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College Football Playoff takes a page from Wall Street

(Kirby Lee-USA TODAY Sports)

(Kirby Lee-USA TODAY Sports)

Forward Market Media (FMM), a software-as-a-service (SaaS) provider, will combine with the College Football Playoff to give fans a chance to see their favorite team compete in the national championship game through a tradable ticket market, reports the Wall Street Journal.

The unique platform pioneered by FMM allows fans to purchase tickets at face value if they own what’s called a TeamTix for one of the teams that makes it to the national championship game.

MIMICS A FINANCIAL DERIVATIVE

The TeamTix option behaves much the same as an option for a stock or a commodity would. In finance, owning options give holders the right (but not the obligation) to purchase an underlying security at a fixed price (called a strike price) determined by a contract. The strike price, in this instance, would be face value for a game ticket, or $450.

And, like most financial derivatives, the value for a TeamTix will increase or decrease based on market demand, and can be traded to other fans.

Starting Wednesday, at the official College Football Playoff website, fans can purchase a TeamTix at the opening price of $20. For the lucky folks who can secure a TeamTix for a given team (up to 1,250 ticket reservations are allocated per team), the prices can then fluctuate based on performance during the season.

So, a ticket reservation for Alabama will cost the same as a ticket reservation for Washington State—$20—out of the gate, and as the season progresses, this TeamTix can be traded to other fans in the market based on the probability the option becomes “in-the-money” (i.e. makes the national championship game).

If Alabama runs the table in the SEC, owners of an Alabama TeamTix will see their option value rise close to the $450 face value of the actual ticket they can purchase.

All trades incur a 10 percent transaction fee, presumably kept by the licensee and FMM. The licensee, in this case, would be the College Football Playoff.

(Derick E. Hingle-USA TODAY Sports)

(Derick E. Hingle-USA TODAY Sports)

A RE-CAPTURE OF TICKET RESALE REVENUE

College football has used this platform in the past with good success. Organizers for the 2013 Orange Bowl National Championship game said they made $1.2 million on the FMM model, with fans from more than 100 teams buying reservations.

This innovative way of selling and re-selling ticket reservations keeps revenue in-house for the promoters and organizing bodies who lose out on the transaction fees generated in secondary ticket markets like StubHub that are not affiliated with the teams or venues.

It’s also pure profit for all those TeamTix reservations that go un-exercised for teams that don’t make the national championship game.

FMM’s unique ticketing approach is half-marketing gimmick, half-fan engagement platform, and overall one sweet money-maker for all parties with a seat at the table.

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