A buying frenzy erupted on Tuesday morning when tickets for
The International Dota 2 Championships were released in the game’s online store.
Players and fans of Valve Software’s popular online game overwhelmed the
company’s servers in a scramble to purchase the approximately 2,500 tickets to
attend the live event in Seattle on August 7-11, 2013. The massive spike in
traffic was more than the Dota 2 online store servers could handle, resulting
in delays, timeouts, and failed transactions. The $50 tickets sold out in short
order, and almost immediately began appearing for sale in secondary markets for
more than $200 each, indicating some portion of the initial purchasers were
looking to turn a profit rather than attend the event.
While failed servers and profiteering ticket scalpers are
not unusual when only a limited number of tickets are available for a popular
event, many were frustrated that Valve did not foresee these issues and take
measures to prevent them. The Dota 2 community on reddit, for example, was
flooded with posts complaints about the sale. Did Valve underestimate the load
on their servers? Should they have planned to hold the event in a larger venue?
Could they have thwarted the plans of scalpers buy imposing buying limits and
preventing purchasers from reselling tickets?
I would like to discuss these three main complaints in
further detail.
Server Load
Server crashing buying frenzies are commonplace online. It
is not because the technology to combat them does not exist. It is not because companies
don’t know how to predict traffic volume and provision resources to accommodate
it. It is because it is not always in the best interest of a company to pay the
costs required to handle traffic spikes. As long as a supply limited item sells
out, the company makes the same revenue, regardless of how terrible the website
experience is for the customers. If enough people are willing to purchase the
item despite the technical problems, why should the company eat in to their own
profits paying for the resources to handle temporary traffic spikes? Valve
maximized their profits by not having sufficient server capacity.
Insufficient Supply of Tickets
In the case of The International Dota 2 Championships, Valve
has the luxury of monopolistic pricing. Nobody else can supply tickets, so
valve can set the price at whatever they want it to be. Given this fact, there
are two ways to address this issue, either increase ticket price to decrease
demand, or hold the event at a larger venue. I think Valve probably had good
reason to do neither. It would have been more expensive to rent a larger venue,
and they would presumably have to charge less per ticket to fill it. It is
certainly possible that the margin cost of a larger venue is greater than the
marginal revenue from increased ticket sales at a lower price. In terms of
pricing in the current venue, I think Valve could have charged more than $50
per ticket and still sold out while reducing the number of problems due to
excessive demand. The problem is, they knew they could sell out at $50 per
ticket because they did it last year. They did not however know they would sell
out at $51 per ticket. I am 99% sure they would have, but raising the price any
amount increases the risk of not selling out. And if they fail to sell out they
miss out on a lot of revenue in other areas. Sold out events are more exciting
for the teams competing, more exciting for the fans, more exciting for those at
home buying compendiums at $10 each, etc. This hype translates into more people
playing and spending money on the game in the future. A concerted effort to
estimate the maximum price they could charge and still sell out would have cost
money, and they may have made an appropriate profit maximizing decision to keep
the price at $50.
Scalping
Eliminating secondary markets is a terrible idea. If people
buy tickets and end up changing plans and not attending, if they cannot resell
their tickets, it creates empty seats at the event which as I already discussed
is undesirable. Scalpers also provide a service to people who are willing to
pay excessive amounts to attend the event and did not manage to buy what
appears now to be an underpriced $50 ticket directly from valve.
