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State Lawmakers Heat Up Secondary Ticket Wars

The Ticket Secondary Wars of 2015 have now gotten state legislators involved in Florida, Washington State, Michigan and Missouri, coupled with two lawsuits against professional teams who have canceled tickets for not using Ticketmaster resale channels. It has created a debate about whether resellers have the ability to maximize their websites by using professional logos, or alert online visitors that their prices are above face value.

Ticketmaster’s lobbying efforts almost paid off in the Florida scenario, creating a push toward “legitimate” tickets through their primary and secondary platforms, as well as opening up a debate about whether it is ethical, or capitalistic to allow one business to corner both markets for the customer on a ticket transaction. StubHub and its funded-Fan Freedom group, are against the plan, which would put them at odds with state laws.

However, in Missouri, it is Ticketmaster’s own features of “credit card” restrictive ticketing entry which have caused legislators there to take up action and may finally resolve whether tickets are indeed a “revocable” license or actual property of the buyer.

StubHub’s watershed lawsuit against Ticketmaster and The Golden State Warriors March 29, 2015 turned out to only be the opening salvo in a resale platform dispute, claiming that Ticketmaster and the Warriors forced Golden State fans to resell only on Ticketmaster’s secondary platform, or have their tickets cancelled. Ticketmaster denied actively doing this in a statement responding to the StubHub lawsuit.

Now, two brothers, Rey and Alex Olsen, filed a class action suit April 22, 2015 against the New Jersey Devils for cancelling their 2013-14 season tickets because the Olsens resold their tickets on other secondary channels such as StubHub, instead of using Ticketmaster.

To put it boldly, that’s oppressive.

The Milwaukee Bucks actively told ticket buyers that if they resold tickets during the 2015 NBA Playoffs, they had the possibility of being cancelled, which they did to one buyer who purchased 25 tickets and posted one on StubHub.

While the legislation crafted may provide consumers with legitimate protections when they purchase tickets in the marketplace, it showcases multiple harmful affects to the bottom line of professional sports franchises by eliminating revenue points by involving state lawmakers. Especially if its causes secondary market disruption, as well as a disallowance of wholesaling ticket products through multiple distribution channels, and creates a sole system that Ticketmaster controls.

Especially when Ticketmaster’s service fees garner 29 percent of the average ticket sold on their platform.

The Primary Market’s Fight In Ticket Secondary Wars

StubHub and other secondary market brokers exist largely because they have out-marketed teams using the franchise’s own ticket product. They do so by investing in S.E.O. (Search Engine Optimization), retargeting and re-segmenting marketing dollars to continual focus on new customers as well as their search habits. By comparison, professional teams have declined to invest, or support, these digital practices, favoring out-dated, old-school telemarketing sales tactics instead.

A former sports executive, Mike Guiffre, who worked in the front offices of the Pittsburgh Penguins as well as the American Airlines Center in Dallas, doesn’t feel he is a secondary market or ticket broker advocate. Now working as Vice President of Client Relations & Business Strategy at The Locust Phase, Guiffre said that resellers have fostered an ability to enhance revenue for the ticket product, which is lost on most franchises, mainly because team executives lack a clear business strategy based on economic principles when it comes to online advertising.

“Teams invest dollars in over-staffing young kids to make phone calls to over-used lists while not finding new customers,” he said. “While aggressive sales teams are fine, over the past decade, teams have failed to use online resources and data to expand their reach.”

According to SeatGeek Data, from April 13-19, 2015 out of the 52 games played in Major League Baseball, there were over 267,053 total listings on the secondary market for an average of 2,872 listings per game played. While it is natural to believe that ticket brokers using ‘bots’ would initiate them for the larger contests, such as Opening Day or around large rivalry games in baseball, this is a period after the initial aura of high-demand baseball games has subsided. And yet, there are several thousand tickets per contest on the secondary market.

One of the highest seating inventory listings during that April 13-19 period was at Dodger Stadium in Los Angeles, where 20.1 percent of the entire capacity of the stadium is listed on the secondary market. The average during that period was 6%, with two games back-to-back at Dodger Stadium, where the Dodgers hosted the Seattle Mariners on April 13-14, equaling 23% of stadium capacity on the secondary market.

This doesn’t happen with a concerted effort from sports franchises themselves, with executives actively selling blocks of tickets to brokers.

Franchises have also leaned on brokers heavily to capture market segment data, yet fail to understand what information they are accumulating. Guiffre’s solution would be for the professional sports business model to completely overhaul its operations, hiring less sales reps and dedicate financial resources toward online advertising to gain those digital customers.

“Put the focus on all other revenue streams, not just tickets, by using available data,” he said. “Secondary sites own S.E.O. Just Google your favorite team, add the word ‘tickets’ and witness the on-going fail.”

One of the major points that primary and secondary resellers agree upon is elimination of ticket-buying ‘bots,’ which gobble up seat inventory the second that an on-sale date occurs. Anyone with enough resources can ‘contract out’ the ability to use another ‘bot’ server, employing to buy up the inventory for an upcoming show. There is a degree of investment that a person has to take to do so, but it can be done. Yet, even that has been a challenge, especially for Ticketmaster, which has been a huge advocate of slowing down, but not eliminating the bots entirely from purchasing tickets, which according to The New York Times in 2013, gobble up 60% of TM’s inventory with one group’s ‘bots’ requesting over 200,000 tickets a day for the hottest shows.

Back in 2012, TM said that they were leading “the fight against bots,” but have to admit that it helps demand for their ticket product. TM, Paciolan and Veritix were asked by the StubHub-financed Fan Freedom Project to help end the abuse of ticketing software and combat ‘bots’ head-on. During that same year, Michigan lawmakers started criticizing the tactics of TM and StubHub, and ended up in 2015 working toward eliminating a 1931 law banning ticket scalping in the state.

California has a similar law on the books since 2013 against ‘bots’ as well. In Washington State, an anti-ticket bot bill passed the state Senate April 8 with a 49-0 vote, and coupled with a House Bill, will be brought to Governor Jay Inslee for signature. California already has a similar law on the books since 2013 against ‘bots.’ But merely creating a law doesn’t mean its exactly enforceable. For seven years, Tennessee has an anti-ticket bot law on the books, with no prosecutions that was crafted by four Tennessee state house representatives as The Better Online Ticket Sales Act. Mainly because it is so difficult to abide by several jurisdictional issues, especially with out-of-state scalpers who target shows in the state. Thus the Tennesse law is ‘toothless’ in its desired effect and fails to prevent any blockage of ‘bots’ to continue to acquire massive blocks of seating inventory for concerts, shows and sporting events.

But as much as large ticket companies, concert promoters and teams hate ticket bots, they also benefit from them. Especially when media headlines report that the latest Beyonce New York City concert sells out in 22 seconds, The Rolling Stones’ Summerfest show sells out in 7 minutes, The Winnipeg Jets’ playoff game sells out in 5 minutes, The 115th Annual U.S. Open’s surging resale asking amounts topping $1,000 and the Cleveland Cavaliers had their first playoff games sell out in minutes as well.

Queue-it Founder Niels Henrik Sodemann spells out how technically impossible it is to actually have a show sell out in less than ten minutes. But that’s doesn’t keep the ticket industry from promoting the idea that a massive ticket sell-out happens super-quick. By making the entire buying public overly-aware that a game/event/show is likely to sell out. Specifically to drive demand, which even Ticketmaster and other ticket companies have to admit, ‘bots’ actually do push immediate customer demand higher to buy when those events go on sale to the general public. National Public Radio exposed some of the ways that even Justin Bieber’s concerts don’t really ever sell-out.

And none of that covers the amount of tickets distributed in pre-sales or to fan clubs. Or the confusion that pre-sales can have, even if The Rolling Stones are coming to San Diego.

Adaption to the new online age would mean updating pre-Internet business practices which have caused professional sports teams’ branding to suffer. This means reducing out-dated staff models, focusing on ‘data-driven’ sales planning beyond current customers.

Guiffre cites the cab industry, which didn’t develop a mobile app and lost market share to Uber, or the music industry’s willingness to allow Apple to overtake them in sales, as similar examples.

“You can’t complain if someone took the initial financial risk through innovation, or improved customer experience,” Guiffre said. “Secondary brokers don’t just re-target better. They actually re-target. Most teams are behind the times in utilizing modern online marketing to find new customers. Teams continuously rely on individual purchasers and don’t find new customers for tickets or other revenue streams.”

How the Secondary Wars Hurt Franchise Revenue

When professional teams sell to brokers, they do so out of the need to move tickets off of the primary. This helps create demand on the primary to the public, who sees the vast amount of tickets gone. It also makes urgency of long-term buying more relevant in general. However, if the brokers are shut out, or eliminated from the marketplace by a system platform, it will create a dynamic shift in how professional teams have done business in the past.

Professional teams would have to carry the load of seating inventory on the primary, waiting for it to be purchased by their fans without brokers. And only after it is offered up as a resale, would teams be able to utilize the system platform such as Ticketmaster in the ability to do that. Teams would be reducing on their highest demand structures, that being brokers, in an effort to appease a system platform who will not purchase large blocks of inventory left behind.

Brokers are investors in the ticket product. They are able to purchase the product, break it apart, and flip certain aspects of those tickets for a higher price than what teams are selling it for. Brokers also then sell a lot of their inventory at a much lower price than what teams sell it for, which creates problems of its own. But by doing so, brokers eliminate large chunks of seats throughout the ballpark, and help create demand for the product.

Teams also have a certain need within the broker-buying structure; they tend to allow those broker sales to carry over the commissions of their 40-plus sales staffs, most of whom earn $20,000 plus commission on sales. Without having those sales in place, teams would have to likely increase their pay for sales staffs, or reduce their sales staff numbers entirely. Minor league sports, which do not have a lot of broker sales overall, tend to pay higher for their sales staffs, yet have a fraction of the workers in the department that a major professional team does.

Mike Guiffre has been utilizing data mining principles for years, and has help established the Divergence Academy to teach data science course. Part of this discussion surrounds the idea of data, and how to capture more of it, as well as use it. Secondary market brokers have the push of actually gather more data than their primary partners, Guiffre said.

“This has become another huge advantage for online broker sites, using data/inbound marketing to find new leads. Secondary segments their marketing through data and analytics. True data and analytics,” Guiffre said. “Not just the fact that the customer once bought tickets and a database says they have disposable income. You never receive generic emails from these sites. The marketing is based off your purchase history or your online behavior/profile.”

The cosmic joke that exists, however, is that professional teams are in a great position for gathering data and potential customers through social media and websites, something that other Fortune 500s globally would kill for, Guiffre said.

“The reality is teams have a huge advantage here with potential customers all-over their social media and websites. Every other company in the USA wishes they could get as much organic traffic as sports teams,” Guiffre said. “Yet, instead of mining their Facebook or Twitter followers and marketing the most likely tickets products or games based on available data, teams just post about tickets on-sale date.”

Instead, professional sports organizations have the real advantage of creating a dynamic social media and online marketing program that go after everyone that otherwise buys off of the secondary market, Guiffre said.

“Teams should be marketing kids clubs to parents, TV and merchandise to out-of-towners, sharing data for away game sales,” Guiffre said. “Teams should be marketing directly to fans based on online profiles determining their potential All of the information is there and teams have an advantage as it comes to them organically. Yet, teams consistently ignore that segment of the strategy or business plan.”

All of this comes down to marketing by StubHub and resellers, down to available data and history, an area that professional teams lack in, Guiffre said.

“That type of inbound marketing has proven over time to be ridiculously inexpensive and effective,” Guiffre said. “The online battle was lost but in turn what happened was that secondary market sites serve as a digital marketing arm for teams. The trade off is “perceived” customer dissatisfaction and the loss of purchase data but secondary sites markets better to those data points anyways so its still a win, which is crazy but true.”

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