Survey Says: Secondary Market, Not So Big
The size of the secondary ticket market is often exaggerated, according to Princeton University Professor Alan Krueger, because promoters and venues fail to collect adequate data about just who’s filling seats at their events.
Krueger, the keynote speaker at the 2002 Concert Industry Consortium, recently released the results of a national survey of randomly selected concerts.
Of Krueger’s sample, only 10 percent of tickets purchased by concertgoers came from secondary market sources.
From his findings, Krueger projects that the overall secondary ticket market for concerts in the U.S. amounts to about $554 million to $630 million per year, or roughly 15 percent the size of the primary market.
Krueger explained to Pollstar exactly why he thought those results were accurate.
"It’s not illegal to buy in the secondary market, depending on how much you pay, so just reporting where you bought the ticket from is not necessarily a problem," he said.
Krueger does contend that people could underreport how much they paid for tickets, or neglect to report how much they paid at all. He said, by and large, participants were quite cooperative because the survey was anonymous.
The study drew a national sample of 30 concerts out of more than 1,000 scheduled for the summer of 2006 (two shows were canceled). Random sections of the venues were selected for the survey, for a total of 3,281 participants.
Concertgoers were asked how and when they obtained their tickets, how much they spent on ancillary items, how much they liked the headliner, and how many shows they’d attended in the last 12 months, among other questions.
The survey also established participant demographics and provided support for a theory Krueger calls the "endowment effect."
The endowment effect focuses on a person’s willingness to pay for a ticket versus their willingness to sell a ticket – even for a large markup.
"I think for concerts and sporting events, when people get a ticket from Ticketmaster, they treat it like it’s really valuable," he said. "When somebody’s lucky enough to get a ticket in the initial distribution, they treat it like it’s either their destiny to go to the event or … value it more than if they didn’t have it, and I think that limits the supply in the secondary market."
The industry has been intensely focused on the secondary ticket market and the income it generates. And, granted, it’s not the number of tickets out there on the secondary market that has everyone’s attention, it’s the value of a few tickets – the premium seats – that everyone wants to control.
Still, Krueger said the secondary market figures are inflated because tickets for high-profile events are resold more often, at higher prices, according to the survey. In fact, sold-out shows have the highest resale rates.
Tickets for events could be listed on multiple Web sites at the same time, which also inflates the size of the market’s appearance, Krueger said (an assertion that Pollstar has heard before from inside the industry as well).
The survey also provides insight into the spending habits of people who buy tickets from secondary sources. Nearly half of those surveyed who purchased tickets – usually at a large markup – on the secondary market did so because they knew they could get better seats. And those surveyed who said they liked the headliner more and owned more songs from the artist also tended to spend more on souvenirs.
"One of the arguments against the secondary market that you sometimes hear is that if people spend a lot of money on their tickets, they’re not going to buy food or souvenirs and I think it’s the opposite," Krueger said. "They spend more on souvenirs and concessions."
Because these types of fans spend enthusiastically on premium tickets and ancillary items alike, Krueger maintains the possibility that these people could in fact be the biggest fans, and the ones that promoters should be actively marketing to.
"It’s in the venue’s interest and the promoter’s interest to have the people who buy in the secondary market in the stands, if they’re going to spend more … and also the artist’s interest, because the artist is making money from the souvenirs."