Are Met Gala Tickets Too Cheap? | Diving In

To fashion fans and celebrity stands, the first Monday in
May means only one thing. The met Gala, Fashion's biggest night.
An exclusive group of celebrities, hand picked by designers and
approved by Anna Win Tour, they make their way up
the iconic steps of New York's Metropolitan Museum of Art
as a bank of photographers ten deep scramble for the
perfect photo. I think the whole spectacle looks a little nuts,
But if you like me, you can't help but think
there's got to be some pretty interesting economics behind all this.
And it turns out there is. This year, an individual
ticket cost a cool one hundred thousand dollars, up from
seventy five thousand dollars last year. But I'm about to
make the case that the real scandal isn't that the
tickets cost too much, but that they cost too little.
Hot take I know with me, I'm going to draw
on two big ideas from economics, signaling and non price competition.
And along the way we'll talk not only about luxury goods,
but Peacock's super Bowl ads, realtors, and the social good.
So while the spectacle of the Met Gala is all
about the celebrities on the staircase. The economics of the
gala are actually about the brand's lou of Aton, Chanelle, Gucci, Prada, Belenciaga.
I think I said that right. I'll stottle with Tom Brown.
They buy the tables, they invite the celebrities, they address
the guests, and they use the night as part fundraiser,
part add campaign, part status tournament. So understanding the MET
Gala is really about understanding the luxury goods industry. It's
about what happens when a market revolves around customers who
purchase a product not in spite of its expense, but
because of it. When the sellers in this market can't
compete the normal way through discounts and deals, and why
one of the strangest concept points of all of this,
there's a museum fundraiser involving evening where you can't sit
down in. Once we're done, you'll understand the economics of
the luxury industry well enough that the MET Gala stops
looking like a runaway extravagance and starts looking like one
of the more sensible things the industry does. Stay channed.
So first, let's get the cast of characters straight. When
you watch the met Gala on TV or more likely
scrolling Instagram. The visible stars are the celebrities. They're the
ones climbing the staircase. They're posing, they're wearing outfits that
look like they required both a tailor and a civil engineer.
But economically, the celebrities aren't the buyers. They're the display case.
The brands are the buyers. Fashion houses by the tables
and decide which celebrities, ambassadors, clients, editors, athletes, or other
useful props they'd like to put their subjective course to
Anna Wintour's approval. So this isn't a market in which
famous people buy a ticket for themselves, but it's one
where brands by association, attention and prestige and celebrities help
deliver it. So the question is why would luxury brand
spend this much money to put the right people in
the right clothes, in the right room on the right night.
To answer that question, we first need to understand why
consumers gravitate toward luxury brands in the first place. And
that's all about signaling. Economists love to use that word signaling,
but it's actually quite an intuitive concept. It basically means
showing off. But importantly, it's showing off that works in
a way that people believe. You. Imagine you're a peacock,
the bloke version, and you're trying to convince a sheela
peacock to mate with you. What she cares about is
your reproductive fitness. Well, the two of you produce cute,
successful pea chicks. You could try telling her I'm awesome,
but all peacocks do. That talk is cheap. If unfit
peacocks can say exactly the same thing as fit peacock's,
the words tell her nothing. So the useful signals are
the ones that are hard for the wrong sort of
peacock or person to fake. That's where the tail comes in.
A peacock's tail is absurd, ornate, cumbersome, energetically costly. You
might be able to see how this is related to
the met gala. It's exactly the sort of thing you'd
never grow if your only goal was to move through
the world efficiently and avoid getting eaten. And that's precisely
why it works as a signal. An unfit peacock couldn't
lug all that ornamental nonsense around. So when a peacock
shows up with a Lady Gaga like giant tail. The
signal is informative. It's credible because it's expensive, not in
dollars here, but in the deeper sense that weaker peacocks
simply can't bear the cost. Well. Humans do some version
of this dance all the time. In fact, the first
version of this theory was developed to explain why some
people invest so much of their lives in certain types
of education. Superbowl ads, for instance, work the same way.
A Super Bowl ad doesn't just say, hey, here's our product,
isn't it awesome? It also says, hey, watch just burn money.
And that matters because only a certain type of business
can afford to burn money. A struggling competitor couldn't sustain
that kind of expense. It would drive them out of business.
So the ad is a credible signal of staining power,
of confidence, and of scale. A luxury good is basically
a Super Bowl ad that got lost on rodeo drive.
In that world, a handbag isn't just a handbag, a
watch isn't just a watch. Instead, there products that broadcast information.
They tell the world about your wealth, about your taste,
and about your status. This is my peacocktail. I'm sending
a signal I can afford this. I know what counts
as taste. I belong here. I'm not just buying a coat,
I'm buying admission to a category. Yeah, we feel how
we look. And because of this, Lucky brands are in
a really strange business. Their customers are peacott and they
want a signal that's expensive enough to be believable, which
means they have to exclude others. That means that the
brand has to protect the credibility of that signal. Look,
if everyone can get a burgen bad, then the magic
just disappears, which brings us to the second half of
our story. Luxury brands are in a bind. Since the
whole point is prestige, brands have very weakened centives to
compete by lowering prices. In fact, price cuts can backfire. Yeah,
it might get you a few extra buyers in the
short run, but you also risk damaging the very thing
you're selling, which is prestige. If part of what the
customer is buying is exclusivity, then if you cut the price,
you're destroying the very thing they came to buy. But
just because brands don't compete on prices doesn't mean that
competition disappears, It just goes somewhere else. One of the
best examples of non price competition, that's what this is,
could be seen in the real estate market. For a
long time. In the United States. Stick with me here,
real estate commissions were clustered around six percent, so a
more expensive house equal to a bigger commission. Check. This
meant that his home prices rose, that selling houses became
more and more lucrative, and so more people wanted them.
That would leak thousands more people to become realtis. But
there weren't suddenly twice as many houses to sell just
because twice as many people got their real estate license.
There were roughly the same number of transactions, but they're
spread across a whole lot more agents, none of whom
are particularly motivated to cut their commission. As a result,
real estate agents came to be spending more of their
time chasing clients, networking advertising, knocking on doors, and trying
to swipe listings off rivals. Basically, realtors do anything except
actually buy and sell houses. The job most of the
time is just being visible enough that someone will think
of you. Whenever they decided to buy ourselves. Look an
outcome in which we are to spend most of their
time looking for work rather than doing workers. It's wasteful
pay attention, though, and you'll notice this mechanism is not
just confined to realtis. If luxury brands can't compete by
cutting prices, their rivalry will also spill over into other margins.
More celebrity dressing, more editorial jocking, more fashion shows, more
giant stores on the fanciest streets in the world, more
architectural drama, more elaborate campaigns, more met gala spending, more
of virtually anything except actually making clothes. Think of those
strange luxury flagships thousands of feet on Fifth Avenue or
Rodeo Drive, marble floors, immaculate lighting, and I don't know,
maybe there's five handbags in the whole shop and basically
no customers. From the perspective of ordinary retail economics, it
just doesn't make sense. It's perfectly good real estate and
the best part of town, and it's mostly empty. There's
a million better ways that society could use that primary
real estate. But once you understand this is a form
of non price competition, you understand how we got here.
The store is not there to sell infantry, it's there
to stage prestige, and the MET Gala is perhaps the
biggest stage of all. So let's put these two pieces together.
On one side, consumers in luxury markets want goods that
help them signal status that creates demand for things that
are expensive, visible, and exclusive enough to be believable. To
do that job, they've got to be pricing. On the
other side, brands and luxury markets don't want to compete
by cutting prices because cheapening the product cheapens their signal,
So they compete through spectacle, celebrity association, editorial, dominance, and attention.
The MET Gala is where those two worlds meet. It's
a giant stage on which luxury brands can show that
they belong top of the hierarchy, that they can attract stars,
command the press, shape the conversation, sit at the very
top tier of aspirational fashion and culture. That's why the
spending makes sense to them. It's how they compete for
the small number of clients. Hey, now here's the part
where I'm going to surprise myself and defend the MET Gala.
If brands are going to spend heavily on this kind
of competition anyway, Where would the money otherwise go. More
cabinist flagships would find handbags and nose shoppers, more elaborate
runway productions, more celebrity contracts, more pr more champagne sipping
after parties. None of that makes the world a better place. See.
The interesting thing about the MET Gala is not that
it eliminates this kind of spending. It doesn't, but it
redirects some of it. Instead of all of that money
going into private status theater, a chunk gets channel into
a fundraiser for the Mets Costume Institute. Apparently it's a
huge part of their budget. Look, I'm not saying I
love the MET Gala or that it's the perfect solution
to anything. Rather, I'm saying it's one of the less
bad outlets for an industry that was going to spend
aggressively on wasteful status competition. Anyway, if fashion is like
an arms race, then the MET Gala's like a form
of soft power, winning hearts and minds through the arts instead.
So is the MET Gala doing this job? Well, I
reckon it isn't. For twenty twenty six individual tickets around
one hundred thousand dollars, while tables started at three hundred
and fifty thousand dollars. All in all, the event raised
forty two million dollars, which sounds like a lot. But
compare that forty two million dollars with what the industry
gets back. There's a firm called launch Metrix, which estimated
that last year's gala generated about one point four billion
dollars in media value for the brands. One point four billion.
That's one thousand, four hundred million. Look, I want to
be careful here. That's a proprietary metric. It's not cash,
it's not profit, and these numbers tend to be flashy
and exaggerated so they'll attract your attention. But even so,
the scale is striking. The museum gets tens of millions.
The industry gets hundreds of millions and possibly even thousands
of them in media and attention and advertising. So the
problem may not be that the gala is too expensive
but too cheap. The fashion industry gets lots of exposure
while the met only gets a few small crumbs. If
Anna went Tall wants my economic advice, and I am
happy to charge you a luxury price for it, I'd
say multiply the ticket price is by ten, you'll still
sell out right now, you're boosting the bottom lines of
luxury brands more than you are the MET. So that's
the economics of the MET Gala. Consumers want luxury goods
because expensive product signal status. Brands can't compete on prime
since lower prices would weaken the signals, So competition spills
into spectacle like giant stores and elaborate shows, celebrity placement,
and yes, for the MET nights like this, Yes it's extravagant,
Yes it's absurd. Yes it's a lot of highly organized peacocking.
But if the industry is going to do all of
that anyway, diverting some of that money into a museum
is actually a pretty clever piece of institutional design when
you think about it. And so I am left to
conclude there is a scandal at the bottom of all
of this, but it's probably not the one you expected.
The price of a MET Gala ticket isn't too high,
it's too damn low. The MET is giving the peacocks
far too good of a deal.