Ticketmaster vs. Stubhub: Who’s Winning the Resale Battle?

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Louis Tomlinson, Zayn Malik, Niall Horan, Harry Styles, and Liam Payne perform onstage during the 'Where We Are' tour at Met Life Stadium on August 4, 2014 in New York City.

One year after the Live Nation-owned seller shook up the $5 billion resale market, its primary rival has lowered selling fees and gone aggressive as concertgoers seek more value.

While 2013 was the year that Ticketmaster and StubHub battled each other in state legislatures over resale laws, 2014 has seen them face off with innovative products and marketing strategies. As Ticketmaster pushes its new TM+ platform to grow its share of the secondary ticket market, StubHub, which is owned by eBay, is betting on a new pricing strategy to protect its dominance. At stake: a U.S. market for ticket resales that Northcoast Research estimates is worth $5 billion annually.

One year into the TM+ rollout, the platform has been used for 3,000 events, ranging from One Direction's Where We Are Tour to Disney on Ice’s Frozen performances. When a customer searches a tour that employs TM+, tickets offered through a venue’s box office are listed along with those being resold by fans and brokers, often at a steep markup.

According to Ticketmaster, TM+ is working thus far. Total resale revenue was up 90 percent year to year through July, and the company -- which Northcoast estimates has retained 11 percent of the secondary market -- expects to capture more than $1 billion in resale gross ticket value from September 2013 through the end of this year. Ticketmaster president of North America Jared Smith says 25 percent to 50 percent of the resale gain has come from exchanges the company runs for the NFL, NBA and NHL professional sports leagues. The remainder has come from new growth through TM+.

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In response, StubHub, which commands 50 percent of the resale market, has taken a surprising tack to maintain its leadership position: dropping ticket prices through a combination of lower fees and an “all in” ticket pricing policy. An all-in price shows the total price of admission early in the ordering process, a shift from the usual practice of withholding fees from the buyer until late in the purchase process.

"We’ve reduced fees in 95 percent of [our transactions] in order to provide a better price to buyers," says StubHub president Chris Tsakalakis, adding that concertgoers tend to be more focused on value than sports events customers. The lower selling fees -- reduced from 15 percent to 10 percent -- could deter migration to TM+, which charges commission and a buyer’s fee rather than a seller’s fee. Ironically, the two competitors’ ticket offerings can end up being similarly priced.

These changes have resulted in a bumpy ride for StubHub -- what eBay CFO Robert Swan calls “a material deceleration” in StubHub revenue and a 6 percent decrease in average ticket prices this year. All-in pricing is particularly challenging. Customers now see a higher ticket price as soon as they begin shopping for seats, and StubHub must educate consumers that all-in tickets could ultimately be cheaper than comparable seats offered by a rival where fees aren’t added until checkout.

But Tsakalakis isn’t deterred. He says StubHub doesn’t want to pursue "bad profits," a term for money earned from transactions that customers find onerous. During the long term, he insists, lower fees are good for the company.

StubHub also has taken measures to improve its customer experience. One move is StubHub Music, an app for Apple mobile devices that scans a user’s iTunes collections in order to provide tour updates on favorite artists and recommend similar acts. And in September, StubHub hired its first editor-in-chief, former managing editor of MLSSoccer.com Jonah Freedman, to create an editorial strategy that will help the company’s site become a destination.

A great deal is riding on Ticketmaster’s ability to convince both promoters and ticket resellers to adopt TM+. Ticketmaster is the biggest contributor to its parent company Live Nation’s bottom line. Music promotion accounts for most of Live Nation’s revenue but little profit. In the first half of the year, Ticketmaster was responsible for 65.3 percent of Live Nation’s operating income while accounting for just 26 percent of its total revenue. If Ticketmaster can grab a larger share of the resale market, it will further solidify Live Nation’s standing as the overwhelmingly dominant player in live entertainment.

The TM+ pitch to prospective clients is simple: The additional traffic from consumers seeking secondary tickets actually helps primary ticket sales. “Obviously it’s counterintuitive based on how the industry has operated for a very long time,” says Smith. “But, lo and behold, it’s playing out exactly how we thought it would.” According to in-house data, Smith says, “When fans see resale and primary [tickets] on the same screen, they are as much as 100 percent more likely to buy a ticket.” He adds that, more often than not, “that purchase will be a primary ticket.”

Michael Marion, GM of the Verizon Arena in North Little Rock, Ark., sees an advantage in the TM+ approach. “I think this option enhances primary sales,” he says. “If a person sees that $65 face-value tickets are available in the upper bowl, or they could spend $400 [in the secondary market] for lower bowl seats, they have a real value decision and choice. I think they are more likely to go with the cheaper primary ticket.”

Don Vaccaro, CEO of secondary-market ticket aggregator TicketNetwork, disagrees. He says his company, which holds an estimated 10 percent of the resale market, has seen single-digit revenue increases year to year through mid-October, and he says he’s confident the secondary market has grown too. It’s a sign, contends Vacarro, that TM+ is cannibalizing primary ticket sales. “If they weren’t, the rest of the secondary market would be down year over year.”

Even when TM+ works as advertised, the combined marketing of primary and secondary tickets can be a tough sell. Fielding Logan, a manager at Q Prime South, which represents The Black Keys, Eric Church and Brothers Osborne, says the data he has seen indicates TM+ improves primary market sales. However, he says, “It doesn’t sit right with my clients that primary sellers are inviting resellers onto the primary ticketing platform. It seems like we are letting the fox in the henhouse.”

Q Prime has vigorously battled scalpers on behalf of its acts. With country artist Church, for instance, the company closely monitors his fan club, the Church Choir -- which offers fans access to front-row seats and the stage pit -- for multiple orders that come from a single city (a sign of a scalper at work) and has decreed that members caught reselling tickets can be booted.

Another potential hurdle: Venues don’t get a cut of TM+ revenue -- although Marion doesn’t see that as a problem. “Maybe I’m naive, but I don’t think it’s in anyone’s best interest to screw the customer. It’s in the [venues’] best interest to sell as many tickets at face value as possible so patrons can afford to come to as many shows as possible.”

Despite Logan’s aversion to linking primary and secondary sellers, he says he does see how TM+ could prove a useful research tool for “dynamically” pricing tickets. If, for instance, tickets for a live event were selling for $60 through a venue’s box office and $50 on the resale market, Ticketmaster could adjust the primary ticket prices to better compete with the resellers. Under such a system, argues Logan, consumers will have an incentive to buy primary tickets. The result could be “fewer empty seats and more happy fans,” he says.

Some promoters will be content to keep primary and secondary ticket sales separate. For example, MLB sells its primary tickets through its own service, Tickets.com, and has a partnership with StubHub for resale. Smaller promoters, hungry for a piece of the lucrative resale market, could establish similar partnerships that split primary and secondary ticketing, says Vacarro. “There are a lot more small and independent promoters who, if they’re not doing it now, are going to integrate the secondary market into their business strategies going forward.” 

Additional reporting by Ray Waddell.

This article first appeared in the Oct. 25 issue of Billboard.