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StubHub Lawsuit And Preferential Pricing

One of StubHub’s most challenging issues to combat in their lawsuit against Ticketmaster is how StubHub’s sellers are charged for tickets placed on the secondary market’s site. Ticketmaster might have a few issues with that too. Specifically when it comes down to the topic of preferential pricing, where specific seller metrics achieved can garner brokers reduced expense incentives.

If Ticketmaster can prove that resellers didn’t list on StubHub because they were incentivized by lower rates on Ticketmaster’s platform, then StubHub’s case might be dead in the water. Because all that becomes is good capitalism.

StubHub’s key claims in its lawsuit is that its ticket listings to Golden State Warriors games were reduced by 80 percent over the last year. This is one of StubHub’s pieces of proof that the Warriors and Ticketmaster had engaged in monopolistic tactics to brokers from listing their tickets on StubHub and other secondary market websites. But the practice of preferential pricing, engaged by both Ticketmaster and StubHub, may be a key explanation in why StubHub is losing out on listings.

What is Preferential Pricing?

Preferential pricing allows StubHub, Ticketmaster and other secondary market platforms, to provide differing rates to each seller, based on past sales metrics on ticket listings. Some platforms even raise a seller’s fees for not meeting certain metric criteria as a reverse incentive to maintain performance on that site. This helps ensure seller etiquette is enforced when dealing with the ticket buyers. If SH screws over a customer with a false listing, or doesn’t deliver on the product, the metrics change the rate the seller is charged on future ticket listings.

The standard SH seller rate is 15%. But mega dealers may only pay as low as 2%.

SH has a metrics system that rates a seller’s performance based on the percentage of their orders fulfilled accurately, and on time, as well as overall sales volume.

Likewise, TM has also been involved in this bloody business of competitive preferential pricing seller metrics. It’s a race-to-the-bottom tactic that could get them in trouble, but only financially. TM has a qualification requirement that fits into a tiered system for aggregate scoring of preferential pricing. All of those incentives, pushing sellers toward a higher qualification score to achieve, can earn a broker significantly lower rates than someone who randomly places two tickets on Ticketmaster’s site on a whim.

TM-integrated teams tend to also have lower fees compared to SH integrated teams. TM service fees are different from team-to-team, event-to-event, but preferential pricing is one of the major differences in fees charged to the broker compared to the standard individual on both platforms.

Preferential Pricing Favors Mega Sellers Over Standard Broker

The comparison can be broken down further when comparing a mega seller that receives a significant preferential pricing break, compared to the average seller, who may be 2-3 pricing tiers down. The spread between 2% and 15% is drastic for selling tickets, which is why a mega seller often benefits over the standard broker from these preferential pricing models.

Here is an example of Ticketmaster & StubHub pricing, based on what both types of sellers pay to list on each site. There will always be some variance in pricing percentages, as well as the actual spread going back to each platform, but in essences, it shows what the seller pays, what the fan sees, and how much each platform stands to make in the process:

chart1

A Consumer Pays More For Ticketmaster Listings Than Those On StubHub

For a mega seller on Ticketmaster listing a $100 ticket shows up as $108 (8% mark-up). The consumer sees that same ticket as $125.82 ($17.82 TM service fee + 8% mark-up). This makes it a 29.41% total mark-up from the original listing price. The mega seller makes $97.25 if the ticket is “instant delivery” (2.75% seller fee), and is paid $94.75 if the ticket is “non-instant delivery” (5.25% seller fee).

A standard broker on TM listing a $100 ticket shows up as $107.50 (7.5% mark-up). The consumer sees that same ticket as $130.88 ($23.38 TM service fee + 7.5% mark-up). That makes a 37.77% total mark-up from the original listing price. The standard broker takes home $95, while the consumer is paying $130.88 (a $35.88 profit going back to TM).

Now, the mega seller on StubHub listing a $100 ticket shows up as $119 (all-in pricing). The consumer sees the ticket as $119.25 (21.43% in fees + mark-up), and the mega seller gets paid $98 after fees (2% seller fee). The standard broker on SH lists a $100 ticket that shows up at $120 (all-in pricing). The consumer sees that ticket as $120 (26.32% in fees + mark-up). and the standard broker gets paid back $95 after fees (4% seller fee).

chart3Meaning the consumer is actually paying 11% more to shop on Ticketmaster than StubHub, and the amount that the consumer is paying actually equals a much lower spread of 20.54% on SH compared to TM, which generates 13.7% more off of its customers in this transaction.

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