Opinion

Felix Salmon

The dynamic economics of LCD Soundsystem tickets

By Felix Salmon
February 19, 2011

A clear narrative emerged pretty quickly in the wake of last week’s LCD Soundsystem ticket fiasco. Annie Lowrey tried and failed to get tickets when they went on sale at 11am on Friday, but was foiled:

Had something gone awry? I quickly checked Twitter. Nobody—really nobody, it seemed—had gotten through. Perhaps there was a problem with the site?

No. As it turned out, the show had sold out within seconds. It is just that professional ticket resellers, otherwise known as scalpers, had scooped up the bulk of the seats. Within minutes, hundreds of them were available on StubHub and other secondary markets where sellers can charge whatever they want. Tickets with a face value of $49.50 were going for 12 times that—with some coveted spots in the general-admission dance area going for thousands of dollars.
How did they do it? With bots. Computer systems—not particularly sophisticated ones, either—submit tens of thousands of requests for tickets the very instant they go on sale, crowding regular folks out.

This story seemed to be confirmed by LCD Soundsystem itself, with a profanity-laden posting blaming scalpers for the problem and presenting new shows at Terminal 5 as the solution. As Lowrey puts it, frontman James Murphy “realized he had an ace up his sleeve. He flooded the market, adding shows, upping ticket supply, and hopefully pushing prices down.”

For anybody who loves both music and teachable moments in microeconomics, the subject was irresistible. Lowrey’s post was followed up by Matt Yglesias, who drily declaimed that “optimal allocation of LCD Soundsystem tickets requires demand-responsive ticket pricing” if scalpers aren’t going to end up collecting rents. And Rob Cox, after looking into the matter, concluded similarly that what we’re seeing here “offers a strange insight into the laws of supply and demand”.

But in fact the story of these shows is much murkier than all this pop-economics punditry would have you think. Bob Lefsetz, who has real-world experience of how tickets are sold in practice, says that far from selling out 13,000 tickets at the public on-sale date, LCD Soundsystem in fact only sold 1,000. He notes:

James Murphy could publish exactly how many tickets go on sale to the general public, but he doesn’t want to. No act wants to, they’re afraid of the public outcry. This information is available to acts, but they don’t want to disseminate it.

After publishing his analysis, Lefsetz then mailed out a letter he received which lays out an intriguing counternarrative. What if the MSG show has not, in reality, sold out at all? The conspiracy theory goes like this: LCD Soundsystem’s promoter, Bowery Presents, owns Terminal 5. By holding back most of the MSG tickets, secondary-market prices would be sure to skyrocket. The way that MSG is structured, the coveted general-admission area in front of the stage is actually pretty small, which means that it’s quite easy to generate a handful of headline-grabbing offers of tickets for sale at $10,000 apiece or more. If they wanted, LCD’s promoters could even put those offers up themselves, and then encourage the band to complain in public about the exorbitant prices.

After getting everybody’s attention by artificially clamping down on the supply of MSG tickets, LCD’s promoters can then easily sell out four or more shows at their own venue, Terminal 5, which by coincidence just happened to be unbooked in the run-up to the MSG gig. Given all the buzz that this activity creates, the unsold MSG tickets can then be quietly disposed of on StubHub and other secondary-market sites.

I suspect that there’s more than a little truth in the conspiracy theory. For one thing, the number of tickets available on StubHub did not actually increase appreciably after 13,000 tickets were purportedly sold out in seconds. On top of that, we’re in mid-February already; it’s definitely weird that Terminal 5 was set to be completely dark from March 20 through March 31, with the exception of a single show on March 25. And it’s even weirder that no one — no one at all — got public tickets for the MSG show when they supposedly went on sale en masse: the only people who have gotten tickets in the primary market did so on the pre-sale dates or through tickets allocated to American Express.

The fact is that concert promoters, like art dealers, are fiercely protective of the asymmetric information advantage they have over the general public. Bowery Presents, the promoter of these shows, knows full well how many tickets were sold to the MSG show, and when. But they’re not releasing that information, because it’s very much in their interest for everybody to believe that 13,000 tickets sold out in a matter of seconds.

I don’t think that’s possible. Bots are sophisticated, to be sure, and anybody familiar with high-frequency trading on stock exchanges knows how quickly financial transactions can take place electronically. But Ticketmaster is not set up as a high-frequency exchange, and indeed puts up obstacles designed to make it harder for bots to buy lots of tickets quickly.

On top of that, bot-wielding scalpers had no particular reason to believe that LCD tickets would become hugely valuable on the secondary market, given that the band had never played a show of remotely MSG’s size in the past. I can see them buying a few hundred tickets over the course of 15 minutes or so; I simply don’t believe that they bought more than 10,000 tickets in the space of less than 15 seconds. I don’t believe they wanted to, and I don’t believe they’re capable of doing that even if they did want to.

People sympathetic to the band, like Rob Cox, claim that LCD Soundsystem and its promoters didn’t understand the economics of scarcity when they put the MSG tickets on sale. I, by contrast, think they understood the economics of scarcity all too well — and successfully used it to generate buzz and publicity. What really happened here, I think, is akin to the IPO of theglobe.com back in 1998, where the supply of new shares was so tiny that the price soared from $9 to $97 on the first day of trading. In turn, that generated lots of headlines, and ensured that the number of people who had heard of the website increased by orders of magnitude.

Supply and demand for concert tickets aren’t static numbers which then get reflected in prices. There are complex feedback loops here too: scarcity and price mechanisms can feed back into increased demand for tickets. Certainly this story has meant a large increase in the number of people who know that LCD Soundsystem is playing its last-ever gig at MSG in April. It’s surely naive to think that all the second-order effects here were completely unintended.

Comments
11 comments so far | RSS Comments RSS

Not to throw a ton of cold water on the Bowery Presents conspiracy theorist you quote, but a couple of other facts might be helpful (on both sides):

1) LCD Soundsystem doesn’t need a “last show” to sell out Terminal 5 for four nights in a row–they did it last year with no problem at the same $35 ticket prices. The sellouts weren’t instant, but they were fairly quick, and there was signficiant secondary market demand (average stubhub prices around $75-80, which for an all general admission show is a decent bump (since every ticket is the same and your are highly susceptible to individual undercutters0.
1a) LCD Soundsytem is big in NYC, but not so much elsewhere–they managed to not sell out the Wellmont Theatre this September. Wellmont is a considerably smaller venue than Terminal 5. (Their opening act–Sleigh Bells–just sold out both the Music Hall of Williamsburg and WebsteR Hall, so that should have only added to the demand).

2) LCD and Bowery Presents have a long history of hyping shows together–last year, LCD played a last minute show at the Music Hall of Williamsburg that sold out instantaneously (their first show supporting the new album), and a show at Webster Hall that sold out just as quickly. They used smaller venues to 1) “thank the fans”, and 2) generate buzz. Both sides know what they are doing in New York. The Music Hall of Williamsburg show was willcall only–LCD knows how to do ticketless, and so does Bowery Presents (see, e.g., Kanye West at the Bowery Ballroom in November).

3) The delay in getting the Terminal 5 shows actually set up (e.g., on the Bowery Presents website, available for purchase, etc) tends to go against the idea that this was all predetermined. Or that’s what they want us to think.

4) There are plenty of times that T5 is dark–see, e.g., the first two weeks of March (4 shows, maybe), the week of April 3, and almost the entire month of May. (Also, off-topic, let’s talk about how bad the sound quality is at that venue)

5) James has a history of making things up. (See, e.g., his 45:33 release):
“Would I lie to you?

Well I lied. I made [conceptual jogging soundtrack] 45:33 for Nike and I don’t even jog. I said I did but that was a total lie. I just wanted to make a record like E2-E4 by Manuel Göttsching. I was mourning that fact that music had changed and you could no longer make a record like that. I could have taken that into EMI but it’d be a bit pretentious. People expect songs. I wondered how I’d ever find the time and justification to do something like that, and that was perfect. But as far as running to test it, I didn’t even expect it to be for running. I wrote these liner notes which I find really funny but nobody seems to think they’re a joke. I’m not built to run. I’m built for fighting, not running away!”

http://www.guardian.co.uk/music/2007/feb  /10/electronicmusic.features16

6) If Taylor Swift and Lady Gaga can’t sell out in 15 seconds (try 30-60, but they have a much broader audience and have been very, very good for most ticket brokers), then something was particularly screwy with this onsale.

Posted by JDIBD | Report as abusive
 

JDIBD, great comment!

Agree with you on sound quality at Terminal 5. The same is true of sightlines. And location. And door management. And everything really. I have a theory that the opening of Terminal 5 marked the point at which Bowery Presents officially became evil. But I do still love Bowery Ballroom.

Posted by FelixSalmon | Report as abusive
 

as far as I can see, every single point in JDIBD’s comment strengthens the conspiracy theory. The last LCS shows sold for $35-$70, Terminal 5 is frequently dark, the frontman lies a lot. the only possibly “anti” argument is that it took time to get the t5 shows organized, which is of course entirely within the control of the promoter and the band.

Posted by johnhhaskell | Report as abusive
 

So, ahhh… this “LCD Soundsystem” is some sort of musical ensemble?

Posted by MattF | Report as abusive
 

Interesting theory, you should point out that Bowrey Presents is the promoter for both the MSG and T5 shows (they aren’t the promoter for all LCD shows) which makes this theory more viable.

More interesting, on The Bowrey Presents’ own web site the MSG show is not showing as sold out even though a ticketmaster search reflects that no tickets are available.

However, this begs a larger question…Let’s say assuming LCD can sell out Terminal 5 which isn’t a strecth. Can they sell out T5 4 times over and fill MSG? That has to assume every fan in the NYC area who has ever had interest in seeing them is going to attend the MSG show. If not, how many tickets is BP holding back? It would have to be thousands, 3K? 4K? 5K? Then how the hell do they sell all of those tickets? There are about 850 on stubhub right now, it would be difficult to sell thousands of tickets for this event in a span of 5 weeks. If they don’t they’ll take a significant loss on the MSG shows thus making the T5 shows a wash.

Posted by Jetty | Report as abusive
 

Oh and if BP is in fact holding back thousands of tickets they are going to be stuck, those tix aren’t really tearing up ebay.

Posted by Jetty | Report as abusive
 

It would be interesting to see a Vickrey/OpenIPO/AdWords-style auction of concert tickets.

Posted by doriantaylor | Report as abusive
 

Wow. What a fascinating theory to present without a shred of supporting evidence . Whether or not it’s possible to sell out 13,000 tickets in a few minutes is irrelevant, because they didn’t. What you might realize if you did a shred of research was that not all tickets were on sale to the general public. I bought mine more than 15 minutes after sale began from the sections reserved for Amex customers, and I got floor seats. (Back of the floor, but still.) Then again, maybe I’m PART OF THE CONSPIRACY and I just don’t know it.

Posted by SamuelAAdams | Report as abusive
 

Let me preface this comment with two things: first of all, I am a ticket broker. I am not a scalper. I have been in the ticket industry for the better part of a decade, have an office and pay my taxes just like any other small business. I also happen to be a fan of LCD Soundsystem since the beginning and have seen him several times live.

With that said, anybody that thinks this is a “conspiracy” by James obviously does not have a grasp on how the ticket industry works as a whole. Furthermore, James’ entire rant, while I understand he was frustrated, was just absolutely ridiculous.

The truth of the matter is that there are about 4,000 active ticket brokers in the country, give or take a few hundred. Of those 4,000 brokers there are maybe less than 50 that actually have “bots” or automated computer programs that give them any sort of advantage when tickets go on sale to a popular live event. The media and artists love to talk about these programs like they are common, when in reality, they cost tens of thousands of dollars and are only owed by large brokers who have 7 figures to throw around freely without thinking twice. The rest of us buy tickets just like any other fan when onsales or pre-sales go live; we are just usually a little bit better at it because we buy tickets every single day multiples times a day whereas the average fan buys tickets to a popular event maybe once or twice a year.

In his rant, it is obvious that James of LCD Soundsystem does not understand tickets or how the industry works by saying things like “MSG holds 50,000 tickets but they are only having 13,000 seats available for our show.” I have no idea what planet he is living on, but at it’s FULLEST capacity, MSG holds 18,000 people. So if you have a public on-sale for a popular artist and each person buys an average of 2 tickets, that is 9,000 people buying 2 tickets when the event goes live. Seeing as how this was advertised heavily as James’ last show ever as LCD Soundsystem, I am sure fans from across the country and across the world made plans to be at this show. It does not surprise me at all that this sold out as quickly as it did, as LCD appeals to the hipster audience from 18-35, most of which have the money to travel to NYC for a show like this. This is not a regular New York show so you cannot compare it to any previous shows that LCD has done in NYC or otherwise. It is a LAST show. And people bought tickets at the rate of which it did because it was a last show.

Lastly, the MOST number of tickets that have been on the re-sale market for this show has not exceeded 400. And that is combining every broker’s tickets that they have listed across the country. 95% of the tickets on Stubhub are from brokers (SH does not actually hold tickets, they are just a marketplace) so that is included in that figure. So if James or any pissed off fan wants to sit around and blame brokers for selling this show out, they can. But the fact of the matter is that about 5% of the tickets were bought with the specific intent to re-sell them. The rest of the ticket sales, assuming none of the tickets were held back for any reason, went to dedicated fans across the world willing and ready to travel to see an artist they love play a final show at the most famous arena in the world.

Posted by Limbeck | Report as abusive
 

Limebeck, there are 840 tickets on stubhub alone right now. Couple that with the hundreds on ebay and that has to be well over 1000 to buy online right now.

However I disagree, you can alway compare last shows to other shows. It’s pretty easy to do just that. You’d have to imagine less than 1% of attendees will be flying in for a final show…let’s say on the high end 5%, it still seems unlikely that everyone who has seen this band ever in the NYC area will buy a ticket to fill out a venue more than 4x the size of T5.

And promoters always hold tickets back, always. The question in this case is how many the promoter held back.

Posted by Jetty | Report as abusive
 

wow. tons and tons of conjecture, in the article and comments alike. basically all hot air here. why, people, why?

Posted by werdyo | Report as abusive
 

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