By Jim McCarthy Jun 28, 2012 0 comments

Is Louis CK Being Generous?

Yesterday, a story about the comedian Louis CK got wide coverage, describing how he had decided to “evade Ticketmaster” and “sell his tickets himself.” He did this, he says, because he doesn’t  want his fans to pay too much.  This will happen, he says, because Ticketmaster charges too many service fees, and because scalpers will buy and re-sell his tickets at a higher price.

First, there’s an important quick clarification: Louis CK is not “selling these tickets himself.”  They are being sold on Etix, which is a ticketing platform in business to make money and competitive to Ticketmaster and other ticketing platforms.  It’s not like Louis printed the tickets, popped up a card table, and started selling them on the street corner.  This sale is being managed by a professional ticketing organization; it’s just being done in what’s called a “white label” fashion.  Even very large entities use white label ticketing (wherein the ticketer isn’t really named or explicitly shown), including Major League Baseball teams.  About half the league is on, which in most cases is a white label.

Second, there IS a service fee, but you just can’t see it.  That is, Etix is (unless they’re doing this as an exception or as a favor to Louis) getting paid, which ultimately is what service fees do for ticketing systems.  It’s just built into the overall price.

Third, that means that Louis CK is very likely giving up significant revenue on these tickets(at least in theory…more on that below), and benefiting from the good will by selling more units.  Since he’s still way in the black, it’s good business.  Highly sustainable and potentially smart.  On the other hand, there’s a price to pay for the scarcity that gets created by this.  That’s right.  When more people want tickets at the price you’re willing to sell for than you’ve got available, some people just get shut out.  On the one hand, acts see this as a good thing because it increases the desirability of your show for next time, but there’s a caution.  Preference is highly perishable.  It’s also possible that people who were conceptually interested just move on to something else.  You shut them out by creating scarcity; they found a “substitute.”

Fourth, the robustness of demand for his tickets in the secondary market is a rare and valuable commodity for him.  The very fact that scalpers can buy and resell his tickets is what makes all this possible, and that in turn reflects the level of demand for his act.  Most acts, very simply, don’t have that kind of demand.  While he does, Louis CK has options like this about how to price.  Whether it drives venues crazy by making them use a ticketing system that they’re not set up to deal with, and whether the logistics at the venue work properly at the show is TBD.

Finally, a reminder about how this works: revenue is a function of price times the number of tickets sold.  And in the case of Louis CK, he’s selling a lot of units at a lower theoretical price than in the past.  What we don’t really know is whether or not he’s selling more.  In other words, he might not be giving up anything at all financially if his actual Revenue Per Seat goes up as a result of dropping his ticket price.  I don’t doubt for a second that Louis CK’s heart is in the right place in wanting specific things for his fans, but on the other hand, we only know one variable in the equation: the price.  We don’t know how this has effected the number of tickets sold, and therefore we can’t calculate revenue per seat.

My hunch is that this program (and all the associated press that goes with it) has driven his Revenue Per Seat way up as compared to previous tours, and so by “giving up” revenue, he’s actually making out just fine.

Generous? Perhaps in spirit.  Financially, though, this may work out for him very well.  Pricing to maximize Revenue Per Seat usually does.

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