How Scalpers Make Their Millions With ‘Hamilton’


A report–and a useful lesson on scalping–by Tiff Fehr of The New York Times.

On July 9, Lin-Manuel Miranda, the founding father of “Hamilton,”took his final bow in the title role of his hit Broadway musical. Other original cast members, like Leslie Odom Jr., who played Aaron Burr, also left the show after that performance and Daveed Diggs took his final bow within days. But the change in the cast was notable for more than matters of casting: It could well have been the high-water mark for demand for “Hamilton” tickets — and for profits reaped by ticket scalpers who make up part of what is known as the secondary market in ticket sales.

 For most of May, the median price of a ticket on the secondary market was around $850. Between the Tonys and the July 9 performances, it pushed toward $1,600. Before Mr. Miranda’s announcement of his departure, ticket holders were offering a seat for the July 9 performance at an average of $2,700. With the news of his exit, the average asking price quickly climbed to $10,900 a seat.

Mind you, the average face value of a “Hamilton” ticket was $189.

The good news for fans of the show: With the cast departures, the resale price has dropped significantly and leveled off at around $700 a seat.

It’s difficult to get definitive sales information because scalpingoperates in the shadows. So to figure out just how much scalpers were making from “Hamilton” tickets, we created a database by collectingpublicly available information on ticket prices on secondary market listings. We watched the ticket price history for each performance, for days and weeks and in some cases even for months.

What we found was that scalpers took in more than $15.5 million from the 100 performances before Mr. Miranda’s final show. The 32 performances between the June 12 Tony awards — where “Hamilton” won 11 statues — and July 9 may have brought in more than $10.5 million for scalpers alone.

The “Hamilton” producers do very nicely on the musical, with net profits of $600,000 a week. For those 32 performances, they made around $2.7 million in profit. Scalpers did well, too — more than $3 million in May and $7 million in June, according to our estimates.
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Scalping can be explained with high school textbook economics. When ticket prices are set too low to balance demand against the supply of seats, any person holding a ticket can find a sea of buyers willing to pay more than asking price for the seat.

 Increasingly, that ticket holder is not a guy at the theater door with an extra ticket. It’s a person employing sophisticated software, a so-called ticket bot, to buy a huge number of tickets moments after the theater releases them. In the time a human buyer can find the calendar feature on a ticket site, a scalper’s network of hundreds of bots has already bought the maximum limit of tickets for multiple days of shows.
With the speed of the internet, scalpers have greater reach into ticket purchasing than ever before. The professional tier of scalpers buys and sell thousands of tickets a year, and leverages millions of dollars of inventory. Some scalpers use custom-written software to manage their inventories and adjust their prices based on real-time market analysis, much like traders on Wall Street. (It should come as no surprise they prefer to be called brokers.)
Because the secondary market is scattered across dozens of websites and storefront services, its size is hard to establish. Overlapping ticket inventories also make prices hard to track. Websites like StubHub, SeatGeek and Ticketmaster re-list more than 35 percent of the 1,321 seats sold in the Richard Rodgers Theater, on average, for each of the eight “Hamilton” performances a week. By placing initial box office sales and secondary market resales side by side, they provide a veneer of legitimacy (and an illusion of regulatory transparency) for scalpers.

Such a strong scalper-driven secondary market is relatively new to Broadway, though sports fans and concert goers have long encountered inflated prices for big games or Beyoncé concerts.

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Every performance of “Hamilton” is a miniature Super Bowl, in terms of demand and resale activity. Fans can still get a seat at “Hamilton” for less than a thousand dollars, if they are willing to wait for it — either buying months in advance from the theater or just hours before a performance, as scalpers drop their asking price.

Looking across nearly 100 days of “Hamilton” performances, we found that the median resale ticket price was nearly $1,120 a seat. By our analysis, scalpers were earning more than six times what they paid for their tickets.

The “cheap” seats in the mezzanine and orchestra sides sell for more than 10 times their face value on average. Premium orchestra seats sell for nearly six times their face value on average.

For a website that is trying to detect scalping, the challenge is finding the bots among the humans. It is not as easy as it sounds. To avoid detection, sophisticated scalpers use bots designed to look like humans, although they use the website far more efficiently. Bots don’t misclick or need to use the delete key, though they may do that as well, in order to further obscure the evidence of a nonhuman purchase.

The masquerade is important because “Hamilton” cancels what it deems to be bulk ticket purchases. The lead producer, Jeffrey Seller, has described canceling the purchases of one bot that had accumulated 20,000 tickets for “Hamilton.”

It is an uphill battle. Bot-driven ticket buying has been illegal in New York since 2010, yet its use is still widespread. When they are networked, bots can play a big role in distorting ticket prices. Bots can drive significant traffic on, up to 90 percent of ticketing-purchasing activity at times.

TicketMaster’s traffic for high-demand events has been reported to be on par with Black Friday online shopping. Another comparison would be “distributed denial of service” cyberattacks, in which networks of bots act like tens or hundreds of thousands of users accessing a website at the same time. In the case of cyberattacks, hackers want to knock a website offline. But scalpers want to put hundreds of bots in line ahead of any humans.

In early June, Mr. Miranda excoriated the effect of bots on ticket affordability for “Hamilton.” That same week, producers raised ticket prices in a bid to reclaim some profits from scalpers.

But the producers have limited options for balancing supply and demand. On the supply side, they will soon offer more seats and performances by opening productions of “Hamilton” in Chicago in September, as well as touring productions starting in San Francisco in 2017 and Seattle in 2018. Initial demand for those productions will be strong, as the most eager fans rush to attend in each city. But eventually it will ebb.

On the demand side, raising the theater’s take by about 30 percent in New York could help dampen enthusiasm, or at least make scalping less profitable. The new cast members could be another factor in reducing demand, depending on how much of a special draw the original cast proves to have been.

In April, the New York State Attorney General, Eric Schneiderman, issued a comprehensive report looking at current law and abuses,ultimately concluding changes are needed to fight the persistent use of bots. Subsequent lawsuits extracted settlements and penalties from some nonlicensed or bot-using scalpers.

In mid-June, New York legislators increased the penalty for use of ticket bots to a misdemeanor, in one of the first legislative responses to the attorney general’s report. The move also represents one of the first steps back toward greater regulation since New York repealed its strong anti-scalping laws in 2007.

At the federal level, Senator Chuck Schumer of New York has proposed legislation that would outlaw such bots. Lawmakers from several other states have proposed their own variations, with claims of broad bipartisan support.

But sellers who list tickets for New York venues from another state are not bound by the laws of New York. (While some of the show’s characters say “everything is legal in New Jersey,” ticket reselling in New Jersey is in fact subject to laws similar to those in New York.)

 And scalping, like sports betting, is a global marketplace. Once a company is ensconced offshore, it is hard to determine the location and laws governing its activity. One of the more popular offshore havens is St. Kitts and Nevis in the Caribbean, a small country made of two islands — the second of which was the birthplace of Alexander Hamilton himself.

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