The West’s top musical acts all play Los Angeles (population 3.8 million), one of the world’s great concert cities. Legendary singer Van Morrison scheduled his new U.S. tour to start there in October—two nights at the famous Orpheum Theater, Oct. 19th and 20th. But then some guys from New Hampshire called him.
Morrison’s tour schedule had him flying to L.A. from England, where he is set to perform at the 1,700-seat Brighton Dome on Sept. 27th and 28th. The enterprising team behind Jimmy’s on Congress, a hot young jazz club in Portsmouth and one of the best music venues on the Eastern Seaboard (really), spied an opportunity. According to New Hampshire Business Review (NHBR), they reached out to Van Morrison’s team to see if he could stop in Portsmouth for a pair of shows on his way to L.A.
This is a little like the Toledo Mud Hens asking the Los Angeles Dodgers to stop for a three-game series on their way to New York. Van Morrison plays in large theaters that seat thousands. Jimmy’s is a night club that seats 312, mostly at tables and the bar (where the cocktails are great).
It was a plan so crazy it just might work.
The booker at Jimmy’s told NHBR that Van Morrison’s team said he could do it on one condition, NHBR reported. The club had to make some tickets available through Ticketmaster’s dynamic pricing system.
The old-fashioned way of selling concert tickets is to use a fixed price. That’s the number that used to be printed on paper tickets (remember those?). Anyone who tried to get tickets to hot shows in the 1970s and ‘80s can tell you the problems with that system. You had to go wait in long lines at the venue (or try to get through on the phone), and the top shows would sell out quickly, with no way to find second-hand tickets other than answering a newspaper classified ad that you hoped was real, knowing a guy who knew a guy who knew a guy whose girlfriend couldn’t go that night, or traveling to the venue the night of the show in the hope that someone would sell you a ticket on the street.
Today’s technology lets anyone anywhere have a chance at buying tickets online, which obviously has its own drawbacks, most notably quick sellouts and sabotage by bots. It also lets venues adjust ticket prices in real time, which is a feature not a bug.
Using dynamic pricing, the most valuable seats for a high-demand show will rise in price until they hit their market clearing value. People outraged by this system think the “actual price” or “true value” of a concert ticket is whatever number the venue decided to offer the tickets for the moment they went on sale. But that number doesn’t mean much.
As we discussed previously, a ticket’s printed price isn’t necessarily the actual market value. It’s usually set somewhat below market value to encourage a sellout. Venues make more money on concessions, so their incentive is to fill the seats.
With dynamic pricing, tickets start at a certain price, but as in an auction the price can change if more people keep bidding for the same item.
Jimmy’s used dynamic pricing for some of its Van Morrison tickets. The top seats there went for $2,502.50 and $3,102.50 each, plus more than $500 in fees, according to NHBR.
After the show sold out, the predictable complaints about “price gouging” could be heard on local talk radio and on social media. People claimed that Van Morrison finally came to New Hampshire and they were denied tickets because the prices were so high.
Wrong.
Van Morrison came to New Hampshire only because the prices were so high.
His October 19th show in L.A. sold out immediately. Tickets for the October 20th show range from $183.40 in the back row of the balcony to $344.85 for a restricted-view seat in the second row of the orchestra. Sorry, but you were never going to see him for $100 at a 312-seat club in Portsmouth. To make that small venue work, prices had to be many times higher than for one of his regular shows.
Dynamic pricing didn’t deny Granite Staters a chance to see Van Morrison. It gave Granite Staters a chance to see Van Morrison. Far from being “gouged,” fans were given a once-in-a-lifetime opportunity to see one of the greatest pop singers of the last 60 years at a small club in northern New England. Honestly, that’s amazing.
In the last legislative session, some legislators who don’t understand how prices work tried to ban “ticket scalping.” After this week, you can be sure someone will try to ban “gouging” as well as “scalping” next year.
All such bans are really efforts to impose by law an economic misconception, which is that “price” is the same as “value.” It isn’t.
A price set by a vendor might or might not be close to the actual amount of money consumers are willing to pay. When it isn’t, prices adjust up or down depending on the behavior of consumers.
No one complains when vendors have to slash prices to clear inventory that they priced too high. But somehow it’s supposed to be immoral if vendors, either at the point of sale or in a secondary market, see that the initial price was too low and adjust the numbers up rather than down.
Calling this immoral is nonsense. Trying to ban it is harmful. Everyone would be better off if legislators stayed out of the way and let concert prices sort themselves out in an open and competitive marketplace. Consumers are best served when their preferences are expressed through the market rather than invalidated by government edict.
Governments only ban what people would otherwise do voluntarily. If people would willingly pay thousands of dollars to have dinner eight feet away from Van Morrison in Portsmouth, as opposed to spending thousands to fly to England or California to see him in a large venue, the government has no business trying to stop them.