Ticketmaster Rolls Out Fan-Friendly Exchange in Wake of Undercover Sting Investigation

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A September CBC News/Toronto Star investigation revealed that Ticketmaster was working in collaboration with ticket brokers, allowing a network of scalpers to acquire tickets in bulk (using proprietary Ticketmaster software) and then re-sell them for a profit; with Ticketmaster collecting fees on both sales. The undercover sting also determined that the ticketing giant was manipulating inventory (see: not releasing all tickets at the same time) to increase the perception of demand and then driving up the price of the remaining seats as actual inventory declined.

Ticketmaster denied the allegations (that have since spawned a lawsuit) saying they’re a “technology platform” that does “not own the tickets sold on our platform nor do we have any control over ticket pricing – either in the initial sale or the resale. In both cases, prices are set by the seller. We also do not determine when tickets are available for purchase or how they are allocated – those decisions are communicated to us by our client, the venue, after consultation with the event presenter.”

While certainly not an admission of guilt, the company has since decided to shutter 2 resale sites (Get Me In! and Seatwave) and to introduce a new fan-to-fan exchange that caps the resale price to the face value of the ticket. Following last week’s roll-out of the new ticket exchange, Managing Director of Ticketmaster UK Andrew Parsons said, “we know that fans are tired of seeing tickets being snapped up just to find them being resold for a profit on secondary websites, so we have taken action.”

Howie Long-Short: Ticketmaster’s creation of a fan-friendly exchange is long-overdue so the result is a win for fans, but Parsons’ statement comes off as a bit disingenuous. Sure, the company has done the right thing, but only after it was caught with its hand in the cookie jar and subsequently got blasted by the media. Remember, Ticketmaster has aggressively fought against bots and secondary market profiteers claiming they’re in violation of the company’s terms of use agreement.

I checked in with Mike Guiffre, SVP of Business Development at SuiteHop and a 20-year veteran of the ticketing industry (on both primary and secondary sides), to find out if he thought a fan-friendly exchange (see: capped resale price) could succeed in a competitive secondary market?

Mike: It is hard to imagine any site that caps resale will be successful long-term. What gets lost in the ecosystem of ticketing is how many resellers, not just brokers but season ticket holders or others who use resale to offset costs of upfront package purchases, take losses on much of what is resold. Without the ability to make a profit on a % of games or events they simply will forgo buying packages. We have seen this quite a bit on the team side which has left too much inventory available for sale game by game which has created too much supply.

Credit CBC News and Toronto Star for exposing questionable business practices, but understand the 2 media outlets didn’t require Sherlock Holmes’ assistance to crack this case; the Live Nation subsidiary (LYV) pitched their undercover reporters (media wasn’t supposed to be in attendance) on TradeDesk (their proprietary resale platform) during an industry conference. It also wasn’t like this racket was a secret, over 100 scalpers were operating on the platform.

Fan Marino: Footies Tech (founded by Ian Ayre, CEO of the new Nashville MLS franchise, formerly held same position with Liverpool FC) has partnered with TechFinancials (publicly traded on London Stock exchange under the symbol TECH) on a company that plans to use blockchain technology to make ticketing a “more secure and stable market”, while helping teams recoup revenue lost from secondary market sales. The platform will give sports organizations tighter control over ticketing (primary & secondary), a trend amongst the progressives in the industry.

I love blockchain for legitimizing each sale, but I’m not sure teams should take on secondary ticketing. As Mike noted, by restricting resale you’re limiting who is willing to buy upfront (see: only fans 100% going to the game); in turn, driving up the supply. With the U.S. sports fan conditioned to wait until the last minute to find a cheap seat, it’s possible (if not likely) teams will end up selling seats for less than it costs to buy a hotdog and a soda.

Speaking of resale sites, Eric Fisher of Sports Business Daily has reported that Stubhub partnered with an unidentified MLB to buy and distribute ticketing inventory. I asked Mike Guiffre for his thoughts on a team partnering with a ticket marketplace turned to broker?

Mike: That is interesting in concept because teams have been attempting the consolidation method with outside parties. It seems this gives them a more direct partnership (deal includes data-sharing component). However, this is also limiting the distribution of the individual tickets to one site instead of broadcasting their inventory on dozens if not hundreds of websites. It would be silly to think this won’t have any sort of negative effect on sales.

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Seattle Awarded 32nd NHL Franchise

NHL

The National Hockey League has awarded the league’s 32nd franchise to David Bonderman, Jerry Bruckheimer and the city of Seattle. The Seattle Partners Hockey group plans to put a team on the ice, for the first time, in October ’21, allowing time for a $800 million (privately financed) renovation of Key Arena to take place and the construction of a $70 million practice facility to be completed. Little else is known about the teams plans as ownership has said they’ll take their time deciding on a team name, logo and color scheme. The club will play in the Western Conference’s Pacific division, Arizona will move to the Central Division to complete the realignment.

Howie Long-Short: Seattle is a logical market for the NHL with a per capita income 2nd to only San Francisco among the Top 25 most populated U.S. cities and there’s certainly no shortage of fan interest, the Bonderman/Bruckheimer Group received more than 33,000 deposits (at $500 or $1,000) for season ticket packages the day they went on sale; the building is only going to seat 17,000 people.

The Seattle Partners Hockey group will pay $650 million to join the league, $150 million more than Bill Foley paid to bring the Golden Knights to Las Vegas in June ‘16. That’s because the league bases its expansion fees on the “value of a team in a specific market” (i.e. Seattle is more valuable than Las Vegas), rather than a multiple of current or projected revenue/earnings; the price also accounts for inflation.

The Bonderman/Bruckheimer group wanted the team to take the ice in October ’20, but ultimately opted to play it safe and give itself another 12 months to ensure deadlines were met. That was a wise decision on their part, as any delays in the arena’s redevelopment (or in the development of transportation infrastructure) likely would have forced the team to start its inaugural season with an extended road trip (not ideal from a competitive advantage standpoint) and it’s possible (if not likely) that the start of the ’20-‘21 season will be delayed (see: looming player lockout); you don’t roll out an expansion franchise during an abbreviated season.

Skanska (a Swedish multinational construction/development co.) and AECOM Hunt (an American multinational engineering/design/construction firm) will break ground on the Downtown Seattle Center arena project later today. You can’t buy into the Bonderman/Bruckheimer group or invest in the developer, Oak View Group (b/c MSG recently sold its stake in Azoff MSG Entertainment), but you can play both companies tasked with the reconstruction of Key Arena; Skanska and AECOM Hunt. Skanska trades over-the-counter under the symbol SKSBF, while AECOM Hunt (a subsidiary of AECOM, component of S&P 400) trades on the NYSE under the symbol ACM.

Elevate Sports Ventures, formed by Harris Blitzer Sports & Entertainment, the San Francisco 49ers and Creative Artists Agency, will manage the venue’s premium seat sales; Live Nation (LYV) and Ticketmaster (a Live Nation subsidiary) are also strategic partners and stakeholders in the sales, marketing and premium services company. Oak View Group will sell the building’s naming rights.

Fan Marino: Seattle has been the largest U.S. market (18th) without a winter pro sports franchise since the Sonics skipped toward more than a decade ago. With the addition of an NHL franchise the Emerald City is once again a 3-sport town, but the Oak View Group isn’t content with placing just an NHL franchise in the building; they plan to bring the NBA back to Seattle too. Councilwoman Sally Bagshaw said she expects the city to have an NBA franchise by 2020. San Diego and Baltimore are now the biggest U.S. cities without a winter pro sports franchise.

Seattle has never had an NHL team, but the city maintains a proud hockey history; the Seattle Metropolitans of the Pacific Coast Hockey Association (PCHL) won the 1916-1917 Stanley Cup (1st team from outside Canada to do so) and finished with the league’s best record 5x in the 10 years the team operated between 1915-1924. More recently, the Seattle Totems won 3 PCHL championships between 1959-1968; the club last played a game in 1975.

Fun Fact: The Metropolitans won the Stanley Cup the year prior to the National Hockey League’s formation. The NHL was still the National Hockey Association in ’17 and the league didn’t take exclusive control of the Stanley Cup, as its championship trophy, until 1926.

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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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Amazon Closes Event Ticketing Operation, May Relaunch with New Platform in 2019

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Amazon (AMZN) has announced it will be closing its U.K. event ticketing operation (Amazon Tickets), less than 3 months after abandoning plans to launch in the United States; though, the company may be planning to relaunch in 2019 with new technology. Amazon’s open distribution model had some initial success in Europe (signed a partnership with AEG, launched a concert series), but the company’s inability to work out a partnership with Ticketmaster (in the U.S.) was its downfall. Speculation exists that AMZN is working on a new platform that would sync with both Echo and Firestick devices and use AI-powered Alexa to locate tickets.

Howie Long-Short: If you’re looking for “underdogs” that could potentially take on Ticketmaster (LYV), look at Alibaba subsidiaries Tao Piao Piao and Damai.cn. Tao Piao Piao, an online ticketer, was formed out of a partnership between Alibaba (BABA) and Damai.cn in May 2016; BABA has since increased its stake in Tao Piao Piao to 96.7%. In March 2017, Jack Ma’s e-commerce giant acquired the ticketing agency Damai.cn for an undisclosed sum (BABA a minority investor since ‘14). The Alibaba Pictures Group (the entertainment sector of BABA) reported in September, that H1 ‘17 revenue increased 313% YOY (to $165 million); attributing the growth to increased contributions from Tao Piao Piao.

Fan Marino: Here’s to hoping AMZN re-enters the ticketing space; they intended on cutting the service and processing fees for Prime members, a change that would have resulted in a savings of +/- $15 for every $100 ticket purchased.

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Accounting Mechanism Could Impact F1 Share Price

F1

Morgan Stanley is projecting $216.1 million in net losses for Formula One auto racing (FWONK) over the next 3 years. While team payouts (68% of profit) remain F1’s biggest combined expense, the financial services firm projects the racing organization’s single largest line item to be the $394.6 million annual amortization hit anticipated between now and 2020. The company is also on the hook for $515 million in interest payments (related to $5 billion in debt) over the same period. The Morgan Stanley report reflects F1 amortization and interest will exceed EBITDA by $115.2 million in ’18, $78.5 million in ’19 and $22.4 million in 2020. While private companies can massage earnings reports to show adjusted bottom line figures, public entities are required to follow fixed reporting standards; showing significant annual losses could negatively impact investor interest in FWONK.

Howie Long-Short: Formula One auto racing (FWONK) revenue declined (-$18 million, to $1.8 billion) in 2017, for just the second time in a decade, following the loss of (and inability to replace) the German Grand Prix and several key sponsors (see: Allianz, UBS). While F1 “shares are up nearly 20% since YE16”, if you exclude their 34% interest in Live Nation (LYV) “the F1 stub is actually up less than 5%.” As for the Morgan Stanley report, the net losses could actually be worse; their growth forecast has been called into question after a key source issued contradicting statements pertaining to increases in broadcast revenue.

Fan Marino: The Formula 1 U.S. Grand Prix is in Austin in October. Rolling Stone is reporting a Bruno Mars (6 Grammy’s last month) tour stop at the Circuit of the America’s on October 20th; coincidentally the week of the race. Stevie Wonder, Taylor Swift and Elton John have performed at the track the past 3 years, headlining the weekend’s off-track events.

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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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Ticketmaster Accused of Gouging Rugby Fans

Scottish rugby fans have accused The Scottish Rugby Union (SRU) of failing to monitor (and ultimately stop) Ticketmaster, the official ticketing partner of the Six Nations Championship, from selling seats at inflated prices (and collecting exorbitant booking fees) on company owned secondary sites; Seatwave and GetMeIn! Tickets are listed for the more than 10x face value ($118 seats are selling for $2,500) and the perceived conflict of interest has forced the SRU to act. The rugby organization is reportedly speaking to Ticketmaster about removing seats from their secondary sites, while it explores launching a non-profit resale site of its own; where seats are resold at face value or below.

Howie Long-Short: Rare negative news of late, for the LYV subsidiary. Live Nation Entertainment reported its best Q3 of all-time, with the company’s ticketing segment reporting its strongest quarterly adjusted operating income ever. LYV also touted the the introduction of the first open source digital ticketing platform in sports (for NFL) and the increased scale of its Verified Fan product (expects to save fans $100 million in ’17); though clearly not to the scale needed to handle primary distribution of Six Nations Championship tickets.

Fan Marino: If Howie can discuss Scottish rugby, Chilean soccer is fair game. Turner Broadcasting (TWX) won the exclusive broadcast rights to Chilean soccer matches, for the next 15 years; with a $1.3 billion bid. Fox Sports (FOXA) was the favorite to land the rights, but a spokesman for the Chilean soccer commission said regulatory concerns stemming from the DIS deal “influenced the decision.” For comparison purposes, the Argentine Football Association accepted a 5 year $1.03 billion offer from Fox Sports Latin America in March.

Scots rugby bosses ‘failing fans’ over ticket resales with Six Nations briefs going for 10 times face value

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GumGum Helps Brands Understand Sponsorship Values

The New Orleans Saints and New Orleans Pelicans have signed season-long partnerships with GumGum Sports to help brands better understand the value of their team sponsorships. The artificial intelligence and computer vision company quantifies the exposure brand partners receive across television, streaming and social platforms; qualifying impressions by clarity, prominence and share of voice. Their proprietary methodology then assigns a dollar value to a given sporting event based on the cost of buying equivalent reach/engagement. The compressive sponsorship measurement tool enables brands to maximize ROI.

Howie Long-Short: GumGum Sports is a division of GumGum Visual Intelligence, a company that has raised $36 million dollars to date. The only public company to have invested in the in-image ad company though, has been Morgan Stanley (MS). Nielsen (NLSN) is also playing in the machine-learning sports media valuation space. The company acquired the Israeli competitor vBrand back in August.

Fan Marino: The Saints and Pelicans have had a busy November. Earlier in the month, the teams announced a partnership with SeatGeek; making the online ticketing company the primary ticketing platform of New Orleans sports, beginning next season. They become the first NFL & NBA teams to sign-on with the upstart company. Saints officials were recently quoted saying they were looking for a more fan-friendly, hassle-free ticketing experience; a dig at long-time partner Ticketmaster (LYV).

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Amazon’s Plans to Disrupt Ticketing Business Shelved

Amazon’s (AMZN) plans to disrupt the U.S. ticketing business have been shelved. U.S. promoters (i.e. Ticketmaster) pay lofty up-front fees for exclusive distribution rights; negating AMZN’s ability to use their size to crack the market. Ticketmaster (LYV) expressed interest in working with AMZN to unload distressed inventory, but AMZN was looking for the ability to provide Prime members with access to the best shows. Amazon Tickets is still operational in the U.K., as the country uses an open model that enables various platforms and companies to sell seats.

Howie Long-Short: Live Nation Entertainment, which owns Ticketmaster, reported its best Q3 of all-time; with concerts, advertising and ticketing segments all reporting their strongest quarterly adjusted operating income ever. LYV grew Q3 revenue 12% YOY (to $3.6 billion) and 19% over the first 9 months of 2017. The company also announced the introduction of the first open source digital ticketing platform in sports (for the NFL) and scaled its Verified Fan product (expects to save fans $100 million in ’17) during the most recent quarter. If AMZN can’t compete with them, nobody can; that won’t hurt Songkick’s pending anti-competition lawsuit against the company.

Fan Marino: Disappointing news for those who regularly attend games and concerts. Amazon intended on cutting the service and processing fees for Prime members; a change that would have resulted in a savings of +/- $15 for every $100 ticket purchased.

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SeatGeek and Facebook Announce Partnership

SeatGeek has announced that Facebook (FB) will become an official ticketing distribution partner; enabling leagues and teams to sell tickets to games, via SeatGeek, on the social network. Best known as a resale aggregator, SeatGeek will provide FB with a 3rd party API (SeatGeek Open) that will integrate directly with their ticketing interface; giving fans the ability to purchase tickets without ever leaving FB. MLS’ Sporting Kansas City is the first professional team to take advantage of the partnership, adding a “get tickets” icon for each game on their Facebook Events page.

Howie Long-Short: Facebook has similar distribution deals in place with Ticketmaster (LYV) and Eventbrite, so while this partnership isn’t exactly revolutionary, it is significant for SeatGeek. It means that SeatGeek can now sell event organizers on Facebook’s reach and their ability to “put tickets where fans are already spending their time online”. Sporting KC is the first, but they won’t be the last to take advantage of this sensible partnership.

Fan Marino: The average price of tickets to Game 6 of the World Series dropped 21% (to $1,044) after the Dodgers lost Sunday night’s Game 5, putting the team on the brink of elimination. Fans could get in to the building last night for as little as $394. That won’t be the case for tonight’s Game 7. The lowest priced ticket available on SeatGeek, as of midnight, was $1,215.

SeatGeek signs up Facebook as primary ticketing distributor

Editor Note: The summary for this story was written by our friends at The Water Coolest. Check out TheWaterCoolest.com for the latest market news and professional advice.

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