Tuesday, January 09, 2007

One trend from 2006, alive and well in 2007 – the secondary ticket market

One of the more interesting industry trends that exploded in 2006 and clearly will remain very much a part of the business of sports in 2007 (and well beyond) is the secondary ticket marketplace. In their never-ending search for new and innovative sources for potential revenue (the leaving no stone unturned economic philosophy) the completely unregulated ticketing ‘service’ professional and college sports teams believe is in the best interests of their supporters. If selling tickets above face value is in the best interests of sports fans then the business partnerships sports franchise have developed in the last few years with StubHub, Razorgator, Tickets.com and the other ‘companies’ that have emerged in the last few years are in the best interests of the consumer.

Monday night’s BCS title game was the ‘perfect storm’ for the secondary ticket market. Two schools with proud football traditions, two of the powerhouse football programs, with large student bodies and even bigger alumni associations pushed ticket prices into the stratosphere. The game was played in Phoenix at the 73,000 seat Phoenix University Stadium. The Buckeyes made their plans to be in Phoenix on November 18, a full seven weeks before the game was to be played. Three weeks before the game on December 18, The Arizona Republic reported Ohioans had purchased 31 percent of tickets at the online marketplace, compared with 14 percent purchased by fans in Florida. The average resell ticket price stood at $1,458 (the face value for tickets was $175)

In the last three weeks ticket prices did drop by as much as 10 percent. The average ticket price for what StubHub believes is their biggest grossing event in six years fell to $1,331 a ticket, with a range from $686 to $5,000. Ohioans led purchasers at 28 percent, followed by Floridians (17 percent).

Each school was allocated 16,000 tickets for the game. According to a report in The Orlando Sentinel, Florida kept 2,250 tickets for players, band members and other students, and allotted 1,500 for coaches and staff, sponsors and its official travel party. The remaining 12,250 were available for boosters and made available via a point system that credited boosters for past donations and number of years as a donor.

The university accepted about 21,500 booster ticket orders, meaning it needs to refund more than 9,000 requests. It also meant that none of the original 16,000 tickets spilled over to the general public. Doing the simple math on the number of tickets distributed to UF students (2,500) factoring in the number of tickets given to each member of the team and the 500 strong UF band its very likely few if any Florida students were at last night’s game. When you consider that Florida believed it was in their best interests to allot more than 75 percent of their tickets to their biggest donors, its easy to understand why the secondary ticket market became the only choice for most Gators fans.

Jeremy Foley, UF's athletic director, told The Palm Beach Post: "This is the toughest ticket we've ever had here. Sixteen-thousand tickets is just not enough, not when you have 60,000 season-ticket holders and you have to take care of the students, the players, the coaches and the band. I know it's a disappointment to a lot of people. It's a disappointment to us, too."

If Monday night’s BCS title game was the ‘perfect ticket storm’ the NFL playoffs (with the exception of the Super Bowl) are much less of an opportunity for the secondary market. The law of supply and demand that drove tickets for Monday nights game into near Super Bowl level ticket pricing was in large part created by the seven weeks Buckeyes fans and the five weeks the Gators had to plan their trips to Phoenix. Alumni with far too many dollars and too little sense want to relive their ‘glory days’ if their alma mater happens to make it to the ‘big game’.

Total paid attendance for the 2006 NFL regular season averaged 67,738 per game and increased to 17,340,879, topping last year’s all-time mark of 17,012,453 and marking the third consecutive year that NFL teams sold more than 17 million tickets.

In many cases market size and the proximity of the opponent have a direct bearing on how much tickets can be sold for on the resell market. (All four wildcard games were sold out well in advance)

According to Forbes Magazine, Philadelphia Eagles fans were willing to pony up to attend their weekend's wild card round against the New York Giants. The average seat at the team's Lincoln Financial Field this weekend sold for $309.28 (remember Giants Stadiums is less than a two hour drive from Lincoln Financial Field). That's $156 more than what fans are forking over to see the Indianapolis Colts play the Kansas City Chiefs.

What's more, Eagles fans are also the most desperate of the weekend’s sportsgoers to see their team battle it out for the Super Bowl XLI title: Tickets to Sunday's game against the Giants went for 38% more than the average $224.74 they traded for during the regular season. By comparison, Seattle Seahawks fans were willing to drop 10% more on tickets to this weekend’s match up than they are to regular season games.

But when it comes to the real luxury seats, New England Pats fans are more willing to spend big. While StubHub's most expensive seat in Philly this past weekend was $883, the top seat at the Pats’ Gillette Stadium sold for $1,145. The New York Jets (a four hour drive from Giants Stadium to the Patriots Gillette Field) also created strong interest in the secondary ticket market last week. According to a report in The Bergen Record, tickets for both games continued to sell at a good pace through Sunday. Most sports franchises embraced the latest ticket technology in 2006, technology that allows fans to work with the secondary ticket operators that allows ticket holders the opportunity to resell their tickets up to and including game time.

On Wednesday, about 1,700 Giants-Eagles tickets were available online through ticket brokers and other so-called third-party sources, according to Don Vaccaro, CEO of TicketLiquidator.com. At the same time, there were about 700 tickets for the Jets-Patriots game. By Thursday, the number of available tickets had fallen to 893 for the Giants game and 450 for the Jets game, Vaccaro said.

The Giants-Eagles game was the top seller at StubHub.com on Friday, outpacing sales of Super Bowl tickets, according to a company spokesman, Sean Pate. The average sale price was $309, he said, with standing-room-only tickets selling for as little as $155 and a front-row seat selling for as much as $883.

Saturday night the New Orleans Saints will host their first playoff game since 2000. In a season of reaffirmation for the Saints, Saturday night’s game represents the ultimate opportunity for Saints fans to celebrate the resurrection of their city. If the Bears lose to the Seahawks on Sunday (and the Saints beat the Eagles Saturday) the Saints would host the NFC title game the following Sunday. For Saints fans and a city that has suffered since the terrible aftermath from Hurricane Katrina, Saturday night makes the Superdome the only place anyone who has had to endure the must ticket.

Needless to say where the law of supply and demand takes precedent over common decency, the game is sold out, except at the secondary ticket market. According to a report in The New Orleans Times Picayune, as of Thursday, at least three Web sites offered a 16-seat suite in the Superdome that included a parking pass along with catered food and beverage at costs ranging from $19,600 to $20,589.

"Saints fans are fired up to see their team play," said Sean Pate, public relations director for San Francisco-based StubHub.com. "They could be playing a Pop Warner team and they'd want to see them play."

The fact that New Orleans Ninth Ward remains uninhabitable sixteen months after Hurricane Katrina appears to be of little consequence those who have tickets to sell. At TicketsNow.com, TicketCity.com and StubHub.com, tickets in Section 610 were selling for $240, $280 and $295 per seat Thursday. Seats in Section 612 were selling for $575 apiece at the Saints-affiliated ticketExchange.com.

"The bottom line is this is the biggest game to hit New Orleans in quite some time," said Randy Cohen, president of TicketCity.com. "There's been a feverish run going on with LSU making it to the Sugar Bowl and now comes the big 'Wow!' The morale down there must be going through the roof." (Needless to say that sense of morality has nothing to do with the tens of thousands New Orleans residents who lost everything they had last August – if there’s a dollar to be made that’s all that matters it would appear)

"After Sunday when your opponents are decided, you're going to see a spike (in prices) because that's when people start to get excited," Jennifer Swanson, marketing and communications director for TicketsNow.com told the New Orleans Times Picayune last week. "Then as we get closer to the event, you're going to see prices fall. But you do have to be careful and follow what's going on if you're going to wait (to buy)."

In Chicago where the Bears will meet the Seattle Seahawks Sunday, thousands of tickets are available for the game at Solider Field, again through the secondary ticket marketplace. While 90 percent of the available tickets at Solider Field where first made available to season ticket holders, last month the Bears put approximately 6,000 tickets available through Ticketmaster to the public. Computer savvy Bears fans bought the 6,000 tickets in less than 10 minutes (a great IT connection or the luck of the draw through TM’s phone database) served as the only real opportunity for Bears fans to buy tickets at face value from $95 to $375 (by comparison the face value for Saints tickets are priced from $70 to $105).

According to a report in The Chicago Tribune, TicketsNow listed more than 1,200 tickets being available for the first-round game, while another online seller, StubHub.com, said it had more than 3,000 tickets for sale. San Francisco-based StubHub is the Bears' official partner for online ticket sales in the secondary market, Sean Pate, a StubHub spokesman, said.

"There's a lot of financial opportunity for those that have Bears playoff tickets to sell, so it's no surprise to see this many" tickets available, Pate said.

StubHub's average selling price late last week according to the Chicago Tribune for the Bears' first-round game was $573. StubHub also has more than 1,000 tickets for the NFC Championship game, with an average selling price of $817. The top ticket price on its web site for that game was listed at $5,000.

How and why a ticket broker managed to secure thousands of tickets to the Bears two potential home playoff games at Soldier Field is anyone’s guess. The fact that StubHub is an official and cherished partner of the Chicago Bears is another matter.

On November 28, 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 November 26 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 that 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 were 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?

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. A $5 million sponsorship fee is very important to the Redskins, but given the Patriots lawsuit against StubHub is a real potential problem.

For whatever reason sports leagues and teams seem to believe there are no rules when it relates to dealing with the secondary ticket marketplace, and at the end of the day the National Football League continues to risk their sterling reputation.

Would the National Football League ever seriously consider a league wide 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 and used in this Insider Report: The New Orleans Times Picayune, The Chicago Tribune, Forbes and The Orlando Sentinel

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