SBJ/February 18-24, 2013/Franchises

Hubbard: Ticketmaster will make money on Yankees deal

Ticketmaster says its new secondary ticketing partnership with the New York Yankees to create Yankees Ticket Exchange will be profitable, despite its slashing of seller commissions from the 15 percent industry norm to 5 percent for season-ticket holders.

Last week’s announcement of Yankees Ticket Exchange represented the first formal manifestation of the Yankees opting out of the five-year contract extension between MLB Advanced Media and StubHub announced in December. The Los Angeles Angels of Anaheim also opted out of the league deal and are expected to announce a similar partnership with Ticketmaster in the coming days.

Ticketmaster and StubHub have been fierce competitors for more than a decade, but the arrival of Yankees Ticket Exchange introduces a price war between the two in the key New York market and for one of the most dominant brands in all of pro sports.

“As a stand-alone entity, this will be profitable,” said Nathan Hubbard, Ticketmaster chief executive. “The margins of the secondary business at traditional levels have been very healthy at scale, and we expect success here, too.”

Buyers will pay a 10 percent commission on Yankees Ticket Exchange purchases, in line with other sites such as StubHub. And the club’s platform will feature electronic integration with its primary ticketing, also serviced by Ticketmaster.

But the club and Ticketmaster said the profit-and-loss projections for Yankees Ticket Exchange were not the driving motivation for the partnership. Rather, both entities are trying to stem the tide of short-selling by brokers not yet owning Yankees tickets and other price manipulations in the resale market. The Yankees have not put in price floors in their resale market, but are still considering doing that at least for certain games or seating sections. Yankees Ticket Exchange will also require sellers to have verified tickets in their possession, eliminating any speculative listings.

“Artificial manipulations in the market don’t help buyers. Will [Yankees Ticket Exchange] stop it? I don’t know. I don’t know if it’s stoppable. We’ll have to see,” Hubbard said. “But what we do know is that we can provide a better experience for buyers and sellers, and we absolutely, definitely know that teams have to be an active part of the solution. You can’t be like the record companies and Napster before, sit back and not do anything about it.

“Cheap tickets, and the noise around cheap tickets, are just the freckle on an elephant’s backside here. It’s really about creating a truer, more pure market and doing something about all the arbitrage.”

The Yankees and Angels also provide Ticketmaster an entry into baseball secondary ticketing that had been closed to them since 2007, when MLBAM and StubHub signed their first deal.

“We’re very happy to have major tentpole brands like the Yankees and Angels experimenting with something new,” Hubbard said.

Even with the establishment of Yankees Ticket Exchange and the deepened alignment with Ticketmaster, the club’s battles with StubHub aren’t over. StubHub after more than 10 years of operation and growth enjoys a high degree of consumer awareness, and the company plans to aggressively promote its service in the New York market.

StubHub also recently signed a lease to open a pickup location at 68 E. 161st St. in the Bronx, directly across the River Avenue-161st Street intersection from Yankee Stadium. The Yankees are exploring whether that office violates New York state law prohibiting ticket resale within 1,500 feet of a venue with more than 5,000 permanent seats. StubHub operates dozens of similar ticket pickup spots around the country, including other states and cities with similar statutes, and believes the law is on its side because the locations are for retrieval of prior orders.

“We’re reviewing our options, and we’ll respond accordingly as needed,” Yankees Chief Operating Officer Lonn Trost said.

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