Scalping Hamilton

from Market Design at on July 31, 2016 at 06:49AM

The NY Times has the story: How Scalpers Make Their Millions With ‘Hamilton’

"For most of May, the median price of a ticket on the secondary market was around $850. Between the Tonys and the July 9 performances, it pushed toward $1,600. Before Mr. Miranda’s announcement of his departure, ticket holders were offering a seat for the July 9 performance at an average of $2,700. With the news of his exit, the average asking price quickly climbed to $10,900 a seat.

"Mind you, the average face value of a “Hamilton” ticket was $189.

"Scalping can be explained with high school textbook economics. When ticket prices are set too low to balance demand against the supply of seats, any person holding a ticket can find a sea of buyers willing to pay more than asking price for the seat.

"Increasingly, that ticket holder is not a guy at the theater door with an extra ticket. It’s a person employing sophisticated software, a so-called ticket bot, to buy a huge number of tickets moments after the theater releases them. In the time a human buyer can find the calendar feature on a ticket site, a scalper’s network of hundreds of bots has already bought the maximum limit of tickets for multiple days of shows.

"Because the secondary market is scattered across dozens of websites and storefront services, its size is hard to establish. Overlapping ticket inventories also make prices hard to track. Websites like StubHub, SeatGeek and Ticketmaster re-list more than 35 percent of the 1,321 seats sold in the Richard Rodgers Theater, on average, for each of the eight “Hamilton” performances a week. By placing initial box office sales and secondary market resales side by side, they provide a veneer of legitimacy (and an illusion of regulatory transparency) for scalpers.

"Such a strong scalper-driven secondary market is relatively new to Broadway, though sports fans and concert goers have long encountered inflated prices for big games or Beyoncé concerts.

Every performance of “Hamilton” is a miniature Super Bowl, in terms of demand and resale activity. Fans can still get a seat at “Hamilton” for less than a thousand dollars, if they are willing to wait for it — either buying months in advance from the theater or just hours before a performance, as scalpers drop their asking price.

"Looking across nearly 100 days of “Hamilton” performances, we found that the median resale ticket price was nearly $1,120 a seat. By our analysis, scalpers were earning more than six times what they paid for their tickets.

"The “cheap” seats in the mezzanine and orchestra sides sell for more than 10 times their face value on average. Premium orchestra seats sell for nearly six times their face value on average.

"For a website that is trying to detect scalping, the challenge is finding the bots among the humans. It is not as easy as it sounds. To avoid detection, sophisticated scalpers use bots designed to look like humans, although they use the website far more efficiently. Bots don’t misclick or need to use the delete key, though they may do that as well, in order to further obscure the evidence of a nonhuman purchase.

"The masquerade is important because “Hamilton” cancels what it deems to be bulk ticket purchases. The lead producer, Jeffrey Seller, has described canceling the purchases of one bot that had accumulated 20,000 tickets for “Hamilton.”

It is an uphill battle. Bot-driven ticket buying has been illegal in New York since 2010, yet its use is still widespread. When they are networked, bots can play a big role in distorting ticket prices. Bots can drive significant traffic on, up to 90 percent of ticketing-purchasing activity at times."