Tag: Mass Behavior in Live Events

The Concert Ticketing Theta Paradox

Jeremy Larochelle

 

When you break them down to their basic economic form, concert tickets are just like stocks – a limited commodity that can be traded based on the perceived worth of the market. This phenomenon has become much more apparent after the industry was shuttered for two years thanks to COVID.  Some fans who had purchased seats for a reasonable price (when the market was flooded with options) and sat on those tickets have watched their values go through the roof.  For example, my mom had purchased three seats in the nosebleeds (200 section) to see Elton John at the Amway Center in Orlando over two years ago for just under $400.  She decided to sit on those tickets and when I wanted to join my family for the show a few months prior to curtains, a single ticket cost more than what she paid for three.  I guess you would say the price – tripled.

 

We all know that because there are only “X” amount of seats for a show demand easily takes over price. Scalpers certainly get it and have made a fortune off that supply/demand misbalance for years. This practice has received a steroid shot thanks to technology.  Today’s scalpers use everything from technology-backed brute force to gobble up blocks of tickets to machine learning algorithms that automatically price, buy, hold, and sell tickets. This has increased the speed at which tickets can be turned over and with that, the price usually goes up.

 

Interestingly, similar technology is used in the stock market. Bots and electronic funds transfers allow companies to price, hold, and sell ownership of publically traded companies at blazing speed. Research into stock pricing will reveal that much of this action is the result of consumer behavior. Digital tools such as the Relative Strength Index (RSI) is used to gauge the momentum of a stock while the MACD tells us in which direction the price is likely to go.  Oscillators, moving averages, and overall technical analysis are all used to tell Skynet when to buy or sell stocks. The one thing nearly all of these equations and the technology that fuels them share is they are built on how consumers collectively behave as the availability (or perceived availability) of a commodity changes. The same thing happens with concerts. Ultimately, the price of an event is dictated by how much a cluster of consumers is willing to pay to get in a show.

 

Unlike traditional stocks which can last into infinity if the company stays afloat. Concerts and events have a limited shelf life and as that performance gets closer time becomes a problem.  Once again, we find a similarity between the stock market and the ticket market. This time it comes in the form of options trading.

 

In its simplest form, options trading gives the buyer the “option” to purchase “X” amount of shares of a company before a pre-determined date. The buyer pays a premium for this benefit. For instance, if John thinks Widget Inc’s stocks, currently trading at $50 per share, will trade at $100 per share in two months. He gives his broker a fee (let’s say $200 in this case) for the “option” to buy those stocks anytime between today and a pre-set day two months from now for $50 per share. If the stocks jump to $100 a share, John can execute his option and double his money. However, if that date arrives and John does not execute his option. He will lose the $200 he paid. The impact of that elapsed time is measured by Theta in options trading and it plays a very important role in how premiums are priced.

 

Theta also exists in the ticketing world but it is widely dependent on consumer demand on a show-by-show basis.  If that demand is huge (say a superstar’s farewell performance), Theta can mean more profit for the re-seller. In some instances, it can even push the demand curve straight up as the strike (event) date approaches. Consequently, if that demand is weak, it can reduce the profit for the re-seller, sometimes to the point of a loss if they are afraid the tickets won’t sell before the date and become worthless. After all, it is best to make some money than no money… right?

 

This can be beneficial for fans who live near a venue. For instance, I live just fifteen minutes from where Elton played here in Orlando and I watched ticket prices daily. Roughly two days before the show, I was able to secure amazing floor seats for the single price of one of my mom’s nosebleed seats when she bought them pre-pandemic.

 

The thing to keep in mind is that just like stocks/ options the concept of time until the show represents an inherent risk to your ticket price. If you want to attend that special event, it is typically best to buy tickets as close to their initial sale date as possible (being a member of a fan club can be worth its weight in gold for times like these). Otherwise, you will likely enter the ticketing options game where Theta could become your best friend or worse enemy.

 

Mass Behavior and Social Cues in Live Concert Venues

Jeremy Larochelle2 Comments

 

 

Formal Theories of Mass Behavior teaches us that when faced with a decision, the consumer will pull from external stimuli to test their initial hypothesis of what they anticipate the outcome to be. For instance, if you think a glass will break when you drop it. You can let it fall to the ground and see what happens. Then, classify this information for future situations regarding the fragile nature of glass products.

 

The problem arises when the consumer cannot test their initial hypothesis directly and efficiently. In a very timely example, it is cost and time prohibitive for the average voter to determine if candidate “A” will do well for them when in office. To truly gauge the outcome, the voter would need to dive deep into the candidate’s past behavior and history addressing various political issues through historical analysis, observing the party in action, and/or speaking with them directly. All items that require a great deal of decision investment to accomplish.

 

To counteract this problem, the consumer takes part in a social engagement where they ask someone – preferably someone they deem has knowledge of whom will be the best candidate and then they weigh those opinions against their initial hypothesis. If these judgments fall into alignment, the consumer’s decision is re-affirmed and they move forward with their initial opinion. This information is then retained in their decision-psyche to be pulled from in similar future situations. Just like our glass-breaking test.

 

However, if the external stimuli disagree with the consumer’s initial hypothesis. They will likely seek out additional opinions to “break the tie.” This back and forth can follow multiple cycles until the consumer makes a final judgement to abandon their initial decision or stick to their guns.

 

So, what in the heck does this have to do with live entertainment? In a previous post, I discussed a phenomenon I call the “adoption point.” This is when the crowd grows to a comfortable size, which reaffirms the prospect’s decision to “join the pack.” It is rooted in our primal instincts, which happen to form the foundation analyzed by McPhee’s Formal Theories text. A time when the young wolf analyzes what he thinks will happen to him if he goes it alone versus joining the rest of his howling buddies. The larger the pack… the more he feels secure in their collective decision to stick together.

 

This is something I see on a regular basis in the concert world.  One of our venues is an open design where onlookers can stand outside the perimeter of the space and watch the band interact with the crowd.  Constant observations have demonstrated to me that when the onlooker hears the entertainment and stops to investigate. They are less likely to enter the space if they do not see a crowd dancing or otherwise enjoying the music. In addition, monitoring this situation has revealed a direct correlation between the time it takes the prospect to enter the room and the number of persons on the dance floor.  If it is zero, the onlooker is extremely unlikely to enter. In a venue with a capacity of 250, if there are 125 plus on the floor. The prospect will very likely enter the space with their waiting time reduced per every ten or so persons in the venue. It is this author’s hypothesis that this correlation can be defined by McPhee’s analysis.  The prospect arrives at the entrance to the venue with an idea of how they will likely feel about their night out. They weigh these thoughts against the enjoyment they see – more specifically how the other patrons appear to be reacting to the environment. The prospect’s decision to join the group is compounded with each body (one unit of positive stimuli) they see.

 

Of course, there are numerous variables at play in these situations. Style of music, time of night, day of week, look of the crowd, other choices available to the prospect, etc. However, in my opinion, McPhee’s analysis could provide additional evidence as to why dance floors seem to go from “famine to feast” in the blink of an eye.  That being the consumer watching from afar is weighing their internal opinions about the quality of music and if they will enjoy it against the reaffirming stimuli of the group. Since it is easy for them to categorize the size of the crowd against the perceived quality of the act, this decision will become shorter and shorter as the dance floor reaches capacity.

 

Venue managers can use this behavior to both increase the turnout as well as ancillary income such as drink sales. Here are a few ideas.

 

Getting and keeping bodies on the floor:

  • When the band goes on break, do not turn down the music and dim the stage lights. Keep it up and keep it lively.  If the budget permits, hire a DJ to spin during the band breaks. And if you only hire DJs, there should never be a break.
  • Reverse host psychology. Most venues I see typically only hire bottle girls… why do we not use bottle guys as well? Males will appeal to your prime female demographic, which will draw your male demographic at a compounded rate.
  • Hire appealing and personable non-serving hosts with the sole purpose of driving the dance floor. Theories of Mass Behavior show us the business science of having a larger group equates to profitability growing at a compound rate. Really weigh the costs of paying a host against the forecasted returns of a room at regular capacity.
  • You have to do it consistently. You want to condition the group of reaffirms (the people your prospects will look to) to come back on a regular basis. You do this by not making them guess. Give them the same quality entertainment every night. Don’t switch genres or styles once you start to see a following.

 

Once you have a crowd:

  • If you already have a strong crowd or operate a ticketed event that is at capacity such as an amphitheater. You can use social stimuli reinforcement to get people to purchase more drinks, food, and schwag. As anyone of legal drinking age who has been to a concert knows, when the guy next to you sits down with a beer. You suddenly want a beer. The more people sitting down with alcohol in your vicinity, the greater your thirst becomes.
  • Statistics are your friend. Collecting data has never been easier. If you sell food and beer, you should be recording those sales. Make sure sales can be categorized by time stamp as well. Now, make sure you are collecting door data through ticket sales or head counts. Those numbers should be time stamped as well. Look for patterns, seek out the lulls, and initiate “blitz” promos where you reduce costs for an hour or so. This will get beers in people’s hands and as more patrons enter after the promotion dies. They will see a positive stimulus and be more prone to buying beers to “join the pack.”

 

The goal here is to start using a new Key Performance Indicator (KPI) in your business analysis. Since I am from rock n’ roll, I like to call this measure The Bodies on the Floor KPI (in an ode to Drowning Pool).  If you analyze this social reinforcement statistic against your other indicators, you will likely find some secret data that could equate to better profitability for your brand.