. For this show I noticed a surprising number of people bought single tickets from me, going alone to Get On Your Knees. I’m not exactly certain why, although I have a theory. Perhaps Jacqueline Novak should do a sequel called “SpankBank.”
And, while I’m gratuitously advising comedians, I’d like to take a moment and speak to Louis CK who is very tentatively scheduling shows here and there. You’re better than that. Make a big move. Do it with confidence and a sense of humor. Here’s what I’d do: corral all your friends in the comedy world and remake the Steve Martin classic The Jerk. Make it Blazing Saddles funny. Donate your share of the points to a foundation dedicated to advancing equality of the sexes or protecting all individuals against sexual harassment. Be bold. Maybe your poster should say: The Jerk — come see it. Or, The Jerk — come, see it. I’m never exactly sure about those Oxford commas. Another benefit of an economic downturn is that “woke” culture fades as people seek relief from the oppression of economic distress.
Ticket pricing is difficult at best in a loose money economy. It’s much harder when consumers pull back. I’ve seen a wide range of shows this year, from ten music festivals (Coachella, BottleRock, Bourbon & Beyond, Ohana, KAABOO, Beach Life, Outside Lands etc.) to the toughest tickets on Broadway (Hamilton and To Kill A Mockingbird), to concerts by touring stalwarts such as Paul McCartney, Foo Fighters, and The Who. Even though I’ve been to every major event I wanted, these were not the shows which really stood out. There were four artists who really made me react this year: Lukas Nelson who I’ve seen about 15 times in the past couple years and continues to deliver. Then, there was Fantastic Negrito who combines ferocious musicianship with intelligent stage presence and patter. Next, Billie Eilish who created a whole new style of rhythmic music under whispered vocals and finally Lizzo who instantly owned a crowd like no one I’ve ever seen. None of these shows were expensive or particularly hard to buy, although Billie Eilish and Lizzo have now ascended to the ticket distribution level I lovingly call a clusterfk. 95% of shows don’t sell out instantly, or at all. Most of them are affordable. This is where we need to concentrate. Sell those shows and build those audiences. And, for any of you who are fans, I can testify that falling quickly and deeply in love with a new artist reinvigorates your love for live music. Familiar is fun, discovery takes your breath away.
One more thing — sometimes the big hitters spring a surprise. I’ve been transparent about how I thought Taylor Swift made a massive mistake during the last tour running a bait and switch “priority for social media” ticket sale. I’ve written about the predictable backlash when dynamic pricing reversed and her biggest fans discovered they’d way overpaid for tickets and later when it came out that up to 20,000 tickets per night were given away to avoid the embarrassment of wide open empty seating areas. But, this year seems different. Taylor is making a couple of Jingle Ball appearances and also promoting her own branded “Lover” festival on the East and West Coast. That’s scarcity working to promote demand. One more thing: I’ve seen her make a couple of appearances on television recently. She looks grown up. She looks happy. And, her new music is sophisticated. I believe the words of her Lover song. They come from her heart. Music undeniably has the power to move crowds. It’s really special when the artist feels the song instead of pandering to her audience. With Lover, finally, Taylor Swift moves the audience through authenticity. She’s always been a gifted songwriter. The ability to deliver genuine emotion is another level of achievement. I hope she continues to grow and demonstrate through her path what others behind her can accomplish.
There’s more than a canary in the coal mine warning about price resistance and purse tightening. There’s also a mouse. The Los Angeles Times just published a story about the effect of Disneyland opening its new Star Wars themed land Galaxy’s Edge and pairing it with higher prices. Attendance in August dropped 3%.
While I think that concerts, plays and sporting events are absolutely discretionary spending items, I’m not so sure that’s true of Disneyland. Disneyland is almost a mandatory pilgrimage, and in particular parents will sacrifice mightily to take the children there. When Disney park attendance weakens, that’s a real telling sign. Demand is softening, prices will follow. Beware of any business strategy depending on continuously pressing ticket prices higher. Trees never grow to the sky, and their leaves drop frequently. It might be time to prune the prices before the entire event ticket market follows the lead of Major League Baseball fans and chooses to stay home instead.
About the author:
I’m an $895/hour consultant advising leading companies in the live event space. If you are an investor, artist, promoter, team, producer, venue operator, primary or secondary market of ticketed events or have comments on this article, please don’t hesitate to contact me:
Eric Fuller: email@example.com