my response

[Joseph Presley]

Has anyone done this in practice? The reason I said that the logistical 
problems are not trivial is because in similar arrangements in other 
industries, complications come up.

The -really- big problem I'd hate to see is the that I've seen in the 
pizza business. The drivers are expected at the end of the night to give 
the store money equal to the total sales that they delivered. Any cash 
left over is their tip and commission. Sounds simple, right?

Well, sometimes what happens is that someone drops a $20 or an 
undeliverable order isn't canceled in the system. This would be as if 
the band misplaced tickets or lost the money. So, the driver is expected 
to cough up the missing money. If he doesn't have enough in tips to 
cover it, he has to go to the atm and give the money out of his own 
pocket. Needless to say, there is tremendous amount of frustration for 
both the manager and the driver.

Now imagine that the promoter and the band gets into a disagreement 
about how much money is owed from the band's ticket sales. However it's 
resolved, someone is going to feel screwed. The risk of a situation like 
that makes me think that such an arrangement is not worth the potential 
extra promotion.

Now suppose instead of the promoter fronting the ticket, he pre-sells 
the ticket to the band for a discount. Well, then the band would have to 
have a relatively significant amount of money to spend up front. If you 
have any deal to refund unsold ticket, then you have the problem that 
you have in the first scenario.

Joe

Chris Rapier wrote:
> 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.