Concert Ticket Industry
Yuki Iwase, Michael Saridakis, Cynthia Sun, Chloe Tao
AEM 4160 – Spring 2015
Table of Contents
1
Introduction
2
Industry
Structure
3
Pricing
strategies
4
Recommendatio
ns
Why we chose the concert ticket
industry
Personal
interest in
concerts
Creative
and
interesting
pricing
strategies
Introduction
Industry Structure
Pricing
influenced
by a variety
of factors
Pricing Strategies
Recommendations
Background: Online concert ticket sales
INDUSTRY BREAKDOWN SEGMENT
OBSERVATIONS
11.0%
Revenue:
Profit:
$4.1B
$338.8M
Wages:
Businesses:
$116.5M
278
13.5%
53.5%
22.0%
Online ticket sales for concerts
Online ticket sales for sporting events
Online ticket sales for the theater and opera
Online ticket sales fairs, pageants and other events
Source: IBIS World
Introduction
Industry Structure
Annual Growth
(2010 – 2015):
3.4%
Pricing Strategies
Annual Growth
(2015 – 2020):
3.2%
Recommendations
Consumers and Major Markets: Consumers aged
35 to 44 are the major market
INDUSTRY BREAKDOWN BY MARKET SEGMENT
OBSERVATIONS
35-44
11.8%
45-64
25-34
 highest
attendance
rate for
nonmusical
plays
 Most likely to
attend
concerts and
sporting
events
26.1%
14.1%
 Established
career
16.8%
24.0%
 Disposable
income
Consumers aged 35 to 44
Consumers aged 45 to 54
Cosumers aged 55 to 64
Consumers aged 25 to 34
Consumers aged 65 and older
Source: IBIS World
Introduction
Industry Structure
Pricing Strategies
Recommendations
Key Industry Drivers: Disposable income and
leisure time
PER CAPITA INCOME TRENDS
LEISURE TIME TRENDS
3.5%
5.4
Hours (per day per capita)
3.0%
% Change
2.5%
2.0%
1.5%
1.0%
0.5%
0.0%
5.35
5.3
5.25
5.2
5.15
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
More likely to
purchase
concert tickets
Disposable
income
Sources: IBIS World, Statista
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Introduction
Industry Structure
Leisure
time
Pricing Strategies
Recommendations
More likely to
purchase
concert tickets
Current Performance: The industry has experienced
strong revenue growth in the years following the
recession
INDUSTRY REVENUE GROWTH
CURRENT TRENDS
4100
4082.4
3941.8
Revenue ($mn)
3900
3827.8
3700
3697.2
3618
Technologica
l innovation
Dynamic
pricing &
other
software
Increase in
disposable
Income
Increase in
profit
margins
since the
recession to
8.3% in 2015
Use of
smartphones
 Mobile
friendly
3500
3448
3412.5
3300
3233.5
3100
2008
Source: IBIS World
2009
2010
2011
2012
Introduction
2013
2014
2015
Industry Structure
Pricing Strategies
Recommendations
Industry Outlook: The industry is expected to continue to
grow in the coming years due to a variety of factors
FORECASTED INDSUTRY REVENUE
EXPECTED TRENDS
5000
4918.6
4900
Revenue ($mn)
4800
4769.2
4700
4621.6
4600
4500
Increased
consumer
sentiment,
spending
power,
advertising
expenditure
Expected
increase in
profit margins
to 8.9% of
revenue by
2020
Expected
increase to 303
ticket-selling
companies by
2020
Customization
&
Personalization
 Social
networks
4478.3
4400
4347.8
4300
4217.2
4200
4100
2016
Source: IBIS World
2017
2018
Introduction
2019
2020
2021
Industry Structure
Pricing Strategies
Recommendations
Cost Structure: Purchasing costs account for the largest
expense category at 56.8% of revenue
Average Costs of all
Industries in sector (2015)
100%
Industry Costs
(2015)
3.0%
10.8%
6.5%
4.0%
2.0%
0.9%
90%
80%
16.0%
70%
2.2%
60%
50%
74.0%
40%
56.8%
30%
20%
10%
0%
Profit
Source: IBIS World
2.9%
8.3%
9.1%
3.5%
Wages
Introduction
Purchases
Depreciation
Industry Structure
Marketing
Pricing Strategies
Rent & Utilities
Recommendations
Other
Barriers to Entry: Overall, the industry has moderate
barriers to entry, with lower barriers for ticket resellers
BASIC TECHNOLOGY
BRAND EXPOSURE
 Internet provides
electronic access to
ticket purchasing,
event information,
etc.
 Large firms benefit
from brand
exposure and large
consumer base
 Initial investment in
website
development is
crucial
Introduction
Source: IBIS World
 Multi-year contracts
represents a
significant barrier to
entry
Industry Structure
Pricing Strategies
CAPITAL & LABOR
COSTS
 Low capital and
labor costs
required
Recommendations
Government Regulation: Enforcing consumer privacy
laws and dealing with mergers in the industry
Merger approved if
Privacy laws
 A few subsidiaries were
sold to create
competitors for the
industry giant
 Federal, state and
international laws
regarding privacy and
storing, sharing, use,
discloser and
protection of
consumer information
and user data
 Certain technology was
disseminated to the
company’s existing
competitors
Source: IBIS World
Introduction
Industry Structure
Pricing Strategies
Recommendations
Competition: Moderate competition in this industry, but it
is expected to continue to increase
MAJOR PLAYERS BY MARKET SHARE
IMPLICATIONS
 ~278 businesses
 Product differentiation
 Scope of events offered, price,
convenience, customer base and
branding
25.9%
 Low globalization
 StubHub expanded into the UK
 Live Nation sells overseas tickets
50.4%
 Small websites are steadily increasing, and
larger companies continue to consolidate
 2010: Live Nation merged with
Ticketmaster
 M&A activity as an attempt for firms to
expand their array of services and
increase their customer base
20.7%
1.0%
Live Nation
Source: IBIS World
eBay
2.0%
Eventbrite
Introduction
SFX
Other
Industry Structure
Pricing Strategies
Recommendations
Competition: Moderate competition in this industry, but it
is expected to continue to increase
MAJOR PLAYERS BY MARKET SHARE
IMPLICATIONS
 ~278 businesses
 Product differentiation
 Scope of events offered, price,
convenience, customer base and
branding
25.9%
CR4 of 49.6%
 Low globalization
 StubHub expanded into the UK
HHI of 1,105.85
 Live Nation sells overseas tickets
50.4%
 Small websites are steadily increasing, and
larger companies continue to consolidate
 2010: Live Nation merged with
Ticketmaster
 M&A activity as an attempt for firms to
expand their array of services and
increase their customer base
20.7%
1.0%
Live Nation
Source: IBIS World
eBay
2.0%
Eventbrite
Introduction
SFX
Other
Industry Structure
Pricing Strategies
Recommendations
Organization: The online concert ticket sales segment of
the industry is broken down into a primary and
secondary market
CHARACTERISTICS
Primary Market
Secondary Market
Sources: IBIS World, FromThisSeat.com
 Ticketmaster/Live Nation
 Box offices and ticket
booths at venues
 Partner with bands and
venues to offer first access
to tickets
 Prices are fixed and set by
the event provider
 StubHub, eBay & Craigslist
 Sell tickets that were
purchased on the
primary market and
then resold
 The seller determines the
ticket prices and adjusts
prices according to
demand
Introduction
Industry Structure
PROS
 Will not pay
above face
value
 All tickets are
legitimate (no
fake tickets)
 Convenience
of buying and
printing tickets
at home
 Tickets are
more often
available
Pricing Strategies
CONS
 Tickets are often
sold out
 Cannot buy
tickets below
face value
 Tickets often sold
above face value
 Tickets aren’t
always immediately
available after
initial sale on
primary market
Recommendations
Major Companies: Live Nation and eBay are the largest
players in the online ticket sales industry
 Primary market
 Largest US online distributor through Ticketmaster
 In 2014, 69% of sales from websites, 18% from mobile
apps
 Has plans to introduce dynamic pricing
 Market Share: 25.9%
Sources: IBIS World, Yahoo Finance
Introduction
Industry Structure
Pricing Strategies
Recommendations
Major Companies: Live Nation and eBay are the largest
players in the online ticket sales industry
 Primary market
 Largest US online distributor through Ticketmaster
 In 2014, 69% of sales from websites, 18% from mobile
apps
 Has plans to introduce dynamic pricing

Share:
25.9%
 Market
Secondary
market
 Entered the online ticket sales industry in 2007 StubHub
 StubHub allows consumers to buy and sell tickets in the
secondary market
 Market Share:20.7%
Sources: IBIS World, Yahoo Finance
Introduction
Industry Structure
Pricing Strategies
Recommendations
Major Companies: Live Nation and eBay are the largest
players in the online ticket sales industry
 Primary market
 Largest US online distributor through Ticketmaster
 In 2014, 69% of sales from websites, 18% from mobile
apps
 Has plans to introduce dynamic pricing

Share:
25.9%
 Market
Secondary
market
 Entered the online ticket sales industry in 2007 StubHub
 StubHub allows consumers to buy and sell tickets in the
secondary market
 Market Share:20.7%
 Primary market
 Allows consumers to create events, and sell tickets online
 $1.5bn in global sales in 2014, and estimated to generate
$91.3mn from US ticket
 Market Share: 2%
Sources: IBIS World, Yahoo Finance
Introduction
Industry Structure
Pricing Strategies
Recommendations
Major Companies: Live Nation and eBay are the largest
players in the online ticket sales industry
 Primary market
 Largest US online distributor through Ticketmaster
 In 2014, 69% of sales from websites, 18% from mobile
apps
 Has plans to introduce dynamic pricing

Share:
25.9%
 Market
Secondary
market
 Entered the online ticket sales industry in 2007 StubHub
 StubHub allows consumers to buy and sell tickets in the
secondary market
 Market Share:20.7%
 Primary market
 Allows consumers to create events, and sell tickets online
 $1.5bn in global sales in 2014, and estimated to generate
$91.3mn from US ticket
 Market Share: 2%




Sources: IBIS World, Yahoo Finance
Introduction
Primary market
Acquired Paylogic in 2013 and Flavorus.com in 2015
Electronic music
Forecasted to generate $41.8M revenue from US ticketing
Market Share: 1%
Industry Structure
Pricing Strategies
Recommendations
Industry Wide Pricing Strategies
Second
Degree Price
Discrimination
Third Degree
Price
Discrimination
Capacity
Constraint
Source: IBIS World
Introduction
Bundling
Dynamic
Pricing
Industry Structure
Pricing Strategies
Recommendations
Second Degree Price Discrimination: Consumers selfselect based on seat location and timing
SCALING THE HOUSE
ADVANCED SELLING
 Price levels by seating in relation to stage
 Each seat offers a unique difference
 Promoters cannot offer slightly different
price for each seat, so resort to “levels”
 Consumers must self-select
 Common for indoor seated venues
 Difficult for standing concerts and
outdoor festival venues
 Price levels by seating in relation to time
sold
 Ticket prices increase as purchase date
closes
 Buyer uncertainty decreases, price
sensitivity decreases
 Common in secondary markets
 Possible in primary markets, release
tickets in “waves” and adjust price
Source: TickPick Blog
Introduction
Industry Structure
Pricing Strategies
Recommendations
Third Degree Price Discrimination: Concert venues
sometimes offer discounts to selected demographics
STUDENTS
 Lower willingness to
pay, more free time
 Supplement education
 found in cultural
performances
 Sponsored by
universities, often
bundled with tuition in
return for varied
discounts
Source: Cornell Concert Series, Wall Street Journal,
VETERANS
 Improves brand image
of the business
 Often more philanthropic
than profit-oriented
 Ex. GOVX
provides a
platform for
veterans to
receive prepurchased tickets
Introduction
Industry Structure
SENIOR CITIZENS
 Similar strategy with
student discounts
 Discounts start from >
50 years old
 Ex. 4 Live
Nation Concert
tickets for the
price of 3
through AARP
Pricing Strategies
Recommendations
Bundling: There are two ways of bundling: offering
multiple perks or multiple artists (or both!)
MULTIPLE PERKS
ARTISTS
High fixed cost
FAN
MERCHANDIS
E
VIP
TREATMENT
CONCESSIO
NS
Source: The Price of Ticket by John Seabrook
•Venue &
equipment
•Personnel
•Headliner
PARKING
FEES
Appeal to
heterogeneity
of tastes
Bundled
with
unrelated
artists
BACK STAGE
ACCESS/MEETAND-GREET
Introduction
Low Marginal
cost of adding
smaller artist
Industry Structure
Pricing Strategies
Recommendations
Capacity Constraints
Still remember
capacity constraints
for hotel pricing?
Underage, Overage,
Booking Limit,
Protection Level
Introduction
Industry Structure
Pricing Strategies
Recommendations
Capacity Constraints Revisited
Introduction
Industry Structure
Pricing Strategies
Recommendations
Capacity Constraints and demand
uncertainty
Costs of holding
large inventories
can be quite high
Capacity
constraints
bind (sold
out)
Introduction
Industry Structure
Source: An economic guide to ticket pricing in the entertainment industry by Pascal Courty
Pricing Strategies
Recommendations
Capacity Constraints for primary market
Not all tickets are sold to the
general public and usually
those best seat are withheld.
Season tickets holders, performers, the venue
operator, news media, the manager and the
Unsold tickets are called
deadwood. The fraction of
unsold tickets may be
substantial.
agent, the record company, the fan club, the
promoter and/or the tour sponsor.
Introduction
Industry Structure
Source: An economic guide to ticket pricing in the entertainment industry by Pascal Courty
Pricing Strategies
Recommendations
Capacity Constraints and Aggregate demand
uncertainty
Secondary
market
Peak load
pricing: Supply
cannot be adjusted
in real time to
respond to demand
changes
Capacity
constraints
Introduction
Factors including
weather
Industry Structure
Source: An economic guide to ticket pricing in the entertainment industry by Pascal Courty
Pricing Strategies
Aggregate
demand
uncertainty
Recommendations
Capacity Constraints and Individual demand
uncertainty
Secondary
market
Peak load
pricing: supply
Total revenue depends on
whether consumers are
allowed to resell implying
that producer will try to
cannot be
adjusted in real
time to respond
to demand
changes
The firm may optimally
ration the market and
underprice
control resale markets.
Aggregate
demand
uncertainty
Capacity
constraints
Introduction
Individual buyers do not
plan ahead
Industry Structure
Source: An economic guide to ticket pricing in the entertainment industry by Pascal Courty
Individual
demand
uncertainty
Pricing Strategies
Recommendations
Dynamic Pricing is a highly useful tool
Practice of raising or lowering
the cost of a ticket in real time,
based on demand and other
factors, such as the weather,
team standings or sales of an
artist's most recent single,
among others
Ticketmaster continue to roll out
its dynamic pricing model,
which relies heavily data
analytics and secondary market
DYNAMIC PRICING
is difficult to engage
Introduction
“Generally we see the really
good seats are underpriced.
The dynamic pricing is a way ...
to really take the money on the
secondary market and get that
in (promoters‘ and artists’)
pockets instead” - Forese
Industry Structure
Source: Ticketmaster’s dynamic pricing effort relies heavily on secondary market by Alfred Branch
Pricing Strategies
Recommendations
Scalping is a form of arbitrage that leverages
demand and supply
1
2
Promoters encourage
arbitrage when they do not
price tickets according to
market forces (house is not
fully scaled)
Efficient allocation of
resources by
capitalizing on
willingness to pay
Introduction
Early buyers may not be
those consumers who
value the ticket the most at
the consumption date
Charge more than
face value
Industry Structure
Source: An economic guide to ticket pricing in the entertainment industry by Pascal Courty
Pricing Strategies
Hurt bottom line of
primary market
players
Recommendations
Resale laws in general are lax
Different legal jurisdictions treat
ticket reselling differently,
ranging from entirely legal, or,
while nominally restricted,
enforcement is lax
Places like Knoxville,
In other places
Clemson, and Auburn have
enforcement of laws
ticket-scalping markets that
constrains behavior
operate openly with a great
even if not eliminating
deal of breadth to the market
Introduction
Industry Structure
Source: An economic guide to ticket pricing in the entertainment industry by Pascal Courty
the practice
Pricing Strategies
Recommendations
Prevention of scalping
1
2
Rationing the
quantity a single
buyer can get
Introduction
3
Requiring that buyers
pay with a credit card
to control large
In extreme cases, selling
non-removable bracelets
and admitting only
bracelet- wearers at the
purchases
consumption date
Industry Structure
Source: An economic guide to ticket pricing in the entertainment industry by Pascal Courty
Pricing Strategies
Recommendations
Relationship of price to number of days until event
300
Relationship price vs. number of days until event
250
y = 0.2958x + 64.608
R² = 0.0916
200
150
100
50
0
0
20
40
Introduction
60
80
Industry Structure
100
120
Pricing Strategies
140
160
Recommendations
180
200
Relationship of price to day of event
Average Ticket Price Per Day
90
84.86
80
70
72.76
74.02
TUE
WED
72.99
77.43
76.65
SAT
SUN
62.66
60
50
40
30
20
10
0
MON
Introduction
Industry Structure
THU
FRI
Pricing Strategies
Recommendations
Relationship of price to genre/artist
Alt-J
Price = 4.89e+01 + 5.194e-04*Median Income
Gaga/Bennett
Price = 1.751e+02 -1.320e-01*(Number of
Tickets Left) + 1.05e-05*(Population)
Imagine Dragons
Price = -52.396096 -.004638*(Number of
Tickets Left) +11.098599*(LN(Median Income))
Introduction
Industry Structure
Pricing Strategies
Recommendations
Relationship of price to genre/artist
Average Price vs. Genre
160
140
120
100
80
60
40
20
0
Jazz
Introduction
Rock
Country
Industry Structure
Hip Hop
Indie
Pricing Strategies
Rap
Recommendations
Pop
Relationship of price to number of tickets left
Price vs. LN (number of tickets left)
300
250
y = 1.4093x + 69.326
R² = 0.0028
200
150
100
50
0
0
Introduction
5
Industry Structure
10
Pricing Strategies
Recommendations
Introduction
Industry Structure
Pricing Strategies
Recommendations
Relationship of price to seating
Introduction
Industry Structure
Pricing Strategies
Recommendations
Key takeaways for three different stakeholders
TICKET BUYER
TICKET SELLER
The closer the date it is
to the event, the
cheaper the price will
be (Exceptions do
exist)
Pricing and seating
highly correlated
Capitalize on scalping
and secondary market
 Trend of increase use of
social media and mobile apps
 Primary seller:
 Utilization of dynamic
pricing
 Need for tighter
regulation for scalping
 Secondary seller
 Keep innovating
alternatives of
engaging buyers
 Potential tighter
regulation
Introduction
Industry Structure
Pricing Strategies
INVESTOR
 From a stock market
analyst view: not the best
industry for stock market
because not many publicly
traded firms
 Smaller startups that sell
tickets for niche events
have become more
prevalent, so this could be
interesting from a venture
capital perspective
Recommendations
T H A N K Y O U