Just the Ticket: Ticket Pricing in the UK

Fancy going to see a band or a show? What about a footie match? Where are you going to get your tickets? You could always go to the box office or ring them up and get them sent to your house. But, hey, everything gets done online these days. And you're buying the tickets so early, you must be getting a good price, right? Why not use one of these agencies' Web sites? They look cool.

But hold on, that might not be such a good idea if you end up paying over the odds for your tickets. There'll be added costs for postage, then there's a booking fee and what about VAT on top of the price? You could pay over £30 for a £20 ticket eventually. How are ticket prices worked out for arts entertainment? How clear is the ticket price information? What rules govern ticket agency services? Is everyone happy with using ticket agents? Is anyone investigating them?

This At your Leisure looks into the factors responsible for ticket pricing. It analyses the UK market for advance tickets and asks if all's tickety-boo with using ticket agents.

Price discrimination in theatre tickets

Some of the most interesting work on ticket sales for entertainment events was carried out in 1996 by Philip Leslie at Stanford Graduate School of Business, USA. What Leslie did was to analyse data for all 199 performances of the play, 'Seven Guitars', which played on Broadway in 1996. He found that there was a great deal of price discrimination at work. This is an entirely legal practice: price discrimination is when the same product or service is sold in different markets for different prices.

Also known as multiple pricing, price discrimination means that in any one audience there could be many people who have paid different prices for what is essentially the same service. In the case of 'Seven Guitars', Leslie found that the show's producers had been especially busy with their use of multiple pricing. He found a total of 17 different price categories, depending on factors such as seat quality, payment method, buying channel used and special discounts offered.

Leslie compared the practice of price discrimination to a uniform pricing policy, where one price is charged to all members of the audience. He found that consumers are largely unaffected by price discrimination, whereas producers benefit to the tune of around 5% increase in profits. In this case, Leslie found that price discrimination is a good thing, helping firms make higher profits without it harming consumers' welfare.

But Leslie also investigated the use of ticket booths, which sold tickets to the show in question at a 50% discount. These provided a significant source of revenue for the show's producers. But he found that it would have benefited the producers more if the booths only offered a 30% discount on the ticket price. This is because at a 30% discount, more consumers would choose to buy the more expensive tickets over the phone, rather than going through the inconvenience of queueing up for the cheaper ones. But even at a greater discount, more tickets were sold, so Leslie concluded that a 50% discount was better than no discount at all.

Ticket pricing in the performing arts

Some key business concepts provide important tools for arts organisations in their pricing. Typically, arts adminstrators have a number of sources of revenue from an event:

Image: For audiences going to shows such as the Lion King, the ticket price is not the only cost they will bear - food and drink, programmes and transport will all add to the cost of their outing. Copyright: Greg Schmigel, stock.xchng

It's also important for organisers to bear in mind that the cost of the ticket is not the only price that consumers must pay to attend an event. Earlier research indicated that more than 90% of people attending an arts event spend money on items other than just their ticket. Some of the more significant extra costs are:

A UK study by Huntingdon in 1993 found that tickets which can be purchased at a range of prices earn more than if they are offered at a single price.

The economics of ticket pricing in the performing arts

Demand for any product or service is determined by a number of different factors. The main demand determinants in the arts are:

Pricing methods in the arts

1. Cost based pricing

This is where ticket prices are based on the levels of fixed and variable costs associated with the event. Fixed costs continue to be incurred regardless of the number of times the event is staged or the show is performed. Administrative costs are an example of a fixed cost. Variable costs fluctuate with the number of times an event is staged. Artists' fees and production costs would count as variable costs.

Imagine a scenario where an event organiser faces the following revenue and cost projections:

Revenue

Ticket price (£)	No. of seats available	Revenue
35	700	24,500
20	200	4,000
15	100	1,500
Total potential revenue		30,000

Costs

Artists' fees	20,000
Production costs	5,000
Administration costs	2,500
Total costs	27,500

In this scenario, the arts administrator following a cost-basis method of pricing would have to calculate the proportion of total tickets needed to be sold in order to cover the costs of the production. They would follow this calculation:
Total costs/potential revenue x 100

This translates in this example to:
27,500/30,000 x 100 = 92%

The company would have to sell at least 92% of the tickets to this show or event, in order to cover their costs: a total of 920 out of a total capacity of 1000 seats.

Ticket agents in the UK

A study published by the Office of Fair Trading (OFT) in January 2005 investigated ticket agencies following complaints from consumers. The major causes of concern were to do with:

Their report produced a number of interesting findings for students of ticketing and pricing in the leisure sector in general and arts events in particular. The report noted that there are two broad categories of ticket agent: primary and secondary agents.

The market for advance ticket sales in the UK in 2003 was approximately £1.4 billion. Around £580 million of the total was accounted for by primary ticket agents. Primary agents' business has grown rapidly in recent years. The report estimates a growth rate of 150% between 1999 and 2003. Reasons given for this growth include:

As in other areas of business, agents provide an important service; offering promoters a more efficient way of boosting ticket sales, and consumers better access to tickets for popular events.

Overall summary of complaints

Agents received more than 54,000 complaints in 2003
Trading Standards Departments get at least 450 complaints every year
The OFT receives some complaints, mostly about secondary agents

Main areas of complaints

Agents charging additional fees that complainants feel are too high
Key information not displayed and only seen late in the buying process
Service and contractual issues including event cancellation and non-delivery of tickets

OFT's main findings

Additional Fees
The OFT found no evidence that consumers are being charged high prices as a result of a lack of competition between ticket agents. Rather, they found that the main pricing issue for consumers is whether they receive adequate information on the prices charged in order to make an informed decision.
Key information
The OFT believes that the main problems with providing price information are the rules governing event advertisers. These are administered by the Advertising Standards Authority (ASA). The rules say that advertisers can either:
- Provide details of the face value of the ticket, plus all additional fees
  or
- Provide no information on advertisements
Not surprisingly, event promoters tend to follow the second of these two options. The OFT called for the ASA's Committee for Advertising Practice guidelines to be re-written so that advertisers of non-broadcast events:
- Include on adverts the face value of the ticket and fact that additional fees may apply and could vary depending on the ticket seller used
- Indicate on adverts where the tickets can be bought at face value
Service and contractual issues
The OFT believes that complainants have issues around the use by ticket agencies of unfair contract terms which cut the level of consumer protection. Examples given include:
- No right to a refund, under any circumstances
- The right of organisers to change the event without a valid reason
- The right of organisers to refuse admission
The OFT recommended that the main trade association for ticket agents, the Society of Ticket Agents and Retailers (STAR), should produce model terms for their members so that the relevant consumer law is followed. The two main legal checks highlighted in the report include:
- Consumer Protection (Distance selling) Regulations 2000, generally covering the right to a refund
- Unfair Terms in Consumer Contracts Regulations 1999
The report carried on to look into the role of secondary agents and found that complaints received about them occur three times more frequently than those about primary agents. Trading Standards Departments are quoted as saying that complaints about secondary agents are under-reported. They blame this on the actions of disreputable agents who target overseas visitors to the UK. These visitors often don't know how to complain or have left the UK before they become inclined to do so.

Some of the complaints about secondary agents are familiar. Others are more specific to this area:
- Misleading information about the price of the ticket and the premium paid by the consumer
- Misleading information about the seat location, such as where a seat offers a severely restricted view
- Consumers not receiving tickets for which they have already paid

OFT advice on consumers' legal rights when buying event tickets

At the end of the main OFT report there is advice on the questions to consider when buying tickets to an event. In addition, there are laws that affect ticket sellers. They are legally required to:

Not provide misleading price information in advertising
Make sure price information at the point of purchase is clear and honest
Confirm seat location
Despatch tickets in time to attend the event
Provide a refund or a substitute for an indoor event if it is cancelled and tickets were bought over the phone or Internet

Activity

Go to one of the ticket agents' Web sites, listed in 'Related Web sites for research' at the end of this article. Choose three agents and find information on one event from each company, on the following points:
- The name of the event
- The event's date
- The price of the ticket
- The additional booking fee, where quoted
Calculate the total cost to you of attending the event by adding together the ticket price, return travel costs, food and drink.
Compare the information from the three ticket agents' sites. You might choose to use a table for effective visual comparison. Did the ticket agent's Web site confirm your rights to a refund? Did their site make clear the need to pay a booking fee? What information did you receive about the non-delivery of your tickets?
Visit the Web site of the ticket agents' trade body, the Society of Ticket Agents and Retailers(http://www.s-t-a-r.org.uk). Check the Code of Practice which is available for download from the site. What date was it written and last revised (updated)?
Which two key pieces of consumer law were raised by the OFT report into ticket agents? Give the dates of these two laws.
Given the dates of the legislation, how achievable is the OFT recommendation for STAR's members to be reminded of their responsibilities under legislation?

At your Leisure - 28 February 2005