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Talking The Future Of Sports Tickets With StubHub's CEO

Tuesday, 26 Apr 2011 | 3:46 PM ET

Last week, we interviewed Ticketmaster CEO Nathan Hubbard right after the company's announcement of dynamic ticketing. Since tickets are such a big part of being a sports fan, we're continuing that series today — an interview with the CEO of StubHub, Chris Tsakalakis.

Stubhub
Paul Spinelli | MLB Photos | Getty Images
Stubhub

Darren: The ticketing business is so volatile right now. How would you evaluate StubHub's position?

Tsakalakis: StubHub is well positioned in the ticketing industry. We continue to offer the highest levels of customer satisfaction of all ticketing companies and we lead the market in the resale of tickets. We continue to serve fans by offering a safe and reliable means for tickets to change hands. We offer the largest ticket marketplace where sellers set prices based on market demand. This means that some StubHub buyers end up getting great deals on tickets below face value while others get unheard of chances to see sold out concerts or playoff games. Sellers setting prices based on market demand also means that average ticket prices have come down this past quarter versus last year, albeit not as dramatically as they have in the past three years. Despite the price decreases, however, we continue to see double digit sales dollar growth.

Darren: How concerned are you about the power that teams have in regards to their restricting of selling on their own marketplaces only? Is that a legitimate threat to your future business?

Tsakalakis: StubHub’s whole business is about giving fans access and choice. That means giving fans choices about where they can sell or buy a ticket. Given that, we do not support any system where tickets can be resold in just one marketplace, as it restricts fan choice. In sports, the ability to resell a ticket is a real benefit to season ticket holders as it allows them to recoup the cost of their investment in season tickets, especially when they cannot attend a game. Most sports teams know and appreciate that. They also know that giving their fans only one choice about where to sell a ticket will not be well received. After all, the most hated consumer companies are real or virtual monopolies. You can just look at the Consumerist annual worst company in America competition to see that. An open marketplace encourages competition amongst marketplaces and sellers, ultimately benefiting buyers by offering the widest selection and driving down prices.

Darren: A team executive told me that the future is team's creating their own separate businesses with you so that they could share in the secondary profits. Do you see that?

Tsakalakis: We currently partner with a number of sports properties across the professional and college ranks. Some of these partnerships include revenue sharing and it wouldn’t surprise us to see additional deals like this in the future.

Darren: What's your reaction to Ticketmaster's new dynamic pricing model? It obviously keeps more inventory away from StubHub.

Tsakalakis: It’s great to see Ticketmaster offering tools for their customers to more dynamically price their tickets. We’ll see which of their customers actually use them. In the meantime, our sellers will continue to dynamically price their listings on StubHub as they have for over 10 years. As teams have experimented with dynamic pricing over the last two years, we’ve seen virtually no effect on our business. Fans will always need a means to resell their tickets and have continued to do so under dynamically priced conditions. The only thing that has changed is the price. For high demand tickets that command a premium in the primary, secondary prices rise even higher. On the flip side, low demand tickets dip even lower because there are no price floors on StubHub. The irony of the dynamic pricing discussion is it isn’t the initial price point that drives prices up on the secondary market, it’s the lack of supply, especially in the concert arena. Within the concert industry, there is a prevalence of tickets being held back from the general public with the best tickets often being sold to ticket brokers at a premium. As a result, there’s often not enough supply to the general public to keep up with demand, and that’s what’s keeping prices high. The fact that the number of tickets being offered for sale is not transparent to the general public means that fans have to speculate as to why they can’t get the tickets they want.

"BLACKBALLING" CERTAIN CUSTOMERS

Darren: Two years ago, the Texas Rangers wouldn't sell to buyers they suspected were reselling only. Yet, they encourage "fans" to sell their tickets on StubHub. What are your thoughts on a teams trying to blackball certain customers?

Tsakalakis: We never agree with the practice of any primary ticket seller attempting to punish original buyers of tickets for reselling their tickets. Like 95% of fans, we fundamentally believe that once you purchase a ticket, you own it and have the right to trade it, sell it or give it away.

Darren: One of the biggest perks to customers about StubHub is that tickets are often below "face" value. Why have you not used that angle in your advertising campaigns? Does it have anything to do with the official deals you have with teams and leagues and not wanting to embarrass them?

Stubhub
Paul Spinelli | MLB Photos | Getty Images
Stubhub

Tsakalakis: We’ve chosen to focus our advertising on access and choice, which are the main values we’ve delivered to fans for over 10 years. The theme of our newest advertising campaign is that StubHub lets fans live the dream of attending any live event they want in any seat they want. That dream may be going to the Super Bowl or sitting in the front row of a U2 concert or spending $5 to see an NBA game. Every fan has their dream and StubHub aims to fulfill all of them.

Darren: Some baseball ticketing officials have regretted the StubHub partnership as their gate walk up has been killed. Do you anticipate that contract renewing next year?

Tsakalakis: Our partnership with Major League Baseball Advanced Media (MLBAM) has been great for StubHub and MLB and, most importantly, has provided a great convenience for fans. We truly value our partnership with MLBAM and hope to continue it in the future.

Darren: There are new sites like ScoreBig that do advertise that below face angle. They just got $14 million in funding. Is there a place for them in this business?

Tsakalakis: Like any other industry, the ticket industry is evolving and there are many players — primary, secondary, aggregators of both, and discount sites like ScoreBig. However, discount sites don’t show buyers the number of tickets and their prices and they often have very limited inventory as they cover a select number of events. We see a place for selling tickets that are not moving (e.g. distressed inventory) and we feel that StubHub, with more than 10 million unique monthly visitors, is a great place to sell such inventory.

Darren: StubHub's greatest move is the ticket guarantee. You all have had some problems with sellers duplicating etickets in mass and reselling them over and over leaving fans shut out at the gate, are you able to help a fan out if that happens and the game/show is about to start?

Tsakalakis: To put this in perspective, we view a fan getting rejected at the gate as the absolute worst fan experience possible and we try very hard to make sure that doesn’t happen. In reality, this happens in less than 0.2% of our transactions so this is very rare. In the few cases where it does happen, we have field representatives at the majority of large events, so they can help remedy most problematic orders. Our FanProtect Guarantee states that confirmed buyers will receive the tickets they ordered on-time, and if they have any problems with their tickets, we will find them replacement tickets of equal or better value, or will fully refund them. We hold sellers financially accountable for tickets that are not fulfilled or are rejected at the gate, so there is no incentive to sell bad tickets on StubHub.

Darren: In earnings reports, eBay (your owner) never breaks out stubhub's numbers. They'll discuss specifics about PayPal though. Why is that?

Tsakalakis: As StubHub is a small business that is like other transactional business in the eBay portfolio, StubHub’s numbers are included as part of eBay’s overall marketplace business. In 2010, PayPal was about a third of eBay’s $9.2 billion in annual revenues. When we get that big, I’m sure we’ll break out StubHub financials for you.

Darren: Funny. What percentage of your sales are sports vs concerts vs theater?

Tsakalakis: When you look at the full year, about 75% of StubHub’s business is sports, 20% is concerts and 5% is theater and other.

Darren: A few years ago the New England Patriots demanded the info of season ticket holders reselling tickets, it seems as if that attitude has generally disappeared. Do you still get requests from teams so they can revoke a seller's tickets?

Tsakalakis: No, we do not.

Darren: Interesting. So does a fan lease the right to a ticket or own it?

Tsakalakis: We believe that fans own their tickets and have the rights to do as they choose — attend the event, resell their tickets, or give their tickets away. In a survey we commissioned of 1,000 eventgoers conducted by Wakefield Research, 95% of consumers believe that they own their tickets and have those rights. We look at tickets like any other commodity. If you purchase a Honda Accord, you don’t need to ask your dealer’s permission to resell or trade your car, so why should you with tickets? We believe artists and teams have the right to set initial prices of tickets and maximize their revenues when they sell directly to the public, but once their price has been met, they shouldn’t have any say in ticket resale.

"CAVING" IN TO DEMAND?

Darren: Do you ever think you'll cave and design a system for allowing paperless seats and "flash" seats to be sold on your site?

Stubhub
Paul Spinelli | MLB Photos | Getty Images
Stubhub

Tsakalakis: We are in favor of any technology that provides fans with a better experience. Paperless tickets and flash seats allow a buyer to show up at the venue with just the credit card they used when they purchased their tickets and that provides some convenience. However, paperless tickets and flash seats currently restrict the rights of fans by either not allowing transfer or resale or only allowing resale on the site of the original ticket issuer. As such, they take away the choice of fans to give away or resell their ticket. When paperless tickets and flash seats remove their restrictions and restore fan choices, we would be happy to have StubHub be one of many marketplaces where those tickets could be resold.

Darren: After the BCS fiasco, how have your policies on "short selling" tickets changed?

Tsakalakis: Just to recap on the BCS national championship, when all was said and done, our buyers got the tickets they were promised. Before the game, we had a few sellers who were unable to deliver the BCS tickets they had promised our buyers. StubHub remedied that by buying tickets on the open market and from some of our buyers who had already received tickets. In many cases, we paid 3 times what buyers paid for their tickets. At the end of the day, every StubHub buyer of BCS tickets got what they wanted and, in many cases, got upgraded with better tickets than what they originally bought. StubHub paid for our sellers’ mistakes so our buyers didn’t have to. We successfully satisfied our buyers and I’m proud of that. Once we made sure our buyers got their tickets, we created stricter policies around what sellers can sell and we continue to hold sellers fully accountable for their sales.

Darren: What percentage of sellers on your site are full time brokers vs. part time brokers vs. casual fans?

Tsakalakis: In 2010, approximately 65% of our sales were by individual or part time sellers and 35% were by large sellers or brokers.

Darren: Some brokers in general feel like TicketMaster will struggle with dynamic pricing as the company is taking for granted how many seats TicketMaster has to sell relative to the secondary market. Do you have any predictions?

Tsakalakis: It’s too hard to predict without knowing which events are going to be dynamically priced and how high or low the price floors or ceilings will be. It’s also unclear how much risk primary sellers will take in selling their tickets. Will they wait until the last minute to sell everything or will they shoot for an early sell out? From our experience, it‘s nearly impossible to dynamically price tickets 4-6 months before an event takes place. There are just too many variables to account for and demand can fluctuate widely, especially as early reviews come in or as market conditions (e.g. weather, competing events) change. It is very hard to price so that all of your tickets are sold and you’re still maximizing revenue.

Questions? Comments? SportsBiz@cnbc.com

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