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Volume 21 No. 2

In Depth

When Jeff Fluhr and Eric Baker came up with the idea for StubHub as first-year students at Stanford business school in 2000, they identified three characteristics that made ticket resale a prime opportunity.

They saw a vast market, with billions of dollars in tickets to sporting events and concerts changing hands. They knew it was fragmented, with eBay only beginning to percolate as a ticket marketplace. And they understood that it was stigmatized — their word, which aptly described what many fans then viewed as a shadowy exchange.

It was that last factor that offered Fluhr and Baker the greatest chance to distinguish themselves.

This year StubHub bought naming rights to the former Home Depot Center in Carson, Calif., home of Major League Soccer’s L.A. Galaxy and Chivas USA.
Photo by: StubHub
“It was this gray market, with a confusing set of legal issues,” said Fluhr, who left the company after selling it to eBay for $310 million in 2007. “And then you had the consumer perception of the guy with the trench coat at the game, trying to hawk tickets out of the trunk of his car.

“Maybe that would have scared a lot of people away from it. But for me and for Eric, we viewed that as a big opportunity. Any time there is a fundamental consumer need for something, but it’s inefficient or there’s a lack of trust, that means there’s a problem that could be fixed. We said this is ripe for change and ripe for disruption. And that was the genesis of the business plan.”

Now co-founder and CEO of Spreecast, a social video platform that allows viewers to join online chats, Fluhr points to StubHub’s ability to bring not only scale, but trust, to the secondary market — a term that didn’t even exist when the site launched — as a linchpin in the company’s growth and eventual dominance.

Once an outlier in a sales channel that many in the industry dismissed or ignored, StubHub has graduated to the mainstream of sports and entertainment, viewed similarly to long-accepted ticket providers on the primary market.

Buyers gave StubHub and Ticketmaster almost identical favorability scores in a nationwide survey conducted this summer by Turnkey Intelligence in conjunction with SportsBusiness Journal (see charts). The survey, covering 400 consumers who bought tickets to at least one MLB game this season, placed StubHub and Ticketmaster well behind the websites and ticket windows of their favorite teams but far ahead of other sites, including eBay and Craigslist.

A closer look reveals that on the matter of authenticity, buyers who expressed an opinion ranked the top three outlets similarly. Ninety-five percent gave team websites high scores on authenticity. Ticketmaster came in at 90 percent, with StubHub at 85 percent.

That’s an important revelation, considering the messaging that the NFL and NBA use on their resale sites, which

operate through Ticketmaster.

On its website, the NFL describes its ticket exchange as the “only NFL-approved way” to buy and sell tickets, saying buyers can “rest assured knowing their tickets are 100 percent legitimate.” The NBA calls its site “the only trustworthy source for authentic NBA Tickets.”

At least in baseball, fans don’t see it that way. StubHub executives said their surveys and brand studies show fans of other sports don’t see it that way, either.

The affinity gap between StubHub and eBay also is particularly interesting, since StubHub is an eBay subsidiary.
StubHub differs from its parent’s ticket site in two key ways. It offers far more tickets, though that has not always been the case. And it offers not only a money-back guarantee, but the promise that it will deliver similar or better seats at the same price if the initial sale falls apart.

Nine years after striking its first team sponsorships with the Chicago Bears and Detroit Lions, StubHub now has deals with 80 U.S. teams and sports venues, including 23 MLB clubs and 37 major college athletic programs, as well as ESPN, Apple, BlackBerry and Google.

“Once you can actually fulfill, and people buy these tickets on faith and it works, that spreads like wildfire,” said Bob Bowman, CEO of MLB Advanced Media, which named StubHub its official resale outlet in 2007 and renewed the deal on behalf of 28 of its 30 teams last year. “It works. StubHub works.”

It sounds obvious enough today. But, considering where StubHub started, and the polarizing manner in which resale has been viewed and discussed within the sports business, the rise is a striking one.

“One of the things I’m most proud of is that, in sports, nobody questions the validity or usefulness of the secondary market anymore,” said Ray Elias, StubHub’s CMO. “Everybody has gotten involved [in resale] now in one way or the other.”

So how did StubHub get here? How did it go from trench coat to entrenched?

Think of it in three prongs.

There was the brand, built from nothing. And a connection, forged despite vast initial resistance. And there was a guarantee, which, really, is at the heart of everything that came after it.

Guarantee pays off

First, the guarantee was a paragraph. Then, two sentences. It still was too much.

“Trying to describe that the ticket is authentic and that StubHub will make sure, at all cost, that you get that ticket or better — that is not easy to do in a pithy marketing message,” said Elias, who joined the company in 2004. “So ultimately it came down to being able to name it the FanProtect Guarantee, and to reinforcing and reinforcing and reinforcing that StubHub, like any best-in-class e-commerce company, was going to stand behind the product that we’re selling.

“This was not Craigslist. And at the time it was not eBay.”

StubHub’s deal with MLB Advanced Media, first made in 2007 and renewed last year, now covers 28 of the league’s 30 teams. Here, fans in rooftop seats look on from across the street at Wrigley Field. “It works,” said MLBAM CEO Bob Bowman. “StubHub works.”
Photo by: Getty Images
Fluhr realized from the beginning that the guarantee would be critical to his company’s success. Even as eBay and others began to capture market share, he remained confident in the opportunity.

EBay offered only a marketplace, along with the warning “Buyer Beware,” leaving it to consumers to tell one another which sellers to trust. Some sites offered buyers their money back if there were problems, but a ticket to a game or a concert is not like an ill-fitting sweater or an iPad with a scratched screen. Tickets not only are perishable, but they are tied to experiences, which can be emotional. Getting your money back won’t rewind the game you missed, or salve the disappointment of a family looking forward to a night out.

“The guarantee was in many ways the nucleus of the value proposition that we were offering,” Fluhr said. “People were skeptical about buying tickets. We were trying to be the solution and the safe alternative.”

A branding watershed came in 2007, when StubHub and ESPN announced a sweeping integration.

Initially, StubHub’s conversations with ESPN were focused on advertising. StubHub bought space on, as well as on other popular sports sites. But as they talked further, it became clear that there was a larger opportunity. Fans often went to schedule pages when they considered buying tickets. But they were like “cul-de-sacs, without something actionable beyond that,” Elias said. “If you start putting ticket links on there, the fans can move forward. They don’t leave ESPN and then go click on Google.”

By incorporating links on ESPN, StubHub not only drove buyers to its site but also gained an important connection to the mainstream, similar to the one it made earlier that year when it struck a monumental, five-year agreement with MLBAM.

Sponsorships deliver sellers

The signs in the stadiums, the “Stuuuuuuuub Huuuuuuuub!” over the PA, the links on the team websites, all of them served to wed the emerging brand to established ones across the sporting landscape.

But the sponsorship deals that StubHub did with teams — starting with eight it signed with NFL teams in 2004 and 2005 — were driven far more by the desire to gain access to sellers who could help it build inventory than a desire to showcase the brand to buyers, who they figured they would reach through the Web and on sports radio.

The NFL was a logical starting point for a sponsorship play, since football had the largest season-ticket base and the

Early deals with NFL teams gave StubHub access to sellers who could help build its inventory.
Photo by: AP Images
highest sellout rate. There were sellers, and even more season-ticket holders who’d be willing to sell if it were easier. There were single-game buyers, and even more who would be willing to buy if they could be sure the tickets were good.

StubHub struck deals with two NFL teams: the Chicago Bears and Detroit Lions. Before long, there were six more.

Rather than offering a revenue-share deal in which it would serve in the role of vendor, as it did with teams in its first few years, StubHub wrote a check, typically for $200,000 to $500,000 a year, that would establish it as the team’s official resale marketplace. StubHub got to keep all the money from the resale transactions, got increased exposure for its burgeoning brand, and got access. The teams got a new sponsor that would not only write a check but also help them deal with a leading complaint from season-ticket holders, who hated eating the cost of unused tickets.

“When we approached them, they’d barely heard of StubHub, let alone understanding there was an opportunity to create a brand-new category for sponsorship,” said Danielle Maged, global head of business development and partnerships at StubHub, who delivered those early NFL sponsorship deals while working for the company as a consultant. “Once we started to communicate what we were trying to offer to season-ticket holders, [the teams] got it.

“We disrupted the existing value chain. We offered season-ticket holders and buyers a lot more control than they ever had been given. That is the polarizing issue at the heart of this. We marketed StubHub as a service to fans backed by the team, so they could safely do what had never been done before in a platform that is managed.”

The decision to go from back-end vendor to official status sponsor changed the way that StubHub was perceived in front offices across sports. Rather than dealing with midlevel executives from ticketing departments about revenue-share arrangements, the company was talking to senior management about midtier sponsorships.

Many of the same teams that initially rebuffed resale as “scalping” changed their minds when it came attached to a sponsorship.

“The minute we called these teams and said, ‘Hey, we’ll pay you a quarter-million or half-million dollars a year,’ they were all ears,” Fluhr said. “It was really the turning point for us. We became an official partner with some of the teams and we were doing college sports and pro sports.

“We did deals with a lot of teams, and we started to get a lot more leveraging clout, because we were moving hundreds of millions of dollars in tickets.”

As teams have come to better understand how much money is in the resale market, those sponsorship agreements have evolved to include more revenue sharing, along with other components.

Some teams see the consumer and pricing data they get from StubHub as more valuable than the sponsorship revenue. StubHub has become such a well-known brand that 60 percent of its traffic comes from people who go directly to the URL. It has come to value the ability to cancel and reissue tickets more than the referrals it gets from the team sites.

“A lot of our deals now are technology deals trying to offer consumers a seamless experience,” Maged said. “It’s not just about buying ads in ballparks. We’re way beyond that now.”

In customer service circles, it’s called WISMO ­— Where is my order? When that question comes to StubHub, it sets in motion a dynamic unlike that facing the typical retail outlet.

“We want consumers to have what feels like the retail experience you get with Amazon or Barnes & Noble, yet we don’t control our supply chain,” said Noah Goldberg, StubHub’s chief operating officer, who has headed customer service for the company since 2002. “We can’t just pull another pair of shoes off the shelf if something isn’t quite right.”

A problem with a StubHub order sometimes means that the seller has been asleep at the switch, failing to ship or email the tickets as promptly as the buyer would like. That typically is an easy fix.

StubHub’s process faces a more difficult test when the seller doesn’t have the tickets, which sometimes happens when tickets are posted on multiple sites. The tickets sell elsewhere — on eBay or NFL Ticket Exchange, for example — but the seller doesn’t take the StubHub listing down immediately. When that occurs, the matter is turned over to StubHub’s sourcing group, a unit of about 10 people working various shifts, which sets to work trying to find comparable tickets that will satisfy the buyer.

There, the dance begins. StubHub offers replacement tickets. If the buyer turns them down, the sourcing agent looks for others. Eventually, if the buyer appears to have unreasonable hopes of getting far better seats for the same price, they suggest the buyer take the refund.

“We have a service operation where the staff has way more power financially to address customer issues than is typical,” Goldberg said. “We don’t have a lot of hard and fast limits for them, like a black-and-white policy that if the buyer’s situation is this, you can give that. That serves to significantly empower the staff. Empowered staff help you make happy customers, and happy customers deliver long-term financial results. We’ve really seen that be true.”

Because StubHub often has thousands of tickets for sale for an event, finding a comparable set typically isn’t difficult. When they can be had for less than the original price, the buyer gets a discount, Goldberg said. When they cost more, StubHub can either bill the seller or eat the loss itself. The company also devotes staff to monitor transactions, looking for those that might lead to problems so that they can address them before the buyer finds out something is wrong.

During the summer, which is its busiest time, StubHub employs about 500 customer service representatives at two call centers, one of which it shares with parent company eBay. During slower periods, it cuts staffing to about half that many, a move made easier by shifting reps back and forth between StubHub and eBay.

Along with the call centers, StubHub also maintains small offices, often out of temporary space, in most pro sports cities and some college towns. While initially created to distribute hard tickets on the day of an event, those also can serve to troubleshoot when buyers run into problems at the gate.

Goldberg still chuckles when he tells the story of how those offices came to be.

Back before most tickets could be emailed or bar codes could be transferred, sellers were at the mercy of the FedEx mailer. And since the cost of overnight or weekend shipping would cut significantly into their take, that meant that, in order to get tickets into the hands of a buyer, sellers had to ship tickets for games played Friday through Monday by Wednesday.

StubHub had to find a better way. In 2004, the company rolled out its solution in Chicago, one of the busier, more

passionate markets in sports, hiring a bicycle messenger who set up shop in a Kinko’s.

Said Goldberg: “We had this guy riding around Chicago with $10,000 or $15,000 worth of tickets in his backpack, picking up from the sellers and then going to Kinko’s to meet buyers.”

It was the genesis of a program that would spread to other markets across the country — even to Augusta for the Masters.

“We approached it the old-fashioned way, by doing right by the consumer over and over again,” said StubHub co-founder Jeff Fluhr. “It’s not a quick win, but medium term and over a long period of time, people trust you. Something goes wrong, you make it right. That’s just elbow grease and long-term commitment to the customer that ultimately pays dividends in the form of trust and loyalty.

“That was just something we were going to do.”

Turnkey Intelligence, through a third-party panel provider, collected 400 online surveys among consumers who bought tickets for at least one Major League Baseball game in 2013. Those consumers were not holders of ticket plans.

The goal of the study was to build a chronology of the ticket-buying process including: identifying the consideration set of ticketing options, preference/priority of options, perceptions of ticketing sources, drivers of ticket buying behavior, etc. The sample was collected in 25 of the 27 markets that are home to an MLB club. Toronto and Minnesota are not represented. Twelve clubs had an attendance rate at 75 percent capacity or higher after the first 50 home games (Red Sox, Cubs, Reds, Tigers, Angels, Dodgers, Yankees, Phillies, Giants, Cardinals, Rangers, Nationals).

All data was collected between June 28 and July 2, 2013.

Q: How would you rate the following ticketing outlets on authenticity / guarantee of tickets sold on their outlet?*

Source Good/very good Average Poor/below average
Team website 95% 3% 2%
Ticketmaster 90% 8% 2%
StubHub 85% 11% 4%
TicketsNow 64% 31% 6%

* Among those with an opinion

Typical first option for tickets

  First option (overall) First option (High attendance teams*)
Team website 34% 29%
StubHub 19% 25%
Team ticket office (phone/walkup) 16% 16%
Friend/relative 15% 15%
Ticketmaster 6% 3% 3% 5%
Other** 7% 7%

* Based on total percent of seats filled, for each club, through the first 50 home games of the season.
** All other options listed, including, Craigslist, eBay and ScoreBig, generated less than 2 percent per option.


Q: How would you rate the following online ticketing outlets on reasonable processing and service fees charged?

  Very good/Good Average Below average/Poor
Team website 51% 37% 12%
StubHub 38% 39% 23%
Ticketmaster 21% 34% 45%
TicketsNow 19% 49% 32%

Ticket buyers who use StubHub as the first option

Male 25%
Female 11%
Under 35 26%
35 years old+ 15%
75%+ capacity* 25%
Less than 75% capacity* 15%
Less than a week until game day 28%
A week or more until the game 14%

* Based on total percent of seats filled, for each club, through the first 50 home games of the season.


Consideration for other sources

First option Team website StubHub Team ticket office Friend/
Ticketmaster Craigslist eBay Search engine
Team website (34%) - 58% 66% 53% 53% 36% 15% 13% 10% 6%
StubHub (19%) 75% - 49% 43% 52% 27% 20% 16% 16% 16%
Team ticket office (phone/walkup) (16%) 69% 44% - 30% 44% 20% 16% 11% 9% 11%
Friend/relative (15%) 62% 45% 57% - 36% 21% 21% 10% 5% 7%

When Ticketmaster markets tickets to a dance or electronica concert, it can approach plenty of logical targets. Past purchasers of concert tickets in those genres represent an obvious tool. Those who have searched ticket listings in those areas is another. So are fans who have expressed fandom in artists such as The Chemical Brothers or Rihanna.

But how about tennis and mixed martial arts fans?

Ticket companies are using data to profile consumers and then target offers for future events, from concerts to sports.
Photo by: Getty Images (2)
As big data and advanced consumer profiling sweep through the ticketing industry and American commerce at large, ever-improving algorithms are helping companies link music fans and sports fans, and generate significant incremental purchases.

The core reasons beyond the attempt to link the once-disparate realms of sports and music ticketing are not hard to understand. Company research from major ticketing players such as Ticketmaster, and StubHub suggest that a buyer of one type of ticket is at least twice as likely as the general population to buy the other type, and that consumption of live events in general begets more consumption.

Until recently, however, many attempts to move between sports and music ticketing have been more clumsy and imprecise.

“We’re now beginning to do a much better job of finding the links and targeting our customers with better promotional emails and a better overall website experience,” said John Forese, Ticketmaster senior vice president and head of the company’s research arm LiveAnalytics.

“We’re actually now seeing a situation where some of our sports clients are coming to us for advice on which acts to bring in on off-nights in their buildings that will appeal to their season-ticket holders, and vice versa with the concert promoters,” Forese said.

Scott O’Neil, new chief executive of the New Jersey Devils and Philadelphia 76ers, said cross-genre ticketing data will be particularly helpful as he begins to oversee business operations of the Prudential Center. The Devils do not constantly sell out their home games, like some of their NHL rivals. And O’Neil is trying to use data, in part from Devils purchasers, to turn one-night concert dates into multiple-night stands.

“The power of the data is real,” O’Neil said. “The days of the big email blasts are obviously gone. So the question is how do we use data to make the absolutely right, most targeted offer and keep the building busy. It’s still early days, really, but the possibilities are very exciting.”

Many of the major ticketing companies have developed their own proprietary algorithms to determine which music

acts and genres match up best with which teams, leagues and sports. Many of those algorithms are based upon internally generated data, such as purchase and search histories, and preferences and fan interest polls submitted by users. Some companies supplement that internal information with third-party content, such as general consumer data obtained from research firms like Acxiom.

The data-driven matchmaking often generates results that would seem intuitive based on general demographics, such as country music fans having a disproportionate interest in NASCAR.

But it’s also the more unpredictable links between things like tennis and electronica that help justify the efforts.

Discount ticketing channel ScoreBig, for example, has found vast amounts of purchasers of Sesame Street and Disney shows among its sports ticket buyers.

“People have different components to their lives,” said Peter Sinclair, ScoreBig vice president of marketing. “A football fan is not just a football fan. They’re also many other things, and the crossover purchasing we’re seeing reflects that.”

Rather than using data to just make pairings between various sports and music acts and genres, though, the ultimate goal is to develop a personalized ticket-buying experience across all forms of live entertainment.

That personalization manifests itself in several ways, from highly targeted emails to website customizations, and push notifications through mobile applications. And when buyers receive more targeted marketing from a ticket company, they generally have been at least twice as likely to click through or respond.

“We’re really pushing on a path to personalization,” said Michael Lattig, StubHub head of brand and creative.
“Grouping definitely helps identify various proclivities, and certainly helps with lookalike modeling. But really the goal is a fully tailored, individual experience. It’s a combination of behavior, demographics and preferences. But ultimately, what we want is to make sure nobody misses an event they want to attend.”

To that end, event discovery remains at the heart of the crossover research. About 40 percent of all live tickets go unsold each year, and the cross-genre data mining in many ways is about trying to lower that figure.

“Unsold tickets remains a really big problem, and our core being is all about trying to solve those kinds of problems,” Sinclair said. “So research like this lies at the heart of everything we do.”

Business rules, however, still govern a lot of what is happening in the cross-genre data mining. Many specific teams and venues have as part of their contracts with their ticketing vendors that their consumer data belongs solely to them. As a result, the data in many instances is used simply to fill a team’s own venue, and not to help sell shows at another venue in town. Those business rules vary greatly from ticketing company to company, depending on whether they operate in the primary or secondary markets, or both.

“We’ve been pretty firm that our clients’ data belongs to them, and most of them wouldn’t take too kindly to me trying to use that to market something down the street,” said John Walker, president and chief executive. “The information has been very helpful for things like when our baseball team clients stage concerts.
And we’ve built a reporting tool for our clients to go in and analyze data. But that data belongs to them.”