Rafi Mohammed

Is it Wise For Sports Teams to Profit from the Ticket Scalping Market?

Posted on June 19th, 2007 (3 Comments)

Remember when scalpers were the “bad guys?” Brad Stone recently wrote an interesting article in the New York Times discussing the fact that many sports teams are getting involved in the ticket resale market. Teams like the Cleveland Cavaliers and the San Francisco Giants now have “official” ticket resale operations – you can sell tickets for whatever price you can get – as long as the teams get a 10% to 20% cut. Eager to get into the ticket resale action, MLB.com (an independent division of Major League Baseball) now owns 94.9% of the online ticket reseller Tickets.com. Additionally, many sports teams have anointed StubHub.com their “official” ticket reseller.

I’ve been wondering whether it’s wise for sports teams to be associated with reselling high priced tickets. I know many of you are thinking, “what’s wrong with you…you must be feeling ill!” Don’t worry…I’m still completely enthralled with capturing value. But what sports teams need to keep in mind is they profit from several products where demand is likely correlated (by correlated, I mean if demand increases for one product, it affects demand for another – for example, higher game attendance positively affects merchandise sales). So if I were Major League Baseball (MLB), I’d keep in mind that while baseball ticket money is great, so are the $400+ million annual television contracts. Not only is this revenue lucrative, but being on television is great marketing for the sport and game attendance.

Here’s my concern: if being able to afford attending games is important to fans, will the notion of sports teams profiting from high priced scalper tickets alienate fans? If fans begin to stray, television contracts could dry up (lower payments, lower television time), which would further decrease game ticket demand. Is this risk really worth a 10% cut of a $200 ticket resale? However, if the television audience does not care about ticket prices – then there’s no problem. It’d be worthwhile for associations like MLB and the NBA to better understand what connection, if any, a sport’s popularity correlates with ticket prices.

A natural analogy to think about is the profit equation for musicians. Much like sports teams, musicians profit from several products: CDs, merchandise, and concert ticket sales. Upping ticket prices has been great for aging rock stars: Bon Jovi is flying around in a private 707 jet and the prospect of grossing 10 million dollars in Boston alone has brokered peace amongst once strife ridden bands like The Police to reunite for a tour.

Here’s the difference between a rock star’s and a sports team’s profit maximization.

  • Relatively speaking, rock stars don’t make much money from ancillary products like CDs (how many of you own The Rolling Stones’ latest CD?). In contrast, ancillary product sales are significant for sports teams.
  • Fans of aging rock stars have grown affluent over the years and are more able to pay high ticket prices. A key target audience for sports teams remains young kids – revenue from mowing lawns only goes so far.
  • Finally, as a business entity, rock stars are approaching the twilight of their careers – they are in the “cashing out” phase of their careers. In contrast, sports teams are ongoing business entities.
  • So what do you think? Do you think being associated with high ticket prices will hurt sports teams? I’d love to hear your opinions!
  • Add Comment
    Send to Friend
    Email Signup
    RSS Feed

    Readers' Comments on This Blog Entry

    From Bob on June 20th, 2007
    I see and understand your concern however, the # of tickets being resold is small. I don't think it effects anyone other than the big spenders that want the primo seats for the most part. I don't have #'s but I would guess that the majority of these seats are bought as season ticket packages and resold. If this is the case these seats would not have been available or were only available via illegal ticket sales. Rock concerts raised their prices across the board. Virtually every baseball stadium has very reasonable pricing for their upper level seats. Many teams create family packages to make sure the family of 4 can participate and the Braves have an entire seating section of $1.00 seats... Now the IPhone is definitely a great pricing strategy and almost worth the price for the technology!!! Awesome! No comparison to the pearl!
    From Donna on June 20th, 2007
    Hey Rafi... Good blogs...I love reading them. Regarding the ticket scalping...i don't think that it will hurt the teams...most people accept scalping as part of the process, even more so with stubhub. Most normal folks don't buy at these crazy prices...only really true fans that have $$ to spare. Like my niece with American Idol. So...it won't hurt the guy/kid just buying a regular ticket if they are still able to get a hold of reasonably priced seats. MLB and others need to make sure that their are still reasonably priced seats in addition to the crazy scalp prices. Would be good if in addition, they held back cheap seats on game day to sell to families, kids, etc.
    From Steve on June 20th, 2007
    It's ironic that you have the same verification code that ticket systems use to discourage scalpers. The teams fall into a couple of categories. First, the ones that come close to (or do) sell out most games. I don't think these teams are going to get hurt in the long run. Then there are those like my beloved Mariners. Averaging 25,000 a game. The difference is that there is a wide range of ticket prices these are offered for on the Marines website "Ticket Market" (look it up - very user friendly). I just bought for a game against Pitts day after tomorrow. Paid $45 for a $38 face ticket 18 rows up inside 3rd base. Same seat the following night, the big Ken Griffey tribute would be $175. It seems to find its level for a team like ours. The Yankees, Red Sox, etc - it doesn't matter. They are selling out and higher ticket market prices won't affect that.