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Major League Baseball announced on Monday that it is extending its partnership with online ticket broker StubHub (EBAY) through 2017—or at least 27 of the league’s 30 teams are. The New York Yankees, the Chicago Cubs, and the Los Angeles Angels of Anaheim have opted out. The three clubs have apparently had enough of watching tickets sell for less than face value through a league-sanctioned service.
The league first joined with StubHub in 2007 through its Advanced Media wing, known as BAM. The marriage worked reasonably well. Ticket holders selling through StubHub could ask any price they wanted. And ticket buyers could access that market on team websites alongside the primary box office. StubHub skimmed about 23 percent off every transaction and sent more than half of that back to BAM, according to SportsBusiness Journal. The league, SBJ reported, has been reaping roughly $60 million a year from the arrangement. (BAM spokesperson Matthew Gould declined to comment on that figure.) Baseball helped StubHub recruit buyers and sellers. In return, teams profited twice from the sale of a single seat.
The trouble is that baseball teams have to worry about the feelings of season ticket holders. Paying $40 for a seat and then watching the one next to it sell for $2 can lead to some awkward questions when it comes time for buyers to renew. And according to ticket search engine SeatGeek, about two-thirds of Yankees tickets that sold on the secondary market last year went for below face value. “We believe there are serious issues with the StubHub relationship,” Randy Levine, Yankees team president, told the New York Post in June. “We are actively reviewing more fan-friendly alternatives for next year.” Translation: We want price floors.
The Yankees and Angels have yet to reply to e-mails about what they plan to do instead of using StubHub. Cubs spokesperson Julian Green writes in an e-mail that the team is “continuing to explore our options as it relates to the secondary market.” An unnamed source at the Yankees told ESPN that the team will be announcing a deal with Ticketmaster (LYV) that is “more favorable to season-ticket holders.” Stubhub spokesperson Glenn Lehrman says the teams have “decided to create their own marketplaces.” It’s likely all three will employ systems like those used by many NBA and NFL teams, setting a limit on minimum prices.
To help teams deal with the negative publicity that occurs when seats sell for a dollar, StubHub has agreed to change its baseball pricing to include all fees upfront. Currently, says Lehrman, a buyer sees the seller’s offer price first, and then—as they go through the checkout process—StubHub’s commission and the delivery fee are added. Seats listed for a buck actually cost about $11. Next year, the company will use “all-in” pricing and will lower its minimum fee. As a result, the lowest list price for a baseball ticket will be $6, which makes for a less-catchy headline.
StubHub and the league, however, did not move on price floors. “We want to leave it to the buyers and sellers to determine the price,” says Mark Plutzer, BAM’s vice president of ticketing. They will do this anyway, of course. The only question is whether teams choose to participate.
“Consumers aren’t dumb,” writes SeatGeek spokesperson Will Flaherty in an e-mail. “They’ll flee to the lowest prices, wherever those are.” He points to ticket pricing for the New York Jets football game against the San Diego Chargers on Dec. 23. The Jets resale service, run by Ticketmaster, sets the floor at $125 for lower-level end zone seats. Elsewhere on the Web, tickets in the same section are going for half as much. Any season ticket holder with internet access can see this. You might think that the Yankees, the team with the highest payroll in baseball, would recognize the futility of standing in the way of market forces and perhaps move to dynamic pricing. You’d be wrong.