On Thursday, two resale tickets to catch Beyoncé on her world tour in May at a London stadium were on sale on Ticketmaster for £586. That is a lot of money to gaze from the upper tier, even at the queen of pop herself, but at least the price was clear enough: it included the face value of the tickets, a “service charge” of £76, and a “handling fee” of £2.75.
Concert ticket prices are less transparent in the US, where Ticketmaster and other concert sites often conceal the fees, which can add 30 per cent to face value, until fans make it to the online checkout. “Americans are tired of being played for suckers,” President Joe Biden thundered in his State of the Union address this week, as he pledged to cap such “junk fees”.
The US is a hive of innovation when it comes to extras that are hard for customers to avoid. Many hotels charge “resort fees” for WiFi and gyms, whether they are used or not, while colleges charge extra fees to students who are already paying a fortune to attend. Not content with baggage fees, airlines make families pay more to sit together.
But America is not alone. We are all wearily familiar with being offered what looks like an online bargain before taking a taxing journey through various options, add-ons and things that feel like they ought to be part of the original product. It can be such a relief to reach the end that we swallow the pain of the final tally, rather than having to start all over again.
This is also known as “drip pricing” — the fine-tuned addition of one little thing after another, that is never quite enough to make us ditch the deal. The psychological craft that goes into leading the customer along while obfuscating the full price until it’s too late would be impressive, were it not infuriating.
Some fees, such as those on the Beyoncé tickets, are compulsory while others are voluntary. “Firms should be free to charge more to add mushrooms to your pizza,” a group of White House economists declared solemnly in October. But the figurative line between pizza and topping is often hard to define: what is an optional extra and what is baked in?
I was outraged on reading my credit card statement recently to discover a £19 foreign currency transaction fee for shopping in Italy. I should have used another card that does not impose such spurious charges but both were the same colour, and I took out the wrong one in a hurry. That is how sophisticated a consumer I am.
So Biden is right: Americans fall into the trap because most of us are suckers when it comes to junk fees. There are many studies looking at how people react to having the full price of a product or service temporarily concealed and the sad conclusion is that they often fall for it. They are annoyed by the final bill but not enough to revolt.
In my case, I vowed to call the bank that had issued the card, make a principled complaint and get the offending fee removed. But more than a month has passed by and have I done so? No. My irritation is not sufficient to overcome my inertia and make me take the necessary action. The financial return to the bank outweighs the cost of its making me and others grumpy.
Similarly, it is clearly irritating for consumers to book a US hotel at one price and find its mandatory “resort fee” tacked on to the checkout bill, but it is a worthwhile gambit for the hotels themselves. One study found that customers lowered their online ratings by only a small percentage when stiffed in this manner: too little to make hotels change their ways.
“Competitive markets by their very nature spawn deception and trickery,” write the economists George Akerlof and Robert Shiller: when prices are pushed downwards by open and transparent competition, companies will immediately look for new ways to obfuscate. It is no coincidence that junk fees proliferated after the internet made comparing prices and shopping around easier.
Ticketmaster shrouds fees in most US states because it is permitted to, and the industry knows that it works. The ticket platform StubHub experimented in 2015 with both all-in pricing and delaying fees until checkout, and found that its revenues were 20 per cent higher with the latter. Virtue does not pay unless the other competitors in an industry are equally virtuous.
Ticketmaster’s ethics are already under attack after the mess it made last year of ticketing Taylor Swift’s Eras tour. But while the company tries to prove it is not an abusive monopoly, it is inviting regulators to make it and other platforms adopt all-in pricing, as they have done in New York state and countries including the UK. That is why Beyoncé’s Tottenham Hotspur Stadium tickets are priced openly.
“The all-in price is the price of admission, and that ought to be the first thing a fan sees,” Joe Berchtold, president of Live Nation, Ticketmaster’s parent company, told a US Senate hearing last month. It is hard to argue with that, whether at a concert, in a hotel, or on a credit card ad. It might not make prices magically fall, but it would at least make them honest.