The Secondary Market For Tickets

I posted a while back on what I perceive to be the effect of StubHub.com and other sites. Most recently, The Sports Economist has an interesting take on what it headlines as "Legalized Scalping." The focus of the post (I confess I didn't have the time to read the linked articles) was on whether prices would drop because of the legal availability of these tickets (after all, the writers of this excellent blog are economists). Read the whole thing and draw your own conclusions.

I still submit that the effect of the secondary market of re-selling tickets won't be so much as to cause prices to drop (unless the teams do so in competition) but to reduce the overall amount of ticket sales that the teams will have. My reasoning is that there are many people out there who want good seats to many fewer games per season in baseball, for example, than even a partial season ticket plan would provide. And those folks want good seats, too, precisely because they're going fewer times. Then there are those who buy the full season ticket or even partial plans, but can't possibly go to all the games. Heck, they can't even give away all the tickets, and the tickets, by the way, purchased in that type of bulk, are very expensive. (In my post, I believe I did the math, but if you want 4 good box seats to a Phillies' game, for example, you're paying $35 per ticket, which, when multiplied by 4 (# of seats) and 81 (the # of home games), gives you a full season ticket package for 4 tickets per game at a cost of $11,340. How many people can afford that?

Very few.

So, what some people must do, whether for their personal use or their business use, is cut up season ticket plans. It's great if you can find 20 families to contribute to the full-season ticket plan for 4 tix per game, but that's not always so easy. My guess is that there are enough inefficiencies out there to create a bolus of unused tickets. And, given the cost of the tickets, you don't want to let them sit unused. Heck, you want to sell them to recoup some of your outlay.

Enter the problem for the teams. Those who don't participate in season ticket plans can buy single-game seats from the home team. Problem is, they can be in relatively remote parts of the stadium. Up until the past few years and the popularity of the internet, the average buyer has readily accepted this phenomenon, precisely because he has to concede that those who pay full freight for a full-season ticket deserve the best seats (even if they get screwed in the post-season and end up in the upper deck because of God knows how many tix MLB, the networks and the corporate sponsors actuallly get). The casual fan has had to take the leftovers.

But he doesn't have to anymore.

The reason is simple -- marketplaces like eBay and StubHub.com. Assuming away potential fraud for the moment (which The Sports Economist points out), there is a marketplace for the fan who wants to go to four games to do better than what the team offers from its remaining seats, and there's a place for the buyer of too many tickets to recoup some of his outlay. In economic terms, there's a fair-market transaction waiting to happen because there's a willing seller and a willing buyer. The seller gets to recoup some of the huge sums he's put out there for the entire season ticket package (and, by the way, there are people with partial plans who are doing this too), and the buyer gets better seats, presumably, than the ones he could have bought from the team.

Good news for the seller and the buyer. Bad news for the team.

The team doesn't get that incremental sale. The re-seller does, probably recoups his cost, and perhaps makes a premium, depending on the game. The Phillies' had 3.25 million fans in '04 (brand-new stadium) and drew 2.6 million in '05. In '05, the new stadium was only two years old, and the team fared much better than in '04. Sure, there were reasons for a dropoff, including the abject dislike of the team's GM, the injury to Jim Thome, the doubts about ownership and the pasting the pitching staff took in '04, as well as the firing of Larry Bowa. But 625,000 fans worth?

I do surmise that because tickets were so hard to get in '04, people who otherwise might have bought from the club might have pursued other venues, such as StubHub.com, precisely because everyone wants as good a seat as possible. So while part of the drop off was owing to the factors I enumerated, I submit that part of it was owing to the growing prevalence of re-sellers. I can't speculate on how many extra sales the Phillies lost, but I would venture to guess the number is significant.

How the teams react to this will be very interesting. It's easy to arrest people in parking lots for trying to sell extra tickets, but they'd have to pursue legislation to prevent people from exchanging tickets over the internet. And that could be hard to do if the re-seller is selling his tickets at face value or less.

Stay tuned, make sure you buy tickets from reliable sellers, and watch this story continue to unfold.