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Volume 23 No. 13
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New tactics on ticketing

NBA teams take a fresh approach on ticket pricing, blurring the lines between the primary and secondary markets

With the Miami Heat in Chicago to face the Bulls on a Thursday night in February, a fan who needed a ticket would have found only a smattering of seats available, all of them scattered singles, on the team website. A click away, on StubHub, tickets were moving briskly, albeit expensively, as they usually are for a marquee matchup or show.

But something different was evolving that day at The sprinkling of singles the Bulls had left on their own site were priced higher than most that were available on StubHub.

The February game between the Heat and the Bulls demonstrated how some NBA teams are trying to respond to the secondary ticket market.
Photo by: Getty Images
Reacting to the market, the Bulls had raised their bar. Lower-level seats between the baselines, originally listed at $290, were priced at $600 to $900. Those on the corners and behind the basket, listed at $230, had been raised to between $350 and $500. The best seats upstairs, which originally were listed at $100, had been upped to $200.

The Bulls had barely any seats available, but they made sure they got what the market would bear. In most cases, their singles were priced twice as high as similar seats that sold that day on StubHub.

A SportsBusiness Journal analysis of 12,259 tickets sold on StubHub for five NBA games this season showed robust profits for resellers of three marquee games, including Bulls-Heat, where sellers turned a profit of $333,413 on 3,012 tickets, assuming they bought at season-ticket prices and paid the standard StubHub commission of 15 percent. It also found brutal losses for those moving tickets for two lesser matchups (see chart).

That sort of extreme gap on the secondary market is one factor that has led teams to not only rethink their pricing models, but reconsider the way they communicate them. As a result, finding a price list for single-game tickets on most NBA team websites has become almost as difficult as finding a big man to build a roster around.

As the line between sale and resale has faded among consumers, many NBA teams have adjusted their tactics to better mirror the market. It’s easier to change the price of a ticket when you’ve never put a sticker on it in the first place.

“Ticket pricing is becoming more fluid and often changes daily based on supply and demand, along with other factors,” said Steve Schanwald, the Bulls’ executive vice president of business operations, who responded to questions via email.
“It’s becoming similar to other industries such as airfares and hotel rooms. Consumers typically aren’t aware of the exact pricing until they make a specific inquiry. We’ve found that fans are becoming much more familiar and comfortable with this trend. And they often benefit because there’s much greater ticket availability and many more pricing options.”

Best price and selection

The Bulls started the season with a single-game price list that showed prices for four different levels of games, which

varied based on opponent and day of week. The list was accompanied by the notation that all prices were subject to change, as they did in a big way on the day of the Heat game. But it gave single-game buyers a starting point.

Many teams no longer do that, instead using phrases like “Tickets as low as $24” and requiring fans to click on an individual game to find out what is available and at what price.

Unlike the many Major League Baseball clubs that change their prices daily, not many of the NBA teams that do so list a grid that allows buyers to see how prices vary from game to game. Removing the price tag is a trend that started among NBA teams two years ago and has taken hold this season, said Jared Smith, president of Ticketmaster North America, the ticket distributor for 24 of 30 NBA teams.

“I happen to think it’s a fantastic strategy,” Smith said. “I don’t think people are making decisions that early in the process. They typically don’t come in saying they want this game and that location at this price. You just need them to shop.”

Brian Byrnes, senior vice president of sales and marketing for the Oklahoma City Thunder, said the consumer is a lot more sophisticated about shopping for the best prices. “With the proliferation of StubHub and eBay in the past five years, there has been a complete shift,” he said. “I don’t know if the fan even differentiates from the primary and secondary markets. They are just shopping for the best price.”

In the case of the hotter-selling teams, such as the Thunder, Heat, Bulls and, this year, the New York Knicks, it may be more a matter of selection than price. Once an on-sale date has passed, fans who search one of those teams’ sites rarely will find much, other than scattered singles and the upper rows of some sections.

Before the likes of StubHub emerged, they would have been left to either work the parking lots and street corners for scalpers or settle for the seats the team had left. Now, they’ll typically find upward of 1,000 tickets listed on StubHub in the days leading up to any game.

“People tend to go where they have lots of options,” Smith said. “In a lot of the cases [in the NBA] you have more options in the secondary market. They see a bunch of inventory and a bunch of prices. With a team like the Heat, you go to the primary and there’s hardly anything there. You go to the Hawks, it’s 300 level and that might not be what you want.

“A lot of fans have become conditioned to go to the secondary market to find what they want.”

That was one of two major factors that drove the NBA to launch its website this season. While the typical buyer is focused on tickets to the local team and doesn’t really need a leaguewide landing page, the portal has allowed the league to drive awareness for its team resale sites with a national ad campaign, similarly to the way the NFL has in recent years for its NFL Ticket Exchange. launched this season to drive awareness of team resale sites.
The more significant innovation, from a consumer standpoint, was the placement of tickets from the teams’ secondary exchanges alongside those still available on the primary side. Fans who were finding few options that appealed to them on the team site now are seeing more.

While some teams initially resisted the move, fearing that they would be funneling consumers away from their own tickets and onto the resale market, the reality is that most fans were going that route anyway.

Increasing awareness of the teams’ own resale sites has helped the teams recapture some of those buyers, said Chris Granger, executive vice president of team management and business operations for the NBA.

“We have seen tremendous increases in traffic to our team ticketing pages, increased conversion rates, and significantly higher sales from team-controlled resale marketplaces,” Granger said in an email response to questions. “The site has exceeded even our most hopeful expectations.”

Granger would not be more specific about the increase. But a source said teams have seen sales on their resale sites go up by 50 to 100 percent since the switch.

Gaining an upper hand?

The Thunder has been among the more aggressive franchises in its attempt to exert more control over the secondary market. During the playoffs last year, the team restricted the sale of tickets to buyers with addresses in Oklahoma and parts of two other states. Team officials say they also have limited the number of tickets held by brokers, which they estimate to represent about 20 percent of season tickets.

Yet even with that, the resale market was robust when the Los Angeles Lakers came to town in March. On a Tuesday night, with the Lakers enduring a rare down season, StubHub sellers moved 1,540 tickets for $240,962.

The average ticket went for more than three times the season-ticket price, even after taking into account 608 tickets with $10 face values, on which the Thunder does not offer season-ticket discounts. Those seats actually offered sellers handsome rewards, at least on a percentage basis, selling for an average of $81 per ticket — or eight times the face. After paying the standard 15 percent StubHub commission, sellers turned a profit of $123,727 on $71,250 worth of inventory.

All of that happened without any significant StubHub sales at courtside. There were only five transactions involving 11 floor seats, and none were in the front row. A pair of second-row seats on the side fetched $3,100 and a pair on the baseline brought $3,000. Seats in the third and fourth rows ranged from $499 to $897 each.

“We micromanage it from a brand protection standpoint,” Byrnes said. “I don’t want a Boston Celtics fan wearing a Celtics jersey sitting in our front row during a home game.”

Clearly, the seats they did sell could have fetched a far higher price if the team had priced them dynamically, raising them steadily along with the market, or even priced them variably, setting them higher for a handful of marquee games.
However, the team chose to forgo the potential revenue gain in the hope that allowing room for profits on the resale market would drive season-ticket sales and renewals.

“It’s a philosophical decision,” Byrnes said. “I don’t differentiate between games like the Bobcats and the Lakers. I want games to be of the same value. It is hard to do, but [when] we look at the secondary market, we are seeing tickets sold above face value for every game. There is inherent value for subpar games.

“One of the suggestions in our market is that we should raise ticket prices. But I think it’s OK when a secondary ticket makes a few bucks. It is a better motivator for people to renew their season tickets.”

Like the Heat, the Thunder is a big draw on the road, and even more so when visiting Eastern Conference cities, where fans get to see the team no more than once a season and not at all in some years.

The Oklahoma City Thunder has made aggressive moves to try to exert more control over the secondary markets.
Photo by: NBAE / Getty Images
When the Thunder hit New York earlier this year for a nationally televised, Thursday night game against the Knicks, the market went ablaze. In the hour before tipoff, tickets moved so quickly that we were unable to log them all before StubHub shut down sales, closing its data off to public view in the process.

Even with that, we counted sales of 5,065 tickets for a whopping $1,542,534. Assuming the sellers paid season “subscriber” prices, as Madison Square Garden calls them, they laid out $591,255 for their tickets. After subtracting the standard 15 percent commission to StubHub, they turned a collective profit of $719,899.

Knicks executives would not discuss the secondary market or its impact on their strategies. But MSG long has been viewed as a hotbed for brokers. The Knicks, like many teams, recently have gone away from a published single-game price.

While NBA teams may see dynamic pricing as an attractive way to address the resale market, many price their tickets in ways that make those adjustments difficult, said Barry Kahn, founder and CEO of QCue, an Austin-based software company that specializes in dynamic pricing for teams.

Many NBA teams scale their arenas with lots of price points, Kahn said, giving them less room to maneuver. Cutting the price of a section that isn’t selling well threatens to undercut other, nearby sections. Teams that price variably for different categories of games run into even more complications.

“An NBA team will have 40 price points and sell 1,000 [single-game] tickets,” Kahn said. “It makes dynamic pricing much more difficult because there’s really nowhere to move with pricing. There is a far greater number of price points here than there are for baseball, and the venues are half the size.

“Our baseball clients sell more individual tickets on a homestand than an NBA team sells in a season, and they have way fewer price points. That whole model makes it harder for an NBA team to react to the secondary market in a meaningful way.”

Not all games — or even many, based on conversations with those who watch the market — perform the way those involving the Heat, Thunder, Lakers and Knicks did.

When the Atlanta Hawks visited the Denver Nuggets on a Monday night in March, the story was quite different.
The Nuggets were riding a 10-game home winning streak, with a 25-3 home record. While not one of the NBA’s marquee teams, the Hawks were a solid opponent, coming in at 33-25. Still, that wasn’t enough to overcome a large hurdle: It was a Monday night. The Nuggets announced attendance was 17,554, about 1,500 short of capacity.

Not counting eight courtside seats — six of which sold for less than half of face — StubHub sellers moved 1,673 tickets for $46,542. All but 30 went for less than the single-game face price. On average, StubHub buyers got a 40 percent discount on the Nuggets single-game price.

It’s impossible to know how bad a night it was for sellers, because brokers sometimes get large discounts from teams for buying season tickets in bulk and also pay lower StubHub commissions if they sell at a high volume. But assuming they paid season-ticket prices, it was a costly night for them, too. After paying the standard 15 percent in commissions to
StubHub, sellers would have lost $68,884 on $108,445 in inventory.

The scene was similar on a Wednesday night in Charlotte, where the Bobcats hosted the Detroit Pistons. Two struggling teams playing on a weeknight delivered the expected StubHub result: $19,154 in sales from 961 tickets, yielding $22,129 in losses for sellers.

Interestingly, a Bobcats season-ticket holder might not have viewed the result so dimly. Two years ago, the Bobcats began pricing season tickets variably, showing season-ticket holders a below-average face price for some games and an above-average face price for others. For the Pistons game, a $30 season ticket would have showed up as $15. The team went that route primarily to give itself leeway on its own pricing. It can now price a single-game ticket for less without undercutting the season-ticket holder. But, in the process, it also lessened some of the burn season-ticket holders felt in previous years, when they regularly saw StubHub prices below what they paid.

Calculating a return on investment based on that reduced price, sellers nearly broke even on the game, losing $3.43 per ticket after paying commissions.

Bobcats executives said they routinely analyze secondary sales and pricing and that, typically, tickets sell at or above season prices.

“When we do our pricing, we can’t get preoccupied with the individual game ticket availability for a Detroit game on a Tuesday night,” said Bobcats Executive Vice President Pete Guelli. “That’s not going to make our year. In our situation, we clearly have to leverage the high-demand games. There’s no way around it. That’s where we see the demand and our prices need to reflect that.”

Enduring a dismal season that’s followed the worst season in NBA history, the Bobcats still managed to set a single-game revenue record when the Heat came to town earlier this month, Guelli said.

Though he hasn’t studied enough data to say so with certainty, Kahn said he suspects that soft resale games far outnumber the hot ones in the NBA, and that in most cases turning a profit brokering NBA tickets may be a tougher go than many expect.

“Inevitably, somebody looks at secondary market data and says ‘Look at this game, we can get more for it,’” Kahn said. “They never talk about all the games where the seller on StubHub gets less [than face price]. And there are a lot of them.”

Kahn points to the time last season when dozens of tickets to the since-relocated New Jersey Nets were selling on StubHub for a penny, and many lower bowl seats could be had for less than $10.

“They were going for a penny a ticket and they still didn’t sell,” Kahn said. “Guess what? It’s not necessarily price that’s the issue. If it was, that Nets game would have been sold out. Tickets expire on StubHub at less than a dollar all the time.”