CHATTING SPORTS TECH

with CHARLES

Long-form musings on how sports tech is shaping the future of sports business

Sharing Some Thoughts on the State of Sports Ticketing

Whereas the last edition explored a future where virtual ticketing gives fans courtside access without leaving the couch, this edition will bring us back to the current ticketing landscape. Given how complex ticketing is, I’m going to deviate slightly from the normal format and list my ten thoughts up front. I’ll then briefly explain each below, with emphasis on some interesting sports tech companies. 

  1. The greatest short-term hurdle for the industry is low consumer confidence…
  2. …Which means the balance of power will shift to the fans
  3. The ticketing industry is experiencing its own unbundling
  4. Organizations must think about ticketing holistically and use technology to maximize profit, not just ticket sales
  5. The pandemic accelerated mobile ticketing’s inevitability 
  6. And exposed the need for better credit solutions
  7. Ticket buying is finally becoming more social to the benefit of all
  8. Membership pass programs are here to stay
  9. Blockchain might create a new buyer pool…
  10. …But it will definitely shake-up the current secondary market

Let’s dive in…

The greatest short-term hurdle for the industry is low consumer confidence…

Until health restrictions are fully lifted which can’t be expected until 2022 at the earliest, a large portion of the population will be uncomfortable attending live sporting events. This obviously shrinks the ticketing buyer pool dramatically. Some of the statistics I’ve seen from released surveys: 

Thus, even if a stadium allows for 100% capacity, the data suggests fans won’t necessarily come back and tickets won’t sell out. Burden will fall on teams’ communications staff to continuously convey the message that health and safety protocols are in place and being adhered to as fans begin trickling back.  

…Which means the balance of power has temporarily shifted back to the fans

ESPN had a good article titled ‘Fans win post-covid ticketing’ which listed five ways fans will benefit: 1) Lower prices and more freebies, 2) Greater flexibility on refunds and exchanges, 3) Farewell to cash and paper tickets, 4) Bye-bye to bots and 5) No expected fee hikes on major reseller market. How properties react with ticket prices coming out of the pandemic will be fascinating to watch. 

Prices will have to be lowered, especially as there’s less demand in the market (putting my MBA microeconomics class to use). But by simply lowering prices, teams establish a lower starting point for future year increases. 

Let’s use simple math to illustrate. A ticket was $50 before the pandemic. The team drops it by 20% for 2021 to lure fans back. Psychologically, fans internalize the new $40 ticket as the norm.  But to then raise prices back to $50 in 2022 would mean a 25% price hike. Some customers become outraged by the size of that increase. The sports team’s PR department has to put out a fire. 

This is the same rationale why NYC landlords use free month rent concessions to entice lessees rather than drop the average monthly rent. The economics to the renter are the same (or better if you factor in time value of money) but the landlord can re-establish old prices once life returns to normal.

The customer will win but teams would prefer freebies over price drops (one solution? membership programs discussed below). Will it be enough to get fans back in the stands? I’d guess not. Teams will ultimately have to bite the bullet and lower prices.

The ticketing industry is experiencing its own unbundling

Unbundling in my words – When a one stop shop for multiple services each with separate pain points is disaggregated by companies laser focused on a specific service. One of the most common examples is the unbundling of the commercial bank from the FinTech world. Whereas the community bank used to provide its customers with every type of financial service, startups have emerged that are focused on a single aspect (e.g., home lending, wealth management, payment remittances, education finance, etc.) and do that one service much more efficiently or at a lower price.

The ticketing industry is facing a similar unbundling, albeit on a smaller scale. There used to be the primary platforms (e.g., Ticketmaster, Paciolan, etc.) and secondary platforms (e.g., StubHub). But over the past decade, multiple smaller companies have emerged in the ecosystem targeting specific pain points and providing tools in areas such as group sales, membership passes, VIP experiences, seat upgrades, marketing, etc. These areas weren’t core competencies of the primary platforms, leaving the door open for smaller and more nimble companies. I’ll touch on some of these new companies below.

Organizations must think about ticketing holistically and use technology to maximize profit, not just ticket sales

With any ticket strategy, the goal should be to maximize the bottom line and not necessarily ticket revenue. Would your organization rather sell a ticket for $100 or $80? Obviously $100. But what if the person who’d buy that $100 ticket never spends at the ballpark while the $80 buyer always buys a t-shirt, program and meal for $50 generating 60% margins. Or if the $100 ticket would sell through a site taking 30% commissions while the $80 ticket would sell through a site taking 10% commissions. In both scenarios, the $80 ticket drives more to the bottom line. 

The above is a hypothetical but hopefully you see that sticker price isn’t always the telling metric. Thinking about ticketing holistically involves a deep understanding of who your customers are, what they do when at the stadium, what your ticket broker ecosystem looks like and what your channel mix is selling across primary and secondary platforms. 

Ticketing is driven by supply and demand principles. Organizational goals will differ drastically across sports. Ohio State football will almost certainly sell-out home games so the school’s goal becomes revenue maximization. That’s a big reason why the school announced a new tier model for season ticket holders going forward, a clever way to frame price increases. On the flip side though, the Yankees are more worried about getting people into the stadium on a random Tuesday against the Orioles, meaning their goal is to maximize distribution across the multiple platforms and keep seats from going empty. 

Regardless of goal, technology has to be a pillar of any organization’s strategy to optimize profit. That could involve using dynamic pricing software in-house from a company like QCue to manage supply and demand or hiring a third party specialist to handle distribution using their own proprietary technology (Dynamic Pricing Partners, Eventellect, Event Dynamic).

The pandemic accelerated mobile ticketing’s inevitability 

Mobile ticketing was always the future. Rapid smartphone adoption was enabling teams and venues to go paperless. Plus with teams wanting to control the fan journey and collect more data to provide personalized experiences, mobile ticketing had to be the backbone. But some teams were hesitant to force mobile ticketing on fans because they didn’t want to upset the portion of their base that wasn’t tech savvy. 

Well COVID-19 reshuffled priorities and accelerated the pace of paperless (and cashless) adoption as teams wanted to avoid exchanging physical tickets and risk spreading germs. With nearly every professional team already having mobile ticketing integrated as a feature of their gameday app and most colleges utilizing some type of mobile pass-through, it’s only a matter of time before mobile ticketing is the norm for every fan (Yes, I believe the need for some paperless ticket is overblown if mobile ticketing becomes the exclusive option).  

And exposed the need for better credit solutions

The pandemic was a black swan event when it came to event cancellations. Besides the one off weather catastrophe or sick artist, events were almost never canceled so ticketing providers never built infrastructure to handle mass refunds. All of a sudden, fans were sitting on hundreds of dollars of credit but without a clear ability to direct those funds, particularly if a fan was hesitant to attend an upcoming game during the pandemic.

Season Share, the company behind the Orlando Magic credit program from the ESPN article, has created a flexible spending product that makes it easy for fans to track unused credit and apply to other purchases and experiences (seat upgrades, merchandise, etc.). Hopefully – and this may be wishful thinking – but products will change the age old industry mindset that all sales are final. 

Think about the potential. Let’s say 48 hours before a game, a family can no longer attend due to an emergency. Historically, either the tickets are relisted on the secondary market or the tickets go unused. Scenario 1 is bad because the fan likely takes a loss after fees and the team doesn’t collect info on the new attendee. Scenario 2 is also bad because the family gets no money while the seat goes unfilled and the team earns no concession revenue. 

With tools that easily allow for cancellation and credit receipt, the original buying family is happy (money can be applied later) and the team is happy because they can re-release the ticket inventory. Assuming deadlines would be added a la the hotel industry where people can cancel up until XX number of hours prior to stay without a charge, teams would be protected from the downside of a flood of last minute cancellations.

Ticket buying is finally becoming more social to the benefit of all 

Edition 2 touched on the power of community and how the next wave of giant companies need a social element (social+). Ticket buying is no exception. In the past, it was a solitary activity. If I planned to attend a Yankee game with three friends, I’d buy a block of four tickets, then collect payment from each of those friends on venmo, and up until recently when mobile wallet transfers became easier, I had sole custody of all the tickets. The team would have no visibility into my three friends while the buyer faced the annoyance of collecting payment.

The good news? Companies recognize these pain points and are solving them. FEVO has built social commerce features that sits on top of the normal checkout process. Consumers can buy as individuals and easily share socially to drive higher conversion rates on group buying. 

Then there’s also the group sales component. One ticketing company founder estimated that up to 90% of a ticket sales rep’s time can be spent coordinating group sales (think a local little league purchasing tickets), which make up only 10% of total team sales. Spinzo wants to make the lives of these ticket sales reps easier, by providing white label templates to easily customize and manage group sales pages for different organizations. 

Membership pass programs are here to stay

If you want to dive in on membership programs, check out EngageMint’s interview of Chris Giles, former ticketing exec with the Oakland A’s who implemented a membership model and then left the A’s to start FanRally. Chris does a great job talking through the economics and the business model so I won’t go into many details.

Besides FanRally, more companies are building various pass programs with FanMaker, Fevo and Season Share all joining the fold. Though detractors think this model introduces cannibalization (i.e., members who would have bought higher priced single game tickets are now getting a discount), I’m bullish because of a) more data collection allows for more experience personalization (think country club model), b) drives more attendance for off games and c) new stadium inventory (i.e., sell standing room then get people to upgrade seats or buy concessions and merchandise).

Blockchain might create a new buyer pool…

Ted Leonsis, owner of the Washington Capitals, Wizards and Mystic and part of the NBA owners committee investigating blockchain, recently shared his thoughts with Sportico. A big headline? Packaging tickets with a digital asset enabled through the blockchain will create a new buyer pool interested in the digital asset but not interested in ever attending the game. 

That may ultimately be the case, but I’m bearish besides the rarest of occasions. The article mentions how attaching a promotional item is similar to traditional bobblehead nights. Sure there are people who collect bobbleheads, but most promotional items aren’t valuable collectables. And yes, you need to actually attend the game and usually show up early to procure a bobblehead which wouldn’t be the case. Would I buy a ticket to get a digital asset and in the process assume the risk to re-sell the ticket? Not as long as there are transaction costs, both monetary (fees) and non-monetary (time). Plus, think how flooded supply in the market would become if every team is attaching a digital asset to every ticket. 

The ONE scenario where I do think this model could thrive is for that 1% of truly special games. Examples? Derek Jeter’s last game at Yankee Stadium or the Staples Center honoring Kobe Bryant after his death. People have emotional attachment to these players’ careers and are willing to spend money to feel a part of the experience, even if they can’t attend. These digital assets might not have serious investment value (too much supply) but people would place sentimental value on the memorabilia. Plus, demand for these tickets already exists if the original buyer wants to re-sell the ticket and keep the digital asset. But then again, maybe the better strategy is for the team to release commemorative digital assets completely separate from tickets. 

…But it will definitely shake-up the current secondary market

Where I am very bullish is blockchain’s potential to overhaul the secondary ticket market. Dallas Mavs owner Mark Cuban shared some thoughts here. Currently teams don’t benefit when a fan resells a ticket through a secondary platform (e.g., Stubhub). The team doesn’t know who the new fan is nor do they collect any of the transaction costs while the Stubhubs of the world collect a fee on both sides. Using blockchain technology, which records every transaction on its immutable ledger, allows a team to understand the entire transaction history and share in any sales revenue. If I’m Mark Cuban or any team owner, I’d be racing to figure out a blockchain solution that grows my top line while shifting power away from existing secondary platforms. From personal experience, I immediately venture to Stubhub when searching for a ticket.

I haven’t spent as much time analyzing emerging blockchain ticketing companies in depth and can’t speculate on who ultimately becomes a winner in the space but there are a couple to keep your eye on. There’s BandwagonFanClub, which has a proprietary blockchain database software monitoring each ticket transaction. And then there’s Aventus Systems, which has a Blockchain based B2B open source ticketing software from Europe for ticket sales and resales. It’s also very possible a company like Dapper Labs, the facilitator of NBA Top Shot, starts building in the ticketing vertical. 

Let’s wrap there as that was a lot of ticketing specific information. Thank you for taking the time to read all the way through. If you enjoyed, please share with someone else who loves sports business or is interested in sports tech. 

Until next time,

– Charles

The next edition will touch on one of the sports world’s favorite buzzwords, gamification

If you haven’t already, add me on LinkedIn and follow me on Twitter @ccampisi_EES. Feel free to share some feedback on the newsletter or just pass along interesting findings in the sports tech space via email (charles@engagemintpartners.com).


Tags

blockchain, membership programs, social commerce, sports biz, sports business, sports technology, sportstech, Ticketing


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