Did Ticketmaster’s Market Dominance Fuel the Chaos for Swifties?
Taylor Swift fans scrambling for concert tickets faced endless queues and crashes on the Ticketmaster website. Now the Senate’s antitrust subcommittee is planning hearings on the company’s dominance in the live concert business. Yale SOM economist Florian Ederer explains the antitrust issues at play and the tradeoffs inherent in satisfying overwhelming demand.
Ticketmaster merged with Live Nation in 2010, making it dominant in the market for live concerts. Is it a monopoly?
Ticketmaster currently controls over 70% of the market for ticketing and live events and is far and away the market leader. Strictly speaking, that does not make Ticketmaster a monopoly because it is not the only seller, but its large market share gives it a dominant position which raises concerns that it may abuse its market power. This dominant market position has also been very persistent. Ticketmaster has held more than an 80% share of major concert primary ticketing since 1995. In 2010 the DOJ approved Ticketmaster’s merger with Live Nation, but required Ticketmaster to divest some of its business to competitors. However, these measures did not stimulate more competition in the primary ticketing sector.
It’s also important to point out that monopolies are not inherently illegal, especially if they are obtained on the merits through superior products and innovation. What is, however, illegal is anti-competitive behavior that excludes other companies from the market and harms consumers through exorbitant prices or inferior quality. Ticketmaster has faced numerous such accusations in the past.
Did the market power of Ticketmaster have anything to do with the frustrations of Taylor Swift fans trying to buy tickets this week?
“Ticketmaster is alleged to have caused harm by providing inferior quality—which it could not have done had it faced credible competitors.”
The canonical harms to consumers by a firm with substantial market power come from the firm’s ability to charge supracompetitive prices. This has been a concern in the past with Ticketmaster using very profitable practices such as “drip pricing” (i.e., add-on fees that come towards the end of the purchase) to extract more money from consumers. However, the frustration of loyal Swifties primarily stemmed from Ticketmaster’s inability to provide a smooth purchase experience. High (but presumably expected) demand for tickets crashed the Ticketmaster system leaving many fans without an opportunity to even buy tickets despite waiting for hours in an online queue. The allegations against Ticketmaster are that it abused its dominant market position by underinvesting in site stability and customer service. Thus, rather than causing harm to consumers by charging exorbitant prices, Ticketmaster is alleged to have caused harm by providing inferior quality—which it could not have done had it faced credible competitors.
Antitrust aside, as an economist do you see a better way to sell tickets for a very in-demand event like the Taylor Swift tour?
This is a difficult question because it involves a tradeoff between maximizing profits and rewarding loyal fans. A common concern for live concerts, especially those with high demand, is that the artist would like to achieve both but they are often in direct conflict. For example, an auction would maximize concert revenue for the artist by allocating tickets to those buyers with the highest willingness to pay, but these buyers may not be the most loyal fans. In contrast, selling tickets at low face value prices gives such loyal fans the chance to buy tickets but leads to excess demand. It also encourages resellers to buy up the tickets in the primary market and then resell them on the secondary market. Taylor Swift attempted to strike a balance by allowing potential customers to register as “verified fans,” but the excess demand proved simply too large for the stability of the Ticketmaster system.