Shorting Taylor Swift
A Journey Through the Spooky World of The Eras Tour Resale Market
Our current financial system has a version of Rule 34, which is if you can think of a dumb idea for a trade, someone has or soon will lose millions of dollars doing that trade. It doesn’t matter how dumb the idea. People buy stock of companies that have already declared bankruptcy, they pay people to order fake pizzas, they invest hundreds of millions of dollars into “Elemental” and “The Flash”. And most astounding to me, at least a few people out there apparently shorted the price of Taylor Swift tickets.
“The high demand for Eras Tour tickets are also complicating speculative ticketing, a ticket resale tactic used by professional brokers who list and sell tickets to eager fans but wait to deliver on those tickets until closer to the concert, banking that prices will go down and they will snap up cheaper seats to turn a profit on the sale. But prices for this tour aren’t falling, and inventory is scant. Brokers are having to either take the penalty for canceling orders or pay the difference to make good on promised seats.”
The article goes into frustratingly little detail about who these brokers are. I want names. I want fly-on-the-wall reporting straight from the midtown offices where two junior analysts pitched the idea to their boss of selling Eras Tour tickets they DIDN’T HAVE on Stubhub, and then buying them back for less once they GOT CHEAPER?!!! I want to see the slide deck they used, the market research they did. “People will eventually get bored of her,” I’m sure they said. “We’ve built a model to predict what surprise songs she’s going to play each night, and we project a huge drop in price after she plays ‘Forever and Always’ in Philly.”
Happily, I ended up on the opposite side of this trade. I was lucky enough to make it through the queue on the second day of the cursed Ticketmaster presale, bought the first four seats I saw to the first Metlife Stadium show, then sold two of them for a massive markup on Stubhub, almost enough to pay for the other two. I could have covered the two sets of transaction fees and then some had I waited longer and timed my listing perfectly, but still.
Anyway, as the WSJ article goes on to explain, the whole reselling infrastructure was completely overwhelmed by literally millions of sales like this one, causing Stubhub and other ticket resale websites to spend hundreds of thousands of dollars buying new tickets at sky-high rates for botched transactions. And when I tell you about what this process entailed, you’ll see why:
I navigated to the Stubhub event page for the May 26th Metlife show, and clicked “Sell Tickets”
I manually typed in the section, row, and seat number of my tickets, and chose a price.
Someone else bought these tickets almost immediately
Stubhub sent me an email with the buyer’s email address, and instructed me to transfer the tickets to this email address.
Then Stubhub sent me a second email with a “confirm transfer” button. After I went into the Ticketmaster app and transferred my tickets to the buyer’s email address, I went back to this second email and clicked this button.
One issue of this system is that it enables short selling. You don’t actually have to have the tickets that you list when you list them. But another issue is that it’s just so vulnerable to human error. I could have listed my ticket on multiple sites, sold it on one site, forgot to immediately take it down on another, and then owed two buyers the same ticket. I could have typed in my ticket details wrong, or selected the wrong show altogether (remember, she was also playing Metlife on the 27th and 28th). I could have mistyped the buyer’s email address and sent it to the wrong person. Or I could have done everything right but then forgotten to click “confirm transfer,” for two weeks, at which point Stubhub would have voided the sale even though I had transferred the ticket to the buyer.
Stubhub does tell sellers that they are responsible for providing the ticket listed “or its equivalent,” and makes them enter a credit card to be charged if they don’t have the listed ticket in time and Stubhub has to buy an equivalent on their behalf. But for most of the botched transactions described above, the platform ends up spending its own money. To offset this risk, Stubhub charges the buyer and the seller about a fee of about 15% each. This is obviously an insanely inefficient system, and no other million dollar market operates this way.
But when you consider the alternatives, it sort of makes sense that concert ticket sales would. If Stubhub decided to get an internal clearinghouse like the New York Stock Exchange, directly buying tickets from sellers and then selling them back to new buyers, it could handle all of the transactions, avoid all of these issues, dramatically minimize the risk, and could afford to take a much lower fee from either end. But this would make it easier to resell tickets online, and artists on Taylor’s level really don’t want that. If they are charging below market value in order to include more of their die-hard fans, they don’t want to take less revenue only for scalpers like me to turn around and sell them to the highest bidder anyway. And it’s a lot less revenue! Beyonce probably makes a few million dollars on each night of her current “Renaissance Tour.” She made $24 million playing at a private event for the Dubai sovereign wealth fund.
You could also imagine the opposite extreme, where tickets are just technically impossible to transfer to resell, like plane tickets, because they match your name to your ticket, or just remove the transfer function from the Ticketmaster app. But what if you get sick? What if you buy a ticket for an event far in the future, and then break up with the significant other you were planning on taking with you? If the tickets aren’t transferable, there’s no way to get your money back and that seat will just empty, which seems bad for everybody.
Stubhub and other ticket sellers walk a fragile line between helping people resell their tickets, and sucking at helping people resell tickets enough that most won’t bother. It’s miserable and magical at the same time, a delicate balance between trouble and perfectly fine.
Okay, that’s all the Taylor content I have for now. I’ll probably be off next week, But I will be back later this month with an update on a certain strapping young shortstop’s battle with a Bronx-based phantom.