ONE of my favourite words is “fungible”.

It’s one of those, it sounds nice in the mouth when you say it – “fungible” “fungible” “fungible”. Trust me, I could do this all day.

So, what does it mean? Well unfortunately, this is where the “fun” stops. Fungible is typically referred to in terms of the trading of goods. A fungible good is one which is easily exchanged or substituted. For example, if I have a bag of rice I can exchange that for another bag of rice.

Rice is fungible, pass it on.

So what’s a non-fungible good? Well, that’s something that’s irreplaceable and cannot be exchanged for a similar item. It’s unique and tends to be limited in quantity as a result.

An example of a non-fungible good would be a ticket in the Away End for Arsenal v Liverpool on the 30th of January 2013. Kick off 19:45. Price £62

The game will only take place once, there is no other equivalent to that game.

Now, I was at the game, I’m at virtually every Liverpool game, but this one was different. A protest had been planned, and rightly so, due to the ticket price. £62 was the highest we had been charged as an away fan all season and there was a sense that enough was enough.

However, the protest on the night though was a little muted if I’m being honest, hardly got going. Just before the game, when a few of the banners started to be unveiled, an Irish lad that was standing next to me –

“You lot are planning this protest tonight over the £62 ticket. Good luck with that but it’s nothing compared to how much I paid”

In for a penny, in for a euro, I thought.

“How much did you pay?”, I asked

“120 Euro, plus travel from Ireland and accommodation. I’d love to be given the opportunity to pay £62!”

As we got talking, other people around us started to join in and everyone was comparing how much they paid for their ticket.

A quick straw poll of the 15-20 people around us found that the average ticket price that night was around £90. The most someone had paid (a fella from Chicago!) was £200!

I had paid the lowest, a measly £62

This brings me back to the concept of the non-fungible good and, unfortunately, the experience of this fella is typical of what happens when a non-fungible good is in high demand. The market takes over and the sellers were allowed to push the price up.

But who were the sellers?

When you look at the eligibility for that game, away tickets were only on sale to Season Ticket Holders, Members or Fan Card holders who had been to minimum of four away games in 2011-12.

None of the people around me met that eligibility.

And the only place that was officially selling these tickets was Liverpool Football Club. The maximum price they were charging was £62. So how come the fans around me were paying so much more?

Unfortunately, the answer is simple and it’s the elephant in the room in any debate about ticket prices.

The reason why the fans had paid more was because the other “fans” had charged them more. Put simply, some fans who met the eligibility criteria had purchased tickets so that they can get those much sought after credits and then sold them on at vastly inflated prices to the large market of Liverpool fans in London, Ireland, Scandinavia and, er, Chicago. The highest bidder gets the ticket.

You go to any Liverpool midweek away game in London and you’d be forgiven for thinking you were at a casting call for Borgen meets Minder meets Father Ted.

This is a problem that uniquely affects away tickets too. It’s a paper ticket, a one off transaction, it’s easy to rip someone off. You’re not giving anyone anything as valuable as your season ticket and, due to the wonders of modern technology, you can conduct the whole transaction from your bedroom. It’s not like you have to take a trip down to London and take a chance on selling it outside anymore is it?

So, why is this a problem and how does it affect us all?

Well, imagine you work at Arsenal and part of your job is to decide the ticket price for next season’s Arsenal v Liverpool game.

Last year you went for £62, you got a bit of grief, but it sold out. However, you’ve also done a more extensive version of the straw poll that I did at the game. You’ve trawled a whole bunch of websites (mostly based overseas to avoid UK law on the re-sale of football tickets) and you’ve seen what I’ve seen. £62 was the lowest anyone paid, the average was a lot higher.

So what do you do? Stick at £62 knowing you’ve underpriced it or increase it further to reflect what is going on anyway and bring the money back into the club?

Reading is our next away game and I’ve paid £40 for my ticket. 2 minutes on google though and I can see tickets going for £130 in the Liverpool end. What legislation there is has become ineffective and the entrepreneurial bedroom touts have never had it so good. Again, what do you if you’re Reading and you see tickets going for that price on the secondary market? If they did stay up you could almost guarantee Liverpool fans would be paying more for their trip to the Madejski next year.

I support the “twenty’s plenty” campaign but how would that affect it? You could argue that it just creates more margin for the seller? However, I would hope it would have the opposite effect by making the whole day out more affordable, therefore encouraging the fan that got the ticket in the first place to attend the game.

The real problem is the resale market and the way it acts as a mechanism to say to clubs “look, this is what you could have charged”. The waters are getting further muddied now by clubs going into partnership with resale sites so fans can officially resell their tickets to other fans. Some fans are even using the market for away tickets to subsidise their own season ticket. The more they get charged at home, the more they’ll charge for their away tickets. A vicious circle.

As the secondary market grows and grows, so will the prices on the primary market. This unfortunately is inevitable. Clubs will never wholesale reduce prices when they see fans selling to other fans at ridiculous prices. Their attitude will always be “if they can do it why can’t we?” and “at least if we’re selling them at a higher price the money is coming into the club rather than lining individuals pockets”. Groups like SOS (Spirit of Shankly) are so important here because they provide a balance to rampant exploitation. Without them, and similar groups, prices would rise even higher, even quicker.

Even the much heralded “German model” has started to see the secondary market thrive off the back of low ticket prices and concerns are being expressed there about what impact this may have on primary ticket prices.

So, how have other areas of the leisure industry coped with the rise of touting?

Take a stadium rock show for example –

5 years ago, all of the tickets for a stadium gig would have been between £50 -£70. As a result ,the best 20% would have then been touted for £100+ on the secondary market.

In response to that , the next tour would have seen all the tickets rise to £90 in an effort to combat the secondary market. Unfortunately, this had the knock on effect of pricing loads of fans out of the market and resulted in unsold tickets. This is the stage that a lot of football clubs are approaching now.

However, some Rock and Pop promoters got wind to what was happening and radically changed their pricing strategy. The Bon Jovi Stadium tour this year, for example, has ticket prices that range from £12.50 to £295. They’ve set the prices to reflect the variable income of their fans and thousands of people are going to see Bon Jovi in a stadium for just £12.50 this year! That would never have happened a few years ago and it’s only happening now because they’ve reacted to what was happening on the secondary market and created a pricing strategy where a higher ticket price can also subsidise a lower ticket price.

The new tiered pricing structure at Liverpool is an example of them trying to do something similar but it’s proving to be more complicated. When a band announces a tour it starts from a clean slate. No one has an existing ticket and they can develop a pricing strategy that takes into account their audience and the market. Put simply, fans can choose to buy the ticket that’s appropriate to their means

However, a football club has fans that have sat in the same seat for years, through thick and thin. If the club is then going to create a tiered pricing strategy where the rich pay more and the poor pay less it means that some of the existing fans have to bear the brunt of that. But how do you impose a huge price rise on some poor fella who’s sat in the main stand for 25 years? It’s ultimately not his fault and you can understand his indignation at being asked to pay more to subsidize a wider ticketing strategy that has nothing to do with him.

It may be wiser to only apply the higher pricing to new season ticket holders and I’d like to see the club offsetting any increase with a decrease in other ticket prices. For example, some of the seats at Anfield offer less than a fantastic view and they should be sold for under £20. This would make the game affordable for more fans. Likewise, new season ticket holders around the half way line should be asked to pay more. This should be phased in over time and not affect existing fans. In time, you would then have a stadium where a lot of tickets are sold for under £20, a lot are sold for over £100 and the rest of sold at varying levels in between.

Like Bon Jovi, but with Depeche Mode songs instead.

Meanwhile, whilst clubs are addressing that, all clubs could improve revenue overnight by offering a better experience – better food, less queues for drink, more toilets, a stress free ticket buying experience etc etc. Raising ticket prices is a crude way of extracting more money out of fans and I’m never sure that giving someone a choice of “Pay up or don’t come” is a choice at all.

The best way to get people inside the ground and happy to pay more is to offer value for money. On average, I pay less than £10 in the ground and over £30 outside the ground. Clubs wouldn’t need to increase ticket prices at all if they understood the reasons for that and sought to address it rather than treating fans as a captive market.

Just before I go –

There’s a festival called Secret Garden Party. Any customer can buy a weekend ticket at the designated price but there is also an option for customers to pay more if they can afford to.

Everyone said that was a stupid idea, why would people pay more unnecessarily? It will never work.

Guess what? It worked

Some people paid more and the extra pot of money helps keep ticket prices down.

That’s so easy to implement and even if no one took up the option the club wouldn’t be worse off. A great opportunity for the club to try something imaginative and reframe the debate

There’s another festival called Glastonbury. Yep, you’ve probably heard of that one. They were so fed up of their tickets being resold on the secondary market and fans being ripped off that they decided kill the secondary market by introducing photo ID tickets that couldn’t be resold.

Everyone said it was too much hassle for customers and it wouldn’t work.

Guess what, it worked. Everyone pays the price that the festival sets and there is no secondary market pushing prices up. It was so successful that The Ryder Cup and many other events followed suit.

So, anyone want to give me a hand with my “Non fungible, non transferrable” banner for next year’s Arsenal game?

And Ian, if you ever fancy going to a festival, just give me a shout. You might need to swap your Harley for a Campervan for the weekend though

Martin is Head of Business Development for See Tickets and has a Hodgsonesque 20+ years of experience in ticketing, the only difference being he’s actually quite good at his job.