Today on Techcrunch, Michael Arrington added his thoughts about the secondary ticket market, specifically referring to Trent Reznors’ comments.

Pricing tickets is very, very hard. Demand for an event peaks just before it occurs, then falls to zero as it begins, like food that has gone bad. Changes in the economy have a dramatic impact on ticket prices, too. A good ticket broker is thinking about the quality of the event, the date of the event, the venue, the seat locations and the state of the local economy when pricing tickets. And if they do it wrong, they eat their inventory and take a loss.

The benefit to the artists and promoters is clear – brokers create a smooth demand curve for tickets. When an event doesn’t do well, no one feels bad for the brokers. But when tickets for a hot event go for four or five times the face value of a ticket, everyone points to the brokers and says they’re greedy. What they don’t realize is that the broker has paid so many people along the way for those tickets, they’re probably only making a 10% margin on their investment. And that’s when things go well.

Arrington, who used to be the COO of Razorgator, is dead on. I’m going to copy and paste Tom’s and my comments from the Hacker News discussion (a news site devoted to startups) on the topic and add some elaboration.

The vast majority of people are never going to understand supply & demand. They’ll always feel entitled to face value prices while ignoring basic market realities. The Chicago Cubs experimented a few years back with a variation of an auction format for primary ticketing and it completely bombed. Now, instead, they have vested interests in most of the broker shops populating the area around Wrigley Field including roof top tickets. Similar end result, different method.My favorite stories relate to when an artist gives out tickets for a free show then becomes enraged when a secondary market forms for them. Their problems would be a lot bigger if a market never formed to begin with… Update: a perfect example of this is Jay Leno

Also, if the team/fan is really concerned with certain people being excluded due to prices, they should hold a lottery based on cell phone verification. Or make tickets will-call pick up only (photo ID and purchasing credit card required). But even methods like this can be gamed and often lead to more headaches. The interesting part about all of this is the opposite is happening for most teams and artists:

http://ticketstumbler.com/new-stuff/2009/03/08/reillys-right-tickets-are-cheap/

Additionally, Tom added:

Nobody is buying tickets so kids can’t get them. They’re buying them to re-sell them at a higher price because there is a market for tickets at that price. They’re not buying them to hoard them for a rainy day or something.The reality is, for most events you can get tickets for face value, through the primary provider, if you do so in a remotely timely fashion. The other reality is that for most events that have a large secondary market you can get tickets well below face value.

Real “scalpers”, the people who stand around at games, are providing a service. They are selling tickets for cost + a convenience fee to be paid by whoever found it too inconvenient to get tickets earlier (or felt like “playing the market” or whatever).

The biggest problem with the ticket industry isn’t the secondary market, it’s the lack of transparency from not only Ticketmaster but from the promoters, artists and teams associated with them. And while there are still many events that completely sell out, the majority do not. For event goers this means deals can be had. Also, in recent congressional hearing, the CEO of Ticketmaster, Irving Azoff, testified that Ticketmaster only sells 60% of its total tickets. Meanwhile MLB attendance is expected to drop a staggering 20%. For teams and artists in this economy, the real challenge is the empty seats and canceled tour stops.