Thursday, December 13, 2012

Dollars & Sense - MLB Renews Stubhub Deal

Sports Business Journal reported earlier in the week that Major League Baseball has renewed its deal with Stubhub as the official secondary ticket market of the MLB.  The deal is said to be for five years (2013-2017) and worth more than the old deal that was estimated to be worth $60 million per year.

An interesting note in the agreement is that the MLB and Stubhub have agreed to a $6 price floor on all tickets (apparently due to electronic delivery fees).  This will help to quell some of the criticism that Stubhub has received for advertising tickets that are well under the market price and face value price. 

Stubhub (and the secondary ticket market as a whole) has become an interesting case study in unintended consequences of decisions.  The secondary ticket market poses a lot of pros and cons.  Obviously the revenue from a deal with a ticket resale website like Stubhub brings in an instant boost.  But is the extra revenue good for the business overall?

The secondary ticket market affects both the good and bad teams.  First for the bad teams, the secondary ticket market essentially represents a team’s ticket sales staff worst nightmare.  It is extremely difficult to sell tickets for a bad team.  We all know that.  It’s even harder to sell tickets for a bad team when ticket purchasers are turning around and selling their tickets to your games for well under the price that you’re looking for.  Sometimes the resale prices can dip below $1.  Not the ticket sales staff’s job just got infinitely harder in trying to deal with the sometimes ruthless relationship between supply and demand.

Good teams, however, are not immune to the wrath of the secondary ticket market either.  Say a team is very good for a very long time.  Demand for tickets is larger than the stadium capacity, and the team sells out most if not all of their games.  This is great.  It’s every ticket sales staff’s dream.  Here is where the unintended consequences come in though.  If all of the games are sold out, then fans are going to be indirectly trained to simply look at the secondary ticket market as their first option for tickets.  So when the team starts doing poorly and tickets are flying into fans’ pockets as quickly as they were before, then how will a team convince the fans to stop using the secondary market?  It’s something that teams deal with every single year. 

Not everything in the world is as straight forward and as great as they seem on the surface.  Sure the pairing between the MLB and Stubhub is a good match, but it’s not perfect.  Teams, good and bad, feel the pressure and deal with it on a yearly basis. 

Follow Kevin Rossi on Twitter @kevin_rossi.

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