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LWIB: The Challenge of Secondary Ticketing for MLB, plus Tidits PDF Print E-mail
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Pete Toms Article Archive
Written by Pete Toms   
Monday, 19 December 2011 16:11

Last Week in Bizball by Pete Toms

This week in “Last Week in Bizball, the challenge of secondary ticketing for MLB, plus tidits.

SECONDARY TICKETING

LWIB, TicketNews.com reported that the Braves are offering a paperless ticketing option for group sales beginning next season. The tickets are purchased with a credit card, stored on that card and that card is swiped at the gate to allow entry into Turner Field. Ho-hum? Sign of the times? In part, I guess, but has this initiative also been launched to limit the number of Braves tickets available on the secondary market? “The restrictive paperless system will be operated by the team's ticketing partner Ticketmaster, which means the tickets are not easily transferable. Because Ticketmaster's system ties paperless tickets to the credit card used to purchase them, the cardholder must be present in order for the group to gain entry….A spokesperson for the team did not reply to a request for comment.” Earlier this year, TicketNews.com provided more details on Ticketmaster’s paperless option and noted that, “Such paperless tickets cannot be resold on StubHub, TicketsNow, Razorgator or any number of other third-party secondary ticket marketplaces, Web sites or exchanges.”

The Braves paperless offering follows the announcement early in the year that they had launched a “season ticket exchange” on their web site. The “ticket exchange” allows fans interested In purchasing season tickets to “find” one another on the team web site and share tickets. At the time of the announcement TicketNews.com reported, “…the move also is a way for a team to try to keep control of its tickets instead of those tickets ending up on the secondary market.”

In 07, MLBAM signed a deal with secondary ticketing industry leader StubHub. That deal branded StubHub as MLB’s official ticket reseller. At the time, it was widely believed within the industry, and amongst sports biz watchers (including me), that MLB would profit handsomely from this alliance. It seemed pretty straightforward. Ticket resellers were profiting off MLB, and so, why shouldn’t MLB become a reseller and take those profits for themselves? And didn’t MLB also have the largest ticket inventory of the “big 4”? And, as with everything BAM, the deal would allow MLB to centralize/redistribute the newfound revenue. MLB has been proven correct in concluding that secondary ticketing was the present and the future. According to an October feature in SportsBusiness Journal on secondary ticketing in MLB, unique visitors to StubHub have increased from 2.5 million in 07 to more than 12 million today. With the BAM/StubHub deal expiring at the end of the upcoming season, how profitable has secondary ticketing been to MLB? According to SBJ, MLBAM expects to receive in the range of $60 million from StubHub this year. But, within MLB there are plenty of critics of the BAM/StubHub alliance. These critics complain that the burgeoning secondary market has cannibalized their primary ticket sales, including season tickets. In fact, some question if fans any longer see a delineation between the primary and secondary markets. And guess who was widely quoted in the aforementioned SBJ piece? Derek Schiller of the Atlanta Braves said, “I don’t believe there is any bigger obstacle or issue, any bigger threat to the professional team sports marketplace and industry as a whole…This is the single biggest issue facing our industry….The amount of dollars at risk is growing near exponentially. And we absolutely as an industry — and not just baseball — need to manage it.”

The SBJ report notes that last season 8 million MLB tickets were resold on StubHub, an increase of 2 million over the previous season. But along with that dramatic increase, and corresponding StubHub commissions paid to BAM, has come a glut of below face value tickets for many teams. This trend is not particular to MLB, SBJ noting that, “Since 2007, average ticket sales prices on StubHub, regardless of sport, have fallen each year, dropping from $112 per ticket in 2007 to $104 in ’08, $94 in ’09, $84 in ’10 and $82 thus far this year.” Angels executive Robert Alvarado was very outspoken about the BAM/StubHub alliance. “We did it to ourselves, StubHub was a small player. And we blew it up. They’re legitimate now. And it’s killing us. It’s killing us. Location. Price. Just about every advantage we had over the secondary market is gone. It’s the blurring of the lines. Because, in my opinion, we failed to do our due diligence before we jumped into bed with StubHub.”

SELECT READ MORE TO SEE THE REST OF THIS ARTICLE

But while the critics of the BAM/StubHub alliance blame it for enabling a “dumping ground” of below (often drastically) face value tickets, clubs like the Red Sox and Giants who “sell out” practically all their ticket inventory, are happy with the arrangement.

Commissioner Selig realizes that secondary ticketing has become a problem for many franchises. In response, last year he formed a committee, which included representatives from six teams including the Braves and Yankees, to study the situation, including the soon expiring BAM/StubHub deal.

The obvious, and easy, solution to the cannibalizing of clubs primary (season ticket) ticket inventory is introducing a “price floor”, as is the case with dynamic pricing. StubHub president Chris Tsakalakis argued that this approach is not realistic, “If we were to impose price controls, floors or ceilings, that would just open things up to a competitor who would not, Market pricing by its very nature is free, and trying to control it just means you push it to other avenues.” Others argue that clubs can decrease the number of their tickets being “dumped” on the secondary market by better tying the price of their primary tickets to demand. In other words, increasing prices to high demand games and lowering prices for low demand games.

The staggering success of MLBAM and the skyrocketing value of local TV rights have generated enormous new wealth in MLB in recent years. But, plain old fashioned ticket selling remains the single largest source of revenue in the industry. And thus, how MLB manages the secondary market is one of their most important challenges

TIDBITS

  • The Ricketts family continue to pursue their vision for a ballpark village/retail/restaurant/entertainment….whatever you want to brand it…development adjacent to Wrigley Field. LWIB it was reported that they paid $20 million for “..about an acre of land at Clark and Addison..” The newly acquired property is across the street from the site of the long-discussed “triangle building”, which is key to the Ricketts’ Wrigleyville development plans. The Cubs are pursuing the same successful strategy of John Henry in Boston, who has increased revenue generation in, around (Yawkey Way) and on top of (Green Monster seats) Fenway Park. In fact, it has been reported that Theo Epstein’s experience working with Red Sox ownership on those successful initiatives is one of the reasons he got the Cubs job.
  • I found myself paying practically no attention to the recently concluded annual Rule 5 draft. Not so long ago the Rule 5 generated interest amongst hardcore MLB fans, including me, because there was a legitimate chance that clubs could acquire a big talent. George Bell, Jose Bautista, Johan Santana, Joakim Soria, Josh Hamilton and Dan Uggla are all former Rule 5 selections. LWIB, in a piece titled “Rule 5 Draft Slipping Into Obscurity”, John Manuel informed me as to why I’m not paying attention any longer. Teams made just 12 selections in the major league phase, the fewest since 2000 (10). The changes made in the 2006 Collective Bargaining Agreement, giving clubs an extra protection year for their minor leaguers before they have to be added to the 40-man roster or exposed to the Rule 5, have made players available in the draft less attractive.”
  • Lots of stadia politics in northern CA. Oakland Mayor Jean Quan is lobbying MLB as part of her efforts to keep the A’s in her city. In addition, SF Mayor Ed Lee and Giants CEO Larry Baer met with the Warriors recently to discuss luring them to a proposed new arena near AT&T Park. On top of that, I think the idea that the Raiders could share the new stadium in Santa Clara with the 49ers is viable. Mayor Quan is in an impossible situation. When pro sports franchises pack up and leave it reflects badly on them. Spending hundreds of millions of dollars, especially when your government is struggling financially, on new stadia to keep those teams only creates more problems. So…good luck Mayor Quan and you should always read Neal deMause.
  • I’m a big fan of Baseball America. BA isn’t hip or fashionable and has seemingly been around forever. There is no video on their site, no snark, no slideshows, no impenetrable objective analysis, no spray charts or graphs, in fact, readers can‘t even make comments! But BA is home to the most informed and current reporting on all matters minor league, college and high school baseball. LWIB, it was announced that GrindMedia (part of Source Interlink Media) has purchased BA. I suspect GrindMedia will endeavour to make BA more appealing to young fans. They note in the press release that they see growth opportunity in BA’s “video platform”. The only thing I want out of GrindMedia is that they continue to employ Jim Callis, John Manuel, Josh Leventhal, Ben Badler, et. al. because they, and not the platform, are what is worthwhile about BA.

You can follow me on Twitter @PeteToms


Pete Toms is senior writer for the Business of Sports Network, most notably, The Biz of Baseball. He looks forward to your comments and can be contacted through The Biz of Baseball.

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