Once upon a time, Taylor Swift became popular. After a respite from performing live concerts, she announced plans for a new tour and in November 2022, opened online ticket sales through Live Nation/Ticketmaster (hereafter Ticketmaster). In anticipation of high demand for superstar performers, Ticketmaster as early as 2017 introduced a variety of changes to its online purchasing software including a presale code for “verified fans” and “dynamic pricing.” The verified fan code was designed to prevent scalpers from using automated purchasing “bots” to snap up all the tickets and then sell them on secondary markets for higher prices. The latter reform also sought to minimize secondary sales by pricing tickets according to demand. The higher the demand for seats, the more a person would have to pay for a ticket. Alternatively, if ticket sales were low, prices would fall.
Taylor Swift is returning to the concert circuit and Congress is getting worked up about monopoly pricing and hidden fees. Unfortunately, our esteemed representatives are investigating Live Nation Entertainment and its subsidiary company Ticketmaster, and not themselves. For those of you who are a little confused, let’s rewind the cassette tape and start at the beginning.
Not surprisingly, the internet melted down as both fans and automated “bots” overwhelmed Ticketmaster’s website. The media reported countless stories of fans waiting online for hours only for the website to crash just when they were about to choose seats. And for all of Ticketmaster’s valiant technological efforts, tickets still appeared on secondary markets at prices significantly higher than the initial purchase price. Attempts to circumvent secondary sellers via “verified fan status” only encouraged scalpers to register as “verified fans.” Outrage ensued. Taylor got mad.
Moreover, this incident also raised the ongoing ire of people upset with service, processing, and delivery fees added to the price, sometimes increasing the total cost of a ticket by 20 percent or more. This concern was raised by Pearl Jam back in the 1990s, but other artists such as Robert Smith (The Cure) brought it to public attention in light of the Swift debacle. And with public attention comes political action.
There Oughta Be a Law … or Should There Be?
Just as every problem these days seems to demand government regulation, congressional Representatives sprung into action, introducing two bills designed to reduce the teenage angst of securing seats at concerts. The first piece of legislation is the Unlock Ticketing Markets Act (UTMA). This bill prevents ticket brokers from establishing a contractual relationship with venues for longer than four years. This will supposedly encourage other companies to enter the ticket-selling market knowing that Ticketmaster’s relationship with, say, the White River Amphitheater will expire in 48 months. If Ticketmaster is afraid of being undercut by new competitors, it will also have an incentive to negotiate better deals that benefit concertgoers.
The second bill is the more cleverly acronym-named Transparency in Charges for Key Events Ticketing Act (TICKET). Here, the ostensible goal is to require the ticket seller to disclose the total ticket price, which includes various fees, before sale. In essence, the legislation seeks to ban “hidden fees.” The act also requires that secondary ticket sellers actually have physical possession of a ticket before they sell it, reducing the likelihood of speculative sales which leave customers thinking they actually bought something when such a sale is contingent upon the seller getting the promised ticket.
There are several basic economic problems with both pieces of legislation.
First, the anti-trust UTMA legislation rests on the idea that if one firm has too much market power it can thus set prices at “above market rates.” But the mere existence of secondary markets reselling Swift tickets for multiple times their face value indicates that Ticketmaster was not — I repeat not — selling tickets at above market rates! Indeed, they were underpricing the tickets. What’s more, the secondary market is — I repeat is — an “unlocked” ticket market where multiple sellers (people who want to resell) are competing with one another. Often the prices are bid up, but sometimes they fall. That’s what markets do. No need for government to “unlock” any market here.
Also realize that the assertion that Ticketmaster is selling at “above market prices” assumes that someone knows what the exact market price is. Hayek says balderdash to that! One can only discover what a true market price is by taking the good or service to the market and letting individuals bid for what they think it is worth. This is exactly what Ticketmaster’s “dynamic pricing” model is based on, something which even the progressively inclined Bruce Springsteen approves of. Granted, Ticketmaster was trying to profit by capturing the consumer surplus that had previously gone to scalpers, but in the process of doing so it introduced a reform that was more market-like, not less. In the dynamic pricing model, it is consumers who dictate prices, not the seller.
As for the transparency of ticket prices (the TICKET Act), it seems odd that concertgoers do not know about the added fees. While the face value of the ticket is the price that is directed towards the concert venue and artists, Ticketmaster needs to turn a profit to coordinate these sales. That is where these fees originate. Perhaps the first-time purchaser will be surprised when they get to the checkout page, but these fees are relatively well known, just as it is well-known that popcorn at the movie theater will be expensive. Ergo, caveat emptor!
But even with that caveat, the “hidden fees” are not really hidden. Before any purchaser clicks “buy,” Ticketmaster does provide you with a total cost that includes an indication of what the various fees are. In other words, the “hidden fees” are hidden in plain sight. If one doesn’t like the final price, one should not click “purchase.” It is that simple. If Ticketmaster, or any other retailer, starts to charge your credit card after the final contractual sale, that is theft and there are anti-fraud laws to deal with this. There is no need for additional legislation to rectify this.
A Twist on the Swift Controversy
If musicians and concertgoers are upset by the so-called “deceptive” practices of a “monopoly” like Ticketmaster and want the government to do something, they actually may want to redirect their attention towards another entity with monopoly power that also attempts to hide fees. That entity is … the government. Yes, the entity that Taylor Swift and her legion of fans are turning to save themselves from a predatory monopoly that engages in shifty pricing is itself a predatory monopoly that engages in shifty pricing.
Well, the monopoly part is fairly easy to understand. Almost by definition, government is a sole provider of various public goods that cannot be provided by markets. A more realistic definition is that government is a sole provider of various public and non-public goods that its political leaders determine should not be provided by markets. Politicians gain such power by asserting their sovereign claim to be the final authority of law and order. That furthers their ability to define what is in and what is out of their authoritative purview.
And when it comes to monopoly pricing, let me just say this – taxes. Unlike the typical Taylor Swift fan who can choose not to attend a concert if it is priced beyond his liking, the government compels individuals to purchase a variety of public goods and services that those individuals may not want. And while in democracies one might claim that through the ballot box consumers of these goods may have some say in what they pay for and how much, in reality we are often forced to pay for things at rates we do not voluntarily accept. Unless there is unanimity in a vote over how to use resources, at least some minority (and sometimes a majority) may be required to purchase goods and services they don’t want.
Granted, to everyone except the most ardent of anarchists, there may be a case to be made for some level of compulsory taxation to provide the most basic of public goods, namely social order. Thomas Hobbes, Adam Smith, and even James Buchanan have all made that case. But the scope and level of government activities have long surpassed these most basic services.
As for hidden fees, the wide variety of taxes that are collected by government make it very difficult to know what we are purchasing at any given time. Indeed, these taxes are often given other names such as tariffs, licensing fees, levies, and the like. While we could quibble about definitional minutiae, at the end of the day they are all government-mandated financial contributions from individuals. Of course, you may have a choice to avoid some of these taxes, but that choice may come at the cost of not being able to pursue other opportunities. Consider licensing fees that make it cost prohibitive to pursue a career as a hairdresser. If that sounds like services charges on tickets making it difficult to attend a concert, that is because it is the same principle at work.
Also, take a close look at your phone bill to see a myriad of additional charges that are added on to the quoted price of your cell service. Yes, those taxes are enumerated on the bill, just as they are on your final Ticketmaster receipt. But, to my knowledge there has never been a legal effort to require these taxes be made as visible as the TICKET Act is asking of Live Nation.
Finally, taxes are often hidden in the way in which they are implemented. While the sales tax on any given item may be written plainly at the bottom of a sales receipt, and with a little experience with our local sales tax we can calculate that into our final price, what we don’t see are all the taxes and other regulatory costs that are imposed on businesses and then passed on to customers. The prices paid for grocery items and other goods do not explicitly reveal the tariffs paid to import various commodities around the world. And while this may sound innocuous, sometimes politicians explicitly try to hide the costs of their policies on consumers. Legislators in Washington State are contemplating a law that would prevent fuel suppliers from informing consumers the cost consumers are paying for a new carbon tax that took effect in January 2023. Not only is this a shifty way of hiding fees, but it may be a violation of free speech!
Yes, buying concert tickets can be frustrating. Competing with other loyal fans for great seats at a popular concert might make it seem that those in charge of allocating those seats are against us. But when we cast our gaze more broadly, we will see how market processes work extraordinarily well to allocate resources and that the politicians we turn to for solutions may be guilty themselves of the behavior they accuse of others of. Hopefully we learn our lesson and won’t get fooled again.
Made available by the American Institute for Economic Research.