Screwing Over Sports Ticket Buyers? There's An App For That
The Minnesota Timberwolves recently joined the New York Yankees in requiring a phone app ticket system that puts a price floor on resales. Fans have responded with a lawsuit. If this is the future, who actually benefits?
Chris Humphreys-USA TODAY Sports
It's hard to overstate just how much the lives of sports fans have changed since StubHub was born in the year 2000. Back in the Pleistocene epoch of the 20th century, when men were men and tickets were printed on cardboard and had sad Mr. Met on them, the only way to buy tickets to a sold-out game was to hang around the stadium and wait for shadowy characters offering "tickets, tickets"; the only way to unload your unwanted ducats was either to become a shadowy character yourself, or to hope your cousin Morty would take them off your hands if you ran into him at Passover.
That's all changed now, thanks to what's known as the secondary ticket market — "legalized scalping" sounds so dirty — that has emerged in the last two decades to become an integral part of the sports scene. It's not always beneficial to all fans — more on that in a bit — but it's how America goes to games now: Estimates of the percentage of seats bought on the secondary market run as high as 25 percent to 50 percent, meaning for some events it's even odds whether the person sitting in the seat was actually the original one to buy it from the box office.
All of this is why fans pretty much flipped out when the New York Yankees announced a while back that they'd be barring the use of print-at-home tickets and instead requiring a new phone-app system — provided by Ticketmaster, everyone's favorite evil wannabe monopoly — that would only allow electronic tickets to be resold at face value or more. It didn't help when Yankees COO Lonn Trost explained that fans buying tickets for below face value were "a frustration to our existing fan base" because they "may be someone who has never sat in a premium location," giving the impression that the team was concerned that low-rent StubHub buyers might put their boots up on pristine luxury cupholders.
Yankees execs insisted that their only concern was protecting fans from fraud—something StubHub says only comes up in about one out of every ten thousand transactions. But given that team president Randy Levine has been blaming StubHub for any and all of his team's attendance woes for years, it's hard not to assume that this is just the latest in Team Steinbrenner's war on anyone who dares to sell their ticket to a Tuesday night game against the Twins for less than what the emperor has decreed.
Fast forward to last week, when the ticket resale wars popped up in an unexpected place: Minnesota, where a pair of Timberwolves season ticket holders filed a breach of contract suit against the team for switching to a Yankees-style smartphone-tickets-only system, saying it "fundamentally, and unlawfully, alters the way Timberwolves ticket holders may use and transfer tickets." Adding insult to injury claims, the suit declared that "Because the Timberwolves have performed so poorly [20-45 at this writing, though that would actually be the team's fourth-best record in the last nine years], plaintiffs and class members have been left holding the bag, since reasonable market purchasers have no interest in paying premium prices for a team mired at the bottom of the conference standings with no hopes of making the NBA playoffs."
That gets to the heart of the matter: When teams like the Yankees and Timberwolves set a price floor for ticket resales, they're not just screwing over fans who'd like to park their fannies in otherwise empty seats at a discount price. They're also hosing buyers of season tickets and other multi-game plans, who in the StubHub age perform a simple calculus before each season: cost of a ticket plan – whatever I can recoup from unloading my unwanted games on StubHub = can I still pay my electricity bill?
"They didn't implement their system until the ticketholders had already paid," says Brian Gudmundson of the Minneapolis law firm Zimmerman Reed, which filed the suit against the Wolves. (If you recognize the name, it's probably from the $765 million settlement the firm won in its concussion lawsuit against the NFL.) "That's a huge breach in our view—certainly not what anybody bargained for."
The result, says Gudmundson, is that a whole lot of people are stuck with tickets that they can't easily do anything with. "The Timberwolves knew at all times, we believe, that a lot of the people who buy these season tickets give away and sell a good majority of their tickets to try to recoup their investment, or get some kind of a business benefit out of it—for example, a business buys a couple of season tickets and uses them to give to prospective clients." Under the Wolves' newly required Flash Seats app, the only way to transfer tickets is to charge at least 75 percent of the face value—and even then, it's only possible if the person you're sending the tickets to has the Flash Seats app on their phone. "God forbid you want to send Grandma to a game," Gudmunson says. "'Grandma, the AT&T store's on the corner!'"
Nick Stone, a Yankees miniplan season ticket holder since 1998, is equally peeved, though not to the point of filing a lawsuit. Like the Timberwolves fans represented by Gudmundson, he already had renewed his 20-game plan by the time he learned about the new policy via media reports."I think it's terrible," he says. "I know that the Yankees try to frame it as saying you'll get more bang for the buck when you resell your tickets because you won't be able to sell them below a certain price. The fact of the matter is when you're trying to resell tickets because no one can go to that particular game, flexibility is key."
Stone, who is in charge of ticket distribution for his group of four Yankee fans who share two seats, says "99 percent of the time" people would prefer to Paypal a payment and receive PDF tickets via email; he figures this year he and his friends will have to try to sell off unwanted games much earlier, to leave time for mailing physical tickets.
Stone says he thinks Yankee fans will start thinking twice about whether to renew season plans under the new policy. And this is where you have to wonder if teams, in their frustration at seeing their box office sales undercut by cheap resales, are cutting off their StubHub nose to spite their season-ticket-sale face. By opening up the season-ticket market to people who don't actually want to go to all the games, or even all that many of them, secondary sales have helped boost season-ticket sales, even while undercutting single-game prices.
With such a complicated mush of incentives at work — should I lock in a shot at playoff tickets by buying a season plan and selling off the extras, or save my money to put toward paying inflated StubHub prices come the postseason? — who ends up winning in the end from the existence of the secondary market is extremely hard to say.
"Traditionally, in a North American sports league, teams are pricing their face-value tickets slightly below market value—they want to reduce their risk somewhat, and they want to get more people in the stands so they can sell them everything else they have in their venue," says Steven Salaga, a sports economics professor at Texas A&M who has studied secondary market sales. The Yankees, he says, appear to be trying to recapture some of that lost revenue by setting prices closer to the absolute maximum that fans are willing to pay, and giving them no other options. "But this really impacts the season ticket holder, because before you're basically selling them the unrestricted right to resell this on the secondary market.," he says. "With this new system, really, the consumer's buying a different product"—something that, Salaga says, could end up hurting Yankees ticket sales once fans catch on.
As for the Timberwolves, University of Idaho economist Jason Winfree—who has coauthored ticket resale studies with Salaga—speculates that they could simply be looking to shut down resales because they're upset at prices for a lousy team being so low. (There could also be other factors at work here: Flash Seats, the smartphone app put in place by the Wolves and a few other NBA teams this season, is owned by Cleveland Cavaliers owner Dan Gilbert.) "It's hard to say how it will go in the future," he says, "but I wouldn't be surprised if more teams do this."
Concerts, Winfree notes, are already increasingly experimenting with "paperless" or "restricted" tickets, where you buy the right to register your name on the admission list and then check in with your credit card or driver's license. It's policy supposedly intended to cut down on profiteering by buying up tickets and reselling them for a markup, but which has the side benefit of all but eliminating ticket resales. The New Jersey state assembly has gone so far as to twice pass a bill requiring, among other things, that venues offer fans the option to buy transferrable tickets, but it has twice died in the state senate.
So what does all this mean for how fans buy tickets, and how much you end up paying for them? As with what it'll mean for teams' bottom line, the answer is complicated. Under a limited-resales system, it would be much harder for fans to get tickets on the secondary market—we might increasingly find ourselves having to send tickets by FedEx or pick them up at physical stores, like it's 2006 or something. (Coincidentally, that was same year I last I had StubHub tickets FedExed to me, and the courier thoughtfully delivered them to my next-door neighbor by mistake.) On the other hand, if fewer people are buying up all the tickets for future resale, and if scalpers are limited to reselling on game day to anyone within hearing range of their shouts of "Who needs good seats?", and if teams have to offer their own discounts to get more hot dog buyers in the seats for crappy games instead of counting on StubHub to do that work for them, then there could end up being some new kinds of bargains to be had. Maybe.
Alternately, we could have a worst case scenario where the entire ticket market seizes up, nobody buys or resells any tickets, seats go empty when their owners can't make it to the game, and everybody loses. Some reports have already claimed that this is playing out in Minneapolis—but again, it's the Timberwolves, so it's hard to tell. Such is the game of chicken that team ticket offices are playing right now, and fans, to mix a zoological metaphor, are the guinea pigs. Until this all shakes out, those of us who follow teams with kinder ticket policies should savor the moment—the New York Mets ticket office just offered to send me PDF tickets without my even asking, bless their souls—and most of all, enjoy one more reason to be thankful that we're not Yankee fans.