Sports ticket prices are collapsing. Is that good news for fans?

The stadium scene.
Aug. 4 2011 10:06 AM

Plenty of Good Seats Still Available

The collapse of the sports ticket bubble.

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The rise of the online secondary ticket market could end up changing that dynamic. Ironically, resellers like StubHub initially looked like they would help drive prices still higher, as fans used them to unload sought-after tickets for more than face value. Teams also watched the sites to determine the market price for seats, and then raised their face values accordingly. MLB even anointed StubHub (now owned by eBay) as its official reseller in 2007, earning teams a cut of every ticket resold.

In recent years, though, StubHub et al. have been a boon for bargain hunters. A glance at FanSnap, which aggregates tickets posted on various resale sites, shows thousands of tickets available for virtually any game you'd care to see, often at well below face value. If you want to take in next week's Indians-Tigers AL Central showdown in Cleveland, for example, you can snag lower box seats in the infield—normally $44—for as low as $25. As a bonus, reseller fees are typically lower than teams' own ticket fees. Given those options, it would be stupid to pay full price at the ticket window.

There's a snowball effect here that can be dangerous for team finances. Just as rising prices on StubHub led teams to hike face values, so does a glut of online tickets lead to the deep, club-sanctioned discounts we've seen of late. (There are other signs of increasing desperation: No fewer than three New York sports teams have assigned "personal customer agents" to try to induce me to buy tickets from them directly; I'm sticking with StubHub, so long as it's cheaper.) There comes a point at which fans come to expect a deal on tickets, whether from the team or on the secondary market, and hold off on buying until they see a bargain. That pressures clubs to offer more discounts, leading to a downward spiral of ticket revenue.

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We've seen this story before, incidentally. Last summer, the concert industry, which had been riding high after years of seemingly unstoppable price increases, completely tanked. Scads of tour dates and festivals were canceled after it became clear that no one was buying tickets. Humbled promoters promised lower ticket prices, while cutting way back on the number of shows offered.

The sports ticket bubble will ultimately stabilize, but as we've seen with the housing market, the landscape won't look quite the same afterward. For a handful of top teams, times are still flush. While 18 out of 30 MLB teams have seen attendance dip, the World Series champion San Francisco Giants are up nearly 5,000 fans per game, and their opponents in last year's Series, the Texas Rangers, have seen attendance jump by more than 8,000 per game. Likewise, premier events like the Super Bowl continue to set their own prices, as seen when the NFL managed to sell several thousand $200 tickets to watch the big game on video screens outside Cowboys Stadium—and after the "party plaza" sold out, tickets were scalped on StubHub for double face value.

Where we look to be headed, then, is a two-tiered system. A handful of top teams and events will be able to charge whatever they want, while most everyone else is forced to give away tickets. That's great if you're a budget-conscious fan of a cellar-dwelling team—or even a fan of the contending Indians, who remain 26th in the league in attendance. (Thanks to the widely observed phenomenon that teams get their biggest bump in attendance the year after winning a pennant, fans generally end up paying the most to see teams that are just past their prime.) For leagues as a whole, however, it seems likely to exacerbate the spread between the haves and have-nots.

Unlike musicians, sports teams compete on the field for both wins and players. When the Eagles (not the Philadelphia ones) cancel tour dates, they don't have to worry about another band snapping up Joe Walsh as a free agent. In the sports realm—not counting the NFL, whose outrageously huge TV contracts, split evenly among its 32 teams, has effectively made it into a television show with a sideline in ticket sales—a more pronounced revenue split can be catastrophic for low-revenue teams, since somewhere in the neighborhood of 30 to 40 percent of revenue comes from ticket sales.

Unless team owners discover a new willingness to share, baseball in particular could be headed back into the small-market vs. big-market abyss. For the NBA and NHL, it could lead to more teams following the example of the Phoenix Coyotes and New Orleans Hornets and becoming wards of their leagues. Declining ticket revenue could also be a major factor in the NBA losing some or all of its upcoming season to a lockout, as now appears likely—according to Forbes estimates, revenue from NBA ticket sales has dropped 6 percent over the last five years. For fans, that's the potential downside of the collapsing ticket bubble: Yes, it's a great time to find ticket bargains, but that only applies so long as the box office stays open.

Neil deMause is co-author of the book Field of Schemesand runs the stadium-news site fieldofschemes.com.