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Bill Brown

A complicated man.

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John Gruber recently wrote:

Peter Kafka, at Silicon Alley Insider, claims the "obvious solution" to Hannah Montana ticket scalping—wherein $67 tickets are being re-sold for upwards of $250—is to raise the initial selling prices of the tickets, so that the money die-hard fans are willing to pay goes to the artist and concert promoter, rather than to the scalper, and then to reduce the prices after the initial high-priced demand passes.

Good advice, I say. And, of course, it's exactly what Apple did with the iPhone. Except Silicon Alley Insider didn't see it that way with the iPhone, writing "To us, this move suggests the phone is not selling as well as Apple had hoped," and "[The real issue] is Apple's obvious misjudgment of the market for a flagship product."

The problem is that concert promoters and the venues they book at aren't terribly interested in maximizing their revenue from ticket sales. Their primary concern is filling up the venues. They charge a premium for location and a premium for certain acts, but they don't exactly go after the scalper market because that market actually makes the process more efficient.

If the venue were to charge scalper-level pricing, scalpers wouldn't buy the tickets in order to re-sell them. The people who buy the scalper's inflated ticket prices may or may not pay the same amount to the venue and the concert promoters have no idea how much people would be willing to pay or even what the size of the market might be for these tickets. So they price the original tickets at a level that works for them.

Scalpers then speculatively buy those tickets in the hopes that they can make some profit through arbitrage. If they can't move the tickets, then they're out the money. So they only buy what they think they can sell. The concert venue gets to sell out (and make money from the full audience through concession sales, programs, t-shirts, and such) and the scalper gets the chance to make substantial profits with little effort.

Scalping is a legitimate and useful service. People just don't like paying more than the face value for anything.