Late Winter Tours Cause High Ticket Prices and Huge Earnings for Artists

***EXCLUSIVE COVERAGE*** onstage at the 2012 Billboard Music Awards at the MGM Grand Garden Arena on May 20, 2012 in Las Vegas, Nevada.
***EXCLUSIVE COVERAGE*** onstage at the 2012 Billboard Music Awards at the MGM Grand Garden Arena on May 20, 2012 in Las Vegas, Nevada.

The 57th Annual Grammy Awards have come and gone while the touring market for the music industry seems to be taking a break as well… or else it should be. The late winter months prove to be one of the rarest times of the year for any artist to undertake a tour and come out profiting, however a few artists seem to be defying that rule and beating the odds anyway.

Chris Brown for example, is launching his Between the Sheets Tour this week at the BB&T Center in Sunrise, Florida, despite his tough year he had with the law. The pop icon is projected to have a high return on his investment for this collaborative project with fellow artists Trey Songz and Tyga, according to Jesse Lawrence of Forbes. Of course Lawrence attributes the upcoming tour’s future success to the comparative value of tickets which are sold a number of times beyond their initial purchase on the primary market,

It’ll be a rewarding winter for Brown, Songz and Tyga, as five of the 25 shows on the Between the Sheets Tour average above $300 on the secondary market.”

On the same note, Brown’s average ticket price, taking into account all of his shows, is $249.49. That’s definitely nothing to stick your nose up at seeing how the BB&T Center has a concert capacity of 20,763 people as of 2014. With some simple multiplication, we can easily estimate a gross value of the event being approximately $5,180,160.87 as indicated by ticket pricing on the secondary market.

Photo taken by Lindsey Rae Evans
Photo taken by Lindsey Rae Evans

However Chris Brown isn’t the only one gaining from this increase in ticket prices as a phenomenon either; according to Forbes Magazine, Maroon 5 boasts the highest ticket prices among all major tours for this year. It costs $312.39 on average for a ticket to one of their most recent concerts, with select tour dates seeing ticket prices soar to approximately $790.64 per ticket.

These positive responses to prices along with the many artists who have bought into the warnings to avoid tours during this time of the year, actually means that Brown and Maroon 5 have given themselves a competitive advantage for this market. Their projected success in their tours can be uniquely their own since there is little to worry about dividing the market share with any other artists. There is little to no outside competition to worry about, besides each other, and there seems to be plenty of interest in both of their tours as indicated already by the shortage in supply of their tickets. These factors add up in the artists’ favor to project great returns and successful tours for them both. Lawrence reiterates,

Other top-priced artists like U2, One Direction and Meghan Trainor won’t play the U.S. and Canada until the summer, which has put more attention on Brown and Adam Levine and co.”  

     The average ticket prices of each major artist to play between now and this summer are depicted below in the graph. These prices are averages of the ticket values sold on the secondary market as noted by both Forbes and TiqIQ. Prices are seen to range from $131.00 to $312.39 for a single ticket, and the arrangement of the artists is in alphabetical order.

Average Ticket Prices on the Secondary Market
Click to make graph larger

These ticket prices can be compared to necessity goods as well as other luxury items, as shown in the graph below, to see that these people can be considered as having very high income elasticity of demand. Individuals are willing to purchase these goods as long as their income allows for it, no matter how outrageously priced the tickets appear to be. The graph also gives a reference point as to what these ticket prices can be compared to. Elasticity would have to be calculated by dividing a percentage change in demand for tickets to concerts by the percentage change in income of the people who want tickets. The resulting answer to this calculation would thus be expected to be greater than “1” for the concert tickets to be classified as a luxury good, which it can be inferred they are. For example: a 15% increase in income of the consumers could translate to a 30% increase in demand for tickets if elasticity were greater than one (and thus is a high income elasticity of demand).

Untitled
Click to make graph larger

Consumer preferences as well as expectations of future values could also be a determining factor as to why ticket prices continue to soar though the late winter market for concerts has spelled disaster for artists in the past. Chris Brown’s new album, Fan of a Fan: The Album, is set to release on February 24, 2015. The hype surrounding Brown’s collaboration with fellow artist Tyga could potentially increase value for his concert tickets on the secondary market just like how good news about a public company’s financial performance could increase its book value. The increase in value is a reflection of how investors’ confidence in the company increased, but here, the investors are the fans.

In conclusion, various factors surround this phenomenon of concert tickets outperforming expectations of pricing in the secondary market. At first glance, it appears that the inflation of prices could be a response to the public feeling that the tickets are being undervalued, but a more detailed analysis shows that various economic factors are at play to explain this discrepancy. Preferences, income, demand, and even elasticity of income help to paint a better image about what’s going on with this market, but despite all of that, one thing’s for sure no matter what: at an average ticket price of $226.10 for any concert by the artists mentioned above, this blogger will just stick to buying the album.

Sources: Forbes, TiqIQ, Best Buy, The University of Alabama Finance Department, Computer World, Electricity Local, iTunes, Bio, Maroon 5, Grammy.com

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