LCD Soundsystem's campaign against ticket scalpers.

Commentary about business and finance.
Feb. 15 2011 5:37 PM

Hipsters v. Scalpers

How LCD Soundsystem is trying to foil professional ticket resellers.

James Murphy of LCD Soundsystem. Click image to expand.
James Murphy of LCD Soundsystem

On April 2, the punk-disco band LCD Soundsystem will play its last-ever show, a huge dance party at Madison Square Garden. At 11 a.m. on Friday, Feb. 11, Ticketmaster was scheduled to put tickets to the show on sale. At exactly 10:50 a.m. on Friday, I went to Ticketmaster's site and set up the appropriate purchase page. At 10:58, I started refreshing constantly. At 11, poised and ready, I got … nothing. The site said there were no tickets available. I reloaded the page madly, and then tried with a new browser window. No tickets. Not even in the nosebleed section.

The band is popular, to be sure, particularly in its hometown of New York. And farewell shows are always hard to get into. But LCD Soundsystem is not quite the Beatles, and Madison Square Garden is not exactly a small club. Had something gone awry? I quickly checked Twitter. Nobody—really nobody, it seemed—had gotten through. Perhaps there was a problem with the site?

No. As it turned out, the show had sold out within seconds. It is just that professional ticket resellers, otherwise known as scalpers, had scooped up the bulk of the seats. Within minutes, hundreds of them were available on StubHub and other secondary markets where sellers can charge whatever they want. Tickets with a face value of $49.50 were going for 12 times that—with some coveted spots in the general-admission dance area going for thousands of dollars.

How did they do it? With bots. Computer systems—not particularly sophisticated ones, either—submit tens of thousands of requests for tickets the very instant they go on sale, crowding regular folks out. A program beats the "captcha" box designed to make sure humans are the ones doing the purchasing. Then the professionals, tickets in hand, head to other sites to put them up for more than face value.

The economist's defense of said behavior goes like this. Ticket sales, for popular bands at least, are characterized by inefficient excess demand: Far more fans are willing to pay face value for a ticket than can purchase tickets—thereby making tickets worth more than face value. Scalpers perform a market-making function, letting ticket prices rise until the market clears. If you want to see LCD Soundsystem, an economist might say, tough luck about your failed initial efforts. But you can still get in—at the market-determined price. So, if seeing that last show is worth it to you, head to StubHub and buy away.

Of course, that theoretical defense is no consolation to the enraged fans looking to dance at LCD Soundsystem's last-ever show—and hoping to buy tickets at the price the band itself set. Indeed, the fan outrage resonates throughout the music world, where concertgoers are increasingly often shut out of the "official" market. A 2006 examination by economist Alan Krueger and others, for instance, found that scalpers sold a full 10 percent of all concert tickets, marking them up 45 percent to 60 percent, on average. The business has grown rapidly since then.

But LCD fans were not left out in the cold. The debacle attracted the wrath of the band's charismatic front man, James Murphy. On LCD Soundsystem's blog, he wrote: "this here is just to say that we were more than taken aback and surprised about the speed of ticket sales for the april 2nd MSG gig, as well as the effectiveness of scalper pieces of fucking shit at getting their hands on said tickets before fans could, and it's knocked us on our asses."

The market had failed in his mind. He told fans not to pay thousands of dollars to get into the Madison Square Garden show: "I will try to figure a way out to fuck these fuckers. NO MATTER WHAT WE DO, IT IS NOT WORTH THAT KIND OF MONEY TO SEE US!" Soon enough, he realized he had an ace up his sleeve. He flooded the market, adding shows, upping ticket supply, and hopefully pushing prices down. (Those shows will go on sale this Friday.)

Thankfully, in the future, other bands need not resort to such measures—there are more effective ways to make sure tickets end up directly in fans' hands. Perhaps the most promising is a method popularized on Miley Cyrus' 2008 "Best of Both Worlds" tour. "Paperless tickets"—which are, alas, illegal in New York— work a bit like airplane tickets: Fans need to bring their credit card when arriving for the show, effectively killing off much of the scalpers' market.

Still, paperless ticketing is not a panacea for fans, says music industry expert Bob Lefsetz. In the case of LCD Soundsystem, ticket supply might have been part of the problem. "There are usually multiple presale events before a show goes on sale to the public," he explains. "There's a sale to the fan club. There's an American Express presale. There might be a venue presale. Then, there are holdbacks—the artist, the venue, the promoter all hold back tickets." That means, despite the fact that the Garden holds 13,000 people, the band could have released as few as 1,000 tickets to the general public last Friday—one way or another, there might have been a lot of disappointed fans.

And looking forward, he notes that some bands actually might not want to do paperless ticketing. "There are a million other shenanigans" that acts use both to retain profits and to make sure shows sell out—shenanigans unavailable if bands choose to sell with paperless tickets. "Many bands actually scalp their own tickets," Lefsetz notes.

Ticketmaster, for its part, supports the move toward paperless ticketing, as do a number of popular groups. Then again, Ticketmaster has hedged its bets on the future of the industry: It bought its own secondary reseller a few years ago.

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Annie Lowrey is a contributing editor for New York magazine. She can be reached at annie.lowrey@gmail.com.