Ticket brokering, also known as ticket scalping, is the practice of reselling event tickets for a profit. Ticket brokers will purchase tickets to concerts, sports games, theater shows, and other events and then resell those tickets at a markup. This allows the broker to profit from the difference between what they paid for the ticket and what someone else is willing to pay to attend the event.
Some people see ticket brokers as providing a valuable service – giving access to sold out events that fans would not be able to attend otherwise. However, ticket brokering is controversial due to concerns about fairness and inflated prices that make events unaffordable for many fans.
So is operating as a ticket broker actually a profitable business? There are some key factors that determine whether ticket brokers can reliably make money.
Factors that impact profitability of ticket brokering
There are a few key elements that impact whether ticket brokers can consistently generate profits from reselling event tickets:
Demand for the event
The first major factor is demand – how badly do people want to attend a given event? The higher the demand, the more that buyers will be willing to pay over face value to get a ticket from a broker. Highly popular concerts, championship sporting events, and smash hit theater shows will have the highest demand. Obscure events or unpopular performers will be hard to profit from. Brokers try to focus on events they predict will have the hottest demand.
Supply of tickets
How many tickets are available also impacts profit potential. If an event has abundant tickets available, it will be easier for buyers to purchase direct from the box office at face value. When supply is very limited compared to demand, brokers can charge much higher markups. Events at smaller venues tend to have higher supply constraints.
Risks from speculation
There is a speculative aspect to ticket brokering. Brokers are making guesses about which events will have the highest demand well in advance of the event date. However, predicting demand is risky and not always accurate. For example, a broker might buy up tickets to a concert tour months in advance expecting high demand. But weak album sales and lack of radio play could dampen interest, making it hard for the broker to sell the tickets profitably.
Relationships with ticket suppliers
Having connections to access tickets from primary market sources like venues, promoters, season ticket holders, and pre-sale opportunities helps brokers secure inventory before the general public can buy tickets. Brokers with an inside track on ticket access can better control supply costs. Those shut out of primary access must buy from public on-sales, where competition is higher.
Operational costs
There are overhead costs associated with running a ticket brokerage, just like any other small business. Brokers must pay for office space, staff, listing fees, payment processing, legal services, and other ongoing operational expenses. Minimizing these costs helps preserve profit margins. Larger brokers benefit from economies of scale.
Legality and regulatory costs
Anti-scalping laws and restrictions on ticket resale impact profitability in some jurisdictions. Strict limits on markup pricing, requiring broker licenses, banning automated ticket buying software, or imposing taxes on resale all cut into margins. Monitoring compliance adds additional costs for brokers. However, lax regulations open up profit potential. The legal environment must be monitored closely.
Reputation and repeat business
Maintaining a trusted reputation is very important for brokers, just as it is in any retail business. Dishonest practices like selling fake tickets or not delivering as promised can destroy a broker’s business. Generating positive word-of-mouth and repeat customers through fair pricing and reliable service is essential long-term. This favorable reputation allows brokers to command higher prices.
So in summary, while ticket brokering can be profitable under the right conditions, there are also risks and costs involved. Profitability ultimately comes down to strategically balancing supply costs, pricing, demand, regulations, and operational expenses.
Revenue potential from different types of events
Not all events have the same profit making potential for ticket brokers. Certain categories of events tend to provide much higher returns than others.
High profit potential events
- Major rock/pop concerts – Popular musicians like Beyonce, Taylor Swift, Ed Sheeran
- Big name stand-up comedy tours – Comics like Kevin Hart, Jerry Seinfeld
- Hot Broadway theater like Hamilton, Wicked, The Lion King
- Major sporting events – Super Bowl, College Bowl Games, World Cup
- Music festivals – Coachella, Bonnaroo, Lollapalooza
These events all have sustained high demand, limited ticket availability, and passionate fan bases willing to pay premium pricing. The biggest names can generate over 100% markup profit potential.
Moderate profit potential events
- NBA, MLB, NHL games for top teams
- Successful off-Broadway theater shows
- Medium sized concerts and comedy tours
- Cirque du Soleil
- Big college sporting events like rival football games
These events attract solid attendance and interest, but have a more limited fanbase size and fewer supply constraints. Markups are typically 25-50% above face value.
Low profit potential events
- Obscure concerts with unproven new artists
- Non-rivalry lower profile sport events
- Minor league sports
- Localized cultural events
- Broadway shows past their peak popularity
These types of lower fan interest events often struggle to sell out venues. Brokers face slim profit margins given easy purchaser access to discounted tickets directly. Lucky to break even or make slight profits.
As a general rule, the most iconic performers, teams, and shows in huge venues with dedicated fans offer the highest upside revenue opportunities for ticket brokers. But the risks are also higher speculating on uncertain demand many months in advance. Choosing inventory wisely is the key to profits.
Cost structure for a ticket brokerage
Running a profitable ticket brokerage carries many typical small business costs, as well as some unique expenses specific to this industry.
Fixed costs
These are costs that don’t vary directly with sales volume:
- Rent – For office space and storage needs
- Salaries – For sales staff and operations personnel
- Insurance – General liability and errors/omissions policies
- Software costs – For inventory systems and online marketplace fees
- Professional services – Legal and accounting guidance
These fixed operational costs create overhead that must be covered regardless of sales volumes. Running a lean operation by controlling these costs is key.
Variable costs
These costs fluctuate based on the number of ticket transactions:
- Event ticket inventory purchases – The core cost of goods sold
- Credit card processing fees – Around 2-5% of transaction amount
- Sales commissions – Paid to ticket sellers, often 10% of profit
- Listing fees – Charged by ticket resale marketplaces
- Shipping – For delivering printed tickets to buyers
Higher sales volume leads to higher variable costs. Profit margins must account for these costs that scale with revenue.
One-time startup costs
Initial investments are required to launch a brokerage:
- Establishing a legal business entity – Formation, licensing and regulatory costs
- Building an inventory tracking system – Software development
- Securing supplier relationships – Venue agreements
- Establishing online marketplaces – Building listings and credibility
- Funding working capital – Float to secure early inventory
These startup costs establish the foundations for running the brokerage. They enhance the ability to profitably scale the business.
Carefully budgeting for both ongoing fixed and variable operating costs, as well as upfront startup investments is necessary to build a financially viable ticket brokerage operation. The right scale and cost structure paired with good inventory choices unlocks profitability.
Typical broker pricing strategies
Ticket brokers employ a range of different pricing models and strategies to maximize profits. Understanding how pricing works is important for financial success.
Dynamic market based pricing
By far the most common pricing approach is dynamic pricing driven by current supply and demand factors in the marketplace. Ticket brokers will adjust prices up or down for an event depending on:
- Public interest and buzz leading up to the event
- Amount of inventory still available as the event nears
- Prices competitors are offering for similar tickets
- Approaching sellout status where remaining tickets become highly scarce
Responding in realtime to market conditions allows brokers to optimize pricing. An initial face value markup when tickets are first listed may be increased or decreased as the event date gets closer.
Tiered pricing by seat quality
Within a specific event, ticket brokers will charge the highest prices for the best seats. Floor seats would be priced higher than nosebleed seats in an arena concert, for example. Premium experiences like VIP access or backstage privileges also command higher pricing tiers. Segmenting inventory this way captures maximum revenue.
Bundled package offerings
Brokers may bundle complementary items like parking passes, merchandise, or meet & greet experiences along with the event ticket as a package deal. This creates an enhanced product that supports charging higher combined rates.
Discount and promotion pricing
Selective discounts may be offered to move inventory that is selling slowly or reach customer volume targets. Promotions like group discounts or new buyer incentives help generate sales momentum. This pricing flexibility helps brokers calibrate to demand.
The core pricing philosophy revolves around leveraging market dynamics to achieve optimal profits, while using tactical variations to increase volume as needed.
How large brokers maximize profits
The top ticket brokers who dominate this secondary market utilize their sizable scale and resources to generate strong profits through:
Access to primary inventory
Large brokers invest heavily in relationships, agreements, and integrations with primary ticketing platforms like Ticketmaster and AXS to gain inventory allocation before the general public. This inside track allows them to secure the most in-demand seats at face value before secondary market price inflation.
Highly automated processes
They apply technology to scalable automated functions like pricing algorithms, inventory updates, order processing, and payment collection to minimize operational overhead. This efficiency magnifies profits across higher transaction volumes.
Sophisticated fraud prevention
Leveraging automation and intelligence to detect fraudulent buyers and payment methods prevents losses from bad transactions. This protects bottom line profits.
Seller networks
By establishing trusted marketplaces, large brokers provide individual ticket holders an easy way to resell extra inventory. This aggregate supply from many small sellers expands profitable revenue potential.
Customer analytics
In-depth data analysis on buyer behavior and activity allows large brokers to finely segment customers for targeted promotions and pricing strategies. Converting high-intent buyers optimizes sales.
Regulatory influence
With financial and legal resources, major brokers lobby to shape ticket resale laws and restrictions in their favor. Loosening unfavorable regulations expands profit opportunities.
The combination of financial scale, technical sophistication, and deep industry connection allows the largest brokers to squeeze maximum profits from the ticketing marketplace. Small brokers must find their niche.
Risks and downsides to avoid
While ticket brokering can certainly be a lucrative business, there are also notable risks and downsides to be aware of:
- Upfront inventory investments that tie up working capital for uncertain demand events
- Inability to accurately predict real market demand leading to losses
- Promoters and artistswitholding tickets to limit broker supply
- Public backlash and shaming as an unethical “scalper”
- Highly negative reaction from loyal fans priced out of the market
- Costly legal issues around prohibited resale in some markets
- Reselling fraudulent or stolen tickets
- Saturated competition from other brokers fighting for supply and margins
These hazards can quickly turn profits into losses. Avoiding risky inventory, maintaining trustworthiness, and securing a low-cost operational structure helps overcome downsides.
Is being a ticket broker ultimately worthwhile?
Evaluating the key factors and tradeoffs shows that ticket brokering carries both substantial monetary upside and notable risks:
- Top events can generate huge 100-200% profit margins in a short period if demand is correctly predicted and supply secured
- But losses are equally likely if customer interest drops or inventory is misjudged
- A broker must pay careful attention to trends, pricing dynamics and competitor actions
- Low costs and operational efficiency are crucial to maximize margins
- Legal compliance and an ethical reputation must be maintained to succeed long-term
- Only large volume brokers benefit from economies of scale that multiply profits
For those entrepreneurial personalities who can handle the risks and volatility, ticket brokering offers exciting profit-making potential. But caution is warranted to avoid major downside missteps. Analytical skills, industry savvy, and business acumen determine success.
Conclusion
Ticket brokering sits in a controversial area, but it meets demand for sold out events and can be highly lucrative. For brokers who carefully manage inventory costs, understand demand trends, run lean operations, price dynamically, and build trusted reputations, strong profits are achievable. But the speculative nature of the business also poses the potential for losses. Ultimately, staying compliant, innovative and efficient allows skilled brokers to do very well financially in this high-risk, high-reward industry.