June 5, 2006 4:00 AM PDT
Can the Net make ticket scalping legit?
The practice of reselling tickets was once the purview of street-corner hawkers and fly-by-night ticket brokers. Street vendors, who took positions outside stadiums and concert halls, often dealt in counterfeits. Brokers often failed to send tickets on time for events--if at all.
Analysts now say the Internet is helping to move the secondary market out of the back alleys and into the boardroom. Internet companies such as TicketsNow.com and StubHub are trying to clean up the industry's image by weeding out con artists, offering up no-nonsense pricing and guaranteeing on-time delivery.
Of course, reselling tickets online isn't new. Some teams and opportunistic ticket holders have been doing it for years. The difference now is that the majority of professional sports teams, primary ticket companies and music venues that once shunned the secondary market are either jumping into the business or partnering with one of the top secondary companies.
On Tuesday, TicketsNow announced that it had become the official seller of secondary tickets for the National Football League's Baltimore Ravens. San Francisco-based StubHub has similar agreements with seven NFL teams as well as with various National Hockey League teams and college franchises.
"The sports clubs are acknowledging that there is a free market for tickets," said Carrie Johnson, an e-commerce analyst for Forrester Research. "They'd rather the sales happened safely than in a willy-nilly way."
The size of the overall secondary market is hard to pin down, said Johnson. Estimates vary dramatically, from $2 billion to $25 billion a year. The overall industry is mostly driven by season ticket holders who can't use all their tickets. In the past, these people would sell the extras to individual brokers, who in turn would sell them, sometimes for far more than a ticket's face value. Before the Internet, zealous fans who'd do anything to see Led Zeppelin or U2 could end up paying far more than the market value, as there was no easy way to compare prices.
Individual brokers still exist, and they've moved online, but sites like TicketsNow, StubHub and eBay--the No.1 source for secondary tickets, according to StubHub--serve as clearinghouses where a host of different sellers can offer their wares side-by-side, and buyers can pick and choose.
But StubHub, TicketsNow and other such sites know that if they're to gain true credibility for the secondary market, they need to offer more than just an efficient way to shop--preventing buyers from being ripped off is paramount.
More than 600 brokers post their inventories on the TicketsNow Web site and all have undergone a screening process, said Mike Domek, the company's CEO. Unscrupulous brokers were notorious for promising a ticket to one customer and then turning around and selling it to someone else willing to pay more. The first customer was lucky to get his or her money back. Not at TicketsNow, Domek said. Any company that doesn't honor the listed price of a ticket at TicketsNow is booted from the site for life.
"The Internet has tamed the secondary market," Domek said. "We're responsible for 100 percent security. Music or sports fans don't want to be in that small percentage that couldn't get into the stadium because they bought a counterfeit ticket or didn't receive their tickets on time."
StubHub is an online marketplace where anyone, brokers and individual ticket holders alike, can buy and sell. To secure transactions, the company holds the money paid by a ticker buyer. Then, like an escrow service, StubHub tracks the ticket and pays the seller once the buyer receives it.
The service has worked well for the University of Southern California for nearly three years, said Jose Eskenazi, one of the school's associate athletic directors. National Collegiate Athletic Association national champions in football in two of the past three seasons, the school has already sold out of season tickets for the 2006-'07 season. Demand for secondary tickets is likely going to be high, Eskenazi said.
"It's been a good partnership," he said. "We can send our fans to a company they can trust and know that they don't have to deal with some scalping type of operation."
Despite the precautions, Forrester's Johnson is still unsure that such a "dicey market" can ever be totally secure. One of the problems is that most event organizers still deal primarily in paper tickets and that means they can always be duplicated, she said. Some of the other challenges the nascent industry faces are antiscalping laws and prohibitions against the reselling of tickets by some sports teams and venues.
In Massachusetts, the Boston Red Sox and the New England Patriots will ban season-ticket holders caught violating club rules against reselling for more than face value. The Patriots will sometimes even query fans during games to make sure they are the rightful owners of the seat they're sitting in. The clubs don't expect season ticket holders to attend every game and have established markets for fans to resell tickets for the original price.
Some musicians and performers also don't like the secondary market, said Johnson.
"An artist runs the risk of alienating fans if tickets are sold above face value," he said. "It can create a perception that the artist is greedy."
Jeff Thomas, director of operations for Exclusive Tickets, based in Mountain Lakes, N.J., says that while companies like StubHub and TicketsNow are helping to clean up the secondary market, there are still plenty of pitfalls.
"When the Internet first emerged, it helped questionable companies," Thomas said. "Anybody could create a Web site and start a business. Vinny on the street was able to mask himself as a professional ticket company and he sort of blended in with legitimate establishments. Companies that are succeeding now have brick-and-mortar stores, 401(k)s, profit sharing, payrolls and understand what we sell today is professionalism and protection."
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