More than any other company, StubHub has been responsible for the perception makeover that turned ticket "scalpers" into ticket "brokers." StubHub helped rebrand an often-vilified vocation by pushing ticket reselling out of the shadows and providing "a very clean and well-lit place for people to buy tickets, with consumer guarantees that we stand behind," says Chris Tsakalakis, president of StubHub and GM of the ticketing division of StubHub parent eBay.
Tsakalakis says resellers serve consumers who can't be bothered to pounce on tickets when they go on sale or aren't lucky enough to score the best seats even when they do. By facilitating secondary ticketing transactions, StubHub and like-minded resellers brought a level of consumer legitimacy to the market that didn't exist before. The company's concert business enjoyed a prosperous 2009, Tsakalakis says, noting that transactions surged 65% from the prior year and that revenue climbed 40% amid a 16% decline in the average price of a concert ticket on the service. Looking ahead, "we still see healthy transaction growth, where we're selling a lot more tickets this year than we did last year," he says.
However, StubHub faces a daunting new challenge. When the U.S. Department of Justice approved the merger of Live Nation and Ticketmaster in January, the DOJ allowed the newly formed Live Nation Entertainment to keep its reselling subsidiary TicketsNow. In an interview with Billboard, Tsakalakis talks about Live Nation and what's ahead for StubHub and other resellers.
Is the DOJ's approval of the Live Nation/Ticketmaster merger is good or bad for your business?
It remains to be seen. Right now it appears to be neutral. What we appreciate about the department's ruling is there is competition in the primary market through AEG's getting the ability to essentially white label their own private [ticketing operation] via the Ticketmaster ticketing technology, and for Comcast-Spectacor to buy Paciolan and provide competition there.
Do you think independent brokers, many of whom sell on your site, will be hindered by Live Nation Entertainment?
I think there is that potential threat out there, but we'll have to see what actually happens. Ticket brokers are amazing entrepreneurs, people who work pretty hard to try to deliver a good service. The ones I talk to that sell on our site are very focused on how well they fulfill, because we give them financial incentives to make sure that they do a great job. But they are, as a group, vilified in the press, a lot by concertgoers more so than sports buyers. They're a little sensitive, they're a little paranoid and I think they have a right to be. To be called a scalper, to be given that pejorative term just for doing business, that's not a great position to be in.
Do you expect that a merged Live Nation/Ticketmaster will try to dominate the resale market?
I really don't know what they're going to do. What they've said publicly is that they will look to retain more of the value that goes to people who resell tickets by pricing tickets more dynamically. And that's their right to do, the right to price as they think the market will bear.
There would seem to be an opportunity for artists to resell tickets on their own fan sites.
I don't think there are that many artists who are comfortable in doing that. In regard to our [sponsorship] deal with Madonna, there was essentially the realization that the resale of tickets is going to happen. If it¹s going to happen, we may as well point people to the best marketplace for that, where there are consumer guarantees, the highest level of customer service, and for Madonna and her tour to promote that, and for them to receive a monetary reward in return. I haven¹t seen any other artists take that kind of public stance yet, however. We¹d love to see it happen with more artists, of course, and we think being the leader in the ticket resale business that we could provide the best possible service in addition to the highest level of return for those artists.
Were you able to get exclusivity on Madonna?
It was exclusive in [that] she wasn't endorsing or marketing another online secondary ticket site. But it wasn't exclusive in the sense that it was the only way someone could resell a ticket to a Madonna concert. And we're very much for that, this idea that we will pay a premium for being the only company you endorse. But we actually like to have competition, we don't want people to feel like their only option is to sell on StubHub. We believe in consumer choice and competition.
You have spoken out publicly against paperless ticketing because you feel it restricts consumer rights. But to play devil's advocate, shouldn't artists have the right to pick the mode of ticketing they use?
The artist has absolutely a right to set the price of a ticket, but if you
ask consumers what they think about the ticket, 95% of them say "once I buy it, that ticket is mine and I can do whatever I want with it" [according to an internal study conducted to StubHub by Wakefield Research]. When you ask consumers about paperless ticketing and explain what it is, 66% believe it is less convenient than printing tickets at home, 71% believe it makes it harder to get into an event, 81% feel it makes it harder to give tickets to someone for an event, and 80% believe the system really benefits the people that sell the tickets, not the individual buyer.
I think when you sell something to a consumer, that consumer has rights. And that consumer can decide whether or not they want to buy what it is that your selling at the price you set, but at that point the deal is made, the product is owned, and that consumer can do with it what they want. And that's what most consumers of tickets believe, too.
You'll host the Stone Temple Pilots show at SXSW. Strategically, what's the goal here?
This is a way of giving back to the music fan community for their support of StubHub. We sell a lot of tickets on StubHub and although a decent portion of those are concerts, the majority are in sports. So this is a way to give back, and also make it clear that we're fans ourselves. It is a marketing/PR [initiative], as opposed to we're getting into the concert promotion business, which is not at all what it means.
There has been a lot of talk about the need to impose restrictions on the secondary market, including limits on the percentage above face value. What's your take on that?
Price restrictions don't make sense. It's odd to think that the law can
control the basic laws of economics -- they're sort of like the basic laws
of gravity. For those who would like to see lower-priced tickets, they can
increase supply. At the end of the day, what we see on our site is that
supply and demand determine the price of tickets, high prices and low
prices, relative to face value. That's just how it works.
Do you support restrictions on the practice of offering tickets that haven't gone on sale or don't exist, what they call "phantom" tickets?
We support greater visibility and greater transparency for the consumer.
We're about halfway through the process of rolling out new events pages on our Web site where we will tell buyers prior to the point of purchase when they can expect to see delivery of tickets so that they understand "do I get them tomorrow because the seller has them right away, or they will get the in six months because the seller doesn't think he will have the tickets until that time." We will require that sellers provide that information -- when they think they will have the ticket in hand -- and we will [translate] that into a delivery date for the buyer. It will probably be another month before this is fully rolled out.
So in theory a broker can offer tickets he speculates he will get, and then can let the consumer know when they can expect to have them in hand?
Yes, and we will hold the seller to that date. And so the seller will have to decide "do I put a later date so I'm sure not to miss, or do I put an earlier date to make it easier for the ticket to sell" Those are the kind of carrots and sticks we're trying to put into place to provide more transparency to the buyer.
Is there a penalty for sellers who offer tickets they can't deliver?
In general we look at things like what the industry calls "dropped order
rates," the percentage of times that the seller receives an order, they
confirm it, but in the end can't deliver on the tickets that were actually
ordered. We give financial incentives to our larger sellers based on level
of volume, quantity, but also quality, and one of the factors that goes into that is the dropped order rate. Also, across the business it¹s a metric that we track to make sure it goes down every quarter. If a seller is able to fulfill on their orders more readily and a higher percentage of time, they will get a lower seller fee. They will get money back, essentially, from selling on StubHub.
What's the current state of dynamic ticket pricing, where the primary seller determines market value?
I support the artists' right to determine at what price they want to sell
their tickets. However, what we've seen, where the attempt is made to set a price at market value, it doesn't mean there is no resale of those tickets.
Resale happens for a lot of reasons. Some people in the industry believe the only reason it happens is because people see they can make a profit, that the face value of the ticket, even when you tack on 30% in fees, is less than the market value of the ticket. But when an on-sale is nine months or six months ahead of time, people will buy tickets expecting to go and then they'll have to resell the ticket when they can't go. We still see resale activity no matter how close the initial price is to the market price, and the market price fluctuates over time, it doesn't stay at one level. I have a lot of sympathy for the folks out there trying to dynamically price their tickets, just understanding it's not an easy job and it's not a job you can get 100% right. That's just the nature of the beast.
The other thing about dynamic pricing is too often it is used to describe the increasing of prices, not the decreasing of prices. We sell plenty of tickets that are below face value. When Forrester did their research in 2007, they asked people who bought on the secondary market whether they paid above, below or at face value, and 60% said they paid above face value, about 20% said they paid face value, and 20% paid below. I think the perception in the market is that 100% of what is sold on the secondary market is above face value, and that's just fundamentally untrue.
What would you like to see happen in this business?
There are a couple of things I'd love to see. One of them is for companies in the primary ticketing space get comfortable with having us be a marketing partner for them. So that if someone comes to StubHub they can see the full array of what's available for sale for a concert, whether that's from a primary ticket seller or from a fan that just wants to sell a couple of extra tickets, or from a broker. All fans care about is getting a ticket to a show. Do they care whether it's primary or secondary? Probably not.
We'd also like to work with folks in the primary business to potentially give them a feed of what we have available as well, so that there is more information available about what's out there in the general market and consumers can have that all in one place and can decide which place to go to based on who has the best customer service. We¹d like to be able to compete in that area.