I don't see where there is a grossly egregious harm here. Nobody is going without the necessities of life because of it. I suppose there are some bands that aren't making the money, but nobody guaranteed them a living at this. There are SCORES of talented artists that never make it. This is a risky and exploitative business and it always has been. I think the government should spend their time regulating the businesses that control our information, computer, and financial systems before they regulate entertainment. How long will it take for people to get tired of spending $100 for concert tix?
How many people? All of them? That could take a while. I don't know how the concert business works on the level we're speaking about, I was just noting how I can understand why some people would think that any time under any monopoly is bad regardless of what product or service is being offered.
Yep...that would take a while. I'm really talking about the regular concertgoing masses at large. Once it dwindles enough...they'll respond. And I would submit that those people do not understand the economics involved. Government being quick on the regulatory trigger has caused disasterous economic results in the past.
There is a valid point to be made, however, that as demand has been shrinking (the number of concert tickets sold has decreased over the past TEN years, not just four) AND the supply has been shrinking as promoters and bands go for smaller venues, the prices have been increasing. This is exactly the reverse of the supply and demand model. How can prices be increasing if demand is dropping? Isn't it usually the other way around? I think the problem I have with this situation isn't the concert ticket sales issue. That isn't, to me, the biggest problem. The problem is the control of ALL ticket sales - concerts, children's events (Disney on Ice, the circus), theatre events, outdoor festivals, auto shows and sporting events - by one company AND the control of the vast majority of advertising and marketing vehicles for those events by THE SAME COMPANY. So, they are free to charge whatever amount they like in fees or in increased prices for events because they set the standard for the entire market. There is no legitimate competition. That is my concern.
I realize your contention is that "equilibrium" will eventually bring things in line. However, my contention is that the companies are happy with things right where they are. There is no incentive for the market to "adjust," certainly not to "regress" to a less favorable (for them) state. ...and that change has all been in the wrong direction. The industry has been in a downturn for a decade or more. In the last five years the decline has been steep. Despite that, all that has been seen is ridiculously increased prices and increased fees -- doubly so in the recent past.
Over time the incentive will be created all by itself. I don't know what it is that makes you think that this will magically defy all of the economic models throughout American history. You're really gripping here and ignoring the facts. TRhe only thing that is constant is change, particularly in an advanced economy like ours. If a steep decline continues, and empty arenas result...then Ticketmaster will either adjust or get out of the business leaving it open for somebody else to step in. That's the way the economy works. I didn't make the rules, I just recognize them.
No "economic models throughout American History" are being defied. I've posted the following, as has (most recently) davo. The result of a monopoly is: consumers end up paying more than they should. No grasping at straws, it is the most basic of economic theories. That is the situation the industry is in now, and the situation it will remain in for the forseeable future. "empty arenas" is a silly theoretical. The industry is happier with everyone except themselves being screwed. They are happy making the amount of money they are right now. They are happy with 36% margins. Perhaps...just perhaps in some mythical future they will drive away enough customers that they cannot increase fees enough to compensate, but by that point the golden goose will be dead. The concert industry is important to me. Not the end of the world, but attending a live performance with thousands of other fans is life affirming. I hate to see people who don't care about the music or the artists kill it. That's already coming to pass. It's not a silly theoretical. They've already done it to commercial radio.
False. Davo even agreed a few posts earlier that even in a monopoly equilibrium would eventually be reached. I agree that it may not be the most efficient way to equilibrium...but to say that the status quo will persist forever is to have a clear lack of understanding of economics. The basic understanding of a monopoly is that they make as much money as they can while they can still charge above normal prices. It is understood that such a situation will NOT persist indefinitely. I really don't know how much clearer I can make it.
And just in time, Salon.com weighs in with another Clear Channel story to warm our hearts: http://www.salon.com/ent/feature/2002/08/07/clear_channel/index.html
I did no such thing. I conceded that equilibrium will be reached, in which there will be a long run stable meeting of buyers and seller. The monopolist will earn above normal profits indefinitely - at least until competition is introduced, or he is regulated. If you don't see that, you are the one who has a clear lack of understanding of economics. Ticketmaster has had a basic monopoloy since 93 i think. I don't think intervention now would be classified as the "Government being quick on the regulatory trigger"
Jeff - it is not a reverse of economic theory at all. The microeconomic model has two compenents - demand, which represents the amount of a good consumers are willing and able to buy, at each given price. As price increases, consumers are willing and able to buy less quantity of a good. The second compenent is supply, which is the quantity of goods a supplier is willing and able to sell at each price. As price increases, he is willing and able to sell more. Equilibrium is reached where these curves intersect. Now in a monopoly, there is no supply curve. The monopolist is able to manipulate his supply and price at will - he is not limited by the action of his competitors. If he decreases price, consumers will buy more, but he gets less return for every unit sold - he has no real incentive to reduce prices, and he sets it at a level which maximizes his profit. That price will be higher than if he had competitors, he will make greater than normal profits, and less tickets will be sold. This web page, http://vlad1mir.tripod.com/market_interaction.htm , has a pretty good description if you are interested.
Sorry I must have misunderstood you. But it has been stated by economists again and again that even in the face of a monopoly prices and output will be reigned in in the market for luxury goods. It is a different story in the market for necessity goods. If you can't differentiate between market segments as to how a monopoly will affect the supply curve and the demand curve, then it is you lacking the understanding of economics.
OK Refman, I challenge you to show me how prices and output will be "reigned in" in a monopoly where the product is a luxury item. If you can do that, I will be big enough to admit that I am wrong and move on. Refer me to an article or text, show an economic proof - whatever. Nothing I have learned, read or heard here can shake me from the basic premise that, in a monopoloy as opposed to competition:- a) Consumers will pay more b) Output will be less c) Supplier will earn super normal profits d) It is not a desirable situation for ticket sales Look - you may well be right - I only have a basic economic education, but you need to prove it to me, I'm not just going to believe it because you say so. I have been through three text books trying to find any reference to differentiation between luxury goods and necessities in relation to monopolies and market power and have not been able to find anything.
Well, theoretically speaking, Refman's point would seem to be that since people can live without luxury goods, at some price point, demand will fall off so far as to prevent the company from selling enough tickets to be worth its while. He seems to be advocating the twin theory that demand will eventually change at the current price point as, in time, people will tire of paying the high prices for the product and stop buying in a large enough numbers to necessitate a lower price just to continue in business. At least that's what I get from the arguments. Demand would eventually have to change otherwise the situation would never be any better than now, when the companies are already making super normal profits on the ticket/concert business. It makes some sense (certainly the first part moreso than the second. Who can predict if the demand curve will shift), but I don't know that you can find a real world example to back it up.
That is largely correct. At some point people will tire of paying high prices for these luxury items. I am basing my analysis on what I learned in my studies of economics as part of my business degree plan at Texas A&M. Generally speaking the economic dynamics change materially when the goods are luxuries rather than necessities. The reason being that with a luxury people will stop buying at a certain price. Not so with necessities. You need them and the company has you over a barrell. That is what I learned, although I haven't taken an ECON course since 1995.
True, but that does nothing to prove your point. People will stop buying luxury items when the price reaches a certain level, just as they will stop buying necessities at a certain price (only they will be lot less elastic and the price will be relatively much higher). However, Ticketmaster will try to remain in the same profit maximizing position they are in now. If they continue to become less efficient and have to raise their prices to a point that they cannot remain in business, then they will probably fold. That is NOT "reigning in prices and output", that is a company going out of business because of inefficiency brought on by their own business practices, otherwise known as market failure. Luxury goods or not, the market will never correct itself to where a monopolist is not earning super normal profits, and producing the same output and prices as a competitive situation. mrpaige, Irrespective of what happens to the demand curve, Ticketmaster will still act to maximize profits. Using your example, they may indeed reduce prices and increase output if demand shifts, but they will still be earning supernormal profits, and consumers will be still be paying more for tickets than they would if Ticketmaster had competition.
That explains SO much j/k Thanks for the backup davo. I think we are pretty much on the same page that this is not good for the industry, and Ticketmaster could conceivably eventually price itself out of the market. However, since they are likely going to be entirely subsumed into the Diller empire, with a losing subsidiary an acceptable thing, the worst case scenario is that it might not happen until the industry is well beyond the point of repair...
This is exactly what you want. When that happens the monopoly will break down, and barriers to entry will relax. Therefore new competition will be created. I don't think it will really take all that long. I'm pretty sure the shareholders won't see it that way. Diller is all about maximizing stock price. A losing sub will dilute stock price. That is unacceptable in the long term. No such thing. People like concerts, and they always will. It may take time to get people back out there, but build it and they will come. I guess the bottom line here is that I am much more optimistic than you are regarding the ability of market forces to right the ship in this type of market. Fear not, it will get better.
