Dark Lord Day 2011 tickets went on sale as planned on March 19th, 2011 at precisely 1pm central daylight time. By most accounts, all 6000 tickets were sold in less than 10 minutes (some say less than 5 minutes). The ticket face value was $10, there was a $2 service fee plus (kind of steep if you ask me) $.50 for postage. In all, the cost per ticket was $12.50. (I would suspect that most people bought their 2 ticket maximum – for various reasons). Now, what does this ticket get you (other than praise and possible favors from your less fortunate beer friends)? It gets you the opportunity to purchase somewhere around 3-4 bottles of Dark Lord, a Russian Imperial Stout from Three Floyds Brewery in Munster, Indiana (for this we’ll stick to 3 bottles, as that is a conservative prediction of the allotment this year). These bottles will most likely retail for $15 per bottle on DLD, so what you really purchased is a car trip to Indiana and an obligation to spend another $45.

Contrary to previous years, Three Floyds is attempting to somewhat control the number of people that show up on Dark Lord Day, and also help alleviate the massive confusing lines. A ticket will be required to enter the “premises,” whatever that means (the premises encompass all of a generous 50,000 square feet and cannot possibly accommodate 6000 people). There are some metal bands performing throughout the day, and port-o-potties on site, and that is pretty much the extent you get for free – otherwise there is opportunity to purchase Three Floyds beers and guest beers as well as Three Floyds food and merchandise. All of this could be had without the need for the ticket, so presumably the ticket really only gets you the opportunity to purchase 3 – $15 bottles of beer. But what these restrictions really mean is that the value of both the ticket and the beer goes up because there is far less supply than required to fulfill the demand and the added restrictions this year mean fewer people will be in attendance.

Now, funny thing, these tickets seem to be worth a bit more than $12.50 ea. Some are crying foul at the $300/ea prices people are asking on Stub Hub for these tickets. As of a few minutes after the sale, several tickets were already posted for $250. As of this writing there are at least 46 tickets listed on the StubHub, ranging in price from  $97 each to $300 – more than enough for a quick study on market economics!

What is the true value of this Dark Lord Day ticket? Is it really $12.50? Or is it $300 as some hopeful Stubhub prospector thinks. Let’s look into this a bit deeper. Last year, on the day after 2010 Dark Lord (Sunday), I tested the eBay market by offering one of my Dark Lord bottles for sale at about 1pm (of course the value of the sale was in the collectible bottle, any contents were incidental) . The bottle sold within 70 minutes for my “buy it now” price of $45. There was clearly an immediate market for Dark Lord and the market price was in the range of $45 a bottle. Perhaps my price was even too low given the quickness of the sale.

Some assumptions: Let’s combine the three bottles into a batch and assume that anyone willing to buy one bottle is also willing to buy 2 more bottles at the same price – it just makes this little thought experiment more simple, and spread the cost of the ticket over the 3 bottles. We’ll also say that time to travel to the brewery or wait in line is free – and any shipping costs to the buyer are separate and not included in this study. Let’s just assume you live across the street from the brewery.

Say I got a ticket and paid the $12.50, the ticket itself has no real value until cashed in for 3 bottles of Dark Lord, making the fixed cost of the bottles $57.50 and I would have to sell them for $19.17 each to break even, so already the value of the beer has gone up. That is the absolute rock bottom price you could charge and break even on Dark Lord.

Let’s look at a the $45 eBay price I was able to charge for a single bottle. Assuming I can sell all 3 bottles at the same price – I will have made a profit of $77.50. But is that the true value of a Dark Lord Day Ticket? Getting closer I think. If someone buys the ticket from me for $77.50, I make the same profit as I would selling the bottles on eBay, but they have to exchange the ticket(+$45) for the 3 bottles, and then sell them on eBay – netting a profit of only the $12.50 ticket cost. Hardly worth the effort – they would need to get much more than $45/bottle. Could they?

Of course they could. Since tickets for 2011 Dark Lord Day sold out on Saturday afternoon, 3 bottles of Dark Lord were sold on eBay for an average price of $69. (2009 bottles were also going for around $60 each). Even a year ago, some bottles of 2010 were selling for more than the $45 I received. A local bar in Chicago I visited a few months ago had a bottle or two they were selling for $99 – clearly you can get more than the $25 profit I received for the one bottle I sold, depending on the place/time/buyer/etc… However, this additional profit comes from market timing, storage costs, etc… Ya know – actual work?!?!? If you are a beer collector, a bar, or some kind of rare beer broker, you might have the time and patience to wait a few months or years before eventually selling the Dark Lord at optimal prices. If you can wait, time the market correctly, be in the right place, and you have minimal storage costs – I would estimate that you could readily get a conservative price of about $75 a bottle or higher the longer you can wait.

At $75 a bottle, with a cost of $19.17 each, that is a profit of $167.50 on 3 bottles for the original ticket buyer. And looking at it from the secondary ticket market perspective, any ticket price that is $180 or less, you would break even or make money. Say you pay $100 for a ticket, exchange the ticket +$45 for 3 Dark Lords, then sell the Dark lords for $75 each, you net a profit of $80.

So I think I have proven that the absolute maximum someone should pay for a ticket given the long term market is $180. Where is the StubHub market right now? The 23 sets of tickets are selling for an average price of…..$176.69! However, the lowest price ticket is $97, seemingly a steal – you could get a profit $83 over the long term. So to those that think $300 for a Dark Lord Day ticket is outrageous, they are right, but only $120 right.

Incidentally, it would appear only 5 tickets have actually sold on StubHub (you have to login and go through the process of listing tickets to see this info) with an average price of $136.20 (range $75-165). This seems to lend more support to the market having the set the correct price for a ticket.

As for me, I got my Dark Lord Day tickets at the $12.50 price. I will be going, with at least 9 of my friends, buying as much Dark Lord as allowed, sharing some immediately, drinking a bottle or two in the next few months, and cellaring the rest to enjoy on more special occasions. And I might sell one bottle on eBay at some point in the future…for $75 of course (collectible bottle only, any contents incidental of course).

UPDATE 3-22-11: As was brought to my attention, Three Floyds has done very little to help their own situation by keeping the price of Dark Lord at $15 per bottle since it was first introduced in 2004. I believe most in the craft beer community would argue that a $75/bottle retail price is far too high. Even $45 might be too high. Goose Island BCS Rare, priced at $45, was a level generally accepted by the craft beer community for a high quality brewery aged beer, even though it was trashed by mass media. However, after a few weeks there was still bottles to be found at major retailers. So perhaps if Three Floyds raised their price to $20-25, it would be accepted by the community, help to reduce demand while still selling out, thus helping to eliminate the huge secondary market. Then again, the fact that they haven’t yet raised the price, might make any such pricing change unacceptable to the market.