Friday, August 03, 2007

StubHub takes a GIGANTIC step forward in the secondary ticket marketplace (with help from

In what has to regarded as an ‘earth-shattering’ move in relationship to the secondary ticket marketplace, StubHub Thursday announced an agreement with, whereby StubHub (at times the sworn enemy for several Major League Baseball teams’) now has a direct partnership with all 30 MLB teams. It has been suggested in some circles (including the pages of anytime an organization markets and sells tickets above face value – a free market system where the consumer can determine what they’re willing to pay for tickets to an event, is at the end of the day what had been defined as “ticket scalping”, has not only been embraced by sports franchises, but is regarded as an important revenue generating opportunity in an industry where sports franchises are looking for new revenue sources where they can generate help offset increased costs.

“We believe this agreement reflects our commitment to providing dynamic platforms for fans to purchase tickets in authorized locations in the digital arena,” said Bob Bowman, President and Chief Executive Officer, MLB Advanced Media. “Secure, simple and fan-friendly. Those are the hallmarks of this national destination for all of our fans.”

Starting with the 2008 season, StubHub will gain unprecedented category exclusivity from MLBAM with its designation, along with official, club-endorsed status from each participating Major League Baseball team. Exclusivity will pertain to all online secondary ticket sales through MLB team sites supplanting other current secondary solutions. All existing team enabled online secondary ticket offerings will be assumed by StubHub, enabling for all bar code ticketing, ticketing kiosks and any other electronic/mobile ticketing delivery, validation and transfers. Additional elements include promotion of the ticket marketplace on and participating club sites as well.

“This partnership truly represents a win-win for both parties, in the best sense of the phrase,” said Chris Tsakalakis, President of StubHub. “The chance for StubHub to align with such a dynamic industry leader is an opportunity we relish. On the other side, we’re excited to offer access to our industry leadership, be it in ticket inventory, customer service or technology. It’s a great day for both companies.”

The secondary ticket market began with the explosion of the Internet (the real growth of the Internet, which followed the 2001 crash that separated the pretenders from the contenders). In the last five or so years companies with solid business plans (StubHub have established themselves as the industry leaders) in regard to connecting sports (and concert goers) through Internet based businesses. Tickets can still be bought at face value, but with the increase of broadband, cellular phone, wi-fi and an assortment of other “connected opportunities” events that are sold-out, are no longer sold-out as long as consumers are prepared to pay the price. Not to compare ticket scalping to the second oldest profession known to mankind – if either can be considered a crime, they’re victimless crimes.

The secondary market for online sports and entertainment tickets at StubHub and rivals like RazorGator and TicketsNow has grown to an estimated $3 billion-a-year since 2000. StubHub operates as an open auction, taking a fee on each sale.

In what has to be considered an amazing about-face, Bowman happily endorsing the benefits of being associated with StubHub, two and a half months ago sang a very different tune when Bowman spoke with The New York Times Brad Stone on June 14.

“We don’t want to teach our fans to go to StubHub. We thought we could make it safer and more reliable,” said Bob Bowman, chief executive of professional baseball’s Internet unit.

Bowman was talking about the successful secondary ticket reselling program the San Francisco Giants have created. Sites like Double Play Ticket Window, a service of the San Francisco Giants, season-ticket holders can sell their seats and buyers can go shopping for games that might be sold out.

The Giants do not allow sellers to list their seats below a minimum price, in order to prevent undercutting their own box office. They also take a 10 percent fee from the buyer.

Two years ago, purchased a primary ticket operator. manages primary ticket sales for 13 Major League Baseball teams. has created a secondary ticket operation, unlike their biggest competitor – Ticketmaster.

Ticketmaster (the grand-daddy of primary ticket operators) has existing partnerships with nine MLB teams. And even more interesting (at least according to Ticketmaster’s website) Ticketmaster claims to be the secondary ticket partner for the nine franchises: Atlanta Braves, Chicago White Sox, Cleveland Indians, Florida Marlins, Houston Astros, Los Angeles Angels of Anaheim, Los Angeles Dodgers, Seattle Mariners and Tampa Bay Devil Rays. Ticketmaster’s “Ticket-Exchange” has partnerships with 15 NBA teams, 10 NHL teams, 12 NFL franchises and a handful of other sports teams and sports related properties.

Where that leaves the existing partnerships the nine MLB franchises have with Ticketmaster’s Ticket-Exchange program remains undetermined.’s StubHub agreement encompasses all 30 MLB franchises (at least when their tickets are sold via’s website). While other StubHub partnerships have included the San Francisco based company paying a rights fee to sports franchises that use StubHub as their secondary ticket partner the agreement announced Thursday is a revenue sharing partnership.

The revenue generated and also shared could be significant. According to a New York Times report: StubHub charges a combined 25 percent fee to buyers and sellers on the exchange of tickets. Under the new arrangement, baseball’s interactive company, Major League Baseball Advanced Media, which is partly owned by all the baseball franchises, will get a share of revenues, plus a fee, said Robert DuPuy, president and chief operating officer of the league. He declined to specify the precise revenue sharing of the deal.

How the agreement was put together hasn’t been fully explained. In late September The New York Times and New York Daily News reported the New York Yankees had sent notices to season ticket holders threatening to revoke their season tickets if they resold their Yankees playoff tickets on StubHub – the same company MLB announced a partnership connecting all 30 teams (including the Yankees) to StubHub.

Both the Yankees and Mets won their respective divisions last year, setting up the real possibility of a Subway World Series – creating the very real possibility of so great a demand in the secondary ticket marketplace, prices for an all New York World Series could reach five figures for one game.

A report in The New York Daily News suggested average tickets for game seven of a Subway Series played at Yankee Stadium could cost $10,000 per ticket. StubHub didn’t wait for either team to qualify for the 2006 World Series, their site offered tickets with a money-back guarantee if an all New York World Series never happened. The 2006 World Series featured the St. Louis Cardinals and the Detroit Tigers. But before the playoffs began – Yankees/Mets World series ticket prices went through the roof.

Tickets were being sold at StubHub, with a price tag of $10,000 per ticket, that weren’t even considered good tickets. Four of the $9,999 tickets were in the front row of the left field stands and the other four were in the front row of the upper deck in right field according to the Daily News.

"It's conceivable," said Sean Pate, spokesman for StubHub, where the $9,999 tickets and hundreds of other playoff seats are already being resold by fans.

"For something like a Yankees-Mets series, you can definitely see someone paying that."

The Yankees were very quick to react to the Daily News report, determining who the ticket holder was. A month earlier the Yankees sent a letter to longtime season ticket holder Orlando Bautista, informing the Yankees fan the team would be revoking his tickets if he tried to sell them on StubHub.

“Why pick on me?” said Orlando Bautista, a doctor in Smithtown, N.Y., who was told by the team in August that his upper-deck and bleacher seats at Yankee Stadium, would be revoked after the season.

He added: “I’m a good fan. I don’t drink. I don’t curse.”

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.”

The hypocrisy at the time seemed unbelievable, even for an organization as immoral as the Yankees can be at times. The New York Yankees COO wasn’t saying you couldn’t scalp your Yankees tickets, he’s suggested the Yankees would take care of the scalping your tickets for you.

Adding even more confusion in the Yankees marketplace when it comes to secondary ticket sources, WCBS the flagship station for Yankees radio broadcasts runs StubHub commercials during Yankees broadcasts that feature the “voice of the Yankees” John Sterling. The Yankees told WCBS they’d ‘prefer’ if they didn’t run StubHub ads, but haven’t demanded the spots not be aired on the broadcast. The average baseball fan isn’t going to understand the Yankees selling the rights to WCBS and they in turn sell the advertising. The average Yankees fan is going to assume if the “voice of the Yankees” is endorsing StubHub, its fine with the Yankees.

If you can believe this, according to the New York Times Yankee game day security regularly question people arriving at Yankee Stadium with tickets in a StubHub envelop.

“It’s a witch hunt against us and eBay for giving fans more access to these games,” Sean Pate, a StubHub said. “These aren’t scalpers. Season-ticket holders are their most loyal fans.”

What makes the Yankees look that much worse – both the Mets and the San Diego Padres operate their own ticket agencies? While both the Mets and Padres try their best to point fans in their direction if they want to resell tickets, both organizations haven’t adopted the Gustopo like tactics the Yankees have set up.

“Our license says not to resell unless it’s on a Padres Web site,” said Jim Kiersnowski, the Padres’s ticket operations director. This season, 36,000 tickets have been resold on the Padres’ site. “We could revoke their tickets, but we don’t think it would help our relationship with our customers,” he told The New York Times.

The Yankees, as Trost made very clear – could care less what anyone thinks! “Most of the individuals say they did it just once. Pity me,” he said. “Or, ‘I gave it to the salesman who gave it to his brother, who gave to his son and he put it on eBay,’ and it’s usually not true.”

The Yankees made it clear in a letter included with their each season ticket holders’ playoff and World Series ticket invoice, you had better pay attention to the rules the Yankees fully intended to enforce, making it very clear what the organization would do if it caught anyone trying to resell Yankees playoff and World Series tickets.

"Please be advised that you will be neither invoiced nor entitled to any tickets to the 2006 post-season," Yankees associate general counsel Alan Chang said in a letter to one season-ticket holder. "And you will not be offered a license for the 2007 baseball season and beyond."

And now less than a year later the Yankees and StubHub are no longer working at cross purposes but as business partners. Is this a classic example of “if you can’t beat them, join them” or a good business decision?

“The taboo of the secondary ticket market has been all but eliminated,” said David M. Carter, assistant professor of sports business at the University of Southern California’s business school. He said that baseball and other professional sports franchises are asking: “Why not capture some of the revenue that for years has been left on the table to scalpers?”

“How people consume sports has changed,” he said. “Schedules are tight — people want to be able to purchase and sell tickets.” He added that fans’ growing confidence with the online experience has lent to the popularity of the secondary markets.

Carter told The New York Times, consumers are growing more and more comfortable with technology -- the power of the Internet and ease of purchasing goods (in this case tickets) on the Internet.

“How people consume sports has changed,” he said. “Schedules are tight — people want to be able to purchase and sell tickets.” He added that fans’ growing confidence with the online experience has lent to the popularity of the secondary markets.

“It’s part of a bigger issue as technology moves forward,” said Mr. Carter. “There’s a push and pull between teams and leagues.”

But what about Ticketmaster and their Ticket-Exchange program and how those contractual commitments will be impacted?

When contacted by The New York Times, Ticketmaster officials were tightlipped. Last month Ticketmaster filed a lawsuit against a Cleveland Cavaliers season ticket holder and the Cavilers in a California federal district court for offering season ticket holders another place to sell their tickets online. The Cavaliers and Flash Tickets (owned by the Cavaliers) filed a lawsuit against Ticketmaster.

Flash Seats and the Cleveland Cavaliers have filed suit against Ticketmaster, the dominant ticketing company in professional sports. In the complaint, Flash Seats and the Cavaliers seek “to stop Ticketmaster’s ongoing campaign to utilize its substantial market power in ticketing service to exclude actual and potential competition,” in violation of federal and state antitrust laws.

The complaint also alleges that Ticketmaster is “coercively seeking to enforce its primary-ticketing contracts (relating to the direct sale of tickets to the public) with the Cavaliers and other customers” by requiring them to use only Ticketmaster’s own secondary-ticketing program (relating to the resale of tickets) or none at all. Ticketmaster does not offer a secondary-ticketing product with the capabilities and fan conveniences of Flash Seats' products and services.

Sam Gerace, chief executive officer of Flash Seats, said, "Fans deserve to enjoy and benefit from a free and open marketplace. We believe fans suffer from less competition and less innovation due to the Ticketmaster business practices we address in our lawsuit. We further believe Ticketmaster is trying to prevent the Cavaliers and numerous other professional sports teams from offering their fans the ability to buy and sell tickets on any secondary-marketing exchange Ticketmaster does not own, as well as preventing fans from enjoying innovative new technology products that are not Ticketmaster's. We feel it is time to put a stop to these practices."

“We have been focused on this issue for some time,” said Len Komoroski, the Cleveland Cavaliers and Quicken Loans Arena president. “Our fans have used and enjoyed the Flash Seats service this past season, and after many months of discussion with Ticketmaster were unproductive, we felt compelled to take this action. How can Ticketmaster be allowed to prevent a team from offering a service to its fans that Ticketmaster itself does not offer? Should pro sports teams simply be limited to offering only services that Ticketmaster decides to offer? We think the answer to that is very clear. No.”

The dispute cites what Flash Seats and the team allege are Ticketmaster’s anti-competitive efforts to interfere with the Cavaliers’ offering to its season ticket holders one of the new and technologically advanced Flash Seats services. Introduced at the beginning of last season, Flash Seats offers season ticket holders the convenience of ticketless venue access, electronic transfer of tickets, and a secure, team-sanctioned online secondary-ticketing marketplace for transferring and selling their game seats electronically (and without paper) to other fans.

Ticketmaster now contends that the Cavaliers’ conduct in making Flash Seats available to its season ticket holders violates Ticketmaster’s exclusive rights. Although the Cavaliers have a contract with Ticketmaster for the sale of individual game tickets in the primary-ticketing market, Komoroski said its exclusivity provision has never been applied, and was never intended to apply, to the secondary-ticketing market for season tickets or the manner in which season ticket holders transfer or resell their tickets to other fans.

“The Cavaliers were the first NBA team to offer this exciting new technology, and their fans have been very enthusiastic about it,” Gerace added. “It is far more convenient and fan-friendly than any other service on the market. Fans have flocked to this innovative service because it is both easier to use and adds value and significant benefit to the ticketing process.”

Tuesday, the Pittsburgh Steelers became the latest National Football League franchise to announce an agreement with Ticketmaster -- the launch of Steelers TicketExchange, a new service that will allow Steelers’ season ticket holders to forward or resell tickets to other fans for games they are unable to attend.

“Steelers TicketExchange is part of our ongoing commitment to provide the highest quality services to our loyal fans,” said Arthur J. Rooney II, president of the Pittsburgh Steelers. “This new system offers secure, fan-to-fan transactions processed by Ticketmaster and a convenient way for our fans to resell and purchase tickets. If fans purchase tickets through Steelers TicketExchange, they can rest assured that they are not purchasing fake tickets.

“The Steelers are fully committed to their fans in Pittsburgh and across the world,” said Sean Moriarty, President and CEO, Ticketmaster. “We are excited to work with the team to ensure that these new services provide added value and the best possible scope of services, making it easy and convenient for fans to attend Steelers games at Heinz Field.”

What’s clear – the secondary ticket marketplace isn’t going away. But confusion continues to reign everywhere, and that sends the worst possible message to consumers. The New England Patriots are waging a war with StubHub. The Patriots revoked 52 sets of season tickets before the start of the 2007 season after the Patriots discovered the holders of those 52 accounts were reselling their tickets on StubHub, not on the secondary ticket website the Patriots had created. Similar to the threats the Yankees made last September, the Patriots are endorsing the resell of their tickets for a profit as long as you deal with the Patriots.

Thursday represented a real step forward for StubHub and a real possibility the confusion in the marketplace might begin to clear itself up. While it’s still uncertain how Ticketmaster is going to react to the full frontal assault on the existing partnerships the company has with nine MLB teams, MLB’s decision to create a direct link with a secondary ticket operator not only gives StubHub’s credibility a tremendous shot in the arm but helps move the secondary ticket marketplace forward. It appears the reselling at tickets at whatever price the market sets will indeed be part of sports future as an industry.

For SportsBusinessNews this is Howard Bloom. Sources cited and used in this Insider Report: The New York Times and The San Francisco Chronicle.

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