Ticketing Allocations the Cause of Free-Falling Championship Game Secondary Market Prices

ChampGame

Ticket prices on the secondary market to the college football playoff national championship game are in free fall, available for +/- 10% of what they were selling for just a month ago, as scheduling, location and the participants have contributed to a depressed secondary market; but, it’s the way championship game duckets are allocated that has caused a flood of tickets to hit the market over the last few days. As of Thursday evening, StubHub had more than 9,000 tickets remaining for sale, with $475 (face-value) seats selling for as little as $114; the lowest ever for national championship game under the current playoff format.

Howie Long-Short: The number of tickets allotted to each of the participating schools is at the core of the ticketing problem; 20,000/per is simply too many tickets to sell, in too short a window (5 days), with the game +/- 2,500+ miles from campus (the longest average distance for any CG game since ’11). The cost of airfare (and hotels) – inflated on just 9 days’ notice – prices out fans that otherwise might attend making it difficult for the schools (and their preferred brokers) to unload the seats.

Dave Wakeman is a ticketing guru that hosts an iTunes Top 100 podcast, “The Business of Fun”, focused on marketing and the selling of experiences. I asked Dave why the participating schools get so many tickets and who receives the balance?

Dave: The College Football Playoff Committee has worked hard to retain a sense of the college atmosphere, allocating a large percentage of tickets to the competing schools; in this case, 40,000 is more than half the stadium (71,000 seat capacity for game). The remaining 31,000 seats are split up among the hosts and the sponsors; those tickets, which are sold in advance, are sold out.  

When the 2017 championship game between the 2 teams was played within 600 miles of campus (Tampa), the schools had no issues unloading tickets and the get-in price hovered around $2,000, but with the game in Santa Clara and flights from Clemson and Tuscaloosa going for upwards of $1,500 tickets haven’t sold; the result has been preferred brokers flooding the market (there are now 2x the amount of seats for sale) with tickets over the last several days.

One might think that a wealthy San Francisco sports fan base would quickly buy up the available seats tickets, but 40% of 49ers SBL members already bought seats to the game and 80+ suites were sold to local businesses, so many Bay Area fans who want to attend the game already have tickets; and it’s not like Northern California is a particularly good college football market. Stanford averaged just 37,850 fans/home game during the 2018 season despite being ranked in the Top 25 going into all but one of those games.

I asked Dave what needs to occur for the game to be a sell-out (meaning few seats available)?

Dave: There will need to be a focus on driving further demand from local businesses. There are a lot of very large companies in the Bay Area that have a once in a lifetime opportunity to take their employees, clients, or prospects to see a national championship and that should be a big demand driver. On the other hand, with rain in the forecast and the perception that declining ticket prices indicates a lack of “buzz” surrounding the game, local executives without a stake in the outcome may just decide to stay home.

It’s lazy (and simply wrong) to attribute the staggering low prices on the secondary market to a lack of interest in the game. Those making the apathy argument will tell you that the casual fan is tired of watching Alabama and Clemson play for a 3rd championship in 4 years, but 28.4 million people tuned in for an SEC rematch in last year’s title game (the highest non-NFL television broadcast of year) and many are expecting “Alabama-Clemson IV [to] pull in more viewers than any other championship game to date.”

Fan Marino: Cratering secondary market ticket prices are in no way indicative of what’s to be expected on the field Monday night when two undefeated teams, coming off semi-final blowouts, vie to become National Champions; and the 1st team in college football history since Yale in 1894 to win 15 games in a season. Need another reason to watch? Each team is led by a projected #1 overall NFL draft pick; Alabama QB Tua Tagavailoa is expected to be the first player selected in the ’20 draft, while Clemson QB Trevor Lawrence is the favorite to have his name called first during the ’21 draft.

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Fewer Fans Attending College Football Games, With SEC Experiencing Biggest Decline

SEC

College football attendance declined -3% in 2017, the most significant drop in 34 years and 2018 isn’t expected to be much better; Dynamic Pricing Partners is claiming that overall ticket sales for NCAA football are down -19% YoY “across many P5 programs”. Contributing to the decline has been a recent (last 5 years) trend of fewer fans following their team on the road, a fate that not even SEC schools have been able to avoid; SEC schools reported 2,433 fewer fans/game last year, the biggest decline amongst P5 conferences. Florida A.D. Scott Stricklin acknowledged the decline before suggesting a solution, “I think you’re going to see an adjustment around the country where stadiums are going to reduce capacity to make the seating better for fans.”

Howie Long-Short: A depressed market for college football ticket sales doesn’t bode well for StubHub, a company coming off a disappointing 2nd quarter. eBay (EBAY) blamed StubHub’s Q2 ticket sales decline on the low number of games played within the NBA Finals (4) and Stanley Cup (5) and “a historically bad MLB start of the season.” While both are valid reasons, StubHub isn’t expecting sales to dramatically increase in H218; which would seemingly contradict their reasoning.

StubHub struggles are far more likely the result of competitors Live Nation and Vivid Seats taking a greater percentage of market share, teams/musicians taking greater control of their markets and a crackdown on secondary market ticketing fees in the U.K. Those aren’t issues that can be solved with a little luck.

StubHub’s short-term outlook forced EBAY to lower full year revenue forecasts; shares are down -9% (to $34.43) since the company reported on July 18th.

Fan Marino: SEC A.D.’s blame everything from the familiarity of the competition (caused by having 2 divisions), to the allotment of bad seats for the visiting team, to modern technology and the comforts of watching at home for the attendance decline, but they’re all in agreement that “people aren’t traveling the way they used to.” That’s a shame, because many college towns (and the small businesses within) rely on the economic activity generated on home football weekends.

As for Stricklin’s projection, I’m 100% in agreement. The next generation of stadiums are going to be more intimate/exclusive. They’ll need to be as the experience of watching has become a particularly compelling alternative with the addition of 4K and the increasing popularity of 2nd screen viewing.

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TickPick Doubles User Base with Razorgator Acquisition

TickPick

TickPick has acquired ticket re-seller Razorgator (excluding its corporate ticketing business) to grow market share in a competitive secondary ticketing industry. The company’s “Best Price Guarantee” (on the exact same ticket) and “No Fee” policy (for buyers), has enabled it to onboard over 1 million active users. Their white-label software will power a revamped Razorgator website, one that also maintains +/- 1 million loyal users. Financial terms of the deal were not disclosed, but it is suspected TickPick paid far less than the +/-$60 million in venture capital that Razorgator had raised to date; considering the company declared financial insolvency back in February.

Howie Long-Short: TickPick has been able to capture market share by operating on slimmer margins (13-14% commission) than the 25%+ collected, per transaction, by market leaders StubHub (EBAY) and Ticketmaster (LYV). The company did $100 million in 2017 sales, with EBITDA of $2 million over the trailing 12 months. Expect them to continue rolling up competitors, as consolidation within the secondary ticketing industry continues.

As mentioned, Razorgator raised $58.5 million over 6 rounds; though, no new money since ’14, before running out of runway. Steamboat Ventures, the venture capital arm of The Walt Disney Company (DIS) and Hercules Capital (HTGC) had both invested in the company. I’m unaware of any way to play TickPick.

Fan Marino: FlipTix, a mobile marketplace that enables fans to buy and sell tickets mid-event, is another exciting entrant to the secondary ticketing space. While historically, most stadiums prevent fan exit and re-entry, the FlipTix app gives promoters the ability to invalidate a bar-code on a ticket, notify prospective buyers, re-sell the seat and issue a new ticket. The original buyer then receives remuneration for their contribution to the transaction, though not necessarily in the form of cash. Secondary buyer pricing is determined by variables like the score and time remaining in the game. With teams once again moving downtown, fans are living/working within walking distance (or a quick ride-share) to the venue. I would expect FlipTix to capitalize on the fan who gets out of work late and wants to “catch a few innings” on his/her way home from the office; a market that didn’t exist prior to their entry.

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MLB Teams Using Secondary Market as Alternative Means of Ticket Distribution

BlueJays

The Toronto Star and CBC are reporting that Major League Baseball teams restricting fans to exclusive secondary ticketing marketplaces (see: Stubhub, TicketsNow etc.) are both profiting from the resale of those seats and using the secondary market as an alternative means of  ticket distribution. StubHub (EBAY) head of global communications Glenn Lehrman acknowledged that teams “do very well (financially)” from tickets sold on the online resale site, a fact previously believed (why else would a team maintain an exclusive relationship with a resale site) but unconfirmed; adding that any tickets sold on the secondary market, directly by the franchise, is “absolutely added revenue” for a team’s bottom line. Lehrman acknowledged that his company would “encourage” teams to sell tickets directly on the secondary market.

Howie Long-Short: Blue Jays President, Mark Shapiro touted the team’s home opener as the “highest-revenue game in the history of Rogers Centre”, but failed to mention that just 30% (13,000) of the stadium’s seats were ever offered on the primary market (i.e. through team box office). On the contrary, at least 20,519 tickets (45%) were available for purchase on resale sites within the last 60 days; at an average markup of 205%. Double-dipping and taking a cut of resale market proceeds is one thing, bypassing the primary market to increase team profits at the expense of your biggest fans (it was Opening Day) is unethical (marketing tickets at one price and selling them at another) and downright piggish. MLB (and any other leagues running this racket) needs to put a stop to this practice for the long-term good of the game, pigs get slaughtered.

Fan Marino: Speaking of the secondary market, the NCAA men’s basketball championship game is arguably the best value in sports. Kansas and Loyola-Chicago fans are long gone from San Antonio, but many bought tickets hoping their team would be playing tonight. Those seats now sit on secondary market, with the price dropping by the hour. According to TicketIQ, a leading ticket search engine, as of 10p on Sunday evening you could get into the building for $84; roughly 1/10th of the “get-in” price ($833) for the 2018 college football national championship game. Looking to go to the game? The NCAA Ticket Exchange, powered by Primesport (owned by OLE) is actually currently the cheapest deal on the market TicketIQ data sources. Below is quick comparison vs Stub Hub (prices after fees)

  • 300’s level / Get-in price:
    • Exchange: $84
    • SH: $85
  • Cheapest 200’s level
    • Exchange: $148
    • SH: $200
  • Cheapest 100’s level
    • Exchange: $157
    • SH: $182

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National Championship Game 1st to Require Mobile Entry

College Football Playoff

Nearly all fans attending tonight’s national championship game at Mercedes-Benz Stadium will use an Apple iOS (AAPL) or Android device to enter the stadium; as Ticketmaster, the official partner of College Football Playoff, will only be issuing paper tickets to a small number of VIPs. The all SEC contest is the first significant U.S. sporting event to require mobile entry; fans will not have the option to print their own tickets. Ticketmaster (LYV) said it’s using mobile ticketing to “increase the safety (i.e. counterfeiting) and convenience of the ticketing process” and to expedite “mobile entry for fans.” Fans without mobile devices will have the option of visiting the box office and having their ticket printed for them.

Howie Long-Short: Stubhub said that Ticketmaster mandating mobile ticketing for the game, has resulted in less inventory; but, TicketIQ is reporting that they’ve seen 2x the amount of inventory (from last year) in the 3 days leading up to the game. In 2017, Stubhub increased its fees 1.5% to 21.8% per transaction; nearly 3x (7.7%) more than parent company eBay (EBAY) charged its sellers. Perhaps that has something to do with why inventory is down.

Fan Marino: Georgia HC Kirby Smart was a long-time assistant under Nick Saban (Alabama, LSU, Dolphins), but guys on Saban’s coaching tree haven’t fared well against their former boss; Saban has won the last 11 meetings over former assistants (Fisher, Dantonio, Muschamp, McElwain, Dooley).

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MLB Sets Record for Sponsorship Revenue Generated in a Season

MLB has set a league record for sponsorship revenue generated in a season, taking in $892 million in 2017; a 7.9% increase YOY and up 26% from just 5 years ago ($663 million). Newly signed deals with Coke (KO), Nathan’s Famous (NATH), Old Dominion Freight Line (ODFL) and 5-Hour Energy along with the addition of presenting sponsorships for the playoffs and World Series, are credited driving the growth. New Era, StubHub (EBAY), Budweiser (BUD), Majestic Athletic and State Farm were the league’s 5 most active sponsors. The data was compiled by ESP Properties, a sports & entertainment research and consulting firm owned by WPP (WPPGY).

Howie Long-Short: MLB finished a distant 2nd among the 4 major U.S. professional sports leagues in sponsorship revenues generated. The NFL brought in $1.2 billion during the ’16 season, the NBA did $880 million and the NHL generated a league record $505 million in ’16-’17 (5.9% increase YOY). With the addition of the Adidas (ADDYY) contract, the NHL is expected to set another record this season.

Fan Marino: While on the topic of baseball, Astros OF George Springer hit a HR in the 7th inning of Game 5 of the World Series, that appeared to explode upon landing. You can check out the video here. While logic points to perfect placement and immaculate timing by the Astros pyrotechnic staff, conspiracy theorists will claim the balls are juiced…with TNT. I suppose it’s possible. The teams have combined for a World Series record 22 home runs through 5 games.

Behind Coke, YouTube, Camping World, MLB Sponsor Spend Hits $892M In 2017

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STUBHUB TO BECOME NFL’S AUTHORIZED TICKET RESALE MARKETPLACE FOR 2018 SEASON

StubHub (eBay) and the NFL have announced a multi-year partnership that will make the world’s largest ticketing marketplace, the NFL’s “authorized ticket resale marketplace”, beginning in 2018. As part of a new 5-year deal with Ticketmaster (LYV), the NFL will be introducing the first open architecture, fully digital ticketing system in sports; meaning StubHub will be able to directly integrate with the league’s primary ticketing system for the first time. The NFL will allow competing marketplaces to integrate with the platform as well, but StubHub will retain exclusive marketing rights and other benefits.

Howie Long-Short: eBay Inc. (EBAY) reported earnings of $514 million ($.48/share) for the quarter ending September 30th. EBAY did $2.4 billion in revenue, up 9% YOY; with $1.9 billion (up 8% YOY) coming from their marketplace platforms. StubHub contributed $275 million in revenue (up 5% YOY), with the growth driven by international sales. The company is currently investing heavily in the redevelopment of their platforms amid stiff competition from AMZN.

Fan Marino: The Province of Ontario is working on consumer protection legislation that would ban ticket scalping “bots” and cap the markup on resold tickets to $.50, on resale sites like StubHub. Banning bots makes sense because it creates an even playing field. Capping resale prices does not. Why would a fan buy a season ticket if they could always get a seat for no more than $.50 above the face value of the ticket? The Raptors & Blue Jays should be lobbying against this bill.

StubHub Becomes Designated NFL Ticket Resale Marketplace

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COWBOYS ARE NFL’S MOST EXPENSIVE TICKET; PATRIOTS AND PACKERS ARE NUMBERS 2 & 3

The cost of attending an NFL game can range significantly from city to city, with resale market prices largely dependent on the quality of the teams playing. According to StubHub (EBAY), no team is more expensive to see live this season than the Cowboys. 5 of the 10 most coveted (i.e. expensive) games on the site include the Dallas football franchise, with Sunday Night’s game against the New York Giants listed as the single most expensive ticket of the season. The defending Super Bowl Champion New England Patriots and Green Bay Packers, with a national following, come in second and third on the list.

Howie Long-Short: The NFL’s exclusive ticketing partnership with Ticketmaster (LYV) expires in 2018. The league is convinced it can make more by retaining a cut of the sales profits than by selling partnership rights. One option moving forward, would be for the league to use an “open platform” that makes seats available through a variety of outside ticketing, e-commerce and social media platforms. SeatGeek has an “open platform” that several MLS teams have successfully used.

Fan Marino: You can find a ticket to every NY Jets home game for $37 or less, except for the N.E. ($100) and Miami ($47) games. For 5 out of 8 home games, you’ll pay more to park your car ($35) than to attend the actual game. Then again, the tailgate is certain to be more exciting than the action on the field.

Americas Team Cowboys tickets most in demand

TICKETMASTER TO USE AUDIO SIGNALS FOR ATTENDEE VERIFICATION; COLLECT DATA ON HABITS/PREFERENCES

Ticketmaster (LYV) has partnered with Cincinnati based start-up Lisnr, as it plans to use ultrasonic sound technology, known as smart tones, to power attendee verification. The signals, inaudible to 90% of humans, are sent from your cell phone as you approach the venue and are verified by scanner at the point of entry, expediting the entry process. Cost, efficiency, the need for fraud protection and the ability to gather data related to attendee habits/preferences, are driving the move to digital ticketing.

ticketmaster_bluewhite

Ticketmaster will soon admit you to events using audio data transmitted from your phone

Howie Long-Short opines: I had to scan 13 tickets Saturday. This would have been useful, but I don’t see it having a big impact on the stock price.

Fan Marino says: Technology has caused a loss of jobs, privacy and interpersonal connection, but it is those ticket stubs, mementos of a bygone era, I miss most. Collecting StubHub (EBAY) printouts isn’t exactly the same.