The economics of *Hamilton*, and money left on the table

The average resale of “Hamilton” tickets on StubHub is roughly $872, according to a New York Times analysis, a markup of $700 above the current average original ticket sale price.

For any given performance, roughly 13 to 22 percent of the seats at the Richard Rodgers — somewhere between 180 and 300 tickets — are available on the secondary market, according to The Times’s research and interviews with ticket sellers. So for each performance of “Hamilton,” ticket sellers and brokers are reaping roughly $150,000. With the Broadway cast putting on more than 400 shows per year, that means these sellers could reap about $60 million per year, just in New York — money the producers, investors and Mr. Miranda will never see.

I still find this equilibrium puzzling.  By the way, here are some numbers on book tie-ins:

“Hamilton” can even sell books. “Hamilton: The Revolution,” a behind-the-scenes book about the creation of the musical by Jeremy McCarter and Mr. Miranda, went on sale in April with a list price of $40. In less than two months, it sold more than 101,000 copies, according to Nielsen, and hit the No. 1 spot on the New York Times hardcover nonfiction best-seller list. (Other authors have benefited from “Hamilton” fever, too: Ron Chernow’s 2004 biography, which inspired Mr. Miranda to write the musical, has spent 33 weeks on the paperback best-seller list. This fall, Three Rivers Press will publish Jeff Wilser’s self-help book “Alexander Hamilton’s Guide to Life.”)

Here is the Michael Paulson and David Gelles NYT piece, it has much more of interest on the economics of the show.


The "Hamilton" phenomenon won't mean much in general until teen-age boys start wearing buckles on their shoes and powdered wigs.

Hamilton is having an impact in kids studying history and rapping about it.

Which is extremely dangerous because they will see how much of the stuff they are fed is lies designed to exploit them.

I'm pleased that Ron Chernow's biography of Hamilton is selling well, but I would be more pleased if people actually read the book, especially the many pundits and other experts who comment on Hamilton (and his nemesis Jefferson) with little or no knowledge of Hamilton (or Jefferson for that matter) other than Hamilton favored "big government" (and Jefferson didn't). Ignoramus equilibrium.

I gave my brother guff the other night for listening the soundtrack and livetweeting it; he replied that I should be excited he is getting into the original fiscal conservative.

I had nothing else to say.

The sound track is amazing VOTE FOR TRUMP

Well, the book needs to be rationed, by the page.

Create lots of demand, and then release only 1000 handwritten pages per week at a price of a penny each.

Then scalpers will auction off the pages for $500 or more per page, and people will read their $500 page, waiting until they can buy another page.

Then an edited version is issued after 6 months with includes one line of each of the pages released so far for $20 in unlimited numbers.

That should generate ten years of demand to get 1000 complete copies of the book sold and read.

Long tails on the distribution of what is popular or in or something that gives you the opportunity to say: "I just saw....", knowing that your listener couldn't have seen it because the ticket or item

Always have really interesting pricing issues. The utility of the person who got to go to Hamilton is very high relative to the person who couldn't get a ticket and has to listen to how good it was.

I just bought a futures ticket and invested in the musical sequel, "Burr", that is opening in an outdoor theatre in NYC in February.

This reminds me of the recent experience of attending a show by a music group called Chairlift. Three days before I saw them in Baltimore, they played in Brooklyn. The Brooklyn show was sold out a couple months ahead, so a second afternoon show was added there. A reviewer wrote that a large crowd was lined up two hours before the doors opened, those who wanted to reach the front of the 550-capacity music hall. In contrast, I arrived at the club in Baltimore a half hour after the opening act had gone on and paid my $15 at the door. Chairlift's singer happened to walk across the street and into the club with me. There were about 60 people on a floor that if stuffed could hold a couple hundred, and another couple dozen on a balcony and back at the bar.

I was left wondering about the contrast in demand. It seems that New York City is the place to be to sell out shows.

Good illustration.

I always like to look at the other side of the issue, like you did. What happens to the scalper when he has extra tickets. Sell. What if there are several scalpers. Sell before the next one does or move to a corner further away from the other scalpers.

As for your situation, I bet you were single without a date so you could take the risk of not getting a low price, last minute ticket.

Single male discrimination.

13 to 22% of tickets are sold in the secondary market for 400% the original price. That means that at least 78% of tickets leave the producer and the consumers happy. A "rational" action of the producer to catch more income would be to increase ticket prices considering some clients pay more but......what fraction of the 78% would leave?

I have no experience in the matter but I don't imagine Coke executives worrying about consumers paying $5 for a Coke in a restaurant. The business is in big sales volume, not in the consumer that pays 400% overprice.

It could be the reverse. If you support a secondary market that charges an exhorbitant price on a few tickets, that makes a high price on the bulk of the tickets seem more reasonable.

Hey, I paid only $172 for Hamilton tickets! What a great deal!

The producers have an incentive to maintain perceived fairness.

Same with small batches of big brand basketball shoes at $250, that have a solid $750 resale market. Trying to sell anywhere near $750 would ruin the democratic image, that it is a lottery/luck thing, not a market. And of course the secondary market adds thrill for young punters.

insert after "item" the word scarcity.

How about tax evasion, in solving for equilibrium? The scalped tickets were originally complimentary tickets for the theater staff and actors, or officially income of only $100.

Interesting post on the economics of ticket scalping.

Here is a book recommendation. Washington and Hamilton: The Alliance That Forged America, by Tony Williams, Stephen Knott. The later chapters cover the differences between Hamilton and Jefferson's group, the Constitution, the Bank, sectionalism, etc. FYI, among the founding fathers, only Hamilton and Washington were soldiers.

Hamilton was a soldier in the sense that he was Washington's butt boy.

Hamilton was a successful field commander at both the beginning and the end of the Revolution. He began his service as a militia captain in New York in 1775, where he came under fire in a successful raid on the Battery in lower Manhattan. Enlisting in the Continental Army, he distinguished himself as a captain of artillery in the Christmas victory over the Hessians at Trenton in 1776. He spent the next four years as an officer on Washington's staff. He returned to field duty in April 1781, and as a lieutenant colonel under Lafayette he commanded a battalion of infantry in the decisive bayonet attack that defeated Cornwallis at Yorktown in October 1781.

Of the 13-22% of tickets that end up on the secondary market, how many were initially sold to "regulars" that buy tickets to plenty of non-Hamilton shows and end up paying more than though the ticket office than they could get those seats on the secondary market. Perhaps those are not the people reselling their tickets, but it is worth mentioning that the market for Broadway shows is larger than one play.

Isn't this probably comparable to the restaurant iicket model?

You and the band/troupe etc...benefit quite a bit by saying "SOLD OUT" In fact, that very scarcity implied probably creates a big chunk of that 60milion value, which the theatre can't make if it made ticket prices high enough to sell all but the last ticket (as they wouldn't be able to say 'sold out').

There is an episode of EconTalk about this, Mitch Weiss on the Business of Broadway, although not specifically about Hamilton.

I think the producers are leaving less money on the table than you'd think:

First, the nosebleed prices in secondary markets can become a form of conspicuous consumption, whereby people who pay them are more likely to talk about it than they otherwise would be. That's good marketing for the long run of the show.

Second, the theater can engage in price discrimination by jacking up the retail price of just a few select seats in prime viewing positions (orchestra rows 2-10, first row mezzanine) to capture some of the peak of the market themselves.

Third, they're playing the long game. By creating enormous amounts of interest in the show, they get an incredibly valuable brand which will bring tourists and others casually interested in the show to seats for years to come. Hamilton won't get nosebleed prices when it's on its 4th replacement of cast and is a 6 year old show. But building a huge brand now means that they'll consistently fill seats in the future at acceptable prices. People will come to NY and when looking at seeing a show, remember "oh yeah, Hamilton is supposed to be really good, let's do that."

I remember us arguing this general issue in UCLA days in the late-1970s.

It is a broad-based issue, for sport teams events and rock-and-roll shows. It is too commonplace over many places and times to dismiss as irrationality or market failure.

Our explanations:

(1) Ration by enthusiasm. People with big bucks can buy tickets, but only a true fanatical fan will stand in line for hours to buy tickets. The latter are the people you want cheering your team, screaming at your show. It is an externality argument.

(2) A shortage creates a buzz. Make something (or someone) hard to get, and people get interested and excited. In other words, a long-term strategy of marketing, for which short-term profits are sacrificed. Keep the prices too low, and interest will last for a longer run of the show.

(3) Loyalty to fans require that you not be perceived as being in the business of exploiting them for your profit. This is not quite the same as a fairness issue.

These explanations also give insight to the hostility toward "scalpers," who are making arbitrage profits but are undermining the factors above in the process. At least in regard to (3), the producers can blame scalpers for high prices rather than take the blame themselves.

I have always assumed that risk aversion and the time value of money play a role as well. $50 now versus the chance of $150 in 6 months isn't a terribly unattractive proposal to a producer.

The scalpers are taking entrepreneurial risk, betting that their skills at at sales, price discrimination and market timing are sufficient to make up for tickets they don't sell or sell at a loss. The theatrical producers don't have that kind of expertise (though they have other kinds) and they don't want to take that kind of risk (though they take other kinds).

I used to buy scalped Yankees tickets on the street. If you wait until the second inning, you can buy them below face. I don't know what the price path is for theatrical tickets, but they definitely go to zero when the show ends, probably before.

No mention of the fact that it's crappy, inauthentic, dumbed down opera, go so you can be seen stuff? :)

A good report on how ticket brokers affect the price and availability of tickets in New York State was prepared by the Attorney Generals Office of New York State. Some of the highlights are interesting - only 12% of available tickets were offered to the general public for a recent Katy Perry concert. And automated Bots were able to purchase over 1000 prime seats for a U2 concert within the first minute of sale.

A good entertaining book on the history of the business side of Broadway came out last Fall. It is 'Razzle Dazzle: The Battle for Broadway' by Michael Riedel. Here is the NY Times review

1. I don't think the market is that big, if only 20% of the tickets end up on the secondary market.

2. It could be that the producers are, indeed, capturing some of this, because they are the ones selling on the secondary market.

Back during the comic book boom of the 1990s, the publishers would often watch issue #1 go way up in price after publishing, which they couldn't capture. One publisher "accidentally" found a bunch of issues that they had failed to ship after release and put them directly into the secondary market.

This craziness was amazing while it lasted. I wonder if anyone has gotten their economics PhD by looking at the weird things that were happening there. It didn't last long before it all collapsed.

Ron Chernow’s 2004 biography doesn't need any added benefit, never asked for such; it lives on its merits of an american founding father . . .

dealing real, not dream, yet again, wtf has life been on earth; yup

the bot speaks up . . .

tweety birds, they know what's going on, they got the hi-view . . .

How is this different than a Stock IPO that get hot. How much money did Bill Gates etc "leave on the table"?

read some money theory, menger's ; "the evolution of money', or something there abouts . . . .

in the mean time, i just like your name, can you tell, joan ?

in the mean time, dress up in something dainty, wtf, we is only here 4a short time . . .

u people is lucky, 2have, certain people talk 2u, from time2time . . .

and u just happened 2b listening . . . , and u 2, s' head, r somebody . . .

life in the bits&bites, lil f o's . . .

twenty, some odd years,d i've been on this forum, ugly spock head readers, ask me if i give n f, 'bout wtf u say?

hear2 lighten up your stay :) a son, who mom named me after, a big time saint . . .

so i have2 say, something decent, at some juncture; do u hear what i m sayin'?

i can sing a song like that . . . , u can't, . . . .

it is ok, u lil', p of s, whatever it is, u come 2b . . .

we are here 4u, and always will b . . .

that is our nature, we are helping people, and the universe is so vast :)

fret not, lil', schitzophrenic, lil' a ho's . . . .

we is here, 4u, and your life is going, 2b, better, b cause we was here, then if not, whenever the f that was? . . . .

b n a flower. consequences & contemplation . . . .

what are all these fractals about anyway?

lil' jeston's, amoeba's, hang in there, we r here 4u, and will catch up someday,

I don't know about Broadway musicals, but I've read that for a lot of music concerts, the tickets that are on stubhub are actually put there by the venue. For something like Hamilton, it would allow them to sell some tickets for $800 without the negative press that would come by actually pricing the tickets officially that way. i noticed when i took my gf to an AC/DC concert that all the best seats were on stubhub but not many poor ones. so it looked like it was organized by the arena, not just random people trying to resell their tickets.

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