Frequent flyers famously bought $1 coins from the U.S. Mint at face value (with free shipping) using rewards credit cards, deposited the coins in the bank, and paid off their cards. They were left with the rewards points.
I wrote about this back in 2008, it lasted in various forms for a couple of years, and was even covered in the Wall Street Journal where it inspired the idea of the U.S. government minting a trillion dollar coin and depositing it at the Federal Reserve to solve the debt ceiling crisis.
There have been several things that worked similar. Way back in 2002 I wrote about buying government savings bonds with a credit card and holding them to maturity. (This didn’t let you pay off the card during the same billing cycle, however.)
It turns out one of the reasons you can’t get your hands on concert tickets to the best shows when Ticketmaster releases them is because of… their value in earning frequent flyer miles. But many rewards points collectors are now getting burned.
- “Buyers clubs” look for limited-availability items, and ask people to buy the items. They reimburse the purchaser in full usually plus a commission.
- This can be for anything expected to be scarce, where you’re limited to buying a small quantity. Perhaps it’s a PS5 game console or limited-edition coin. Or it might be something where bots are stalking a site to make purchases quickly, and you might want thousands of human bots.
- Buyers clubs might sign people up to buy concert tickets. There’s even a contract promising to reimburse right away. You go buy a concert ticket, get paid back, and even earn a commission. You might be tempted to go see Taylor Swift yourself, if you bought the tickets, or re-sell them yourself since the price is going to pop. But you’ve signed a contract!
The problem here is that there is risk and several buyers clubs have fallen apart. They work well until they don’t, and a deal goes south. PFS Buyer Club is getting a lot of attention right now. It’s been public and let people sign up, while most have been private. And they… made commitments they aren’t able to keep.
- Travis Scott is popular and has a big tour. His tickets, which sold at a $61.50 starting price, sell out in major markets with smaller venues.
- But in small markets with huge venues, he doesn’t fill stadiums. And shortly after tickets were released and sold, he doubled the size of his tour. Some of those $61.50 tickets are selling for $15.
People went on a buying frenzy as soon as tickets were released, floating tens of thousands of dollars expecting the buying club to reimburse them and pay them a commission (and let them net the miles). However the buying club isn’t able to sell the tickets! They’re going to take a huge loss. They’re promising to still come through… eventually. And they complain that they can’t just borrow the money at current interest rates and carry the cost.
BoardingArea blog Out and Out saw what this buying club was doing with Travis Scott tickets and decided to go out on his own. Why take just a commission from them, when he could reap the profits from reselling Travis Scott tickets himself? He’s on the hook apparently for $17,000 in tickets that are now underwater in value.
It’s estimated that 40% – 50% of Travis Scott tickets were purchased by resellers, whose investments are underwater by 60% – 80%. Jason Koebler explains why Ticketmaster and artists allow this reselling, which blocks fans from purchasing the tickets they want: it guarantees sell outs, some shows are going to do that anyway but many won’t, so it helps ensure money in everyone’s pocket.
Not every tour and not every sports team is a winner, and brokers buy thousands of tickets that actual people don’t want every single day. Ticketmaster and the artists make their money from fees and the face price of these tickets that otherwise wouldn’t have sold or would have sold at face value prices that were much lower.
…Ticketmaster makes its money. Travis Scott makes his money. Fans can now go see the show if they want to for $10. The only people who lose here are ticket brokers, who are eating, collectively, millions of dollars of money on these shows.
Of course, Scott might end up playing to half-empty arenas in half of the country because brokers are ultimately going to end up eating a lot of these tickets and they’ll go completely unused. But situations like this are why we should not trust Ticketmaster when it says it wants to crack down on resellers.
Meanwhile brokers include buyers clubs, which are made up in part by people looking to earn frequent flyer miles at no net cash cost. The problem is that in every deal you have to evaluate your risk. Many of these have worked out very well! But some of them haven’t, and when they don’t they can leave participants floating big money and staring down big losses.
I was in this deal with PFS, gratefully they did offer an out a month ago to be paid for the cost paid for tickets immediately in exchange for giving up commissions of $25 per ticket. I got approximately $7k check back (giving up about $1k in commissions on 40 tickets)
Learned lesson to be really careful about jumping in schemes like this later.
Resellers suck.
Sure, resellers SOMETIMES lose money, but over the long term they suck money out of the entertainment industry, depriving artists of income and making seeing shows more expensive for fans.
Another link to the same article posted by Gary not requiring a paywall login
http://web.archive.org/web/20231005150037/https://www.404media.co/ticket-brokers-bet-on-travis-scott-will-lose-thousands-of-dollars/
I gave up on getting screwed by Ticketmaster a long time ago. As for the musicians, that is the devil that they chose to do business with. I can go to YouTube. I can also go to small venues with lesser known musicians and have a great time being near the stage.
I learned with The Plastic Merchant to never bite off more than you can chew when it comes to reselling.
I’ve probably resold $100k worth of stuff over the year (only losing out on $400), so I’m definitely ahead, but it’s always a risk, no matter what you’re reselling.
Yup, you never hear of the 99% of the time when they are winners and only about the losing propositions. I did PFS with the coins a few times and while they went smoothly, at the end of the day I was “risking” tens of thousands for net commissions of 3-4%, including the 2% credit card “points”. A standard “finders fee” is at least 10% . So no more.
The Hasidim in Brooklyn know exactly what they are doing, I’m shocked that their profits from Taylor Swift can’t cover this loss. They just don’t want to give it back…
I absolutely positively refuse to by any ticket that’s sold thru Ticketmaster. A total rip-off. Period. I’ll just stay home.
I was also in on the PFS deal. I took the option to cash out quickly instead of waiting for them to sell and getting the commision. I hope that they can work it out because they have been very professional in all the deals they have done with me. They give very good directions and have always come through.
For the resellers, this is the risk that they get paid to take. No different than the stock market.
Resellers and scalpers hurt the true fans. And no it’s not free economy or whatever other justification people like to use. It’s blocking people from enjoying it and trying to take advantage of people. It also hurts the IP / company / artist, as it causes fans to be disinterested in caring about the product because “what’s the point when you’re not going to get it anyways”.
also Amex, Chase, Amex, Barclays, Citi and any points or cash back “scheme,” not limited to frequent flyer.
Those shady BGs should ge fk themselves!
On another note a lot of the Travis Scott shows have just been moved by an hour. Dont know if somehow that can be used as a means to get TicketMaster to refund the original purchased tickets!
I saw this “deal” but I was like I’m not a moron. You don’t try to resell tickets to events that are not heavily attended by white people. You want stuff like Taylor, Adele, Luke Bryan. You need to know what audience have the disposable income to overspend for tickets.
Good point Hal, same if you never heard of said Artist. I just assumed he was some old country “privileged” white man with that name..
Even Burning Man tickets dropped to about half face value before the event in August this year. The people who bought the double price tickets were badly “burned”. There will be a lot less speculative buying in 2024. Finally.
Screw anyone and everyone who participated in this scheme. How do you not feel like absolute scum doing this?
So, bots in St. Petersburg, Russia, and Princely heirs in Nigeria are not only competing with Ed Band-Aid ripper Bastian for most evil entity; but, also, entertainment industry tickets derivatives?
Some computer brainiac is getting super-elite status on all *A, OW, and SkyTeam, and it’s not I.
“305” as usual you are here trolling. Go away, your hateful rhetoric is not wanted! This is a site for miles and points enthusiasts some of whom are resellers. Get a life.
I love when ticket resellers lose! HAHAHAHAHHAHA
No sympathy at all for those resellers and brokers if they lose their money. I hope it happens a lot. These parasites don’t stick it to Ticketmaster; they stick it to the general ticket buying public – “I’m going to make points and you’re going to pay a lot more than you should for your tickets, if you can get them at all.”
But one big takeaway is that it is essential that airlines continue to NOT allow name changes on tickets. Exactly the same thing would happen.
I don’t really mind much if they try to resell tangible products, such as electronics. There are many places and days to buy those and they won’t corner the market. When it’s a specific concert on a specific date, people who actually want to see the concert get screwed by these greedy people.
@DaveS Actually I despise them selling tangible products too. When they buy these and try to change more to the rest of us, we don’t get to enjoy them. Look at special edition videogames or other collectibles. Us TRUE FANS miss out just so somebody else can screw people over by making it unavailable. All that does is causes a lot of the fans to quit caring about the special stuff, which in turn hurts the brand by killing the market and interest.
@Daniel so do you despise any business that makes a profit and we should end all capitalism? Surely Amazon/Walmart/etc is charging more than their cost of acquisition.
So therefore with any product, “you don’t get to enjoy them”
@CMorgan I’m as much of a point and miles enthusiast as anyone else. There are ways to participate in the hobby without being a complete scumbag aka reseller. I’ve been in the game for 10 years now and haven’t had to do any shady manufactured spend or reselling clubs because I’m not greedy like you obviously are
Daniel nailed it in his comment above. I hope your son/daughter really wants a toy or concert ticket one day and you have to tell them “sorry Johnny, can’t get you that because secondary market bought them all up and is reselling them for a huge profit so they can fight with 50 other people for an upgrade on their 2 hour flight”
Those are the people you are hurting by participating in things like reselling at scale. Enjoy your extra 1,000 points
I love reading the comments from the likes of Daniel and DaveS, clearly two people who don’t understand basic economics and the role of the “scalper” in a free market system.
My favorite comment. “…people who actually want to see the concert get screwed by these greedy people.”
Translation: “I’m not greedy, it’s only the other guy who’s greedy”.
My heart bleeds for you scalpers.
My alligator tears floweth greatly …. from all of my laughter!
BURN BABY BURN
Buyers clubs are a scam. You hold all the risk. Don’t bother.
@Luke @James N
Yes, I do despise scalpers! And no, secondary resellers. A product unavailable so that they can reap a huge profit, is absolutely not free economy! It is quite the opposite of free economy! Free economy involves fair competition that benefits the consumer. What you are trying to consider fair market is actually monopolization and antitrust behavior.
A manufacturer making a deal with retailers to sell something at a specific price is totally different from people acting as a middleman, artificially inflating that price to exaggerated amounts, so that they can make a large profit. That is price gouging, and would cause antitrust lawsuits if it were done by a regular corporation. For example, the lawsuit that accuses Amazon of artificially inflating prices of certain consumer goods during the 2020 pandemic, so that they can make a higher profit because those goods were in higher demand and less available. If corporations are not allowed to do it, then it is no different for consumers, except that we haven’t yet had the legal challenge or laws written for that. But it is still the same thing. Except, scalpers or even worse because they take what is normally available to the rest of us, and prevent the rest of us from being able to get it unless we give into their extortion.
And you’re wrong on your translation too! Those of us who hate scalpers do not buy and resell goods to the same consumer at inflated prices. We buy goods that we want, or that we want to give to somebody, with the only exception being when somebody gives us the money to buy it for them and we are doing so at the same price with no profit margin in between. (For example, “Hey can you get me one too?” Or, “can you grab me a few things at the grocery store while you are there?”)
*** (voice type error correction) “And no, secondary resellers making a product unavailable so that they can reap a huge profit, is absolutely not free economy!”
Suckers
Daniel, you completely validated my point that you don’t understand economics. Here are a few examples to start you on your journey.
https://mises.org/library/ticket-scalpers-are-hidden-heroes
https://fee.org/articles/in-defense-of-scalping/
As far as I know there is no legally binding contract with PFS. Unless things have changed from a few years ago, my understanding was they do not have a business license, they do not share their real names, they are an anonymous internet cabal incapable of signing a legally binding contract. Who exactly are you going to sue if it goes south? Good luck with that. That’s why I bailed on their coin deal a few years ago. The risk is not worth the reward.
Well PFS will generate auto contract for every “transaction” and lead you to believe it is indeed legally enforceable. A very slick automated website, I do doubt they would do anything if you chose to keep the coins or tickets. I too gave up on the coin “deals” for the same reason, the risk of sending off the coins and the wait before payment, which seems like what exactly is happening here.
Scalping / arbitrage occurs for one reason only, an imbalance between supply & demand that is not reflected in price. When that becomes reasonably predictable, an opportunity exist. But they all can’t be home runs. The remove perfect competition (bots, pre sales, fan clubs, holding back tickets to release later) but creating false scarcity the odd shift ever further.
The entitlement of some of us Americans. Fans thinking they deserve the right to go see an event at some set price. Fans blame the scalpers and ticket brokers for using arbitrage and demand to make money. Fans cant wait to line the pockets of popular artist. I say the fans priorities are just messed up.
Buying coins with a credit card and then cashing them in is completely unrelated to buying tickets to a show, so I’m not sure why it’s mentioned here. It was stopped when the credit card companies caught on and exempted “monetary instruments” (I think that’s the phrasing they used) from earning rewards.