Concert tickets and the free market

Earlier this week I heard another discussion on You and Yours about ticket touting and the ‘no ticket’ scammers that try to rip off gig goers. One comment by the chair of the culture, media and sport select committee had me spitting out my tea, and then laughing heartily.

The story was ostensibly prompted by Muse’s plan to only sell tickets through their own site, so hoping that only the fans who actually want to go (‘the true fans’) can get tickets, as opposed to those who want to buy some and then resell at a higher price. This reselling, known as the ‘secondary market’, won’t be outlawed as government can see the ‘advantages for consumers’ (culture.gov.uk, p. 2), and as society seems to believe in the primacy of the market it would seem absurd to say that reselling has to be at face value. If this were the case, then those who get the tickets are just those quickest to act, and some ‘true fans’ still wouldn’t be able to go. At least with the clearing mechanism of the touts, those who want to go most (as measured by willingness to part with cash) get to go, and one never hears complaints about being able to buy tickets at less than face value from the touts!

But the concern here is the selling of tickets that haven’t been released yet. Of course there are some scammers who pretend to have a ticket, sell and fail to deliver: this is fraud. However, there are others who sell a forward contract on the tickets, taking someone’s money to deliver tickets that they are sure they will have at the point at which they need to sell:

Winifred Robinson: Would you support the idea of making it illegal to sell tickets that you don’t have in your possession? Because often in defence afterwards, these online sellers who don’t deliver will tell you that someone else let them down.

John Whittingdale, MP: Well, if you are trying to sell something you don’t deserve(?), then that is a criminal act in itself…

This is where I laughed. I laughed because selling something you don’t have in your possession is pretty common, and arguably the basis of our entire financial market, and a large part of our non-financial economy too. Futures trading, forward trading and a whole host of derivatives are based on buying and selling ‘promises’ as opposed to the actual commodities or shares.  Even in the old-fashioned manufacturing industries, importation and retail, money can be handed over before the goods are in existence, never mind in the sellers hand (known as ‘paying up front’, and I imagine the MP has heard of this). And sometimes someone further up the chain may let the seller down, and the deal doesn’t happen. Money can be returned, bankruptcies occur, and so on. Some end consumers can make losses like this too: if you pay for a telly online, and then the import company goes bust, you an end up with nothing. I don’t think the government is thinking of making all of this economic activity illegal too… that would be ridiculous.

If regulation is needed to counter the risks of default, perhaps they should start with the financial markets. After all, if we take the most cited reason for the current economic difficulties – sub-prime mortgage defaults – what we find is a number of financial bodies trading in future income streams (the repayments of homeowners) that in the end didn’t come in. They may have been wrapped up in credit default swaps and collateralized debt obligations, but effectively people were trading in the the future monthly payments of householders, as this is where the profit would come from eventually. It wasn’t these payments that were in the hands of the sellers, but promissory notes for these payments, and as we have seen some of these payments aren’t being made. How this differs from selling a gig ticket you don’t own yet, I can’t see.

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