The irony for Hongkongers to ask for regulation against scalper tickets
In recent months, Hongkongers’ repeated failures in getting tickets of live performances by their most favourite artists sparked a debate on whether the city should tighten restrictions against scalper tickets. It is however ironic for Hongkongers to ask for this, as it is in their genes to arbtrage.
Excessive demand was the cause of scalper tickets
The episode started this February when tickets for the concerts by Joe Hisaishi, the renowned Japanese composer and musical director, quickly sold out. At the same time, scalper tickets were offered online at prices 10 times or higher than the official ones. Remedial actions were taken soon with an additional performance with 80% of the tickets sold through ballot and under the so-called “real-name registration” mechanism, such that these tickets could not be resold (Note 1).
Then the second disappointment in March became the straw that broke the camel’s back. Dayo Wong Tze-Wah, the most loved standup comedian in the city, announced his retirement shows in July. His popularity among Hongkongers guaranteed a complete sold-out was despite a total of more than 200,000 tickets. Supply shortage was aggravated by priority sales arrangement. Scalper tickets were offered widely at substantially higher prices. Both the comedian and his fans were angry. He criticised scalpers for earning unjust profits and asked audience not to buy these scalper tickets. He also urged the government to tighten law agains scalper tickets (Note 2).
In both cases, the high demand was mainly due to the performers’ popularity and their infrequent performances. However, the fact that only a small portion of tickets were for open sale intensified the already excessive demand. This situation was however cautiously created by the performers.
It is common now for performers to find sponsors for their live performances, especially large scale shows. Such an arrangement is mutually beneficial from economic point of view. With sponsorship, performers are largely free from the risk of low revenue due to unsatisfactory ticket sale. For sponsors, usually big companies, they would have earmarked certain expenditures for advertisement anyway. The right for sponsors to disseminate tickets or sell them before open sales helps them retain existing customers or recruit new customers, a trick commonly used by retail banks. This is a win-win scenario for both performers and sponsors and makes perfect economic sense. In fact, the more tickets reserved for internal sale, the better for both parties.
As a result of the above practice, it is common for big live performances to have only a small portion of tickets available for open sale. For instance, the diagram below was a seating plan for Hins Cheung’s concert to be held this June. Most of the seats, especially the most expensive ones, were blocked for internal sale channels. Fans called this a “hopeless seating plan”, meaning that it is hopeless for you to buy desirable tickets through this channel. They therefore have incentive to seek good tickets from other channels, such as buying scalper tickets.
Sponsorship arrangement by itself is a piece of evidence that performers care their own financial risks more than whether their fans could get tickets, which makes perfect economic sense too. The irony lies in the fact that Wong called foul for others to seek their own economic interests when such situation was created single-hanedly by his cautious choice shielding him from financial risks.
Banning Scalper Tickets Makes No Economic Sense
After Wong’s advocate, Mrs Carrie Lam, the Chief Executive responded by promising studies on tightening the existing law against scalper tickets, probably to cover all performances held in government venues. I doubt whether Lam had studied the problem first, as such prohibition makes no economic sense. (Note 3)
While some Hongkongers asked for actions against scalper tickets, they are not aware that most of them had indeed taken part in arbitraging activities as well. Many Hongkonger had been buying properties such as stocks, real estates, coins, or even iPhones for solely resell purposes. These are all arbitraging activities. Before Apple Inc. included both HK and the Mainland China as the first batch of regions for iPhone sales, many in HK had exhausted all kinds of channels for iPhones whether new iPhones were on sales. Once the new smartphones were on hand, they were quickly sold for reselling to Mainlanders. On the other hand, many Mainlanders came to HK buying diary products, medicine, etc. for resale in China, too. If the government is to ban scalper tickets, would it also prohibit the above arbitraging activities as well? If not, what is the rationale for banning one of the many kinds of arbitraging activities while the others are permitted?
Indeed, I am not the only one having doubts on Lam’s proposal. David Webb, an activist on economic and financial policies in HK, also raised similar queries (Note 4).
The existing anti-scalper tickets law was only for tax purposes
Some pointed out that there had already been a law prohibiting scalper tickets, but the prohibition only limits to specific venues. They opined that this was a loophole and should be plugged. Wait, is this really a loophole?
After digging out old records, I am quite certain that the law was against tax circumventions instead of protection of performance goers. According to the official records of the Legislative Council, the lawmaking body in HK, the government explained that the amendment of law introduction such restriction:
It has a very distant connection with finance as well, because under the Entertainment Tax Ordinance, the tax vanes with the price paid for admission, and the price paid for admission when paid to these touts is never the price on which we can based the entertainment tax (Note 5).
This explained the rationale for restriction of scalper tickets to be limited to certain specified venues as only entertainment in these places were subject to entertainment tax. The policy intent of the existing law was then to stamp out tax circumvention instead of ensuring audiences to be able to buy tickets at certain prices. It should be noted that, the government has already abolished entertainment tax in early 1990s but unfortunately the auxiliary measure is left untouched until now.
In this regard, the existing law banning scalper tickets was introduced for a purpose not related to the protection of consumers or even banning scalper tickets. It was for protection tax income of the government. The so-called “loophole” claimed by supporters of tightening this law is indeed a carefully designed measure for other purposes. If the government is to indeed ban scalper tickets, it needs to explain the differential treatments for similar arbitraging activities in HK.
Note
- Hong Kong Philharmonic Orchestra’s announcement of the additional performance http://www.hkphil.org/eng/concerts_and_ticket/concerts/concertdetail.jsp?id=624
- Wong later announced that 9 more performances would be added, and a total of 150,000 tickets would be available for open sale. It appears that he intended to increase supply in order to reduce rooms for arbitrage.
- 行政長官質詢時間答問全文（二） https://www.info.gov.hk/gia/general/201804/11/P2018041100621.htm(It appears that the government does not take Lam’s promise seriously that no English version is available)
- Carrie Lam’s latest assault on free markets (https://webb-site.com/articles/tickets3.asp)
- P. 4 to 5, Hansard on 16 January 1941, Hong Kong Legislative Council (http://www.legco.gov.hk/1941/h410116.pdf).
