my response

[Chris Rapier]

On 3/9/06, Joseph Presley <jwp7 at pitt.edu> wrote:
>
> This sounds like an interesting idea, if as you stated, it's provided as
> a service for the opening bands. The only way I can see that happening
> is if the deal for the band included a percentage of the door after a
> certain number of people show up. Then you can offer the band tickets in
> order to help them out.

I think thats overly complicated.

> How would you deal with the logistics? It doesn't sound like a trivial
> problem to keep track of how many tickets the band sold and to get the
> money from the band for the tickets they sold.

Actually this is pretty trivial. The promoter offers the band T
tickets for presale. The band says 'okay' and pays for T tickets at a
discount price of P. The band sells N tickets. The band hands the
remaining  (dT = T - N ) tickets to the promotor who refunds the band
dt*P dollars. The difference between the face value of the ticket F
and the discount price P times the number of tickets sold N ends up
being extra profit for the band ((n*F) - (T*P) + (dT*P)) . The band of
course, can sell the tickets at any price they want to as long as they
are willing to absorb any loss this might incur.

So say Band X is playing a show. They buy 50 tickets from the promoter
at a discount price of $5 for a total outlay of $250. The tickets have
a face value of $10. The band then sells the tickets to friends and
others for $7.50 each. They sell 40 tickets. Band X gives the
remaining 10 tickets back to the promoter and receives a $50 refund.
Band X makes ((50 - 10) * $7.50) -  (50 * $5) + (10 * $5) = $100 just
on the presale of the tickets. The promoter helps fill the venue in
addition to piggybacking on the promotion the band does. The promoter
might feel that he might be losing money because these people who show
up might have paid full price - but of course, they might not have
shown up if it wasn't for the fact they dealt directly with the band.
So thats a risk the promoter has to take however, its really just a
risk that they won't maximize profit. The promoter of course, needs to
determine what the optimal discount ticket price is - this should be
(at least) the break even price so they don't actually lose any money
on these tickets - unless he wants to use these tickets as a loss
leader.

In short, the band doesn't take any real risk because they can get
their money back on any tickets they don't sell. The promoter doesn't
take any *significant* risk because he has the money in his pocket (he
might have to refund all of it of course, but this doesn't represent
an actual loss for him). The band can be assured of making *some*
monkey as long as they sell some tickets. The promoter gets to fill
the venue and gets free promotion. The logistics are dirt simple
because you only need paper tickets to track everything. Of course
agreements have to be made to handle some issues that might come up
but it wouldn't be anything horrifically complicated.

Also, if that math was beyond anyone here you need to log off and get
back to studying pre-algebra for your big quiz tomorrow.