The secondary ticket market used to be very simple. If tickets for a concert or a sporting event were sold out, fans went to the venue prepared to pay a lot of money, and looked for a scalper hoping to get one of the sought-after sold-out tickets.
The resale market changed forever in 2000 when Stubhub was created—setting up an online national ticket re-selling community. Sometimes tickets were priced greatly above their face value, but often tickets for less desirable events could be purchased at a fraction of the original cost. In 2007, EBay bought the company for $310 million.
Teams and venues have historically treaded carefully with ticket re-selling, not wanting to be in the position of having hands in both the initial sale and subsequent ticket re-sales. These barriers are starting to come down, as teams get into the re-sell and transfer business in order to generate additional revenue.
A major breakthrough occurred on November 12th, when sports and concert promotion company, Anschutz Entertainment Group, (AEG) announced an official sponsorship with Stubhub that will help the group take a share of the money available in the re-sell market. The entertainment giant, based in Los Angeles, owns dozens of venues worldwide, including the four-million square foot L.A. Live complex which includes the Staples Center. Additional venues include the Warfield in San Francisco, and the Best Buy Theater in New York’s Times Square. The company also owns the NHL’s Los Angeles Kings and Major League Soccer’s Los Angeles Galaxy and has a minority interest in the NBA’s Los Angeles Lakers.
The new partnership, which will begin in early 2013, will allow prospective purchasers to buy tickets through Stubhub for events at AEG venues even if tickets are not sold out.
“We can say, ‘You wanted floor seats; there are no more floor seats available, but there are floor seats available on StubHub,’ ” Bryan Perez, AEG’s president of ticketing and digital business told the Wall Street Journal.
Stubhub has been very successful by taking a cut of the seller’s sale price as well as adding a fee to the buyer for every transaction on its website. This adds up to a 25% cut of every transaction, resulting in revenue of $325 million dollars in 2011. With the secondary market progressing on mobile platforms, the re-sale industry has become a $10 billion market.
Under the new deal, some of that revenue will now go to AEG (details not disclosed). This deal also has immense benefits for Ebay and Stubhub. Stubhub has rarely, to date, ventured into the sale of tickets to events taking place outside of the United States. Their new partnership with AEG, however, will turn them into a worldwide business, since AEG owns venues in Brazil, England, Australia and several other countries.
“Today, StubHub is largely a domestic U.S. business. This is a significant move to globalize StubHub.”
– Devin Wenig, President of eBay’s Marketplaces
Going forward, it is tough to tell how these partnerships will play out. The Chicago Cubs are a recent example of a team that used a faux ticket re-seller to capitalize on the secondary market price markups. With many major events going for premium prices, the temptation is certainly there for other teams and venues.
On the other hand, this digitizes the re-sell market and helps avoid the unenviable position of showing up at the desired venue without physical tickets in hand. The bottom line is that the secondary market isn’t going away, and AEG felt the need to be a part of the action, instead of viewing it from the sidelines.
AEG’s Chief Executive and President, Tim Leiweke, told WSJ: “People go out and buy and sell tickets on the secondary markets,” he said. “That’s never going to change.”
The biggest question now is: Which venue giant is next?
(Photo Courtesy of http://svendoornkaat.photoshelter.com)