How to change the secondary ticketing market: Part 3 — The 120% Rule

This is the third piece discussing the issue of touting and TicketSwap’s unique approach to making the secondary ticketing market better for fans. Written by TicketSwap UK Market Developer, Daniyal Ahmad.

In its simplest form, touting is about taking advantage of scarcity and distorting the original ticket price set by the performer or event organiser. This price distortion is what draws the most attention and scorn from fans, live music professionals and the media. For example, even without the issue of touting at play, the supply of tickets to see Ed Sheeran already pales in comparison of the demand from millions of fans wanting to attend his first tour following his latest album release. There are simply too many Ed Sheeran fans in the world willing to pay the standard face value of a ticket to see him play live for him to satisfy by doing a tour once a year (or even 5 times in a year).

Ed trying to keep back the hordes with a confetti gun…

The resulting situation of demand outstripping supply is what brings the secondary ticket market to the fore, as inevitably there will be tickets that will become available because of genuine reasons (i.e. seller can no longer attend) or monetary motivations (i.e. seller wants to capitalise on demand by selling ticket for a high price). Yet when a large portion of tickets are bought in the initial primary sale for £70 and then put on sale on Viagogo for over £1500, not only is the supply-demand balance skewed even further, the small minority of fans who can even afford such a price are paying money that actually never reaches the performers, organisers or venues that produced the performance.

The money spent obtaining tickets from touts means fans have less available to spend on the next show or tour that comes to town. This creates a drain on the live music industry and its potential pool of customers; not to mention negatively affects the reputation of the artist or the organisers. The solution is to simultaneously decrease the average cost of a resold ticket and increase the pool of ticket resales between genuine fans, which will keep more money in the pockets of real fans and drive secondary prices down across the board. As we discussed in Part Two, TicketSwap helps achieve this by creating an alternative marketplace for fans to safely buy and sell tickets, removing the ability of touts to distort prices.

A tout reacts to the 120% rule [real footage]

The cornerstone of our mission to establish this safe and fair marketplace is our 120% price cap. We enforce a cap on the resale price of all tickets listed on the platform to 120% of the original price paid. We’ve found that this price cap is the fairest way to allow sellers to recoup the full price they paid for ticket including booking fees, transaction fees, delivery fees and our own 5% service fee, while still keeping prices fair for buyers looking to buy tickets. It also incentivises more fans to sell their tickets safely and transparently on our platform instead of unsecured selling on FB, Twitter, Gumtree or Craigslist, where tickets are not verified, transactions are not secured and there is no trusted 3rd party to intervene if something goes wrong with the ticket.

Of course, touts are not likely to embrace the price cap and, accordingly, aren’t allowed to sell on TicketSwap, forcing them to look elsewhere for buyers willing to pay inflated prices. However the 120% rule does motivate the average fan with spare tickets to sell on TicketSwap, creating a steady stream of fairly priced resale tickets that provides fans with safe and transparent alternative to touting websites. Just as important: the money spent buying tickets on TicketSwap goes directly to another fan, keeping the flow of money easily within reach of the music industry. The TicketSwap service fee covers the cost of our service, technology and funds partnerships with events organisers, ticketing companies and venues that help increase the safety and efficacy of our marketplace.

The rationale behind the 120% rule is simple: capping the marketplace just above the primary original price creates a competitive marketplace where the prices offered reflect the demand for tickets, but without pricing out normal fans from buying tickets. Sold out events where tickets are very scarce might have tickets selling at the 120% maximum, but the moment there are more than a few tickets available sellers are forced to drop prices and compete in order to ensure that their ticket is sold before the event happens. When events are not sold out, sellers are immediately forced to compete with the price offered by primary ticket outlets and thus usually sell well below face value. At the end of the day, the lower a seller’s price compared to the original price, the higher chance they have of selling their ticket, which incentivises competitive and, thus, fair pricing for buyers. To this point, we’ve made sure that on every TicketSwap event page, visitors can see all the past prices paid by other purchasers so they can be sure they are getting a good deal.

Money spent buying from touts vs money spent on TicketSwap buy from another fan.

By setting the price cap slightly above face value, TicketSwap creates a marketplace that both encourages price variety but keeps maximum prices from being inflated beyond the reach of buyers. Thus, the majority of tickets sold on TicketSwap are sold at face value or less. Coupled with our efforts to remove the risk of ticket fraud through our Secure Swap system and strict checks on tickets and sellers, the 120% rule creates a fair marketplace where fans are in control.

Next Up Part 4: Transparency

Missed Part 1 & 2? Read them here and here.