Wednesday, August 18, 2010

The law of supply and demand meets the scalpers at Fenway Park

As if this bummer of an economy wasn’t enough of a drag, the scalpers hawking tickets are coming up against something we haven’t seen in these parts in years: Red Sox fatigue.  Home games – which have been sell-outs since May of 2003 – are still selling out. But that’s largely because the scalpers are holding the bag on a lot of seats. If you look around America’s Most Beloved Ball Park (soi disant), it’s possible to see scattered blocks of empties.Gasp!

Now there are days where [one of the scalpers interviewed] struggles to get 50 percent above face value.

While the scalpers are doing their own WTF-ing about why this is so, I’m sure that the great minds in the Red Sox organization are analyzing this one every which way they can think of,. And I suspect that there are enough root causes to keep business analysts working overtime.  Over exposure. Over marketing. Waning interest among “fans” who really didn’t care about baseball and/or the Red Sox to begin with. (These are referred to locally as pink-hatters, i.e., those who don’t even know what color the real Red Sox cap is. Hint: it’s not red.)

Other possibilities: a jaded fan base that, two World Series rings later, doesn’t so much live and die by the Olde Towne Team with quite the intensity we used to.

Years ago, Marty Nolan, a political reporter for the Boston Globe, famously wrote about the Red Sox: They killed my father, and now they’re coming for me.

For a lot of us lifers, that pretty much summed up our relationship with the Red Sox: intense, aggravating, consuming, life-shortening.

I can still get riled up about this team, snapping off the TV when I’ve seen enough. But it’s nothing like how I used to be when I would quite literally take to my bed with the covers over my head during tense games where my long history as a fan caused me to predict a terrible outcome. You think I’m kidding?  I missed most of the legendary Red Sox comeback games against the Yankees in 2004, and relied on my husband to relay updates to me while I sat in bed with the covers over my head. I did watch all of the seventh game of that series, only because I realized after Johnny Damon’s first inning homer that things were going to be all right. The World Series that year was a foregone conclusion.

Three years later, the 2007 World Series win was gravy.

Now? I’m not saying I want the old days back – when I first began watching baseball, the Sox were cellar-dwellers – but the feelings are not quite the same these days.

Meanwhile, a key root cause of the decline of interest in the Red Sox is the fact that the product this year is pretty ho-hum.

I’m wouldn’t (yet) go so far as to use the term mediocre – they’ve still got a shot at something, and they do play in the strongest division in baseball – but this year, most of the A-list players have spent long chunks of time on the disabled list – including the two biggest spark-plugs  (Pedroia and Youkilis), and the cutest player(Ellsbury).

The Red Sox results to date have been pretty lackluster, and the team hasn’t fared all that well against other contenders. It’s conceivable that they’ll make it to the play-offs, but it’s not likely that they’ll make it very far. (Qualifier: never say never.)

Bottom line: scalpers can’t command the big bucks they’ve enjoyed the last few years.  Unless the Yankees are in town, there just aren’t that many folks willing to pony up $100 for an SRO “seat” with face value of $25.

Yes, the laws of supply and demand are at work: the guy trying to get $100 for that SRO ticket probably commands more than that for a big game. But, curiously, even at the last moment – when the tickets are nearing the end of their shelf life, i.e., the game has started – the scalpers interviewed in the article are folding what they’re holding.

Hey, I’m a believer that scalpers – who are, after all, assuming risk in acquiring tickets – have a right to extract a premium. I’m assuming that at least some of what’s in a scalper’s inventory was purchased for more than face value from season’s ticket holders – all the more reason to add a transaction fee. Frankly, I’d just as soon see a street scalper make it than a) the Red Sox, b) Ace Ticket, a “legal” scalper.

But, if I’d shelled out a lot of money for a bunch of tickets I wasn’t going to use for myself, and the clock was tick, tick, ticking, I do believe I’d unload them for what I could get. (I might draw the line on accepting less than face. Fair’s fair.)

One scalper in the Globe article was looking for $150 for seats that cost $52 per. Even after the game had started, and even while surrounded by similarly clad fellow scalpers.

To a casual onlooker, the solution seems simple. Drop the price. But when the idea is brought up, the man in the gray cotton T-shirt quickly shoots it down.

“Let me ask you something,’’ he says. “If you owned a store, and you sold milk, and all your milk was about to go bad, and everyone held out until the last minute to buy your milk, and you dropped the price, what would happen?’’

He doesn’t wait for an answer. He explains that no one would be willing to buy milk at full price. The integrity of the product would be compromised.

Well, it’s easy to poke flaws in anyone’s reasoning, but to my thinking, if you’ve got milk that’s about to go bad, you should be willing to sell it at a discount.  As someone who pretty much examines every item, other than toilet paper and dishwashing liquid, for it’s sell-by/use by date, I wouldn’t buy milk that was about to go bad, unless I absolutely needed to use it right away.

Maybe it’s just me, but this wouldn’t have any impact whatsoever on future purchase decisions.

I would still be willing to pay full price for milk that had some life left in it, but milk that was about to turn sour? Unless I absolutely, positively needed it on my cereal or to make pudding. No way.

I don’t want to wrap my head around the scalper’s dilemma too tightly, but there would come a moment in time when I’d just want to cover at least some of my losses.

Sure, there will be ticket buyers who are willing to pay chicken with you, but if there are no other buyers around?

When demand goes up, prices go up. When demand goes down, prices follow. Kinked demand curves aside – and maybe ticket scalping represents one -  isn’t this the way that efficient markets work?

Me, I’d rather walk away with a little something jingling in my pockets. (Tickets for yesterday’s game just don’t jingle.)

Meh! What do I know about the economics of scalping?

I’m just sitting here hoping that, next season – assuming the Red Sox don’t pull something off this year – it’s easier to buy tickets the old fashioned way: game day, face value, at the park. Play ball!


Anonymous said...

I think there's a bit of a problem with your reasoning. To start off with your milk analogy is a bit flawed. You avoid buying expired milk because its utility is lessened. You can't keep it around as long. For you, and presumably for most consumers, any discount you'd get on the milk for being close to, or past, the expiration date, would not justify the lessened utility. But game tickets don't lose their utility as the opening approaches. If you buy your ticket six months ahead of time or six seconds the utility is still the same. So in that case there's no advantage to the consumer in paying full price when they can get it for cheaper. Thus the only thing keeping someone from waiting until the last minute in order to take advantage of discounts is the fear that tickets will be gone by the time they act. Now maybe discounting would make sense once the game has started. As the game goes on the utility of the tickets decreases and so there's a disincentive to wait it out in hopes of a discount.

Also, the only reason for these guys to discount tickets is if they expected to sell them to someone who otherwise would not buy the tickets at full price. Sure, these guys are losing money on the unsold tickets but they can only make money through discounting if there's someone who will buy discounted tickets who otherwise would not. Are there such people? I'm a little skeptical that there are lots of Sox fans wandering around Fenway at the last minute before a game who want tickets but are unwilling to pay full price. It seems to me, and obviously this is what the scalpers believe, that there would be more people who would come down to the park and wait till the last minute to try and score some discount tickets than there would be Sox fans who happen to be wandering down Brookline Avenue at the last second willing to plunk down several dozen dollars (cash) and several hours of their time for a Red Sox game on the spur of the moment.

Maureen Rogers said...

Anonymous - Thank you for putting somet thought into my flawed reasoning. As I mentioned, I was neither willing nor able to think through the milk analogy, etc. for my post. Instead, I went with how I, personally, buy near-death milk, and what I would do if it were the last minute outside Fenway, and tickets weren't moving. Which is get what I can. But, hey, I'm not a scalper. Still, I'd expect that scalpers could figure out when to cut their losses - cold rainy night, Sox playing the Mariners, near-death point in the season - vs. when it's worth hanging on (beautiful night, Yankees in town, game could mean something).

Anway, thanks for thinking this whole thing through. Can't say I entirely agree with your reasoning, but that's mostly because I'm too lazy to think it through. (Way too much economics going on there.)

Joe Hass said...


It's interesting to me that the scalpers have a vested interest in promoting the Red Sox as a "premium brand," as it were. This kind of behavior is common when it comes to companies that want you to think of themselves as exclusive (think Kate Spade, Prada). They'd rather burn their product than sell it at a discount, because they're all about the exclusivity. That's what these brokers are trying to tag the tickets.

But the Red Sox don't seem to be as interested in this positioning (not surprising: as far as they're concerned, the product's sold already). So you have this odd amalgamation: the primary seller just wants to unload inventory. The secondary seller wants you to believe that this inventory is some special thing.