Keep score on the secondary ticket market
Get out a pencil and paper for this parable. Herein lies an occasion of sports management at its worst and a paradigm of scruples at its best.
A baseball fan sold four tickets (with a total face value of $260) to Game 3 of the 1999 American League Championship Series at Fenway Park for $12,100 through eBay’s online trading service. Not bad for a day at work; in the case of Ken Griffey Jr., one hour of work. Yet the prevailing reasons for influencing a ticket buyer to make such a purchase seem incredulous to the average fan. After all, not even the allure of an American League Championship Series game between the Boston Red Sox and the New York Yankees, the anticipation of a Pedro Martinez-Roger Clemens matchup of biblical proportions, or the moments “Priceless,” presented by MasterCard, between a father and son can be heady enough for most fans to drain a savings account for playoff tickets. And yet it happens every October.
Paying 4554 percent above face value, in most cases, does not seem like a rational decision. Of course, with a bloated economy, there is still a trickle of “irrational exuberance,” Federal Reserve Chairman Alan Greenspan’s euphoric buzzword.
Playoff time means more than just the best teams competing for top billing. It also brings out the biggest spenders, some of whom may not even be supporting the home team, or even the away team. Instead, the postseason cultivates an upper class with more purchasing power, collectively, than some small countries. Very often, these people are not season ticket holders, but just attend the big attractions.
The economic medium that displaces the wealth of banknotes upwards is better known as the secondary market. It’s no surprise to most economists why secondary markets like eBay are successful. Fans may routinely use this online service in hopes of capitalizing on arbitration opportunities, especially for sporting events. The unrestricted pricing mechanism has created a win-win relationship for both buyer and seller. Surely Adam Smith would have approved.
However, Red Sox executives have not welcomed the secondary market with open arms. CEO John Harrington and his staff responded strongly against reselling playoff ducats. Rather than hide their jealousy of season-ticket holders who gauge the market more accurately, Red Sox representatives have chosen to publicly berate their customers, who sustain the franchise’s profit margins.
“Anyone who has resold even a single ticket to these playoffs will have their season tickets permanently taken away,” exclaimed Boston Red Sox director of public relations Kevin Shea, the prototypical political “hatchet man” counterpart. Forget the palpable notion that he was the wrong messenger, and especially the wrong message. In essence, Red Sox executives have contradicted themselves by denouncing the very free-market system that allows them to price their tickets through natural market forces.
The Red Sox would have little financial incentive if the federal government regulated ticket prices, so the franchise and others would hardly benefit from stadium revenue. The crazy decision to formulate an “anti-ticket scalping” policy inexorably degenerates for two reasons. First, Red Sox executives have little influence on the execution of this plan. While eBay may void online transactions if they are reported to violate state or local law, the company is not required to do so. Second, they erode brand equity and public relations when they threaten fans. It’s not blasphemous to acknowledge that not all Red Sox fans are die-hard loyalists.
There is no justifiable defense for the franchise’s recent actions. Clearly, the public relations repercussions are disastrous, but also economically, there is nothing to gain and everything to lose. A secondary market creates a viable solution to maximize actual attendance. Even in the playoffs, as the Atlanta Braves’ poor attendance numbers attest, not all ticket holders go through the turnstile. So, at the height of their financial season, franchises are operating below capacity and not reaping the full benefits of having more warm bodies in the stands.
The opportunity cost of ignoring a secondary market can be the equivalent of losing millions of dollars spent on concessions. Also, having richer fans purchase these tickets can only increase a franchise’s sales volume.
Many other Major League Baseball franchise executives agree. In fact, some teams have adopted the motto: “If you can’t beat ’em, join ’em.” The San Francisco Giants recently formed a strategic alliance with eBay, exemplifying how teams can use the secondary market to their advantage. In fact, the team’s website, Giants Virtual Dugout, provides a direct link for Internet users to access eBay.
“New technology provides a way for franchises and venues to offer customers better access to the secondary market,” said Pat Gallagher, senior vice president of the Giants. “If managed responsibly, it can help long-term retention of season ticket accounts and reduce the number of empty seats at sold-out events.”
As Giants executives and others demonstrate more economic savvy, Red Sox officials face the unenviable task of restoring public approval and then reevaluating their marketing strategy. They should be flattered that their product has been rated so highly, or upset that it has been priced so low. Either way, the franchise must reconsider its position in secondary markets or face serious consequences. Some Red Sox season ticket holders will face financial tribulations by making such large capital expenditures before the season just to acquire their seating rights. Without a secondary market, the cost of holding unused tickets can add up quickly during the season.
“We want our seats, but the Red Sox don’t have to tell us how to use them,” said one 1999 season-ticket holder. “If they want to raise ticket prices, that’s fine. Just don’t preach we can’t do the same.” “.
Do Red Sox executives have second thoughts? Probably not. The correlation between a verbal misstep and responsive management in professional sports is virtually non-existent. Some franchise owners have mitigated corporate mistakes by putting stronger leaders at the helm. Others have approached the requirement with grace and humility, a fitting strategy in Boston.
Apology may restore some of the damage done by Red Sox executives, but this gross miscalculation will not be misconstrued as the “Curse of the Bambino.” No, they made this mistake without the help of Bill Buckner, by choice.
© 2007 LineDrives.com, Michael Wissot,