Ticketmaster, the largest primary ticket outlet in the United States, recently came under fire for dramatically increasing service fees on tickets for in-demand concerts and events. Ticket prices for some shows skyrocketed to over 10 times their face value when fees were added. This led to outrage from fans and calls for investigations into Ticketmaster’s business practices. There are several factors that likely contributed to Ticketmaster’s decision to raise prices.
High demand for tickets
The basic laws of supply and demand are a major reason why Ticketmaster can charge higher fees. As the largest ticket seller, they have exclusive contracts with many major venues and artists. This means they control the supply of tickets for must-see concerts and shows. If there is a lot of demand from fans for a limited number of tickets, Ticketmaster can charge higher prices and get away with it. Face value ticket prices are often set by artists and promoters, but dynamic pricing allows Ticketmaster to adjust service fees based on demand. A Beyoncé concert will understandably have soaring demand, allowing Ticketmaster to boost service fees and make a higher profit per ticket.
Captive audience of superfans
Ticketmaster also understands the psychology of superfans who must have tickets to see their favorite artist live, no matter the cost. These passionate fans become a captive audience willing to pay inflated prices. Music tours by legacy rock bands like The Eagles or Bruce Springsteen draw nostalgic fans who will fork over hundreds of dollars to relive their youth. Younger superfans of pop stars like Taylor Swift or Harry Styles consider concert tickets a must-have experience and status symbol. They will pay the price gouged fees because Ticketmaster holds the keys to their desired concert kingdom. These devoted fans are less sensitive to price hikes because of their deep affinity for the artist.
Monopoly in ticket sales
As the primary ticket outlet for many major venues and artists, Ticketmaster essentially holds a monopoly in the ticket sales industry. According to a Billboard analysis, Ticketmaster sells over 70% of the primary tickets for concerts in the United States. This lack of competition gives them free rein to charge fees as high as the market will bear. Fans hoping to buy tickets on the primary market have no alternative but to go through Ticketmaster and pay their fees. While some buyers turn to secondary sites like StubHub, the majority still go through Ticketmaster as the official source. As the dominant player, they leverage their monopoly power to maximize revenue.
Justification for Dynamic Pricing Model
Ticketmaster defends its variable and surge pricing model as a valid free market approach. Some explanations the company offers to justify the higher fees include:
Reflecting true market value
Ticketmaster argues the higher prices reflect the true market value and demand for hot tickets. Just like airline seats or hotel rooms, they say ticket prices should fluctuate based on demand. The surging prices allocate the limited supply to fans who want them most. Market value pricing is used widely across industries like hospitality and travel, so Ticketmaster contends they are just meeting customer willingness to pay.
Offsetting losses on lower-demand events
Ticketmaster claims the extra revenue earned from high-demand events makes up for losses on lower-demand events. Not every concert or show is a hot ticket. By charging lower fees on some events but higher fees on in-demand shows, Ticketmaster balances revenue across its platform. This cross-subsidization helps sustain its overall business model.
Covering rising costs
In a statement, Ticketmaster also cited rising costs across the live entertainment business as a reason for needing to charge higher fees. They claim the costs of marketing, talent acquisition, technology development, security, and operation expenses have all increased significantly in recent years. The higher fees help cover those increased costs of doing business.
Backlash Against Ticketmaster’s Practices
Despite their justifications, Ticketmaster faces immense backlash for their pricing practices. Some of the chief complaints against their methods include:
Price gouging
Many consumers complain that Ticketmaster’s fees amount to pure price gouging. They argue that just because fans are willing to pay higher prices due to demand, does not make it ethical to continue raising fees. Price gouging could be seen as exploiting customers and misusing monopoly power.
Lack of transparency
Critics say Ticketmaster lacks transparency in their dynamic pricing model. Customers have no idea what they will pay in fees until late in the purchase process. Fees are revealed right before the final checkout, once the customer is invested in buying. This prevents customers from fully understanding the ticket prices when making a purchase decision.
Misleading advertised prices
Low advertised ticket prices are seen by many as misleading bait-and-switch pricing. The initial price advertised does not reflect the huge fees added at checkout. Critics argue this is deceptive marketing that tricks fans who rely on face value prices when deciding to buy tickets. It compounds the lack of transparency.
Captive audiences
As mentioned earlier, taking advantage of captive audiences eager to see their favorite performers is seen by many as an unethical business practice. Fans have no option but to use Ticketmaster, so jacking up fees on high-demand shows is viewed as predatory.
Potential Changes and Regulation
In response to the backlash, there are some changes Ticketmaster could consider to make their pricing practices more fair for consumers:
Upfront all-in pricing
Ticketmaster could start displaying complete all-in pricing upfront that incorporates fees. This would provide greater transparency to fans early in the buying process. Sites like airline booking platforms have started doing this.
Fee caps
Ticketmaster could implement caps on how much fees can be inflated for in-demand shows. This would prevent them from spiking fees at astronomical rates.
Broader distribution access
They could open up distribution more broadly so competitors can sell primary tickets rather than just Ticketmaster controlling supply. This would reduce their monopoly power.
There have also been calls to regulate Ticketmaster’s practices. Some options include:
Price gouging prevention laws
Laws could be passed to prohibit price gouging on event tickets, just as many states have laws preventing price gouging essential goods during an emergency.
Regulations on transparency
The FTC or state agencies could issue regulations requiring upfront disclosure of full ticket prices across the industry to protect consumers.
Breaking up the Ticketmaster monopoly
Regulators could force Ticketmaster to divest parts of its business to create more competition in the primary ticket market. This would reduce their singular hold on supply.
Conclusion
In summary, Ticketmaster’s variable and surge pricing on high-demand tickets has alienated many customers. While Ticketmaster argues it is a valid practice, critics contend it is predatory price gouging leveraging monopoly power and misleading customers. Potential solutions include voluntary changes by Ticketmaster to improve transparency and fairer pricing. Regulations may also be needed to increase competition in the ticket industry, prevent monopolistic power, and mandate ethics-focused policies that protect consumers. This public relations crisis and customer backlash may spur changes, but Ticketmaster still largely controls primary ticket sales for now. However, if fans unite and speak up, regulators take action, or Ticketmaster institutes reforms, the landscape of the live entertainment and ticketing industry could be transformed for the better.
Ticketmaster Fee Revenue Data
| Year | Total Fee Revenue | Percent Increase vs. Prior Year |
|---|---|---|
| 2018 | $1.63 billion | 19% |
| 2019 | $1.66 billion | 2% |
| 2020 | $1.49 billion | -10% |
| 2021 | $1.55 billion | 4% |
| 2022 | $1.9 billion | 22% |
This table shows the massive fee revenue Ticketmaster has generated in recent years, topping $1.9 billion in 2022. The substantial 22% jump in 2022 coincides with the widespread complaints of major fee inflation, validating those consumer concerns.
Key Takeaways
- High demand, superfans with inelastic demand, and lack of competition enable Ticketmaster to raise fees.
- Ticketmaster defends the practices as market-based pricing but many see it as unethical price gouging.
- Potential solutions include voluntary changes by Ticketmaster, regulations on the industry, and breaking up the Ticketmaster monopoly.
- The outcry over fees and Ticketmaster’s power reflects an industry at a crossroads faced with pressures for reform.