As the World Series approaches, so begins another mad scramble for tickets to the Fall Classic. For diehard fans, however, the search for seats on the first base line has become a lot easier -- with the proliferation of ticket-selling websites that often offer wider selection and cheaper prices.
Online ticket resellers like StubHub, TicketsNow, RazorGator, and dozens of smaller sites, along with online marketplaces eBay (NASDAQ:EBAY) and Craigslist, are fueling a booming ticket resale market that’s putting more fans in the stands -- and setting up a David-and-Goliath battle with Ticketmaster, the industry leader.
It's all part of an estimated $10 billion-a-year ticket market for concerts, games, and other events. So far, StubHub and eBay say they and their peers have captured about 20 to 25 percent of that business, and they expect the figure to grow exponentially over the next few years. For now, much of the market is still in the hands of storefront ticket brokers, old-school scalpers on the corner yelling “I got two!” and season-ticket holders who pawn their seats off to friends and coworkers.
While eBay, the online auction giant, still resells more tickets than any other company, of the dedicated online resellers that have arisen in recent years, San Francisco-based StubHub has emerged as the frontrunner. The company, which takes a 25 percent cut from buyers and sellers, moves around 300,000 tickets a month -- generating $199 million in revenue last year.
TicketsNow isn’t far behind. The Crystal Lake, Ill.-based company, which brought in $142 million last year, offers around 2 million tickets from the many affiliated ticket brokers that partner with the site.
(StubHub and TicketsNow ranked No. 8 and No. 369, respectively, on the 2006 Inc. 500, Inc. magazine's annual list of the nation's fastest-growing private companies.)
According to StubHub president Jeff Fluhr, the ticket-sales market was longing for a shakeup. “Historically, there hasn’t been a lot of choice in the ticketing industry. Essentially, you had one option” -- Ticketmaster, which sold 119 million tickets valued at $6 billion last year. In many areas, the company operates what some call a near monopoly over the primary sales market.
Even so, until online ticket resellers started making hundreds of millions of dollars, Ticketmaster hadn’t paid much attention. But now that the resellers have grown up, the “800-pound gorilla,” as StubHub spokesman Sean Pate calls Ticketmaster, has taken notice. “They are envious of the prices that tickets are being sold for on the secondary market,” Pate claims. He explains that whenever Ticketmaster sells a seat for $45 and the concert sells out, ticket resellers often re-offer the seats for higher prices -- meaning that Ticketmaster and the events it promotes are losing out on that aftermarket cash.
In response, Ticketmaster has started its own ticket resale site called TicketExchange, in hopes of capturing some of that share back from StubHub and its upstart peers. Ticketmaster is leveraging its existing relationships with sports teams and event promoters to make itself the “official” ticket reseller -- 45 major sports teams have signed on so far, as well as a number of event promoters.
Instead of posting their extra tickets on StubHub or eBay, fans log onto the TicketExchange site and list their offerings there. If their seat sells, their ticket is invalidated and the buyer is mailed a new one with its own unique bar code. Ticketmaster says this will cut down on fraud and keeps scalpers out of the market, but it could mean stricter regulations and controls over how the secondary market operates, if it's consolidated under a major player like Ticketmaster.
So, from anybody’s perspective but Ticketmaster, that’s not a good thing, says Arizona State University economist Stephen Happel. “Price controls hurt consumers” by keeping prices high, he says. “If you don’t let people sell tickets above face value, it’s a price control.”
This may not make sense if you're upset about trying to buy front row Rolling Stones tickets for $1,000, but most tickets on the secondary market aren't the ones you hear about in the news that are priced hundreds of dollars over face value. In fact, Happel and others say, the majority of tickets on the secondary market sell around face value or even below -- usually when tickets are originally overpriced by a few dollars, or when, for example, a fan can't go at the last minute and wants to unload them.
For the time being, consumers don’t seem to be buying Ticketmaster's model -- or at least not in the numbers that are flocking to StubHub. Last year, Ticketmaster's TicketExchange site sold 329,000 tickets -- about what StubHub does in a month. While TicketExchange’s business is growing, it may be a slow, uphill battle.
In Detroit, where TicketExchange is the “official” reseller for the playoff-bound Tigers, the Ticketmaster program sold just 2,221 tickets, mostly from season ticket holders. StubHub, which doesn’t have an official deal with the Tigers, sold 30,500 -- 15 times the volume of TicketExchange. Part of it’s the strong brand awareness StubHub has established with consumers. In addition to being a well-run business, Happel says, “they’re very good at marketing themselves.”
Despite the new challenges, Ticketmaster president and CEO Sean Moriarty says that the company’s relationships with event promoters and dominance of the primary market will eventually let them take the lead in reselling. “I’m very confident that over the course of the next couple of years, the Ticketmaster platform is going to grow by leaps and bounds,” Moriarty says, though he won’t put a timeline on when he expects that to happen.
There’s no question that Ticketmaster's service is expanding -- it sold 463 percent more tickets last year than in 2004. It’s just that StubHub, Ticketsnow, and eBay may be growing even faster. And in the race to establish their brands and capture that $10 billion market, they may beat Ticketmaster to the punch.
Ticketmaster may be fighting the inevitable, according to Happel. “They’ll never eliminate the secondary market,” he says.
Whatever happens, one group is benefiting from all the competition -- fans. “What a competitive market does is drive tickets down to face value -- and in some cases below,” Happel says. StubHub’s Fluhr and Ticketmaster—“the more competition in the market,” says spokeswoman Bonnie Poindexter, “the more downward pressure on pricing.”
But, being the dominant player, Ticketmaster would like to avoid an era of falling prices and deals on tickets if they can help it. The company has been extremely active, Moriarty says, in lobbying state regulators and lawmakers to crack down on resellers, whose practices they say are illegal. “We agree with the secondary-market resellers that the individual fan should have the right to resell their tickets… but we think that until such time the laws are changed to reflect it, no one should be exempt form complying with the law.”
Of course, that would put everyone back at zero except for Ticketmaster, which could give the company a much better shot at playing catch-up than it has now. Says Pate of Ticketmaster, “I don’t think they’re trying to get back a piece of the market -- I think they missed it from the start.”