What, No Bailout?

I wish we saw this attitude more often, particularly among large corporations (from an article discussing aftermarket ticket prices for the Super Bowl).

"This is really something we never anticipated," said Will Flaherty, director of growth at SeatGeek. "The cheapest seat on SeatGeek right now is $8,000, but no site seems to have any inventory." Flaherty believes speculative buying is behind the spike. Ticket brokers frequently sell "air" to their customers, taking orders before they have tickets in hand. "We've noticed significantly more speculative selling activity than in recent years," Flaherty said. "Over the last few days, those sellers have been scrambling to buy up tickets to fill their orders, resulting in the Super Bowl ticket version of a short squeeze. Brokers with tickets in hand have been taking advantage of their leverage, raising prices dramatically and arbitrarily withholding some of their inventory."

Ety Rybak, co-founder of the high-end brokerage Inside Sports & Entertainment Group, has spent more than anticipated this time around to fulfill orders before the game. "I can tell you some ugly horror stories about what I have had to pay. But that’s part of the business," he said. "If I sold you tickets for $2,500, and I have to pay $7,500 to do it, unfortunately that’s the world that I chose to live in." The flip side to the high costs is a brisk business in late orders.

Maybe the US sugar cartel, among many other groups, could discover this approach to individual responsibility.

  • lelnet

    I'm glad they're stepping up and owning their mistake, and the consequences thereof. But since what they're doing _is_ basically the same thing as short selling (except with football tickets instead of publicly-traded securities...which of course makes it even worse because of the significantly reduced liquidity of the underlying market), I have to wonder why they didn't see it coming. I mean, isn't "up" the direction that these prices _normally_ go, as the event approaches?

  • Milton

    The answer to your question- in short- is no. Super bowl tickets usually hit a high right after the championship games and the day after. Over the next two weeks they generally go down. I dapper a bit in the ticket business and I've always had the urge to short sell super bowl tickets but I lack the nerves as well as the capital to do so. It's years like this that make me glad I stay away.

  • marque2

    A lot of times tickets to hot events can even go below the ticket face value hours before the event, as folks who try to game they system realize they have extra inventory on hand and don't want to get caught with worthless paper once the event starts.

  • Milton

    Yup, exactly- I've been the beneficiary of that many times (45 bucks for Rangers/Devils Eastern Conf Finals in the Garden comes to mind). I wouldn't call it gaming the system, though. It's a business like any other- you take risks, sometimes they pay off, sometimes they don't.

  • marque2

    Yes, poor choice in words. I wasn't trying to imply ticket sellers are illegitimate - even though several states make it illegal.

  • STW

    One of my clients got a ticket for face value, $960, because season ticket holder lottery win.
    He thought it mighty funny when I told him the one time I went the face price was $40 or about $160 today with straight inflation.

  • esoxlucius

    I'm not a big sports fan so can someone who is please explain why football teams don't just auction the seats in the first place? The biggest screaming evidence of a price -vs- supply/demand mismatch the secondary market price. It's like admitting that they are leaving thousands of dollars on the table per ticket. They should have an auction for tickets that ends one week before the game, so everyone who has tickets can still make travel arrangements. Please, I'm serious, someone explain why sports teams don't want to capture the revenue that they can clearly see is left on the table.

  • Not Sure

    I'd imagine they'd love to capture it but would prefer not to be the bad guys for charging higher prices. Same thing with musicians who could charge more for concert tickets but would face the wrath of fans if they priced their tickets at a point closer to where they know they will actually end up selling. Easier to let the scalpers (or ticket brokers, if you prefer) take the heat. At least, that's what I think.

  • Roy

    I'm not one to begrudge anybody their own preferences in entertainment, but to me, there isn't a football game on this planet worth an $8000 ticket.

  • Milton

    Valid question. I believe the answer is quite complicated and really varies from team to team and sport to sport. First off, I would say, is that more often than not the difference between the primary and secondary market prices are not as large as you would think. The Super Bowl is an exception- not the rule. Secondly, where the secondary market prices are indeed higher, the teams would love to sell every ticket at the higher price. The problem is they can't. There aren't 20-50k (depending on the sport) willing to spend that kind of money on the game- it's only a small percentage. So they need to find that perfect price point where they get a lot off people into the game while charging them as much as they can. So say, for example, they charge $50 for a ticket and they sell to 15k real fans while the other 5k go to brokers who can identify 5k people willing to pay $75 dollars for the game. Had the team charged $75 all along they only would've sold 10k (of course I'm making up numbers- just trying to pain the picture of what a team may be thinking). This is why teams often are tinkering with their plans, sometimes they embrace brokers, sometimes they ban them. They're trying to find that perfect price that nets them the most money. Finally, there also is an aspect of retail vs'wholesale. The team acts as the wholesaler and will sell at a discount while the broker- the retailer- has to deal with the individual customers, something which the team may not have the proper resources for.

  • esoxlucius

    If I was king of the (sports) world I would build my own secondary market for my own team's games. So if you sell a season ticket for $50 and the ticket holder, which is frequently a business not a person, can't find anyone to make it, I would build a market where we could auction the ticket and regardless of the face value, the team would make, say 20% of the auction price, be it higher or lower at the time of the game. This gives an easy exit to season ticket holders and an additional revenue stream to the team for doing nothing but providing the platform to make the secondary sale. The original ticket holder is happy because they walk away with 80% of whatever they would have gotten anyway. Then, when those special games rolled around which seats were obviously in high demand, I would auction them all. Auctions for land parcels often include provisions for one or more parcels based on the auction price so you could be guaranteed to win several seats together if you wanted. It wouldn't have to be onesies separated all over the stadium. BUT, if you auctioned them, there would be very little secondary market value and the scalpers would go bankrupt.

  • Milton

    Here's the problem: a) You use the term season ticket holder as the "true fan" but the reality is the majority of teams cannot sell the entire arena/stadium to season ticket holders and are forced to rely on the brokers to become season ticket holders themselves b) teams can do whatever they want, but the sellers and buyers will choose where they choose to buy and sell and there's nothing the team can do to stop it. The majority of teams actually do have their own secondary market, but the sellers and buyers still predominantly use stubhub and the like because stubhub, as opposed to a team, has zero incentive to keep the prices high.

  • mx

    You've basically described StubHub. They pay many of the teams to be the official resale market for tickets. In exchange, they get the support of the team (around here, StubHub is also an in-stadium sponsor of the SF Giants) and the necessary connections to the team's ticketing system to facilitate the transfer of print-at-home tickets securely and electronically.

  • herdgadfly

    Comparing ticket price speculators who sell seats not yet acquired to the US sugar cartel is patently absurd. Ticket resales under these circumstances is risky but domestic sugar tariffs is guaranteed to maximize agricultural profits at the expense of American taxpayers.

    The government program in place for the past 76 years provides that domestic sugar will go for as much as 62% more than world commodity prices for cane sugar. American sugar producers have no risk and a built in customer, Uncle Sam, paying premium prices always.

    The Soviet-like total control system in place tells farmers who, when, how much and at what price sugar will be grown. Direct USDA payments are first made to farmers; then the government must store purchased sugar while withholding it from the market; finally our super-smart bureaucrats sell at a loss to ethanol producers in order to subsidize yet another program that cannot survive without government intervention and support.

    From the Amherst Student:

    . The Congressional Budget Office reported that the U.S. sugar programs will cost American taxpayers $629 million over the next 10 years — $374 million from [USDA's] Feedstock Flexibility Program alone — and force consumers to pay an additional $3.5 billion each year. Put another way, U.S. taxpayers will have to pay $374 million to safeguard a system that already costs them $255 million so that they will be charged an extra $35 billion.

    If you’re still not convinced, maybe the idea of having Coca-Cola made with actual sugarcane will do the trick.

  • Dan Wendlick

    IIRC, the Chicago Cubs tried a more direct approach a few years back. The Wrigley organization created a ticket broker which "bought" all single-game tickets and marketed them on a floating-price model basis. However, part of the deal was that the broker retained the rights to return unsold tickets to the box office hours before gametime. Thus the premium paid over the face value was realized by the parent company, but the risk of unsold tickets was still borne by the team. This had the effect of lowring the apparent revenue numbers in the league's revenue sharing formula.I think this was declared illegal under the franchise agreement by MLB and ended or modified.