Fixing Prices: The Speed of Sound in Concert Tickets and Market Moves

Let’s analyze Coldplay concert tickets in Mumbai through a financial lens, specifically drawing parallels to IPO pricing and other market phenomena. The core issue here is a misalignment between the initial pricing of the product (the concert tickets) and the true demand-based market value, which, as you’d expect, leads to an aftermarket price correction.

The IPO Parallel

When BookMyShow first listed tickets for Coldplay's concert, they were priced between ?2,500 and ?12,500. Given Coldplay’s immense popularity and the pent-up demand (this is their first return to India after nearly a decade), this pricing was far too low. As a result, the tickets sold out almost immediately, with the website crashing due to over 1.3 crore people trying to secure a seat. The dynamics here resemble an IPO that’s underpriced.

Consider a typical IPO: Companies often underprice their shares to create a buzz, ensure strong initial demand, and reward early investors. This generates excitement and drives a price "pop" once trading begins. In the case of Coldplay tickets, the "pop" happens not on an official stock exchange but on resale platforms like Viagogo, where the same tickets are resold at a 20-30x markup. Tickets that originally sold for ?12,500 are now listed for ?3 lakh, and in some cases, as high as ?12 lakh. The resale market here functions like the aftermarket trading of an underpriced IPO. In both cases, initial buyers (scalpers in the concert case, day traders in IPOs) capture the immediate upside.

Market Inefficiency and Arbitrage

This phenomenon is essentially a market inefficiency. BookMyShow’s prices failed to reflect the true demand for Coldplay tickets, and that gap between the official price and the actual market value creates an arbitrage opportunity for resellers. Like any arbitrage situation, this happens because of price discrepancies in different markets—in this case, the primary market (BookMyShow’s official sale) and the secondary market (resale platforms). The difference here is the profit margin that scalpers capture by buying low and selling high.

In financial markets, this kind of arbitrage can be seen in multiple places. One parallel is the bond market, where underpricing of newly issued bonds allows institutional investors to buy them at a discount and resell them at a premium in the secondary market. The same principle applies here: the underpriced Coldplay tickets are essentially a discounted asset, and resellers act like bond traders, capturing the difference between the two markets.

Regulatory and Ethical Dilemmas

Both IPO underpricing and ticket scalping pose a dilemma: Who captures the value? In an IPO, the company leaves money on the table by underpricing shares, effectively transferring potential profit to early investors. Similarly, by underpricing concert tickets, Coldplay (or BookMyShow) leaves significant revenue on the table, which is instead captured by resellers who do not add any real value to the transaction.

This raises ethical and regulatory questions. In the financial world, companies and regulators often attempt to clamp down on insider trading, pump-and-dump schemes, or front-running to prevent market manipulation. Similarly, BookMyShow filed a police complaint to combat ticket scalping, warning buyers that tickets purchased from unauthorized resellers would be invalid. However, much like in financial markets, completely preventing this behavior is nearly impossible unless the primary market adopts a more accurate pricing strategy from the outset.

Supply Hoarding and Market Control

A more cynical analysis suggests that some of the inefficiencies in both IPOs and concert ticket sales might be deliberately engineered. For example, fans accused BookMyShow of reserving a portion of tickets for celebrities, influencers, and high-net-worth individuals, thus artificially limiting supply to the general public. This echoes the practice of companies or underwriters in IPOs reserving shares for institutional investors, effectively locking out retail investors from the initial price action.

The effect of this is that when tickets do become available to the public, they are immediately scarce, driving up prices in secondary markets. Whether deliberate or not, these supply constraints create an artificial scarcity that benefits the resellers and scalpers, just as preferential allocations in an IPO can benefit institutional investors.

The Bottom Line

So what’s the lesson here? Whether it's concert tickets or shares in a hot IPO, when something is underpriced relative to market demand, there will always be an aftermarket correction. In the case of Coldplay tickets, this correction came in the form of resale prices ballooning to 30 times the original price. It’s a reminder that while artificial pricing strategies can help create initial buzz, they also pave the way for a secondary market where someone else captures the upside. The question is, do you want that "someone else" to be a scalper with a Viagogo account, or should the band (or the company, in the case of IPOs) keep the value they’ve created?