We were treated to a Super Bowl for the ages between the Patriots and Seahawks. Unfortunately, thousands of fans arrived in Phoenix for the trip of a lifetime only to find that they weren’t getting the tickets they were promised and didn’t get to attend the game. As the Super Bowl ticket market broke down before our eyes, ticket prices climbed to over $9,000 per ticket and globally known companies who had planned their outings months in advance were left outside. Multiple companies were trying to get customers they had flown to Phoenix into the game, with large groups left out of the game by even the biggest names in secondary ticketing.
So what exactly happened?
The Super Bowl market sets up
The Super Bowl market has been relatively stable for the past 10 years because of broader understanding how tickets are distributed, who gets them, and when. We outlined the Super Bowl ticket market in detail last week on The Fields of Green. As you can see, the trends for Super Bowl tickets were stable until 2015:
The tickets are given out to the teams, leagues, and sponsors, who then resell them to brokers, mega-brokers and customers. The breakdown is similar every year and was the cause of this year’s disaster:
~17.5 percent to each participating team (Seahawks and Patriots)
~8.5 percent to each losing Championship week team (Colts and Packers)
~5 percent to the host team (Arizona Cardinals)
~1.2 percent to each non-participating team
~11 percent to the league
Most large events have matured following the Super Bowl, where “events companies,” ticket brokers and travel firms claim to have exclusive access to the game. These providers, many of whom seem reliable and have been around for decades, sell tickets they don’t yet have. They have to — as you can see above — as more than 50 percent of the tickets don’t even get allocated until three weeks before the game. They take orders at the price they think they can get tickets and then fill those orders as the game nears. This is called market speculation or “spec.”
Market collapses in the perfect storm
Once the Seahawks and Patriots got in, we knew there would be a big problem. The Cardinals and Seahawks have pre-negotiated deals with a major broker to sell them a large portion of their tickets. The Patriots have the same deal, only with another broker (Ace Tickets). Over 40 percent of the tickets were controlled by two companies who could now manipulate the market however they chose — PrimeSport, a long time broker with bad experiences in collapsed markets like the 2010 World Cup, and Ace Tickets in Boston.
By six days before the game, mayhem had set in. “Events companies” and ticket brokers realized they weren’t going to get tickets they usually got and had a choice: 1) Buy the tickets from the mega-brokers with team deals for five times the price and take a huge loss, or 2) Simply walk away and tell customers, “there are no tickets, here is a refund.” The industry calls this a “broken order.”
Our customers are corporate partners who know that scenario No.2 is simply not an option. Not when top customers have already been booked for the weekend in Phoenix.
How bad was it? We connected one customer with 30-plus tickets 10 days prior to the game in the best seats in the house for $220,000. Just six days later we were called by another broker looking to fill his broken order offering us $600,000 for the same tickets. (The customer who bought the tickets was not interested).
What really happened
In the not-so-distant past, major marketplace sites such as StubHub, SeatGeek and VividSeats would require any seller of Super Bowl tickets to have those tickets in their possession before listing them for sale at a major event. As competition in the ticket marketplace space has grown, those rules were weakened in order to compete. The major marketplaces, who would “guarantee” purchases, would allow brokers and event companies they knew and had history with to list tickets on spec.
Once the teams were set, the major providers knew they had the inventory and everyone else was holding orders they had to fill with nowhere to go. They could dictate the market, sit on the inventory, and wait for brokers and events firms to default on their promise. Once that occurred, StubHub and the major players would have to overpay or suffer serious brand damage by walking away. StubHub chose to fill the orders, paying millions to do so. In the long-term, this was the right move. Other major companies, such as SeatGeek, decided to break, which we were surprised by. A number of brokers “took their beatings” and their losses, knowing this event will thin the herd and they will maintain their reputation with their buyers.
The secondary ticket market is still evolving. As it does, there will be price wars as the Seat Geek, Ticket Evolution, Vivid Seats, Gametime crowd cuts fees to try and take market share from StubHub. Other players, such as PrimeSport, DreamTix, Ace Tickets and Ticket City will attack StubHub and the other major marketplaces in a different way, by signing deals direct with the teams to get the inventory before it gets to the StubHubs of the world.
Both approaches have serious risks. Cutting fees in a marketplace to compete with a dominant player such as StubHub makes it awfully difficult to have enough cash on hand to cover customers in an event that unfolded like this Super Bowl. Taking on inventory seems like a terrific idea given this Super Bowl, and bravo to these providers who played it beautifully, but it can go south very quickly and dramatically as it did in this year’s College Football Playoff and, more famously, when the 2010 World Cup went south for PrimeSport, causing massive layoffs and a change in ownership for the firm.
As we’ve written in the past, and please note the date on the publication, there are four easy rules to avoid getting burned:
1) If it’s too good to be true . . . it is: If the deal you see is that much better than anything else, it’s fraud.
2) You get what you pay for: Trying to save money from a company you don’t know is not worth the risk.
3) Steer clear of speculation
4) Don’t try to beat the market: There are professionals with 30 years experience in this market. You will not beat them.
Families, fans and businesses traveling to a dream event and getting left in the cold by deceptive brokers is an avoidable shame. These same tragedies happen at the Masters, Final Four, World Series and every other major national event. As the market evolves, we’ll see booms and droughts. It’s worth paying the extra money to go with a resource you can trust such as Ticketmaster, TicketExchange or StubHub.
Tony Knopp is CEO of TicketManager, where he is responsible for the day-to-day technology and management of over 30 million sports tickets annually. Tony previously held positions as an early member at StubHub and with AEG Worldwide, and has over 15 years experience in the technology and ticket markets.
Disclosure: TicketManager works with customers on all aspects of their tickets from managing current inventory to purchasing inventory. As such, we do help customers find and purchase Super Bowl tickets. We do not, however, buy any tickets for sale or take any speculative orders. We help our customers buy from the aforementioned players and connect buyers with sellers we trust. Our executives have over 15 years of experience in the ticket market, ranging from major primary providers to early entrants at StubHub and at no time was this experience and market knowledge more important to our partners than over the past month. I’m proud to say that every single TicketManager customer gained entrance to the Super Bowl and none of them were exposed to the ridiculous prices we saw as the game neared.