Finding value in potential StubHub sale
Back in March, eBay announced it would undergo a strategic portfolio review, and during an earnings call in July, CEO Devin Wenig reportedly said, “We’re making significant progress and actively reviewing the role and value of StubHub … in our portfolio.” The potential sale of the ticketing agency is offering a snapshot into the state of the secondary ticket market.
Well-documented attendance declines across a variety of sports would seem to indicate that the secondary ticket business is in peril, but prices are going up and younger audiences still value live events. With that in mind, Corey Gibbs, executive managing director of Ticket Solutions and a 25-year industry veteran, said revenue in the sector is growing by 10% per year and “there’s no reason to believe it’s going to stop growing.”
The question for prospective investors then, is what role will the secondary market play moving forward in the live events ecosystem?
Patrick Ryan, co-founder of Eventellect, believes that much of the upside in the StubHub business is in its potential pivot to the primary market. “A large brand like StubHub can lean on their clients to try and push them to distribute a greater percentage of primary market tickets through their marketplace,” he said.
While StubHub’s strong relationships with intellectual property holders offers it growth potential, the company’s reliance on access to inventory remains a cause for concern. In a worst-case scenario for the secondary market, primary sellers such as the teams or Ticketmaster could increase control over their product by limiting or refusing to allow transfers in order to control as much of the data as possible. Such a move is not likely because there is still a desire to get as many people into a stadium as possible, but it would lead to fewer transactions and thus declining revenue for StubHub.
There is value in the StubHub brand regardless of what the secondary market’s future holds. Travel websites have had success transitioning from marketplaces to referral-based businesses. With a powerful live-event resource engine and a large, loyal customer database, StubHub could make a similar transition. Ryan said it’s “a real, viable revenue model for the future of the secondary ticketing market and should the secondary ecosystem become more of an information and referral source, the StubHub name would be particularly attractive.”
StubHub is a profitable business, with sources estimating it nets eBay as much as $300 million per year. A recent report by Bloomberg pegged the company’s value at $3 billion, but Ryan believes the company will sell for up to $6 billion. “There’s a very real chance that eBay decides to hold onto StubHub and keep the cash it spins off to themselves if the best offer is really only $3 billion,” he said.
Gibbs agreed, saying, “I can’t see them exiting at 10x. There isn’t enough on the table there. At 15-20x, sure.”
Corey Leff is a writer in New York.