Sunday, April 19, 2009

So Maligned, So Misunderstood...

Poor Ticketmaster. So big, so maligned, so misunderstood.

Maybe it has something to do with those Springsteen tickets that somehow disappeared immediately from Ticketmaster's web site and ended up on a secondary market site called "TicketsNow" - at inflated prices, of course. Just a small detail: "TicketsNow" is owned by Ticketmaster. A settlement with the New Jersey attorney general's office cost the ticket behemoth only $350,000.

Or, maybe it has to do with the four class-action suits in Canada that have been filed against Ticketmaster, including one for $500 million. Apparently some concert-goers got a bit huffy following the purchase of 2 tickets for a concert of "Smashing Pumpkins" on the TicketsNow web site for $533.65 instead of the $133 that it would have cost if the tickets were available at regular prices.

And to add insult to injury, Ticketmaster has been ranked only 5th in the "Worst Company in America" competition (today is the last day to vote as it goes up against number 12-seed United Health Care). Looks like Ticketmaster is an odds-on favorite to go to the semifinals against the winner of Citibank vs. Sprint (hey, I don't make this stuff up! I'm betting on a Ticketmaster vs. Chrysler final.

Truth be told, Ticketmaster is just a symptom of a business that can be very dirty. At least with Ticketmaster (or its subsidiaries), you actually get the tickets you pay for – even if they are sometimes at outrageous prices. Pity more the poor folks who purchase tickets from bogus web sites or find that the tickets that they receive are simply counterfeits of the real deal.

We all have friends that have been scammed – just this past week two couples I know who bought tickets for a July concert of Springsteen in Dublin discovered that their tickets came from a fake web site. They were lucky, as the credit card company refunded their money.

The grimier sides of the ticket business also have ramifications in other areas. Just a few months ago I ran into an unexpected problem that caused a legitimate ticket company delays and not a few headaches: a number of the clearance companies we contacted rejected our application – they simply did not want to touch a company involved in the ticket business.

It didn't matter when we explained to them the business model: "Nope", the underwriters said, "too many charge-backs, too risky". Fortunately, a solid clearance company was finally found that understood the business model.

America in recent years went soft on "secondary market" sales, and in many states "scalping" has been legalized, much of it simply out of frustration and a lack of desire to deal with the problem. Looks like, however that there is some push-back, not only from a frustrated and angry public, but even in the form of federal legislation, as proposed recently by Sen. Charles E. Schumer (D-NY).

I get a little nervous, though, when Ticketmaster hails the proposed legislation, as its CEO, Irving Azoff, recently stated: "Ticketmaster recognizes that the ticket resale industry needs far-reaching changes to better protect consumers and ensure fair access to tickets". Indeed.

Sunday, January 25, 2009

Ticket Scalpers Suffer - Boo Hoo!

Pity the poor ticket scalpers. Their excessive profit margins have been sliced dramatically. Not only are they suffering from the sub-prime meltdown, but to add serious insult to injury, they got a Super Bowl with the Pittsburgh Steelers and the vaunted (?) Arizona Cardinals, not exactly your dream matchup.

So the poor "secondary market" vendors (isn't that a nice phrase for "ticket scalper"?) like StubHub, Razor Gator and newcomer LiveStub are reporting significant decreases in ticket prices as we get closer to next week's game. Even poor ol' Ticketmaster Entertainment has been forced to open a ticket office at a Super Bowl for the first time ever. Just think of those falling profit margins! Must be down to at least 100%...

Gee, ticket brokers and online "ticket exchanges" (another fancy term for "scalper" or "touter" as the British like to say) are reporting that the cheapest "get-in-the-door" tickets are selling for only about $1,700 to $1,800. That's more than double the face value of most Super Bowl XLIII tickets, which is basically $800 for the upper level seats and $1000 for lower level seats.

Of course, who suffers most from the ticket scalpers/touters, but the fans and the organizers. Let's do the math: an average Super Bowl ticket, face value, for argument's sake (including luxury boxes) is $1000, but sold for an average of twice that much, i.e. $1000 gross profit for how many seats that are sold on the secondary market? 25,000? 50,000? I will do the math for you: $1000 multiplied times 50,000 = $50,000,000 that gets transferred between fans and the various "ticket exchanges", legal and otherwise.

OK, let's be nice, and pretend that the gross profit is only $500 for 25,000 seats...even in this pathetically conservative scenario $12,500,000 just got transferred between fans and the secondary market scalpers; and that's just for ONE GAME.

And who else loses in all of this? Yes, of course, the NFL - Not for the Fans League. Instead of devising a system where REAL fans can get seats for the Super Bowl at FACE VALUE, AND figuring out how some of those moneys will revert back to the league itself, they continue to condone a system where tens of millions of dollars pass between ticket scalpers (oh sorry - I meant between the "secondary market") and fans while they blithely stand by.

Monday, January 12, 2009

Sports Business Suffers Like Everyone Else - Almost

Sports is big business – but until now, when big business suffered, the sports industry was somewhat immune. Not anymore.

The spending sprees of the New York Yankees and the Abu Dhabi consortium that bought Manchester City and forked out $58 million for Brazilian superstar Robinho notwithstanding, the downturn in the global economy and the subsequent reduction in corporate sponsorships are affecting the games that we love to see.

When times get tough, the first thing to go in almost any business is the budget for public relations and marketing, and the cuts in these items are already being felt in those sports where corporate sponsorships play an extraordinary role and are a significant part of the operating costs.

Golf, motorsports (Formula 1, NASCAR), European football (soccer) and tennis are already feeling the pinch, including in some cases cancellation of major events or reductions in sponsorships and money prizes. But other sports that can rely more on season ticket holders and television revenue – that would include the "big 3" in America (football, baseball and basketball) – are also beginning to suffer from a reduction in income from corporate sponsors in terms of advertising and for corporate luxury items like front row seats and stadium suites.

When economies go into a downward spiral, the sports industry has generally NOT suffered nearly as much. In fact, sports have been surprisingly resilient: a recent report by a Baltimore-based investment banking firm, Moag & Co., found that between 1970 – 2008, during periods of bear markets or great uncertainty, professional sports consistently and significantly outperformed the broader markets.

But this time things seem to be a little different. Fortunately, the demand for sports, in the terminology of economists, is highly inelastic. Psychologically, people are loathe to give up on sports and their favorite teams. Even President-elect Obama has chimed in now several times on the need for a college football playoff.

The demand for tickets – especially for championship events - remains high. Scalpers/touters and their friends in the "secondary market" remain extremely active, though we are seeing some consolidation and increasing cooperation in the field as well as a decreasing demand for top-price seats at sporting events as well as concerts.

There does seem to be a decrease in ticket prices for less than top events - for example the recent announcement by the English Football Association that they are reducing prices for some national team games, including less attractive games against Slovakia, Ukraine and Andorra.