Wednesday, November 29, 2006

Yet another shinning example of what’s wrong with the secondary ticket market

It seems every few weeks another story emerges suggesting in no uncertain terms the secondary ticket marketplace is a market out of control, heading towards a dangerous place in terms of perception, ethics and proper business practices. Once again, at the center of what remains a new revenue stream for professional sports franchises, are the mixed message being delivered. In this case, the New England Patriots are suing StubHub, despite StubHub having partnership agreements with eight National Football League franchises. The secondary ticket market reads a lot like the classic Abbott and Costello “who’s on first” routine.

Last Tuesday, the New England Patriots filed a lawsuit in Suffolk Superior Court against StubHub and two Patriots season ticket holders for what the Patriots believe is the illegal resale of tickets to Patriots home games. According to a report in The Boston Globe, the Patriots are seeking an award of three times the revenue StubHub and the other defendants brought in through the online sales, plus an injunction against further resale of Patriots tickets on the StubHub website.

And here’s where the NFL is normally the master of their own domain when it comes to everything associated with the National Football League and better begin to understand the scope of the problem the league will be facing in the not too distant future. The Patriots entertained the Chicago Bears Sunday afternoon at Gillette Stadium. The Bears are one of eight NFL franchises who have a partnership agreement with StubHub. The other seven teams: Atlanta Falcons, Cincinnati Bengals, Detroit Lions, Houston Texans, Indianapolis Colts, San Diego Chargers, and Washington Redskins. How in the minds of the New England Patriots can StubHub be considered ticket scalpers, but are partners with the franchise the Patriots played on Sunday in Foxboro. One of the keys to any sponsorship is doing what you can to reasonably help your partners business grow. Would it not be incumbent for the Bears to have directed Bears fans who wanted to attend Sunday’s game in Foxboro to their partner StubHub if they where interested in tickets to the sold out game. However, what happens if football fans directed by the Chicago Bears inadvertently become tangled up in the Patriots/StubHub lawsuit – what message is being sent out?

And what happens when the Patriots next visit the Nation’s Capital and Patriots Nation wanted to accompany their team on the road making it a weekend road trip. FedEx Field may seat more than 93,000, but the Redskins sellout their season before the team plays a down of football. If you want tickets to Redskins games you’re forced to deal with the Redskins secondary ticket partner, StubHub, the company the Patriots are suing. When you consider the terms of the Redskins agreement with StubHub you better believe the Redskins and StubHub have an outstanding working relationship.

The Washington Post reported that StubHub pays the Redskins $5 million annually for their sponsorship. StubHub retains all of the revenue from the resale of Redskins tickets.

Karl Swanson, a spokesman for Redskins owner Daniel Snyder, made it clear to Heath the Redskins has no issues with their secondary ticket partner, StubHub.

"We have never been concerned with individual ticket holders selling individual tickets," Swanson said. "Our concern has been with blocks of tickets."

Have the Redskins sued fans who attempt to use StubHub’s competitors or others means (eBay, Craig’s List) to resell their tickets? No, but that doesn’t mean you either play the game the way the Redskins want it played or you don’t play it at all.

"We had the Redskins a couple of years ago taking tickets from people who had big accounts," said Jeff Greenberg, owner of ASC, a ticket broker in Rockville in the Washington Post report. "We had them last year going on eBay to see that people were listing their tickets on eBay and taking them right away from people. But this story is a 180-degree switch. . . . They have teamed up with these people just to get a piece of this pie."

The Philadelphia Eagles sold out their remaining tickets for the 2006 season an hour after putting tickets on sale on June 14. According to a report in the Philadelphia Inquirer, moments after game day tickets where unavailable at face value, the Eagles posted a notice on their website: "Still looking for tickets? Go to where fans can buy or sell tickets... "

The reaction in football crazy Philadelphia was swift and to the point.

"When this happened, we got a flood of calls from people who said the ticket sales [from the Eagles Web site] were closed in a matter of seconds, literally seconds," said WIP-AM sports-talk host Angelo Cataldi.

"Now regular Joes can't go see a game unless they pay four or five times the value, and the team is actually suggesting that they go to scalpers," said Tony, a longtime Eagles fan who declined to give his last name to the Daily News.

The Eagles where just as quick to react when suggestions arose the Eagles where working hand-in-hand with secondary tickets sellers.

. "This is crazy," said Eagles president Joe Banner.

"The same number of single-game tickets were available this year as last year, and it's more than when we were at the Vet," Banner said. "What was different this year was that, in response to fan complaints, we made them available through the Internet as well as Ticketmaster, so they went that much more quickly."

Nevertheless the optics aren’t just bad, aren’t just terrible, they’re embarrassing. TicketsNow Chief Executive Mike Domek was a broker for seven years, a ticket scalper working the phones. Now according to a Business News report: his business employs 100 people and generates annual revenue north of $40 million from online sales and the licensing of its listings, which allows smaller online brokers to have access to a ticket inventory, and that was 18 months ago.

Earlier this month on the eve of hosting the Major League Baseball All-Star Game, the guy who used to work out of his basement hustling tickets reached a seven-year extension with the Pittsburgh Pirates.

" has been an excellent partner of the Pirates since PNC Park opened in 2001. Like our organization, they continue to strive to deliver an improved customer service experience," said Tim Schuldt, Pirates Vice President of Marketing, Sales and Broadcasting. "We plan to take advantage of any future ticketing technology enhancements to ensure our fans receive the highest quality ticketing experience possible."

"We've had an excellent partnership with the Pirates for the past five years and are excited about the opportunity to continue to bring new innovations that will help the Pirates in their constant effort to improve the fan experience," said Andy Donkin, co-president of

If the consumer is confused about who they can’t and can deal with when it comes to reselling tickets, bewilderment reigned supreme during the Major League Baseball playoffs.

Prior to their first round elimination at the hands of Detroit Tigers, the New York Yankees sent a not so subtle message to their ticket holders – try and sell your tickets on the open market and you’ll lose the right to buy your tickets next year. The Yankees response, exactly what you’d expect for the Evil Empire – sheer arrogance and gall.

“It’s a violation of our policy to resell tickets,” Lonn A. Trost, the Yankees’ chief operating officer told The New York Times. “It’s in our contract. If you don’t want to sign it, you don’t have to buy tickets.”

As offensive as Trost’s suggestion was, Trost told the New York Times, the Yankees were getting ready to launch their own secondary ticket agency.

“Times change,” he said. “You re-examine everything.”

Sports might be a half trillion dollar industry, but when it comes to managing and monitoring the secondary ticket marketplace, Alphonse and Gaston, and the Keystone Cops could do a better job than most sports franchises. Picking the biggest obscenity in the secondary ticket marketplace is a lot like deciding what is the most offensive remark Michael Irvin has made during his ‘career’ as a broadcaster. There are so many to choose from, it’s impossible to choose.

However, the Detroit Tigers took the secondary ticket marketplace to a new level during the World Series. The Tigers managed to provide ‘enterprising’ Tigers season ticket holders with an opportunity to circumvent City of Detroit and Michigan scalping laws in letting the marketplace determine how much tickets for the first two games of the World Series could be sold for.

The Tigers offered their season ticket holders (as they have throughout the entire 2006 season) an opportunity to resell tickets at what the Tigers call their “Tigers Ticket Exchange”. How does the Tigers Ticket Exchange work, according to the Tigers website, explained as simple as this -- Season ticket holders, now you can use the Tigers Ticket Exchange to resell your 2006 postseason tickets for games at Comerica Park!

If you can't use all of your postseason tickets, you can make them available to other Tigers fans with this efficient and easy-to-use service. As a full season ticket holder, you post your available unused tickets and name the price you want for each ticket.

Buyers can view and select the tickets that meet their game, price and seat location needs. The Tigers Ticket Office conducts the transaction from season ticket holder to purchaser to ensure a safe and secure exchange.

All payments are made directly to the Tigers. Tickets are e-mailed to the buyer and they are able to print their tickets at home. If a potential postseason game is not played, the Tigers Ticket Office will refund the purchase to the new ticket buyer. It's that easy!

However, while it may be easy, the Tigers Ticket Exchange operates under the principal of the free market system. The system allows Tigers season ticket holders to sell tickets at whatever price they determine. The Wednesday night before Saturday’s game one of the 2006 World Series, there were 169 different ticket offers. Tickets with a face value of $250 per ticket, a ticket price established by Major League Baseball, were offered at a cost of $8250 per ticket. The least expensive tickets with a face value of $75 where being offered at a cost of $572 per ticket.

The obscenity only began with the Tigers creation of a Ticket Exchange board. Selling tickets above face value is illegal both in the City of Detroit and in the State of Michigan. However, the Tigers are working within the bounds of the law because the law doesn’t apply to tickets sold by Tigers. World Series tickets are being sold well above face value through eBay, StubHub, Razorgator and all of the usual suspects. However, none of those would be considered legal in Detroit or in Michigan. And the Tigers, and here’s the real kicker – collect 10 percent, the Vig, the Juice, their cut of the pie. But because the Tigers were the ‘rights holder’ they are free to sell the tickets for whatever they’d like.

For their part in regards to the Patriots lawsuit against StubHub (criminal to some, partner to others) when it comes to dealing with whether or not they’re actually ticket scalpers, StubHub loves talking about their friends, but not their enemies and those who don’t appreciate or understand the unique opportunity they believe they’re offering sports fans.

"StubHub is a champion for the rights of fans to be able to gain access to tickets for events they want to see and a platform to sell the tickets they cannot use," the statement said. "Every individual is subject to our user agreement which obligates them to abide by their local and state regulations with respect to ticket resale," the company released in a statement.

Earlier this month “TicketLiquidator” sent out a release proclaiming the company was ready to challenge StubHub for ‘king of the ticket scalping hill’. The public relations agency representing “TicketLiquidator” offered Sports Business News the opportunity to help “TicketLiquidator” usher in their new era by interviewing “TicketLiquidator’s” CEO Don Vaccaro. SBN was interested in talking with Mr. Vaccaro, but the focus of the interview would address whether or not the secondary ticket marketplace serves as nothing more than a platform for ticket scalping, SBN was thanked for our interest but Mr. Vaccaro would not be available. There’s no issue whatsoever with Mr. Vaccaro’s declining an opportunity to be interviewed, but the sooner secondary ticket operators understand if they’re selling tickets above face value, they’re nothing more than scalpers dressed differently, the sooner they’ll earn respect.

Scalping tickets (selling tickets for more than $2 above face value) is illegal in Massachusetts. According to the Boston Globe, Boston’s four major sports teams – the Boston Red Sox, Boston Bruins, Boston Celtics and New England Patriots have all either launched or will be setting up their own secondary ticket marketplace in the not too distant future.

"It appears that the current law is obviously not working," said state Representative Michael Morrissey, a Democrat from Quincy in a Boston Globe report. "I applaud the actions of the Patriots, but the question is, how does that stop the guy on the corner from reselling the ticket? They'd never know about it if the person didn't list the ticket on StubHub."

Daniel Goldberg, the attorney representing the Patriots, offered the unique ‘spin’ lawyers are infamous for to the Boston Globe.

"If you're encouraging people to list their tickets for sale, if you're doing that knowing that these tickets have an expressed prohibition against reselling and they're not telling them what the risks are, I think that's an issue," he said.

"Our experience is that as the listings on StubHub have increased, so also have the number of people who show up at the stadium with invalid tickets," Goldberg said.

What’s so surprising about one NFL franchise suing a corporate partner of eight other NFL teams is how closely the NFL protects its corporate partners. On November 7, 1995 Jerry Jones, the owner of the Dallas Cowboys filed a $750 million lawsuit against the NFL, charging that NFL Properties is an illegal cartel and seeking to have it dissolved as the exclusive licensing and marketing agent for all 30 teams (in 1995 the NFL had 30 teams).

The NFL had sued Jones for $300 million in September 1995 after Jones reached sponsorship agreements with Pepsi and Nike for Texas Stadium that went directly against market exclusivity the NFL had in certain sponsor categories. Both sides reached an out of court settlement, but at the end of the day Jones backed down to the ‘power of the master’ the NFL.

Would the National Football League ever seriously consider a league sponsorship with a secondary ticket operator? Never, it wouldn’t make sense to potentially taint the NFL’s brand with the perception of being directly linked to anyone selling NFL tickets for more than face value. Leave that to other sports leagues; leave that to those ‘desperate’ enough to accept money from anyone. But in ignoring the various local and/or team operated secondary ticketing agreements; the NFL may indeed be making a big mistake. For a business so focused on delivering a unified message on everything, the NFL is setting itself up for embarrassment when it comes to the optics of how their member’s teams are dealing with the secondary ticket marketplace.

For Sports Business News this is Howard Bloom. Sources cited in this Insider Report: The Boston Globe and The New York Times

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