Scalping tickets refers to buying tickets to concerts, sports games, or other events with the intention of reselling them at a higher price. It is a controversial practice, with proponents arguing it allows prices to reflect demand and opponents claiming it exploits fans. Here we examine the pros and cons of scalping to determine if it can be a lucrative business.
How does ticket scalping work?
Ticket scalpers aim to buy tickets below market value early and resell them at a premium closer to the event. This relies on:
- Buying tickets during pre-sales or immediately when they go on general sale, before they sell out.
- Predicting which events will be in high demand and low supply.
- Reselling at a significant markup on secondary resale sites like StubHub.
Scalpers use various tricks to buy in bulk: special software to purchase tickets faster, multiple credit cards, and recruited buyers. They hope to profit from the difference between face value and resale price.
What are the potential upsides?
1. Allows price discovery based on demand
Many argue that scalping allows tickets to be priced according to what the market will bear. When events are very popular, scalpers can capture surplus value rather than sellers underpricing tickets. This incentivizes them to procure tickets and make them available.
2. Provides access to sold-out events
Once an event sells out, scalpers may provide the only way for fans to get last-minute tickets. While often at inflated prices, it gives an option besides sold-out primary markets.
3. Can be lucrative if done well
Successful scalpers can earn large profits from buying tickets below market rates and
reselling at high demand prices. Like any business, strong inventory management, understanding demand, and minimizing costs can lead to good returns.
What are the potential downsides?
1. Unethical to profit from artificially inflated prices
Many view scalping as unethical price gouging. They believe it exploits fans’ enthusiasm to charge exorbitant prices for tickets that should be face value. This excludes some fans.
2. May skirt consumer protection laws
Scalpers operate in legal gray areas in many jurisdictions. They may violate laws against ticket speculation, false advertising, or bot purchasing depending on local regulations. Fans have limited recourse.
3. No guarantee prices will rise
Scalpers take a risk in buying inventory. While they hope prices will exceed face value, unforeseen circumstances like artist cancellation, lagging interest, or competeing resellers may leave them unable to sell at a profit.
4. Requires significant upfront costs
To scale up scalping requires major investment in software, hardware, inventory, and labor. This represents a major sunk cost, with the risk that events underperform expectations. Significant capital is needed.
Revenue potential case study
Let’s look at a case study to analyze the revenue potential of ticket scalping:
Sample scenario
– Hot new band is going on tour with shows in your city
– Venue capacity is 25,000
– Face value of tickets is $50
– You estimate you can resell tickets for $200 each
Potential revenue
Number of tickets purchased | 10,000 |
Face value price per ticket | $50 |
Total face value cost | $500,000 |
Resale price per ticket | $200 |
Total revenue from resale | $2,000,000 |
Total profit | $1,500,000 |
In this hypothetical case, investing $500,000 in buying 10,000 tickets leads to $2,000,000 in revenue for a $1,500,000 profit. A 300% return on the initial capital.
Key factors determining profitability
The potential profit depends heavily on:
– Accuracy in predicting demand – Buying for shows that don’t resell leads to losses
– Inventory management – Carrying too much inventory ties up capital
– Connections for bulk purchasing – Access to presales and bulk buying allows lower acquisition costs
– Market monitoring – Adjusting pricing based on competing resellers is crucial
Is ticket scalping a reliable business?
There are a few factors determining if scalping works as a steady business:
It requires specialized knowledge and tools
Being an effective scalper requires building skills in:
– Predicting event demand and pricing
– Bulk ticket buying techniques
– Monitoring the secondary market
– Adjusting pricing strategically
It also needs significant investment in bulk buying tools and inventory management systems.
It has high risks and operating costs
Scalping requires major upfront investments in tickets, with no guarantee of return. Operational costs like software and labor are high. Just one event’s tickets failing to resell at a premium can lead to major losses. It is a high-risk, high-reward model.
It operates in a legal gray area
Scalping occupies uncertain legal territory, with varying regulations region to region. Changes to law could impact the business model. Operators may risk lawsuits or criminal charges.
Competition is fierce from other scalpers
Being successful requires analyzing competition and differentiating your business. As scalping grows more popular, new entrants and saturated markets make it harder to profit.
Conclusion
In summary, ticket scalping certainly offers the potential for huge profits by reselling in-demand events. However, it also requires significant expertise, capital investments, risk tolerance, and access to purchase tickets. The legal ambiguity and competitive nature of the business poses additional challenges. For those able to master the intricacies of the secondary ticket market, it offers money-making opportunities. But easy profits are far from guaranteed given the inherent risks and opacity. Treat scalping as a high-risk, high-reward enterprise with significant barriers to becoming a profitable business.