What do Taylor Swift, Bruce Springsteen and Hamilton on Broadway all have in common? They are using Ticketmaster’s Verified Fan program to keep the scalpers from making a fortune on their events.
At first glance, this is a big “so what?” If the artist and a venue is willing to sell a ticket for $50, then they get their $50 regardless of who bought it from them. If a fan is willing to spend $500 to see an artist and they can get a ticket from a scalper for only $300, they are happy too.
Notice that the fan captures $200 of economic surplus. She was willing to pay $500, but only paid $300. There is almost always some economic surplus for the buyer in any transaction. The only time there wouldn’t be economic surplus is if the amount the fan was willing to pay was exactly equal to the price.
Given this scenario, the obvious recommendation is that artists should charge the $300 (or $500). They are providing the experience. They should get the reward. However, artists don’t price at these high prices because they want to build and maintain a large fan base. If Taylor Swift suddenly started charging $300 for tickets, her fans could get mad and become less fervent.
Scalpers then get paid for being the bad guy. They buy tickets at list prices, and then resell them for a profit, sometimes a huge profit. Fans blame the scalpers, not the artists.
Enter Verified Fan. You have to register at Ticketmaster. They will comb your social media sites to verify that you really are a fan, and then they may give you access to tickets at list price. You don’t have to go through a scalper.
Let’s go back to the original scenario. The artist and venue are happy with $50 per ticket. A fan is willing to pay $500. Now the fan is able to buy the ticket at $50 which results in $450 in economic value. Think about that. You are willing to pay $500 but can buy the ticket for $50. Your fanaticism increases.
Of course Ticketmaster should be taking a fee for this service. This may be either added to the ticket price or taken out of the share for the artist and venue. Regardless, fans are happier, artists are happier and Ticketmaster is happier. The only people hurt are the scalpers, and who likes them anyway?