Introduction
On 31 August 2024, tickets for the long-awaited Oasis reunion tour went on sale. The results were predictable: prospective purchasers waited online for hours to buy tickets. When they got to the front of the queue, tickets were either sold out or only available for a price greater than that which the fans had originally believed to be the price. Tickets soon appeared on secondary sites at inflated prices. Some saw the price of tickets they wanted rise while they were in the queue. They therefore – mistakenlyFootnote 1 – assumed that the ticket sellers were dynamically pricing the tickets.
What was also completely predictable was the public’s (or at least the fans’) response. The usual cries of unfairness, disappointment, exploitation and ‘pric[ing] out the true, loyal fans’Footnote 2 appeared in, and were magnified by, the popular press. This popular sentiment, amplified by pressure groups,Footnote 3 fed into the new Government’s manifesto promise to ‘put fans back at the heart of events’.Footnote 4 In January 2025, HM Government launched a consultation ‘Putting Fans First: A Consultation on the Resale of Live Events Tickets’.Footnote 5 This was not the first such study.Footnote 6 Anger surrounding event ticketing and subsequent secondary market sales is not uniquely found in the UK. Similar views can be seen in the US,Footnote 7 Canada,Footnote 8 Australia.Footnote 9 They likely exist everywhere large events take place.
Fans’ concerns arise from the initial allocation of tickets to first purchasers (the primary market) and extend to the perceived high prices in the resale market (the secondary market). These problems stem from market failure in the primary market. Previous, and likely future, interventions in these markets, on basis of ‘fairness’ or ‘putting fans first’ have exacerbated the consequences of this market failure. Some measures, primarily attempting to address information asymmetry, have been implemented in the UK. These have had partial success.
We argue that market interventions of a consumer protection nature (eg addressing concerns regarding information asymmetry and fraudulent tickets) are likely to improve the functioning of the markets, benefiting consumers/fans. However, we also argue that price-based interventions (ie price caps on ticket resales) only exacerbate existing market failure and will ultimately undermine consumer protection efforts. This is contrary to consumer/fan interest. In our view, the most effective reform is to address failure in the primary market, by employing a more effective means of ticket allocation. Ironically, this reform requires no regulatory intervention but may prove to be unpopular until the advantages of a more effective ticket allocation procedure become clear.
Our focus is on the markets for concert and event tickets in the UK. As previous governments have attempted to exploit public sentiment surrounding event ticketing, there is a wealth of information regarding these markets.Footnote 10 In addition to this, the Competition and Markets Authority’s (CMA’s) investigation of the merger between Viagogo and StubHub, the two largest firms in the global secondary market, provides additional data.Footnote 11 We mention in passing the market for sporting events in the UK. These – particularly football – have a special regulatory regime, driven by public safety concerns, so they fall outside of this paper’s focus. As the nature of primary and secondary ticket markets is consistent throughout the world, our suggestions regarding event ticketing are applicable outside the UK. Similarly, our treatment of UK regulation (both actual and proposed) can serve as an illustration of what does (or more significantly, doesn’t or won’t) work.
In the next section, we discuss the primary and secondary ticketing markets, describing their functioning, the economic issues (market failures) and popular concerns associated with each. In Section 2 we consider the UK’s existing regulatory regime and proposed/possible modifications. We do this by briefly discussing the harms (perceived and actual) associated with the two markets and the practices found in them and evaluating how these harms are addressed by regulation. This allows the identification of areas to which regulatory efforts should be directed.
Section 3 provides suggestions for a better regulation of the markets. Our suggestions for regulatory intervention are primarily of a consumer protection nature, focused on reducing informational asymmetry. This will improve the regime in both markets. We are critical of other attempts at regulation, particularly involving price caps in secondary markets. We address the fundamental cause of dissatisfaction regarding the operation of these two markets, namely inefficient allocation of tickets in the primary market. We provide a solution to this, which requires little legal intervention. The final section concludes.
1. The market for event tickets
(a) The primary market
(i) Description of the market
The primary ticket market for larger music events in the UK is mainly structured around a web of contracts among the artists and their managers, concert promoters, booking agents, concert venues, and ticketing agencies. There may be other parties and arrangements. These depend on the demands of the tour and parties involved (eg recording/film companies, tour sponsors, transportation/logistics companies, etc). There are, of course, other contracts (eg logistics, merchandise sales, insurance). These are not of concern to our present purpose. This business model is standard throughout the world.
Artists are represented by a manager. Through their manager, the artist contracts with a booking agent who in turn agrees with a promoter for a tour. A tour will include performances at several venues. The booking agent, in turn, agrees with the operators of the venues to host the concerts. Promoters will contract with primary ticketing agencies to sell tickets to the concerts.Footnote 12
Each of these parties has their own incentives. The artist will wish to provide quality entertainment for their fans, make money from the tour (which may possibly include increasing royalty and other ancillary income)Footnote 13 but do so in a manner which does not appear to rip off their fans. The manager, as the artist’s agent, facilitates this, and is incentivised through their contract with the artist. The booking agent acts as an intermediary between the manager and the promoter in arranging the tour and receives a percentage of the revenue for each performance.
The promoter takes the financial risk of the tour. It contracts with the venues (and ultimately the artist) to put on the events, and it will contract with primary ticket vendors to sell its share of the event tickets. Promoters have preferred primary vendors.Footnote 14 The venue will receive rent (either a flat rate or a share of ticket revenue) for the event, plus revenue from concession sales. The promoter will guarantee the rent for the venue and a minimum fee for the artist. Net profits are split in the range of 90/10 to 80/20 between the artist and the promoter.
The arrangements among the booking agent, promoter and venue will determine ticket prices, although very exceptionally the artist may have some influence in the pricing decision.Footnote 15 These exceptions are few and far between. This is not known to the public at large; consequently the popular view is that the artist sets the price, and it is the artist that is viewed as exploiting their fans when ticket prices are perceived as high.
Unlike classical concerts or opera,Footnote 16 events have few ticketing zones (unless such events are staged in stadiums with their own zones, eg Floor, 100, 300 and 500-level). The allocation of tickets will be determined by agreement between the venue and promoter, where ‘the venue controls how the majority of tickets are distributed. The ticketing inventory is split between venue and promoter, with typically 70/30 or 60/40 splits, and a small allocation for the artist and manager.’Footnote 17 Arrangements with other parties will place further pressure on ticket availability to the public at large.
There is the ‘holds list’. Promoters and venues may reserve a number of seats for hospitality packages, there may be presales to certain groups (in particular, fan clubs, venue, credit card or promoter specific ‘priority programmes’)Footnote 18 and the parties involved in the event production process may have tickets reserved for them.Footnote 19 The Waterstone Report remarks:
Evidence from the US has suggested that for some events as much as 85–90% of a venue’s inventory has already been sold or placed by the time of the internet sale opening to the general public.Footnote 20
Primary vendors may place further tranches of tickets on the market closer to the date.Footnote 21
At the appointed time, the primary vendor will sell tickets to the public at the agreed price.Footnote 22 In the cases which give rise to concern, ie the ‘big name’ events, tickets rapidly sell out,Footnote 23 some later appear on secondary ticketing sites. This is a consequence of ticket prices on the primary market being set too low, ie under the market clearing price.
In these cases, parties knowingly sell a commodity at a price below what prospective buyers would pay. In the commercial world, this is a counterintuitive outcome. The simplest, but least likely, explanation is inadvertence: the parties wanted to clear the market but underestimated the clearing price. A better set of explanations can be found in the incentives of the relevant parties.
The artist will earn their revenue stream from ticket sales and complementary revenue, particularly merchandise sales at the venue. Merchandise revenue is a lucrative income stream. As examples, during the 2023–24 ‘Eras’ tour, Taylor Swift’s merchandise sales were $440.8 million,Footnote 24 and in August 2022 Travis Scott sold over $1 million (£820,000) in merchandise during two shows at London’s O2 Arena.Footnote 25 The bargaining power of the artist determines whether the venue or other parties receive a share of merchandise revenue. An artist will not necessarily want to extract every bit of consumer surplus via the ticket price, as the artist may wish that fans spend this surplus on merchandise (in the case of Taylor Swift, an average of $40/fan over the first 60 showsFootnote 26). The artist may have quasi-moral feeling regarding a ‘fair’ price for tickets, will want to play to a sold-out house, or realise that gaining a reputation (fairly or not) for price gouging may harm their future income stream.Footnote 27
Promoters have similar motivations to underprice tickets. As noted in the Waterstone Report:
[The promoter] is the person organising all the technicalities of the show. They are essentially risk-takers and commonly bear a good deal of this risk personally, both financial and reputational. Staging a concert is an expensive business, with often tight margins, and judging the level of demand is difficult, because consumer tastes change rapidly. Tickets need to be priced to cover the costs of hiring the act and the venue, and evidence from representative bodies suggest that the promoter tends to make their profit on the last 10–15% of sales. Hence selling out a venue is in their interest … For a promoter, profit maximisation will be tempered by some risk aversion in their pricing strategies.Footnote 28
Additionally, due to the significant period of time between the sale of the tickets and the date of performance (eg in the case of the Oasis 2025 tour, tickets went on sale on 31 August 2024, for performances in July–September 2025), promoters will want to receive their money sooner (inter alia, to alleviate cashflow concerns), rather than closer to the date of performance.
Primary ticket sellers will sell tickets to the public at the announced date and time. They sell tickets usually at their face value, plus any handling or other service charges. Some tickets (eg prime locations) may be sold for more than face value, and primary ticket sellers may offer discounts on group purchases.Footnote 29 Primary sellers may obtain the tickets at less than face value. Their incentives are to provide an efficient distribution system, subject to any contractual restriction (eg maximum number of tickets per customer). Both the promoter and the primary seller will want a significant amount of ‘hype’ prior to the sale, which can be channelled towards the rapid sale of the ticket inventory.
The venue seeks to maximise revenue. As well as rent, concessions and parking are the venue’s main additional revenue streams. Its costs are primarily fixed; it receives a fixed fee from rent, but its non-rent income is dependent on attendance. This also incentivises both lower pricing and sale of its unsold ticket allocation through secondary ticketing agencies.Footnote 30
(ii) Market failures and popular perception
There are two significant market failures associated with the primary market. These are the chronic underpricing of tickets, because of the perverse incentives which the parties face, and the information asymmetry involved in the public being unaware of the precise number of tickets available to be competed for in the initial sale.
Selling tickets at below their clearing price (ie underpricing) means that there will be excess demand for these tickets, creating immediate arbitrage opportunities. A purchaser of an underpriced ticket will be in a position to resell that ticket to someone who values the ticket more than the original purchaser. Hence there are incentives for those who may be uninterested in the event to buy tickets through primary sellers and in turn resell those tickets in the secondary market at an often-sizable profit. This process, of course, can be (and is) automated using bots.Footnote 31
Primary ticket sellers know precisely how many tickets they have for sale for each event. This number is not known to the public at any time prior to or during the sale. This informational asymmetry is also compounded by the general unawareness that, due to arrangements among the relevant parties, a fairly large number of tickets are reserved and will not be part of the public sale. This information is key in managing prospective buyers’ expectations, particularly regarding their chances of obtaining tickets and determining whether to spend hours online in a possibly futile attempt to purchase tickets. Those involved in primary ticket sales have the incentive not to release this information, as publicising it in advance or on primary ticket sellers’ ‘holding pages’ could reduce the hype associated with the release of tickets.
The popular concerns with the primary ticket market dovetail well with the market failures enumerated above. Fan frustration can be summarised by a lengthy wait online, to buy (if they are sufficiently lucky) a poor seat, only to see better seats immediately available in the secondary market. In addition, prices may increase during the queuing time, leading to the impression of the undisclosed use of dynamic pricing. Frustrations are compounded by the view that bots had been used to harvest tickets in the primary market and allocate them to the secondary market at a significant profit. Even more anger would ensue if those who attempted to buy tickets were aware of the quantity of tickets that were held back and hence were never available to buy.
These concerns with the primary ticket market are exacerbated by similar concerns surrounding the secondary market.
(b) The secondary ticket market
(i) Description of the market
Secondary tickets sales occur for at least three reasons. First, secondary markets can be used as a means of unbundling multi-event ticket packages, eg season tickets. As tickets to the sorts of events we consider in this paper (and those considered by the Government in its consultation) are typically not sold as part of a bundle, we will not further consider this use.
Secondly, there is often a significant interval between the date on which tickets are sold in the primary market and the event itself. In this interval, people’s plans can change for any number of reasons. A secondary market will allow those people an opportunity for mitigation. As a result of this, secondary markets can operate as an exchange mechanism, allowing fans an opportunity to ‘upgrade’ their seats, through buying a better seat and selling their original ticket.
Thirdly, and most significantly, ticket underpricing in the primary market provides an arbitrage opportunity. Underpriced tickets in the primary market leaves consumer surplus ‘on the table’, which can be extracted through a subsequent sale at the (higher) market price.
Arbitrage opportunities occur at small scale levels, where a fan may intentionally purchase more tickets than they need with a view to reselling the excess – eg to off-set their own tickets and other costs of attendance. At the largest scale, bots are used to harvest tickets, resulting in events selling out rapidly.Footnote 32 The harvested tickets then immediately reappear in the secondary market at a price reflecting market reality.
In its merger inquiry of Viagogo and StubHub, the CMA observed that the secondary market consists of several different types of reselling channels:
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(a) uncapped secondary ticketing platforms – online platforms that allow ticket holders (resellers) to resell tickets to buyers at any price that they choose;
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(b) capped secondary ticketing platforms – online platforms that set a limit on what the reseller can charge for the ticket;
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(c) non-specialist channels and social media – such as Gumtree and Facebook; and
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(d) offline channels – such as box office return outlets and ticket touts outside venues.Footnote 33
In contrast to box office returns, online channels serve to match ticket buyers to sellers; these channels charge buyers’ fees and most charge sellers’ fees.Footnote 34
The advantage of secondary platforms is that they offer some guarantee to the purchaser that the ticket is genuine. For instance, both Viagogo and StubHub guarantee that the buyer will be provided with the event ticket in time or will receive a full refund or a similar ticket.Footnote 35 These guarantees are enforced by a hold on payment to the seller, who is paid when tickets are received by the buyer or (as is the industry standard) after the event.Footnote 36 It should be noted that primary ticket sellers may not forward the tickets to those who originally bought them until some point close to the event, often about a week before.
(ii) Market failures and popular perceptions
Market failures associated with secondary ticket markets are primarily information asymmetry and other uncertainty about nature of the tickets (including their genuineness). Sellers have incentives not to disclose:
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• negative information about the tickets (eg obstructed view, floor-level but way at the back);
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• their identity, particularly if they are selling a great number of tickets obtained through bot harvesting, as these may be cancelled; and
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• whether they have (or will have) the tickets they are offering.
The latter practice is speculative selling, where a speculator sells a ticket at a premium hoping to buy the ticket at a price less than the amount for which it was sold. This may be a violation of secondary ticketing sites’ terms.Footnote 37 There are also incentives for less scrupulous individuals to engage in fraud and counterfeiting.
There is a popular, but economically naïve, view that secondary ticket markets somehow ‘rip off’Footnote 38 consumers. This view is formed by the perception that the list price in the primary market is the actual (or perhaps, ‘fair’) price for the ticket and thus any markup in the secondary market is evidence of exploitation. This feeling is aggravated when the secondary seller is perceived as not providing any value added in the transaction, and is further exacerbated when, on the day of sale, tickets are unavailable on primary sites but are readily available – albeit at a significant markup – on secondary sites. All these emotions are ripe for opportunistic exploitation.
(c) The interface between the two markets
Although the two markets are notionally independent of each other, they interact; and those taking advantage of this interaction can engage in opportunistic behaviour. Promoters and others involved in the production of the event may place tickets on the secondary market (avoiding the primary market) to take advantage of that market’s higher prices or to create the illusion of scarcity in the primary market.Footnote 39 While the UK’s Consumer Rights Act 2015, s 90 requires disclosure of relationships between ticket sellers and event organisers, there appears to be no public evidence of any such disclosure. Either such relationships do not exist, or (more likely) they are unreported. In fact, in a recent case involving the legality of ticket touting, Green LJ remarked:
If the appellants are correct and there are potentially hundreds of other operators all running businesses like theirs; and if they are also correct and there is connivance and collusion between ticket touts and the PTW [primary ticket websites] and STW [secondary ticket websites], then the ticketing market is one which appears to be characterised by a high degree of criminal fraud. The evidence we have seen certainly suggests this possibility.Footnote 40
Historical evidence and other jurisdictions’ experiences provide additional credence to this suggestion.Footnote 41
There is also the issue of bot harvesting, ie the use of software to rapidly purchase tickets on the primary market, with the aim of marking up and reselling the tickets. As will be seen, there are no regulatory or commercial incentives for primary platforms to prevent their use. Secondary platforms are unlikely to engage in bot harvesting themselves, but other parties may use bots to intermediate between the two markets and exploit arbitrage opportunities. The existence of this practice exacerbates feelings of ‘unfairness’ when tickets are only available (at perceived high prices) on the secondary market.
These market failures and public perceptions are addressed through regulatory efforts. We explore the UK’s regulatory regime in the following section.
2. The UK’S regulatory regime, market concerns and regulatory need
(a) The regulatory regime
The UK’s present regulatory regime is a mix of general consumer protection legislation, with some specific regulation aimed at the secondary market. Both markets are governed by the Digital Markets, Competition and Consumers Act 2024. Sections 225–230 of that Act restate the prohibitions of the (now revoked) Consumer Protection from Unfair Trading Regulations 2008. In general terms, consumers are not to be provided with false or misleading information about any matter relevant to the transaction (sections 225–227). The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013Footnote 42 require that certain information – none of which is specific to events tickets – be provided to the consumer prior to the conclusion of the contract. But since event tickets are ‘services related to leisure activities, [where] the contract provides for a specific date or period of performance’, their purchaser does not have the right to cancel/ return the tickets that distance purchasers of other forms of goods and services possess.
Sections 90–95 of the Consumer Rights Act 2015 (CRA 2015) specifically regulates the secondary ticket market. Section 90 requires resellers to provide information which includes:
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• the seat/ area in which the ticket is located;
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• restrictions or other limits on the use of the ticket;
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• the face value of the ticket; and
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• the identity of the operator of the secondary ticketing facility.
Section 91 prohibits organisers from either cancelling resold tickets or blacklisting a reseller, unless resale violates the terms of the original sale, and the term prohibiting resale was ‘fair’ as defined by Part 2 of the Act. Section 92 imposes an obligation on operators of secondary ticketing facilities to report criminal activity associated with the resale of tickets. This report is to be made to the event organiser and ‘an appropriate person’ (ie a police constable). Section 106 of the Digital Economy Act 2017 enables regulations to be made to criminalise bot harvesting of event tickets, which was done through The Breaching of Limits on Ticket Sales Regulations 2018.Footnote 43
Ticket resales for some high-profile events (eg the 2012 Olympics, 2022 Commonwealth Games, some football matches) are regulated through specific legislation. For instance, The London Olympic Games and Paralympic Games Act 2006, s 31 made it an offence to, inter alia, offer for sale a ticket for an Olympic event without the authorisation of the London Organising Committee. This had the unintended consequence that as result of this ban on resales, some otherwise high-profile events were poorly attended.
Unauthorised secondary sale or transfer of tickets for ‘designated’Footnote 44 football matches is a criminal offence pursuant to section 166 of the Criminal Justice and Public Order Act 1994. This limit on alienability is justified on public order grounds: to prevent violent disorder between rival groups of fans.Footnote 45 Given that fans’ plans change over the course of a season, and that fans may want to unbundle their season tickets or otherwise transfer (including gifting) individual tickets, football clubs have robust secondary facilities to permit sale and transfer of tickets.
In addition to these provisions, criminal offences such as fraudulent trading (Companies Act 2006, section 993) and fraud govern the conduct of those operating in secondary ticket markets. Hunter and Smith Footnote 46 involved two accused who were using bots to harvest tickets for resale, in violation of the contractual terms imposed by vendors in the primary market and where violations of those terms may lead to the tickets being cancelled. The defendants did not advise their customers of this. The defendants were convicted on each count of a four-count indictment, which alleged:
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1. establishing a system to circumvent quantity of sale restrictions on the primary market, deceiving the primary seller that they were ordinary consumers and not touts (Companies Act 2006, s 993);
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2. possession and use of bot software, contrary to Fraud Act 2006, section 6(1);
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3. falsely representing to their customers that the tickets were valid and would guarantee entry to the event (Companies Act 2006, section 993); and,
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4. engagement in speculative selling, ie selling tickets which they did not possess, but nevertheless sold, contrary to the terms of the secondary site used by the defendants (Companies Act 2006, section 993).Footnote 47
The Court of Appeal upheld the convictions of the defendants on all counts. As we are outlining the regulatory regime, we need not delve into the reasons why the Court held that the evidence supported the convictions in that case.
Existing regulation imperfectly addresses the problems felt to be associated with the ticket markets. The problems or ‘harms’ associated with the purchase of event tickets are not identical in each market. Ticket buyers’ concerns in the primary market are typically focused on ticket availability (ie whether the event will be sold out before obtaining an opportunity to buy their ticket), opportunity costs of the time involved in waiting in line, and – more recently – the seller’s pricing strategy (whether some form of dynamic or opaque pricing is used). There are two main concerns with the secondary market: the price (viewed as extortionate) that a purchaser needs to pay and whether, once bought, the tickets will permit entry to the event or in fact will be delivered.
(b) Market concerns and regulatory need
(i) Concerns with the primary market
We have outlined above some of the frustrations of and challenges faced by fans who wish to purchase events tickets. Most of these frustrations result from information asymmetry. The seller knows: (1) the number of tickets available for sale and (2) their own pricing strategy. The seller’s site can be used to obtain information regarding queue length and estimated time to be at the front. Additionally, informing those in the queue of the number of unsold tickets is also essential, as without this information merely one’s place in line is insufficient to make an informed decision to wait or leave. Providing this information would allow for those considering a ticket purchase to have appropriate expectations and thus alleviate a significant degree of frustration with the process. This information will have no effect on whether the event is sold out. But disclosing this information is unlikely to be in the interests of the primary vendor’s and its associated parties’ reputation, particularly if this disclosure demonstrates that a significant number of seats are unavailable for purchase due to presales or prior allocation, and/or the vendor will be employing a pricing strategy popularly viewed as ‘unorthodox’.
At present, these details are typically not disclosed, as the these details are likely (incorrectly) perceived by ticket vendors as merely shaping fan perception of the ticket buying process. If at least a part of the motivation driving new regulation of these markets is to reduce the ‘enormous challenges [fans face] when purchasing tickets’Footnote 48 and ‘increase transparency for fans’Footnote 49 then recognising the legal significance of this information thereby requiring primary ticket vendors to provide it, will go a long way in accomplishing these stated objectives. This information is key to establishing prospective purchasers’ expectations before they enter the market and reduces friction when the fan is in the market.Footnote 50 It is likely that section 225 of the Digital Markets, Competition and Consumers Act 2024 mandates that such information be supplied, as its provision may cause the consumer to take a different ‘transactional decision’, as remaining in the queue or ‘giving up’ are different decisions.Footnote 51
Another driver of the fans’ inability to obtain tickets on the primary market is the use of bots to harvest tickets. The use of bots is prohibited by regulation. If acquiring tickets with the aid of a bot is a violation of the primary site’s terms (which could lead to cancellation of the tickets), then bot use and subsequent ticket resale can lead to Hunter and Smith criminal liability. Little effort has been made to incentivise primary ticket sellers to prevent the use of bots. There is no analogue of CRA 2015, section 92 imposing an obligation on primary vendors to report known bot use to the authorities, nor must they make any effort to prevent such use. As noted, given the commercial incentives for a quick sell out (namely cash flow and ‘hype’) primary ticket vendors have no commercial reason to prevent bot use.
Our proposal is that regulatory efforts be made in these directions. Reducing information asymmetry regarding ticket availability will aid in establishing fans’ expectations before and during the buying process. This may mitigate some frustrations with the primary market. But the most effective means of enhancing ‘fan satisfaction’ is to alter the pricing structure in the primary market, as we argue below. If our argument is accepted, our suggested ticket allocation mechanism eliminates the incentive to use bots. However, should our suggestion for reforms to primary market pricing go unheeded, a second-best alternative is to implement a primary market analogue to CRA 2015, section 92.
(ii) Concerns with the secondary market
As noted above, concerns with the secondary market are twofold: the price and authenticity. Price concerns focus on the mark-up of the tickets in the secondary market: the so-called ‘rip-off pricing’. Authenticity concerns include whether the ticket will: (1) be delivered on time; and (2) permit entry into the event (ie it was an otherwise valid ticket but was cancelled for being obtained or transferred in breach of the original sales agreement).
Authenticity concerns are not unique to secondary ticket markets. Sale of fraudulent or counterfeit goods is found in other markets. Purchasing goods from reputable outlets usually mitigates this risk. As a means of signalling their legitimacy, all major UK secondary ticketing vendors guarantee that tickets sold through their site will be delivered and will permit entry to the event, otherwise the site will obtain an alternative ticket or refund the purchase price. These guarantees will also cover cancellation of the event.Footnote 52
By providing these guarantees, these sites promote themselves as more trustworthy than other means of obtaining tickets on the secondary market. Fans are aware of this guarantee and do utilise it. According to StubHub:
Fewer than 4% of ticket sales on StubHub result in the FanProtect Guarantee being invoked. This includes cases where the event was cancelled and where StubHub offered a full refund. Once event cancellations are removed, this figure amounts to an even smaller percentage of all ticket sales on StubHub. In over two thirds of these cases (68%), StubHub was able to source comparable or better tickets. For the rest of these tickets, they offered a full refund.Footnote 53
This may provide some reassurance to ticket purchasers.Footnote 54
Though such guarantees may serve to encourage purchasers to use a given secondary outlet, they only partially mitigate the risk assumed by secondary market purchasers. The fan base of many large events includes those who have made other outlays to attend. These may include travel and foregone vacation. Reimbursement for an invalid ticket will not compensate for these latter losses. However, it should be noted there are similar risks of disappointment resulting from the event’s postponement or cancellation. These also attach to tickets bought in the primary market, where the standard compensation is a refund of the face-value (plus fees) of the ticket.
Views of ‘speculative selling’ are shaped by concerns of non-delivery. ‘Speculative selling’ is the practice of a secondary seller ‘selling’ a ticket they do not yet own, as they anticipate that they will be able to obtain a ticket before delivery is due. Their profit is the difference between price sold and paid. For this strategy to work, two conditions need to hold: (1) the secondary market must be sufficiently liquid for the relevant tickets to be available; and (2) the price curve for these tickets is downward sloping. This latter condition is usually the case.Footnote 55 Speculative selling is analogous to naked short selling, where a market participant will short sell stock (or other asset) without first either borrowing or making arrangements to borrow the asset. This practice is nominally regulated in the interests of financial stability and market confidence.
Financial markets are usually sufficiently liquid to permit subsequent purchases of shorted assets, though this may entail that the short seller incurs a loss. Short sellers typically have the financial resources to withstand the losses should the short sale be loss-making.Footnote 56 But these characteristics may not hold for secondary ticket sellers.
A ticket which was speculatively sold may not become available in the secondary market and/ or the price may not have dropped by the amount that the speculative seller had hoped. In these cases, the seller’s motivation would be to walk away from the transaction and evade payment of compensation. As noted, the larger secondary platforms provide a guarantee against non-delivery and will withhold payment to those who sell tickets on them until delivery (or after the event) as a form of security. But, as also noted, the limits of this guarantee only partially compensate the fan who may have expended a significant and nonrefundable sum for travel and accommodation ancillary to attendance at the event.
Accordingly, speculative selling is viewed as an appropriate target for regulatory intervention.Footnote 57 This is despite the relative infrequency of failed transactions (likely around 1%)Footnote 58 and that such behaviour can also incur criminal liability. Thus, one can question the need for further regulation, particularly when the main players in the secondary ticketing market, who have the greatest exposure to this risk, are not actively advocating further regulation. Rather, the people that this sort of regulation would benefit are those who exuberantly buy tickets from secondary vendors other than these major players. These purchasers – likely through their elation in being able to seemingly obtain a ticket – did not perform appropriate due diligence on the vendor. It is not obvious that this sort of purchaser behaviour should justify the creation of a new layer of additional regulation, as opposed to a more rigorous enforcement of the existing regime.
The main frustration which surrounds fans’ experiences in the secondary market is the apparently inflated price at which these tickets are offered. It is this emotion which makes headlines and feeds into populist calls for a regulatory response, usually involving price caps. A more objective examination of the secondary market should temper this emotional response.
Tickets with four-figure prices (hence representing a significant markup over face value) do appear on secondary sites. These make for great headlines. But these are offered prices. The downward sloping price curve also applies on the secondary market. Further, purchasers in the secondary markets can often buy tickets either below, at or slightly more than face value. The Consumer Survey accompanying the Waterstone Report indicates that 54% of purchasers paid face value or less, while only 11% paid substantially more than face value.Footnote 59
Given the relatively small percentage of purchasers who could possibly benefit from price regulation in the secondary market, one can legitimately question its need. Two further points tell against such a knee-jerk regulatory response. First, these purchasers are engaged in voluntary transactions to obtain a luxury good. Secondly, this regulatory response will necessarily be concluded through price caps; and price caps will have unintended outcomes, which in this case will ultimately harm consumers. We explore these points below.
3. Suggested regulatory reform
This section examines regulatory responses (both actual and proposed) to the perceived difficulties with the two markets. To date, the primary focus of event ticket market reform has been directed at the secondary market. This may have improved conditions by removing some informational asymmetry. However, the popular view is that these reforms alone are insufficient.
There has been very little focus on reforming the primary market for event tickets. This is unfortunate, as it is failures in this market which are the source of the problem. Resolving these failures will not just go a long way to improving the market for event tickets but will also make most of the regulation in secondary markets redundant. We discuss actual, mooted and our proposed reforms to the two markets in the following sections.
(a) Reforms to the secondary market
The most significant reforms to the secondary market are those in sections 90–95 of the CRA 2015, and reforms introduced by the Violent Crime Reduction Act 2006. As discussed, the former, inter alia, aims at addressing information asymmetry and seeks to strengthen prohibitions against bot harvesting. The latter prohibits, on public order grounds, the secondary sale of (most) football tickets.
Price caps are an often-suggested reform to the secondary market, as an effort to improve fan experience. In addition to being part of the Government’s pre-election manifesto, a price cap in the secondary market was a campaign promise made by the now Prime Minister,Footnote 60 and forms an implicit premise in the Government’s 2025 consultation.Footnote 61 Yet as appealing as price caps are, it is foolish to suppose that they will solve the problem. In fact, price controls will act to consumers’ detriment.
The secondary market’s ability to provide fans the opportunity to obtain tickets which are unavailable on the primary market is both its most used and its most frustrating function. The intensity of this frustration provides significant opportunity for populist exploitation. But a closer examination of why tickets that are not available on the primary market may be available on the secondary market illustrates why price caps will not resolve the problem.
Tickets are sold on the secondary market at prices above their face value (or face value plus sales costs) because secondary sellers take advantage of arbitrage opportunities. Tickets for the events in question were placed on the primary market at a price below the clearing (or equilibrium) price.Footnote 62 In other words, given the price in the primary market, the demand for tickets exceeds the supply.
By underpricing tickets in this way, primary sellers have provided opportunities for those who were able to buy tickets to extract additional consumer surplus through a resale of the ticket. In addition, if someone were confident that tickets on the primary market were underpriced, they would have every incentive to go on that market to buy as many tickets as they could to resell for a profit. This shifts a resource (or a good) to a higher-valued use. It is simply rational economic activity.
This is also not a new business model. An article that appeared in The New York Times of 12 December 1867 reported:
At 9 o’clock yesterday morning the box office at Steinway Hall was thrown open for the second course of readings in this City by Mr. Charles Dickens. …
A large proportion of those standing near the head of the line were ticket speculators, but scattered through the single file were many laboring men and several little boys, who only came to be bought off. The little fellow who led the force was very fortunate in selling his place to a Southern gentleman, it is said, for $30 in gold. There were many such instances – indeed, it was not uncommon for anxious to give $10 to $30 for the privilege of supplanting another …Footnote 63
In addition to reselling tickets, these ‘speculators’ offered the unbundled sales of tickets, allowing individuals to purchase a ticket for a single reading – box office sales were only for a series of readings.Footnote 64 The contemporary practice of using bots merely (and literally) eliminates the ‘middlemen’ in the activity of obtaining tickets.
Proposals for a price cap in the secondary market take the form of a limit to the markup which secondary vendors can apply to the tickets. Implicit in the justification of these price caps are the assumptions that: (1) a greater number of tickets will remain on the primary market (for sale at their ‘face value’) and (2) this will result in a more equitable outcome for fans. There is also an implicit assumption that these will be the only consequences, as unintended outcomes are never considered by price cap advocates.
It is likely true that price caps on the secondary market will increase availability of tickets in the primary market. Some marginal secondary market vendors will likely decline to participate, given that the opportunities for a significant return have been eliminated through the cap.
But not all potential vendors will be deterred. Some may take the price cap as the upper limit to the price they can charge and thus settle for somewhere around a 30% markup/profit.Footnote 65 Quantifying the consumer benefits of price caps (in particular the amount of additional tickets which would remain available on the primary market and the resulting savings to consumers through reduced markups) is of course an empirical question, and its answer is contingent on a number of variables which would include number of seats, initial ticket prices (and permitted markup), the stature of artists, time period, etc.
Any consumer advantages of price caps must be weighed against their detriments. ‘High’ prices and price increases are market responses to low supply, and send a signal that more goods are needed, incentivising their production. This is a lesson of introductory microeconomics. It is a further lesson that price caps act to disincentivise the production and supply of needed goods. Rent controls, and their failure to increase housing supply, are part of this latter lesson.Footnote 66 In addition to failing to increase supply in ‘legitimate’ markets, price caps also cause a diversion of scarce goods into black markets. Event tickets will not be an exception.
A consequence of price caps in the regulated secondary market will be the diversion of tickets to an unregulated (‘black’) secondary market.Footnote 67 Traders in a black market will certainly not offer the same guarantees of ticket validity and delivery offered by legitimate secondary vendors. Indeed, if enforcement measures are put in place to enforce such price caps, this will almost certainly drive the markets offshore, nullifying any possible consumer protection measures.Footnote 68
Further, there are significant costs to effectively implementing such a price cap. The new black market will almost certainly be internet-based. Its elimination will require a costly expenditure of resources. For the ban to be effective, the enforcement authorities would need to do a regular and thorough search of websites (located both within the UK and abroad) and social media channels, have any offending sites promptly blocked and any offers of tickets taken down. The latter enforcement tool will require the cooperation of those social media platforms. Given the incentives that ticket arbitrage provides, it will almost certainly be the case that these efforts will be a resource-intensive and expensive game of ‘whack-a-mole’ that will never eliminate these markets.Footnote 69 This is a poor use of governmental resources.Footnote 70
(b) Reforms to the primary market
Rather than tinkering with the secondary market, reform to the primary market is likely to better improve ticket distribution and hence enhance fan experience. Ticket prices in the primary market are set too low, causing the market failure which fuels fan frustration.
The solution is to address this failure in the primary market, by pricing tickets at or closer to the clearing price. This eliminates incentives to use the secondary market for arbitrage, hence disincentivising bot harvesting of tickets. This will likely result in a greater number of tickets being available on the primary market. A secondary market would remain, though this market would more likely serve as a means of mitigating a change of plans. It is also unlikely that a black market for ‘uncapped’ tickets of any significant size would emerge.
Effective ticket allocation in the primary market can be realised through adopting a more efficient pricing strategy. Rather than setting an initial price at below the market clearing price (as is currently the case), there are other pricing mechanisms open to primary sellers to allow for better discovery of the clearing price. Dutch auctions and dynamic pricing are obvious candidates.
Dutch auctions likely have an advantage over dynamic pricing. Prices in a Dutch auction, by definition, decline. Therefore, a prospective buyer can assume that if they postpone purchasing an item sold in such an auction, its price will not rise in the interval. This mirrors the standard price curve of event tickets. A successful buyer in a Dutch auction purchases the good when its price drops to that buyer’s reservation price. An auction can be designed so that both the amount and timing of price drops are announced in advance. This informs those who wish to buy at a given price of the time when tickets will be sold at that price, provided such tickets remain available.
On the other hand, with dynamic pricing, the price of a good can rise and fall. There is no guarantee that the good’s price tomorrow will be less than its price today. It is this unpredictable variability of dynamic pricing that taints the popular view towards the practice.
The immediate objection to the use of these other pricing mechanisms is that they will raise prices on the primary market, making event attendance unaffordable. This objection is hyperbolic. Not all events sell out. In these cases, the asking price in the primary market exceeds the clearing price; this may be a result of those responsible overestimating that price. One not well publicised use of secondary markets is their use by promoters to offload tickets for poorly-selling events at a discount from face value. This provides the promoters with some revenue and allows those attending the show the experience of (something approaching) a sold-out event.Footnote 71 A system of declining prices in the primary market eliminates the need for this practice and allows for some error in the initial estimation of appropriate ticket prices.
There may be a high demand events where the average ticket price on the primary market is higher in the Dutch auction/dynamic pricing model than in the existing model. But focusing on only the primary market in these cases yields an incomplete picture. A more appropriate comparison between the two regimes is the average prices paid by attendees (irrespective of the market in which the ticket is bought) plus the total opportunity costs of acquiring these tickets, ie buyers’ time spent in online queues.
Additionally, even if the ticket prices for in-demand events are seen as high, one must recall the sort of goods event tickets are. They are luxury goods which are a paradigm discretionary purchase. No one is harmed through the nonconsumption of a luxury good. Any claim to the contrary would use the word ‘harm’ in a very wide and extended manner, making the word meaningless. Rather, what is occurring when fans express disappointment of their inability to obtain tickets at low prices (or, more accurately put, only obtain tickets at what they feel is too great a price) is that the fans are expressing dismay at their inability to obtain a luxury good for below market price.
Were the luxury good nature of event tickets more readily realised and popularly accepted, much of the outrage over ticket pricing and availability would dissipate. No similar outrage is expressed – or given a sympathetic ear by the political class – regarding frustrated prospective purchasers of Hermès Birkin bags or Rolex Oyster Perpetual watches (both of which have secondary market prices exceeding the manufacturer’s primary market price).
We also do not have an unfavourable view of using auctions and dynamic pricing for luxury goods. The art market is characterised by the use of open ascending price auctions. Dynamic pricing is used (and indeed was developed) in the markets for hotel accommodation and airline fares. While a significant amount of hotel and airline spending is for discretionary (or business) purposes, not all of it is. Some may be travelling out of necessity, eg for bereavement or medical reasons. While we might complain about such hotel and airline prices, we now accept them and plan accordingly (when possible). As a result of dynamic pricing not only are airline seats are usually available, but planes typically fly at (or very close to) capacity. The economic evidence shows that this arrangement is welfare enhancing.Footnote 72 Our acceptance of these pricing practices is largely a result of how our expectations have developed.Footnote 73
If these practices were implemented in the events ticketing market, it is also likely that fans would see the advantages of the new practice (ie the more general availability of tickets) and adapt their buying habits accordingly (ie not purchase tickets the instant they go on sale but wait for the price to decrease as scheduled). This might not be in the promoters’ interest, as it may reduce the ‘hype’ associated with high ticket demand and the resulting quick sell out. The slower process will also deprive promoters of their almost instantaneous access to ticket revenue.
On the other hand, given that the sale price of tickets under this pricing mechanism greater reflects their value, those selling in the primary market will likely obtain greater revenue through this process. It must be noted, however, that this appropriation of revenue is at the expense of those who would have otherwise obtained it in the secondary market. This transfer of wealth is neutral to fans.Footnote 74
The increase in the original sale price of the ticket may give rise to the perception that artists, promoters and other players in the primary market are profiteering and exploiting fans. This is not an uncommon view. It is one shared by some artists and events. However, this suggestion does not preclude sales of tickets at a price below their value. To effectively establish a regime in which ‘true’ fans (eg as measured by membership in a fan, promoter, venue or credit card company ‘club’) can have early access at a reduced price, all that is required is that these tickets be made nontransferable. The technology to do this exists. One needs only to print an identifier (eg uploaded photo, name, final digits of the credit card used in the purchase, etc) on the ticket which is verified upon entry. This latter point is essential, as without a credible means of enforcing non-transferability, many of these tickets will end up on the secondary market. This may add a slight cost to event security, but this is the cost to the artist or promoter for taking the moral high ground of offering that perk.Footnote 75
The need to control below-value sales to ensure that tickets do not end up on the secondary market points to the need for an effective means for fans whose plans have changed to have an opportunity for mitigation. Returned tickets could, prima facie, be sold to those on a waitlist or sold by the primary vendor at the then market price. A secondary market would remain a means of resale of transferable tickets. However, as those who would place tickets for sale on this market would have originally bought them at a price reflecting their value, rent-seeking opportunities are unlikely to be present.Footnote 76 What remains of the secondary market would no longer serve or be seen as a means to capture an ‘unfair’ economic rent. This would improve fan satisfaction, irrespective of any economic benefits which may or may not result from this market shrinking.
The advantages of this suggested restructuring of the event ticket market’s pricing mechanism are evident. Such restructuring would make a greater number of tickets available in the primary market. As the market would price tickets closer to their economic worth, this would leave little left-over consumer surplus to be captured. Arbitrage opportunities are significantly reduced. This, in turn, disincentivises activities which are central to the bulk acquisition of underpriced tickets, such as bot harvesting. A residual secondary market would continue to exist, although its role would be primarily to facilitate resale of tickets where fans’ plans have changed. It would not serve to realise arbitrage opportunities.
In contrast, restructuring the secondary market by imposing price caps will have significant unintended effects. A price cap may result in these markets closing.Footnote 77 This would eliminate mitigation opportunities for fans whose plans have changed and drive all secondary ticketing to insalubrious markets. Even if secondary markets do not close, there will be additional diversion (particularly of tickets to blockbuster events) into black markets. This is the antithesis of ‘putting fans first’.
Our suggested reform has the advantage of optimal allocation of tickets while decreasing prospective buyers’ transaction costs (through decreasing waiting in a queue). It is likely that a greater quantity of tickets will be available on the primary market, which will enhance fan satisfaction. These goals will be achieved by addressing the problem at its source, rather than through ad hoc regulation of the problem’s symptom, and the unintended (but foreseeable) consequences that such band-aid regulation brings.
This suggested restructuring of pricing in the primary market can be accomplished with very little regulatory effort. It merely needs to be implemented by those active in the primary market. There may be room for some regulatory efforts to combat information asymmetry. Regulatory efforts may include requiring that primary sellers publicise: (1) the number of tickets available (and that this number is updated on a frequent basis); (2) when in line to buy tickets, one’s position; (3) the pricing mechanism (eg dynamic pricing, Dutch auction); and (4) if a Dutch auction (or similar process) is employed, the time and the amount of price reductions.Footnote 78 These latter points are aimed at reducing information asymmetry in the market. Not only is reducing this form of market failure a legitimate purpose of economic regulation, but it would serve the populist goal of improving ‘the fan experience’.
Conclusion
The current state of the event ticket market is often frustrating. Fans are annoyed when they cannot obtain tickets for an event at the low price they initially expected to pay. This anger is amplified when, after finally accessing the primary vendor’s websites, they see the event is sold out. Yet they can immediately find tickets available on secondary sites – at a significant mark-up. The example of Oasis, with which this paper opened, is merely one of many.
This outrage makes for good headlines, and these headlines can be exploited by the political class to make themselves popular by appearing to be ‘on the side of fans’. This exploitation frequently involves proposing simplistic solutions that have significant unintended consequences.
In one sense, the fans, press and political class are correct. There is a problem in the events ticketing market. But all are equally incorrect in assessing the extent and location of the problem. As a result, it therefore is not surprising that the proposed solutions to the problem are misguided.
The problem is almost certainly significantly smaller than press reports make it out to be. Events which are not sold out or tickets selling below face value on secondary sites do not make for interesting headlines. The problem is with the few blockbuster events or tours where the primary market underprices the tickets. When this market failure occurs, what transpires in the secondary market is nothing more than an economically rational response. Correcting underpricing in the primary market will effectively address the problem.
Attempting to address the problem through regulation of the secondary market, particularly through price caps, will be an expensive failure. If arbitrage opportunities exist, tickets will end up on a secondary market. If a price cap is imposed in the ‘legitimate’ secondary market, and if further gains above that cap can be made, trade will shift to ‘illegitimate’ or black markets. Policing the internet to identify and ‘take down’ black market sites will be an expensive and fruitless game of internet whack-a-mole. And as tickets disappear onto these black markets, so too will any consumer protection. This is not in the fans’ interest.
Rather than seeking simplistic solutions (particularly those with significant unintended consequences) and spouting populist messages, those designing (or approving) the regulation of ticket markets should address the real problem in the market. In event ticketing, the problem is located squarely within the primary market. No form of regulation of the secondary market, particularly price caps, can correct that. To suggest otherwise is politically popular, but economically illiterate.
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