Tuesday, February 27, 2007

The NBA goes where no sports league has gone before – brokering their tickets

Monday the National Basketball Association went where no major professional sports league has gone before openly endorsing the burgeoning secondary ticket marketplace. The real question is, if it looks like a duck, sounds like a duck and walks like a duck is it a duck. Or in this case, if a ticket to a sports or an entertainment event is sold above the listed face value printed on the ticket is it a ‘scalped ticket’? If a ticket is sold as part of a package that includes transportation, accommodation or other goods and services a pretty strong argument can be made the reseller has put together a package for that event. But if anyone, business or individual, street corner hustler or multi-billion dollar Internet based business, offers only a ticket to an event above the listed face value than in fact that is the definition of what ticket scalping has always been about.

"Fan resale of tickets has become ubiquitous and the NBA shares our position that every fan expects and deserves to have the right and the ability to resell their ticket to the extent permitted by law," said Sean Moriarty, President and CEO of Ticketmaster. "We're pleased that the NBA has selected us to provide this league-authorized service. The NBA has tremendous brand recognition across the country as well as the world, and they recognize that fans identify the brand to their event ticketing experience. This League-wide agreement encourages greater protection, choice and flexibility for fans and makes it easier and more cost effective for the League and its teams to connect with those fans directly."

"Ticketmaster is providing NBA teams with the most innovative ticketing services and products for reaching our fans," said Adam Silver, NBA Deputy Commissioner. "Working with Ticketmaster has set the NBA on a course to achieve record numbers of season ticket and attendance for the fourth consecutive year."

"Phoenix Suns fans know to go to Ticketmaster as the one stop shop for tickets to attend Suns games," explained John Walker, Sr. VP - Business Development, Phoenix Suns and US Airways Center. "Whether fans are buying their tickets from us or from other fans through TicketExchange, at Ticketmaster they are assured a valid authentic ticket that they know will get them in to see the game. Our Box Office has also seen a significant reduction in reports of fraud. Suns fans have a team-authorized channel to buy and resell tickets through Ticketmaster and we're very pleased to see the service rolling out across the entire League."

Is it against the law to resell tickets above face value? According to a report in Monday’s USA Today: about 15 states have anti-scalping laws. Massachusetts, for example, bars the resale of tickets above face value. Ticketmaster CEO Sean Moriarty says his company's online platform's software won't process a transaction if it violates the law. Now, "People are going to buy more tickets and feel better about it," Moriarty told the USA Today. Legalities aside – is it moral and ethical for any sports league to directly associate itself with the practice of selling its tickets above face value?

In the United States, ticket resale on the premises of the event (including adjacent parking lots that are officially part of the facility) may be prohibited by law, although these laws vary from state to state and the majority of U.S. statehoods do not have laws in place to limit the value placed on the resale amount of event tickets or where and how these tickets should be sold. Ticket resellers may conduct business on nearby sidewalks, or advertise through newspaper ads or ticket brokers. Some U.S. states and venues encourage a designated area for resellers to stand in on or near the premises, while other states and venues prohibit ticket resale altogether. Resale laws, policies and practices are generally decided, practiced and governed at the local or even venue level in the U.S. and such laws and or interpretations are not currently generalized at a national level.

Another issue in the United States is that since ticketing laws vary state by state, many ticket resellers use a loophole and sell their tickets outside of the state of an event. Therefore, a ticket reseller who is reselling tickets to an event at New York's Madison Square Garden is not subject to New York State's markup laws as long as the sale takes place outside of New York. The majority of ticket brokers in the New York metropolitan area have their offices in bordering states New Jersey and Connecticut for this reason.

Online auction sites like eBay only enforce state ticketing laws if either the buyer and/or seller reside in the state where the event is taking place. Otherwise, there is no resell limit for tickets.

Scott O’Neil the NBA Senior Vice President, Team Marketing and Business Operations spoke with SportsBusinessNews Monday evening addressing a number of different issues relating to the NBA’s announcement Monday. O’Neil made it clear the NBA decision wouldn’t impact the existing relationships StubHub has with the Charlotte Bobcats, New Jersey Nets, the Portland Trailblazers and Washington Wizards. The four NBA franchises each have team partnerships with StubHub. StubHub is also an in-venue advertiser with the Dallas Mavericks but their relationship with StubHub (at least officially is limited to that of an advertiser).

O’Neil tiptoed around several of the questions SBN asked, including if this is an indication that the NBA has no issues with tickets being sold above face value (often referred to as 'ticket scalping). “The market exists and is growing at a rapid clip. Currently, there are millions of NBA tickets posted across the web in the secondary market,” O’Neil told SBN.

O’Neil didn’t answer the question relating to what the NBA defines as “ticket scalping” but did answer this question asked by SBN, concerning the message the NBA is sending out to basketball fans about tickets being sold above face value.

“Don't think it is a message other than we understand market forces (supply and demand). With an all-time record attendance set again this year (4th year in a row) and season tickets being sold and renewed at a record pace, we want to make sure that fans wanting to experience the greatest athletes in the world, playing the world's most exciting game have that opportunity...and we get to build a connection.” O’Neil the NBA’s Senior Vice President, Team Marketing and Business Operations told SBN Monday.

If Monday was a day of reckoning for the secondary ticket marketplace, how do secondary ticket operators feel about the next step in the evolution of the ticket reselling business?

“We wonder if it is in the best interest of NBA fans that a company which controls the primary ticket distribution is also now being promoted by the league as the secondary market solution as well? It’s positive in that it will further expose the secondary ticket market to fans for which we think StubHub has the best solution. We continue to see substantial year over year sales growth for team’s that already have TicketExchange as their official provider,” StubHub’s Sean Pate told SBN.

“We definitely view this latest move by Ticketmaster as a benefit to our business as well as to the industry in general. There remains a great need for consumer education as it relates to the secondary market for event tickets (TicketsNow has produced and released a PSA specific to this topic), but more and more sports fans, concert-attendees, and theater-goers are becoming aware of – and embracing – the secondary market for event tickets. The Ticketmaster announcement only helps to further legitimize our company and our industry,” Jennifer Swanson TicketsNow.com Director, Marketing and Communications said.

“It certainly was exciting news for the secondary industry. In answer to your questions… the announcement/relationship bodes well for our company as it brings more visibility and interest to the secondary market. It also reaffirms corporate America recognizes the potential for the secondary market and confirms the industry and online platform as a valid and viable arena to conduct business” Razorgator.com spokesperson Julie Reynolds told SBN.

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. Monday’s announcement by the NBA clearly reinforced that development.

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 with StubHub, Razorgator, Ticketsnow.com and the other ‘companies’ that have emerged in the last few years are in the best interests of the consumer.

It is simply a matter of the law of supply and demand? 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.

Its funny when you ask anyone directly connected to the secondary ticket marketplace if they believe Monday’s announcement is a trend (leagues signing deals with secondary ticket brokers) to watch for, their first response is to try and put you in your place.

“Let’s be clear on differential between traditional ticket “brokers” and the marketplace that StubHub operates. The former takes inventory strictly to resell where StubHub’s model is to manage transactions in the provided marketplace and guarantee those purchase against delivery or fraud issues.

“Because the NBA chose Ticketmaster for this marketing deal does not preclude teams who desire a better fan offering and a more endearing brand name to choose to work with StubHub. Teams will continue to sign with StubHub for Official Ticket Marketplace relationships for these reasons as well as the issue of not wanting one vendor to retain both platforms. Whether or not other leagues sign endorsement deals for the secondary market will not impact StubHub’s business, as their fans have clearly made their choice. The fact that StubHub’s system is set up so that users get paid out in cash once their tickets are sold will remain a key differentiator from TM’s, where the seller only gets credit towards next year season’s tickets.” StubHub spokesperson Sean Pate said to SBN Monday evening.

Monday brought an announcement of a different sort from Razorgator.com. The NCAA and RazorGator Experiences announced RazorGator had been selected by the National Collegiate Athletic Association's (NCAA®) as their Official Hotel and Hospitality Package Provider for the NCAA Men's Final Four.

"Basketball fans will now have an exciting opportunity to travel in style to the Men's Final Four games with special access to Hard-To-Get (SM) tickets and world-class hospitality experiences," said RazorGator Experiences President, David Lord. "March Madness will become a completely different experience for fans now that Official NCAA Men's Final Four packages will be available on the web. Traveling to The Big Dance(R) will be easy, fun and even more exciting."

"The NCAA's decision to select RazorGator Experiences as our Official Hotel and Hospitality Provider is based on our commitment to giving our fans the very best," said Gregory Shaheen, senior vice president of Basketball & Business Strategies, NCAA. "Now Men's Final Four fans have an easy, satisfaction guaranteed way to make top notch travel plans with a company that has a successful track record in the sports industry and is authorized by the NCAA."

There is a night and day difference between the reselling of tickets above face value and the packaging of tickets, accommodations and other components associated with a particular event.

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. The NFL offers packages to events like the Super Bowl, but it’s a complete weekend package that includes everything anyone attending a Super Bowl would want to experience,

Ironically if anyone were to wager on which sports league would take that leap and officially license the reselling of their tickets above face value, most might have guessed the National Hockey League may have gone in that direction. However, it’s the NBA, a business managed by sports leading commissioner David Stern who made what is at best a questionable decision Monday. For a business so focused on delivering a unified message on everything, the NBA is setting itself up for embarrassment when it comes to the optics of their decision to enter into a relationship with the secondary ticket marketplace.

And yes, if a ticket is sold above face value, no matter how you paint that picture you are in fact scalping tickets. It may be perfectly legal in 35 states, it may be legal in the not too distant future in all 50 states, but there are nothing more than subtle differences that separates “Johnny” in the parking lot across from the arena, and “Billy” selling tickets on the Internet. Making it official – one more example of how sports have evolved into a half trillion dollar industry.

For SportsBusinessNews.com this is Howard Bloom

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