By Mark Henricks
The longstanding war between teams and ticket resellers is coming to a head this year following a flurry of lawsuits and legislative reform initiatives in recent months. The result will determine the direction of the estimated $2 billion annual market for reselling tickets to events featuring professional and collegiate teams. At stake are millions of dollars in fees and markups charged by resellers who may charge 10 times or more the face value of a ticket — a trove increasingly coveted by cash-hungry teams as well as some of the biggest names in electronic commerce.
The New England Patriots fired the opening salvo in this engagement in November when it filed a lawsuit against online ticket reseller StubHub Inc. Lawyers for the NFL team accused the San Francisco ticket broker of violating a Massachusetts law against selling tickets for more than face value.
StubHub responded by filing its own lawsuit against the NFL team shortly after, charging the Patriots with violating the same law. The reseller claimed the team was breaking the law because service charges it levied on face-value resales done through its own resale mechanism exceeded the maximum $2 markup allowed by the 1927 Massachusetts law governing resales.
In January a Massachusetts legislator, apparently buying the arguments of some resellers, introduced a bill that would repeal the decades-old anti-scalping state law. The new law would allowed resales at up to three times face value, which keeps reselling financially attractive to individual resellers and ticket brokers as well as firms like StubHub that don’t actually sell tickets but live off percentages and service fees charged to sellers who use its service.
Looming over the escapade are two monoliths of Internet retailing: Ticketmaster, a unit of $5.7-billion sales InterActive Corp. of West Hollywood, California, and eBay Inc., the $4.6-billion sales online auction giant based in San Jose. Ticketmaster, which already dominates the sale of tickets to sporting as well as other types of events, is moving strongly into the reseller market. eBay already lists tickets of many kinds among the items for resale on its site, and in January announced a $310 million deal to buy StubHub, which brokered about $400 million in resales last year, including tickets to many professional and college games.
The underlying trend is a continuation of the shift toward legitimacy of the ticket resale business. Once the exclusive domain of shady scalpers lurking outside arena gates, ticket resales have increasingly moved online and into the sunlight. The Washington, D.C.,-based National Association of Ticket Brokers, founded in 1994, is partial evidence of the trend. Other indications from the introduction of practices intended to make buying a resold ticket palatable to people who wouldn’t think of patronizing a traditional scalper.
This last is a concern in part because of counterfeiting, an issue StubHub addresses by collecting credit card information of anyone listing tickets for sale on its site. The reseller, which handled 3 million tickets last year, says frauds are almost unheard of and is so sure of itself that it guarantees that fans purchasing tickets on its site will be able to attend the events.
Another problem is the way some original ticket sellers will invalidate bar codes on resold tickets, making them useless. Ticketmaster has reportedly done that on gray-market resale tickets to watch teams who have exclusive deals with it for ticket resales. Still another approach is taken by teams that pursue fans who resell tickets. The New York Yankees, for instance, has gone so far as to revoke the season tickets of people caught listing their tickets for sale on StubHub.
The lawsuits by the Patriots and StubHub aren’t likely to amount to much in the end. eBay, which has 310 million reasons to be concerned about it, declares the Patriots case without merit. A lawyer for the Patriots, meanwhile, characterizes StubHub’s complaints as “ridiculous.”
Indications are that a less confrontational solution will be found to the ticket resale mess. Ticketmaster, for instance, approached the issue by lobbying legislators in the states that have anti-scalping laws. The NATBA says only 15 states prohibit ticket resales for more than face value. Seven of those allow exceptions for licensed brokers, and the number of states outlawing scalping is shrinking. New York, Florida, Louisiana and South Carolina have lifted or loosened rules against selling tickets at much more than face value in the last year or so. Similar bills have been introduced in the Massachusetts and Arkansas legislatures in recent months.
Resellers are also inking deals with teams to resell their tickets. Ticketmaster has such deals with more than 100 sports organizations including the NCAA, which recently named it exclusive for resales to the Final Four.
StubHub has a few dozen similarly exclusive arrangements. Although its list of partners includes the likes of the Chicago Bears and Portland Trailblazers, some teams with highly sought-after tickets, such as the Boston Red Sox and New York Yankees, have refrained. The Yankees, for instance, announced plans to set up their own ticket resale site. Other teams have done likewise, albeit with limited success because they limit resale prices to essentially face value and few resellers are willing to forego the chance to reap markups as much as 10 times or more which are available on sites like StubHub.
At the root of the legal issues surrounding the scalping fray is the question of whether original ticket buyers have the right to resell their tickets. Many teams require season ticket buyers to sign agreements prohibiting resales, arguing that they’re selling not an item but a license to attend, which can be revoked. But this strikes many people as out of line. As the Arkansas legislator who is seeking to repeal that state’s anti-scalping law said, “It doesn’t apply to anything else in our society. We’re allowed to buy other items and sell them for a profit.”
