Sat, Sep 07, 2024 page9

• Surge pricing for Oasis tickets spurs misplaced fury

  Dynamic pricing, although it might be unpopular, is an efficient way to match supply with demand

  • By Matthew Brooker / Bloomberg Opinion
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  The use of “dynamic pricing” to sell tickets for the first Oasis concerts in 16 years has mired the British band’s heralded reunion in controversy before it has even begun. Fans waited for hours on Live Nation Entertainment Inc’s Ticketmaster Web site during the weekend, only to see prices jump by multiples by the time they came to pay, prompting hundreds of complaints to advertising regulators, outrage from members of parliament and even the promise of a government probe. Some of the ire is misdirected.

  We have heard this tune before. Singers Taylor Swift and Bruce Springsteen are among artists who have run into similar furors in the US, where flexible ticket pricing has a longer history. In the UK, the sale of singer Harry Styles’ tickets using the method attracted criticism in 2022. The Oasis affair brings the issue to a different level of public attention, though.

  The British pop band’s reunion tour would be one of the cultural events of next year, at least among those who pine for the 1990s — a distant era when the UK was a more optimistic country and the economy was in great shape.

  

  Illustration: Tania Chou

  An estimated 14 million people were expected to seek tickets, British press reports said. Mess with that demographic at your peril. It clearly includes a number of the current parliamentary intake.

  “Scandalous,” “depressing” and “definitely cause for an investigation” were among members’ comments published on Monday.

  British House of Commons Leader Lucy Powell said she paid more than double the initial quoted cost for an Oasis ticket. Powell told BBC radio she did not “particularly like” surge pricing, before adding: “It is the market and how it operates.”

  Precisely. Anyone who waited hours on the Ticketmaster Web site for a ￡148.50 (US$195.59) ticket, only to be presented with a checkout price of more than ￡350, has good reason to be irritated. However, the advantage of a flexible pricing system is that it equalizes supply and demand. Tickets end up in the hands of those who value them most, in money terms. In economic terms, it is a more efficient allocation of resources.

  This can get obscured. Dynamic pricing has been around for a long time and is widely used for everything from ride-hailing and flights to hotel rooms. It has even spread to restaurants and beer. That has not made it any more popular. An image of price-gouging attaches to the practice, perhaps because the most memorable examples tend to be negative — such as Uber prices jumping by multiple times as people tried to escape the London Bridge area after a 2017 terrorist attack in the UK capital. Examples of companies lowering prices at times of low demand are more easily forgotten. After all, humans are more averse to losses than they are pleased by gains.

  Consider the position of a concert promoter. Pitch the cost of a ticket too high, and you might end up with half-empty arenas. Go too low and touts, or scalpers, would rush in and resell at a profit in the secondary market. They capture the excess value that would otherwise have gone to the artist and promoter. Dynamic pricing enables musicians to retain more of that surplus, which is the argument advanced by Ticketmaster and others for using the mechanism (ticketing platforms that earn a percentage also benefit from higher prices, of course).

  The UK reaction betrays some muddled thinking. The government would examine dynamic pricing as part of an upcoming consultation into the ticketing market that is aimed primarily at tackling scalpers.

  The government plans to end the “scourge” of touts and ensure tickets “at fair prices,” British Secretary of State for Culture, Media and Sport Lisa Nandy said.

  Who decides what a “fair” price is? The implication is that the prices set by the Ticketmaster algorithm were too high, but the evidence for that is dubious. The cheapest ticket for Oasis’s July 25 date at Wembley Stadium in London was ￡740 on secondary sales Web site Viagogo as of Monday morning, or more than double the ￡350-odd Ticketmaster cost that caused outrage. That is a clear sign that some money was left on the table. Forcing sellers to set a lower price by fiat would only hand more profit to scalpers (which few governments or consumers like, but no one has found an effective way to eradicate).

  That is not to say that any ticketing system is perfect or beyond scrutiny. If you are going to spend 11 hours waiting for your dream gig ticket, you would at least want to know that the price might have doubled by the time you get to the front of the line. This seems to have come as a surprise to many.

  Companies that use dynamic pricing must be transparent about it, although “people can always choose not to buy,” London Business School marketing professor Oded Koenigsberg said.

  There is also a social equity argument here. What if the market clearing price is more than some of the band’s core fan base can afford? That is a special irony for Oasis, whose image leans heavily on the band’s working-class Manchester roots (guitarist Noel Gallagher in 2022 said that rock music had become too middle class).

  Charging what the market is to bear is not always the wisest strategy, at least for companies that want to retain consumer loyalty. Uber Technologies Inc cancelled surge pricing on the night of the 2017 attack and refunded customers who had paid the higher prices.

  Such considerations might count for less with rock icons, who can usually count on the devotion of followers. Oasis could surely do something for its priced-out fans if it chose, though. It is an appeal that makes more sense than railing against a pricing mechanism.

  Matthew Brooker is a Bloomberg Opinion columnist covering business and infrastructure. Formerly, he was an editor for Bloomberg News and the South China Morning Post.
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