By Thomas Heath
Washington Post Staff Writer
Monday, July 24, 2006; E01
In their endless search for more cash, the major U.S. professional sports leagues and even colleges are getting a piece of the ticket-scalping business, a multibillion dollar industry that until recently had been controlled mostly by small-time companies and street sellers.
NFL, NBA and NHL teams have partnered with Internet firms with names such as StubHub and RazorGator to reap a share of what is known as the "secondary ticket market," where ticket holders can resell their tickets, often at prices well above the price they paid for them.
The emergence of these new enterprises ends years of frustration for sports teams, which have watched as scalpers and brokers sold tickets for several times their value without teams being able to capture any of that market.
"Teams for decades were frustrated by the fact that they couldn't get any of those profits from the secondary market," said Stephen Happel, an economist at Arizona State University who follows the secondary ticket market. With the help of the Internet and entrepreneurs such as RazorGator's David Lord or StubHub's Jeff Fluhr, "they get a cut of this and it's more money in their pocket."
All four major professional teams in Washington now have an online ticket reselling presence, including the Redskins, who in the past have stripped season tickets from customers who resold them. A year ago, The Washington Post lost its tickets, most of which went to the newspaper's carriers, when the team alleged some had been resold.
"We had the Redskins a couple of years ago taking tickets from people who had big accounts," said Jeff Greenberg, owner of ASC Ticket.com, a ticket broker in Rockville. "We had them last year going on eBay to see that people were listing their tickets on eBay and taking them right away from people. But this story is a 180-degree switch. . . . They have teamed up with these people just to get a piece of this pie."
Karl Swanson, a spokesman for Redskins owner Daniel Snyder, said StubHub came highly recommended by other NFL teams and that the team has not changed its policy on the resale of tickets.
"We have never been concerned with individual ticket holders selling individual tickets," Swanson said. "Our concern has been with blocks of tickets."
Industry experts estimate the revenue potential from the resale market at around $2.5 billion. The money to the teams isn't big -- yet. MLB.com Chief Executive Officer Bob Bowman said the total revenue from online secondary ticket resales is less than $10 million across all 30 teams, but that number is expected to grow as teams try to decrease eBay's share of the market on the Internet.
Yesterday, there were more than 450 listings for Redskins tickets, despite the team's previous zero-tolerance policy, and more than 500 listings for Washington Nationals tickets on eBay.
"There's a lot of money to be made," said Greg Bettinelli, director of tickets for eBay. "This market is still in its infancy."
Teams benefit in a number of ways, from sponsorship revenue to creating a convenient outlet for fans to sell their tickets without leaving them in the drawer or giving them to charity.
StubHub pays hefty sponsorship fees to be the official site for the resale of tickets. In Washington, for example, StubHub paid to be the preferred marketplace for the resale of tickets for the Redskins, Wizards and Capitals, with the Redskins' deal worth around $5 million over five years to the football team, according to StubHub representatives. StubHub does not pay the teams commissions on its transactions.
In addition to the Redskins deal, StubHub has signed on as the preferred ticket reseller with seven other NFL teams, two NHL teams including the Capitals, and two NBA teams, including the Wizards. TicketsNow has signed the Baltimore Ravens and plans to announce a deal with another NFL partner next week. RazorGator has four NFL partners, including the San Francisco 49ers and Philadelphia Eagles.
The revenue model calls for most teams to earn their share from sponsorship revenues, but eBay's Bettinelli said that could change if the revenue from the fee on each ticket resale soars.
Cutting a simple sponsorship deal "is a lot less work," Bettinelli said. He said teams may decide to run the ticket site themselves or demand a piece of the revenue on transactions if there is a big demand for their tickets. "The Red Sox may be in a different position than the Florida Marlins," he said.
Major League Baseball has decided that the fee on transactions holds more financial promise. Baseball has its own marketplace for secondary tickets on its in-house Web site, MLB.com, and it collects a commission on the price of every ticket that is resold on that site. On the Nationals site, for example, the buyer pays a 20 percent "convenience fee" plus a small handling charge. The "convenience fee" is usually split evenly, with the buyer and seller each paying 10 percent, in most MLB markets.
"This industry is alive and vibrant," MLB.com's Bowman said.
Team owners say it's not only about economics, but it also wins over fans.
Ted Leonsis, owner of the Capitals, said team owners were at first uncomfortable about doing business with the companies who resold their tickets, but those fears abated because of the revenue possibilities and the goodwill it created with season ticket holders who had an easy way to resell unused tickets.
"Owners initially thought that we were in competition with those people, until we realized that if something's good for your season ticket holders, it's going to be good for you," Leonsis said. "It opened up a new sponsorship category and the world didn't end."
MLB.com's Bowman said teams will follow ticket buyers on the secondary market closely to see if they can turn them into a full- or partial-plan season ticket holder. StubHub also plans to dig into the Redskins' 150,000-name long season ticket list as a way to spread its customer base.
The online companies bristle at being called scalpers or brokers. They argue that they provide a legitimate and honest marketplace for tickets that have already been purchased by a fan or someone else who now wants to resell them.
"We don't buy and sell tickets," said Fluhr, chief executive officer of StubHub. "We don't own the tickets. We become the official marketplace where season ticket holders can go to submit their tickets for sale."
The competition between the Internet marketplace companies is becoming fierce, with new partnerships announced every day. Although the teams partner with the online ticket marketplace site, ticket holders are free to resell their tickets on any site, including eBay, or any of the other sites.
Proponents say the revolution in the Internet ticket industry makes it easier for season ticket holders to sell their tickets, and buyers do not have to stand outside an event and seek out sellers. Critics say it increases hoarding and speculation and ultimately raises ticket prices.
"There's nothing wrong with being a season ticket holder and not being able to use your tickets and reselling them," said Paul Bauch, a Chicago attorney who unsuccessfully sued the Chicago Cubs over their involvement in the secondary ticket market. "What's happening in the marketplace is people aren't buying them as a fan, but are buying them to speculate."
Analysts say the new companies are trying to build a brand around trust and individual service that eBay may find difficult to provide because of its size.
"There are efficiencies that StubHub, RazorGator and TicketsNow can bring to the table that are more efficient than eBay," said Sucharita Mulpuru, a senior analyst at Forrester Research specializing in online retail. "They have lists of interested consumers, relationships with brokers and they stand behind their sale with money-back guarantees. They have found a niche that does not make sense for a company like eBay to expend resources on."
Don't bet on it, said Bettinelli.
"We look and see what's happening as validity to what we've been doing for a long time, and this gives us more reason to continue to invest," he said.