What role do technology and pricing algorithms play in the resale ticket market in the U.S.?

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What role do technology and pricing algorithms play in the resale ticket market in the U.S.?

Hello! Thanks for your question about the role of technology and pricing algorithms in the resale ticket market in the US. The most useful sources I found to answer your question are Why You Can’t Get a Ticket to the NBA Finals, an article written by the former CEO of Ticketmaster, and New Ticketing Technologies Will Open More Doors to Live Entertainment. The short version is that technology and pricing algorithms are critical to the ticket resale market. The future of this market is heavily dependent on the current success of automated purchasing bots, and the debate around their legality/use. There are numerous projects aimed at at reducing the size of the secondary ticket market. Below you will find a deep dive of my findings.

OVERVIEW:

The resale, or secondary ticket market is currently a hot button issue with many artists, teams, promoters, venues and consumers. There is a significant amount of interest in providing fans better access to tickets, and reducing the amount of tickets entering the resale market. Resale ticket companies, like StubHub, and resale ticket brokers are the target of these endeavours and are opposed to this, as it will greatly reduce their potential profits.


BOTS:

The bulk of the frustration with the secondary ticket market stems from the process of primary ticket sales. Ticket brokers have developed automated programs (bots) that can pass through the checkout experience much quicker than a person. These bots typically grab a selection of tickets, which the broker can then decide whether to purchase or not. The attempt to use CAPTCHAs to block bot traffics has been bypassed using inexpensive overseas labor to complete that step.

The perceived problem with this is compounded by the fact that, on average, less than half of the tickets for any given show actually make it to the general sale. There are often multiple pre-sales - which can also easily be infiltrated by brokers - and additional tickets are often sent directly to the secondary market by the artist or promoter to take advantage of the higher prices.

This past December, the United States introduced a new law in an attempt to combat this issue; the Better Online Ticket Sales (BOTS) Act. This new law makes it illegal to resell tickets that were purchased using a bot. As this is a multi-billion dollar a year market, the implementation of the BOTS Act will not likely stop their use. It is more likely that the legislation will stop the use of bots that can be easily identified, and will lead to the development of more sophisticated software that can get around identification.

PRIMARY MARKET PRICES:

The music industry, in particular, is seen as undervaluing their tickets in an attempt to allow fans to afford tickets. This often backfires, as brokers pick up these lower priced tickets and sell them for multiple times the face value. Many have suggested that by increasing the price of tickets in the primary market, not only would the extra money stay in the hands of the artist, but the profitability of ticket resale would be reduced, and bot purchases would decrease allowing more fans to buy tickets first hand. There is the potential to use algorithms similar to those currently being used in the secondary market to determine a more realistic fair market value for tickets. This is, however, a difficult sell to many artists and promoters, as it can make them appear greedy to their fan base.


PAPERLESS TICKETS:

Another means to reduce bot purchases is the use of paperless tickets, which require attendees to present the credit card that was used to purchase the tickets when they arrive at the event. This makes bot purchases nearly impossible and could have a very negative effect on the resale market if implemented more widely. Paperless ticketing is offered as an option to artists using Ticketmaster, but is not often used as it presents problems for individuals who are looking to give tickets as gifts, or who decide to sell tickets if their plans change.


OPEN API DEVELOPMENT:

Open, transparent, easy-to-use software that allows developers to create and improve upon a given technology has helped evolve many other sectors but has not yet taken hold in the ticketing business. This is largely due to the closed, inaccessible nature of the existing system, in which Ticketmaster controls a large portion of the primary market, and has numerous venues and promoters locked into exclusive long term partnerships.

There has been some movement towards this type of development within smaller brands. Companies like Eventbrite and Ticket Evolution have developed flexible and easy to use APIs for ticket sales, allowing developers to create extensions and add-ons and improving integration with other products and services.

Open development has the potential to improve controls within the primary market, which in turn could reduce the size of the secondary market. An open system, for example, could lead to improvements in the buyer authentication process, which is recommended as a means of thwarting bot traffic.

Of course, open development also has the potential to improve and grow the secondary ticket market itself, which could offset some level of reduced bot activity.


DYNAMIC PRICING:

Dynamic pricing has been suggested as a another means to reducing bot traffic. This would work similarly to airline pricing, with demand influencing the price. With this type of system, when a number of bots attempt to buy tickets the price goes up, minimizing the incentive to purchase for resale. Ticketmaster has experimented with dynamic pricing in the past, but has not yet implemented it across the board. Issues that they have noted with this process include the possibility of penalizing fans who buy early if prices drop over time.
SECONDARY MARKET ALGORITHMS:

Within the secondary market itself, proprietary algorithms are used to determine what tickets to buy, to determine what the proper market value of tickets is, and as a tool for sorting listings. Major resale sites like StubHub have traditionally organized tickets using limited sorting options. More recently SeatGeek, an aggregator service for secondary ticket sales, has developed an algorithm that calculates what they call the "deal score," a combined ranking of tickets based on price, seat location, and historical trends. Stubhub has also recently introduced a similar sorting feature for "best value" that takes advantage of their extensive database of historical sales information. Online sales combined with pricing algorithms, both for purchasing and selling, have made the ticket resale market into a multi-billion dollar industry.


MOBILE APP INTEGRATION:

A number of mobile apps have been developed for sports teams in an attempt to influence traffic within the secondary market. These apps aim to guide resale of tickets towards their proprietary secondary markets. They do this by improving fan engagement and incorporating value added features like venue maps, concession menus, and special offers. The apps are geared towards individual resales, not broker traffic.


CONCLUSION:

To wrap it up, technology and pricing algorithms are the backbones of the modern resale ticket market. The main technological influence on this market is the use of bots to purchase tickets from the primary market. The bulk of development that is occurring, and is anticipated to occur in the near future, focuses around the debate around reducing bot sales, and thus possibly reducing the size of the secondary ticket market. Thanks for using Wonder! Please let us know if we can help with anything else!
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