Can someone give me a dumbed-down version of exactly how ticket reselling businesses work?
I'm not looking to get into the business but I'm progressively hearing how more and more people getting into this space.
I'm certainly not looking to insult anyone but how can a business be profitable where the only requirement is to essentially bottle-neck supply at the point of ticket release to the public?
In a perfect world, all 82.5k seats in MetLife Stadium would be priced according to their own specific valuation, and that would fluctuate according to opponent, time of year, time of game, etc.
That's an unruly amount of variance for Ticketmaster to manage when each season is built, and quite honestly, it's more information than John Q. Public has any desire to absorb when renewing his season tickets.
However, once the ticket is decoupled from its originating software constraints, the actual market dynamics can take over in a way that is free from PR ramifications and is truly demand-based. The end result is typically a fairly small margin - most brokers aren't charging 2-3x face value in the aggregate, which is the way that many people believe they operate, although they do reach those levels for certain events (and for other events, they'll sell for well below face value but those are considered part of the necessary cost for acquiring the premium value inventory). The brokers will also purchase season tickets for every single team in the league, which ensures them access to playoff inventory as well.
The thing that's important to realize is that the market isn't actually set up to funnel inventory to the secondary market, but it does end up functioning that way, largely because teams are so used to their historical sales benchmarks (which are almost entirely tied to season ticket renewals) that it would be a massive risk to carry that inventory themselves and sell them as single-game tickets instead, even if they've identified that some portion of their STH base is comprised of brokers. Add to that the fact that from a marketing standpoint, they're wary of charging some of the highest prices that the market will bear, and what they're left with is a choice to absorb the inventory risk themselves by attempting to box out the brokers, but doing so with limited pricing upside - it ends up being a scenario that many organizations ultimately choose to avoid.
The brokers end up doing the teams a favor by taking the bad games along with the good, taking the PR hit for charging as much for the tickets as the teams themselves should probably be charging (both on the high and low ends), and help the teams stay "sold out" even during lean years, which is a metric that helps keep their sponsorship revenue robust.
Hope that helps.
Brokers used to make more $$ back when every fan could not have visibility to available seats on ticketmaster and stub hub... and when corporations used to have more money to spend on entertainment.
That's what I thought. And given the dust-up over memorabilia sales, I was a bit skeptical of this business's scruples.
If you're just a pass-thru for the resale - ie StubHub, SeatGeek, et al - then there is almost no risk. You charge fees to the seller, and the seller assumes all of the rist. It the tickets sell, you get fees on both sides of the transaction. A pretty sweet deal, although there is a ton of competition in that space.
If you're just a pass-thru for the resale - ie StubHub, SeatGeek, et al - then there is almost no risk. You charge fees to the seller, and the seller assumes all of the rist. It the tickets sell, you get fees on both sides of the transaction. A pretty sweet deal, although there is a ton of competition in that space.
1.2x is a margin FAR above what most brokers make, by an order of magnitude.
But it's small margins on huge money. The biggest brokers are moving close to nine figures worth of inventory annually. If they're netting 5%, they're golden.
The other piece to the puzzle that most people don't consider is they almost all pay with their Amex cards. If they flip $100M worth of inventory per year and can do anything better than just break even after their breakage costs and other overhead, they can do very well simply on their Amex points alone.
In a perfect world, all 82.5k seats in MetLife Stadium would be priced according to their own specific valuation, and that would fluctuate according to opponent, time of year, time of game, etc.
That's an unruly amount of variance for Ticketmaster to manage when each season is built, and quite honestly, it's more information than John Q. Public has any desire to absorb when renewing his season tickets.
However, once the ticket is decoupled from its originating software constraints, the actual market dynamics can take over in a way that is free from PR ramifications and is truly demand-based. The end result is typically a fairly small margin - most brokers aren't charging 2-3x face value in the aggregate, which is the way that many people believe they operate, although they do reach those levels for certain events (and for other events, they'll sell for well below face value but those are considered part of the necessary cost for acquiring the premium value inventory). The brokers will also purchase season tickets for every single team in the league, which ensures them access to playoff inventory as well.
The thing that's important to realize is that the market isn't actually set up to funnel inventory to the secondary market, but it does end up functioning that way, largely because teams are so used to their historical sales benchmarks (which are almost entirely tied to season ticket renewals) that it would be a massive risk to carry that inventory themselves and sell them as single-game tickets instead, even if they've identified that some portion of their STH base is comprised of brokers. Add to that the fact that from a marketing standpoint, they're wary of charging some of the highest prices that the market will bear, and what they're left with is a choice to absorb the inventory risk themselves by attempting to box out the brokers, but doing so with limited pricing upside - it ends up being a scenario that many organizations ultimately choose to avoid.
The brokers end up doing the teams a favor by taking the bad games along with the good, taking the PR hit for charging as much for the tickets as the teams themselves should probably be charging (both on the high and low ends), and help the teams stay "sold out" even during lean years, which is a metric that helps keep their sponsorship revenue robust.
Hope that helps.
Thank you, a lot of this makes sense.
What about someone like Billie Eilish who is clearly going to sellout stadiums left and right. Why wouldn't TicketMaster simply jack up the prices 200% owning to her popularity?
It seems like analytics plays into this pretty significantly. I'm surprised a large organization like TM wouldn't want to heavily invest in this area in order to maximize profit.
Quote:
And some additional inefficiencies by way of ticket software limitations.
In a perfect world, all 82.5k seats in MetLife Stadium would be priced according to their own specific valuation, and that would fluctuate according to opponent, time of year, time of game, etc.
That's an unruly amount of variance for Ticketmaster to manage when each season is built, and quite honestly, it's more information than John Q. Public has any desire to absorb when renewing his season tickets.
However, once the ticket is decoupled from its originating software constraints, the actual market dynamics can take over in a way that is free from PR ramifications and is truly demand-based. The end result is typically a fairly small margin - most brokers aren't charging 2-3x face value in the aggregate, which is the way that many people believe they operate, although they do reach those levels for certain events (and for other events, they'll sell for well below face value but those are considered part of the necessary cost for acquiring the premium value inventory). The brokers will also purchase season tickets for every single team in the league, which ensures them access to playoff inventory as well.
The thing that's important to realize is that the market isn't actually set up to funnel inventory to the secondary market, but it does end up functioning that way, largely because teams are so used to their historical sales benchmarks (which are almost entirely tied to season ticket renewals) that it would be a massive risk to carry that inventory themselves and sell them as single-game tickets instead, even if they've identified that some portion of their STH base is comprised of brokers. Add to that the fact that from a marketing standpoint, they're wary of charging some of the highest prices that the market will bear, and what they're left with is a choice to absorb the inventory risk themselves by attempting to box out the brokers, but doing so with limited pricing upside - it ends up being a scenario that many organizations ultimately choose to avoid.
The brokers end up doing the teams a favor by taking the bad games along with the good, taking the PR hit for charging as much for the tickets as the teams themselves should probably be charging (both on the high and low ends), and help the teams stay "sold out" even during lean years, which is a metric that helps keep their sponsorship revenue robust.
Hope that helps.
Thank you, a lot of this makes sense.
What about someone like Billie Eilish who is clearly going to sellout stadiums left and right. Why wouldn't TicketMaster simply jack up the prices 200% owning to her popularity?
It seems like analytics plays into this pretty significantly. I'm surprised a large organization like TM wouldn't want to heavily invest in this area in order to maximize profit.
Ticketmaster doesn't set prices in most instances, though there's some cases where they do (notably, for Live Nation owned venues, which is TM's parent company).
The artist and promoter set prices and quite often are very sensitive to fan backlash when ticket prices are seen as "too high" on the primary market, so they artificially keep their prices in a range that they have determined is safer for the optics of that artist's brand. The irony is, they aren't actually saving their fans any money because the secondary market sniffs out any price inefficiency and pounces on it, quickly. So the tickets that can fetch $1k do end up costing the end user that much, but the artist doesn't end up taking the blame (or making the revenue that ends up in arbitrage margins instead).
More recently, the trend has been to use a ticket status known as Platinum (which is modeled after Broadway's "premium" ticket designation), which gives the artists a bit more opportunity to capture the true value of the ticket without pricing entire swaths of a venue at a price that most fans can't afford. Their thinking is that if they at least give their fans a chance to buy the tickets at a cheaper price, even if the secondary market ultimately scoops up most of that inventory, they've upheld their end of the artist/fan covenant.