Earlier this afternoon, I reported that eBay was close to buying StubHub. This deal has been rumored for a long time as it would really add to eBay's ticket business. Tonight, eBay confirmed the deal for $310 million. The deal is expected to close in the first quarter of 2007.
StubHub did more than $400 million in business in 2006 and made about $100 million in profit. It's a great business model because they take a 15 percent commission from the seller and 10 percent commission from the buyer. And they were able to beat the pants off of eBay -- they sold more than 5 million tickets since they started up in 2000 -- because they guaranteed against fraud. Get ripped off, they'd get you a ticket of equal value.
The greatest part of this story? In 2002, eBay sat down with StubHub. StubHub wanted only $20 million, but eBay balked.
"eBay's purchase marks a great day for the secondary ticketing industry," said StubHub co-founder Eric Baker, who is now CEO of Viagogo, a secondary ticket site based in Europe. "Secondary ticketing is definitely here to stay. People have been reselling tickets since the days of the gladiators -- and they are not going to stop anytime soon."
I'm not going to say it's a parallel situation, but it's similar to the Google acquisition of YouTube in terms of sector volatility. Just as Google bought YouTube without knowing what the legal future of online video will be, eBay's acquisition comes as the secondary ticket market is rapidly changing.
The Patriots are currently embroiled in a lawsuit with StubHub, saying that sales on their site violate Massachusetts' anti-scalping law. Stubhub says the Patriots, who have their own secondary ticket deal with Ticketmaster, are being monopolistic.
"For years, TicketMaster, the teams, the promoters, the acts, all pointed the fingers at legitimate ticket brokers and said what we were doing was not good and now as the industry as gotten legitimate and larger, now everyone wants their piece of the pie," said Jim Holzman, owner of Massachusetts-based Ace Ticket.
Meanwhile, for the NFL playoffs, the Chargers and the Bears are restricting online ticket sales to people with local credit card billing zip codes.
So the first question is, what exactly would eBay be buying? The answer: It's just too soon to tell exactly what they will be able to do over time. There's going to be a lot of fighting between teams and secondary ticket brokers over what exactly they can control. The first six years of StubHub's reign saw almost none of this. So expect there to be big battles in the courtroom.
The other interesting thing to think about is whether this means that eBay will go away from their model of charging just the seller and go to the more lucrative StubHub model of charging the buyer and the seller. I'm not sure if that's going to happen since it would be kind of weird for them to use the dual revenue model for eBay tickets and to only skim off the top from the seller for all other parts of their site.
More On Kobe:
I had a chance to speak with Kobe's agent Rob Pelinka on Wednesday.
What does Kobe being No. 1 in jersey sales suggest?
Pelinka: People relate and identify with Kobe's passion and drive for excellence, as well as how he has evolved into a leader. When consumers choose his products, they put on the "badge" of those qualities.
What is coming up for Kobe?
Pelinka: We are in discussion with multiple blue-chip companies right now. The key for Kobe at this point in his career is finding true partners. He is really not interested in just being a typical endorser or pitchman, but in building true brand equity with his corporate relationships.
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