The Inconvenient “Convenience” of Paperless Tickets

Last week, the Boston Red Sox rolled out a new restrictive paperless, digital ticketing initiative for Upper Bleacher seats at Fenway Park.  As a ticket broker, paperless ticketing has been a source of conflict and consternation since Ticketmaster introduced paperless tickets in 2008.  What should be a convenience for consumers, has turned into a means to lock consumers into a purchasing decision and to force customers into particular ticket resale options.  Attempting to force behavior has created backlash in the marketplace from both consumers and ticket brokers.  Any time a customer is forced to do (or not do) something in order to do business with you, it creates transactional friction that diminishes the value your organization creates.

First, a quick primer on paperless tickets.  As the name implies, nothing ever gets printed.  At the time of purchase, tickets are “bound” to the credit card used for purchase.  To access your tickets, you present the credit card to the usher at the venue who swipes the card in a magnetic card reader.  The usher prints a receipt that indicates your section, row, and seat(s) and with that receipt, you enter the venue with your party. It’s that simple.  EasySeat’s customers that have used Flash Seats , a non-restrictive paperless ticketing option from Vertix, consistently tell us they’d never want to purchase a “traditional” ticket ever again.

So, if it’s that easy, why all the consternation?  Under the Ticketmaster paperless ticketing and the Boston Red Sox Tickets @ Entry systems, the tickets are locked to the credit card used to purchase the tickets.  Even if the credit card has expired or you close the account, you must retain the card in order to gain access to the event.  And, unless you want to loan your credit card to someone else, these tickets cannot be resold or transferred.  Well, that is unless they are resold via Ticketmaster.

That brings us to the root of the problem with a restrictive paperless ticketing policy.  The stated goal is to provide security and simplicity for ticket buyers and fans, however, as implemented by Ticketmaster, it’s really just a methodology to capture a larger portion of the resale market.   The implementation undermines the very value proposition they claim to offer: convenience.  This, in turn, creates opportunities for ticketing companies like Vertix and ticket brokers like EasySeat to provide the value that Ticketmaster has failed to deliver.  If EasySeat can simplify the process of buying and selling restrictive paperless tickets by meeting customers at the venue, for example, EasySeat has created incremental value where Ticketmaster has taken it away.

This situation reminds me of a conversation I had with one of my programmers.  He was befuddled that I was training a large customer to do work that, to that point, Geode Software was being paid to do.  In his mind, with training, the client would eventually lose their need for Geode’s services.  I explained to him that our role, as a service provider, was to meet our customer’s needs.  If we make using our services difficult or withhold services altogether because it’s in Geode’s best interest, the client will find another service provider that will deliver in a manner that suits their particular needs. 

That same, simple principle from the IT services industry is exactly what is playing out with paperless tickets: it’s in Ticketmaster’s best interest rather than the consumer.  Since EasySeat is not the artist or team that produces the product, we, like Ticketmaster, are a resource that contributes incremental value to the ticket buying process.  That value is delivered in the context of convenience.  Any policy, such as resale restrictions, that diminishes convenience in turn diminishes the value to the customer.  In any service-based or value-added business, it’s important to understand how your policies impact the consumption of your services.  A travel or delivery charge may help cover operating costs, but it may impact the ease of doing business with your company and, in turn, the value you create.  Don’t make your customers do what’s easiest or best for you, because if you do, you’ll find that there’s an EasySeat in your industry that’s ready, willing, and able to what is best for the customer.

Expose Yourself like Madonna

The moment that Madonna was announced as the halftime performer for Super Bowl XVLI,   I told everyone that Madonna would go out on tour in 2012.  And, as announced the day after the Super Bowl, Madonna is launching her first world tour since her Sticky & Sweet Tour in 2009.  How did I know she’d go on tour? The last time the halftime performer that was not either on tour or going on tour was Prince in 2007.  Every single artist, from The Who, The Black Eyed Peas, and The Rolling Stones, all took advantage of the publicity bump that comes from being part of a worldwide television event.  A watershed event like the Super Bowl is a great platform to sell additional tickets or re-start stalled ticket sales.  On a smaller scale, a bump in visibility can fuel growth of a startup.

In terms of visibility, Madonna’s halftime show it about as big as it gets.  With over 110 million viewers, nearly 1 in 3 people in the US were watching the game and more people were watching Madonna’s halftime show than the game itself.  Almost 4 years since her last album and 3 years since her last tour wrapped up, it’s the perfect moment to catapult Madonna into the headlines.

But, Madonna is a worldwide superstar; mention just her first name and people around the globe know who you are talking about.  How could she possibly need additional exposure?  The answer is simple: to sell tickets.  Without the Super Bowl, she’d sell tickets, but this kind of exposure will be necessary to capture the prices for this tour.  Using Boston’s TD Garden as an example, the majority of the Floor, Loge, and Club levels will be priced between $170 and $355 per ticket before fees, and the Balcony level will range from $45 to $90 per ticket before fees.  These prices closely match the ticket prices in 2008-09.  While her 2008 tour was on top of the secondary market, the average ticket price was only $306.  For a concert in which the majority of lower level seats were between $150 and $300 face value, that doesn’t represent much of a premium.   When the premium over face value is small, it means that marketplace demand wasn’t much beyond the asking price, and possibly even less.

It’s pretty easy to draw the conclusion that the world’s most watched television event will help sell tickets, but not everyone can perform at halftime of the Super Bowl.  It doesn’t have to be this large of an event to benefit a small business.  In 2010, EasySeat was ranked #176 on the Inc 500 list of fastest growing private companies in America.  Being part of the Inc 500 is the closest equivalent to playing Super Bowl halftime that you can find as a small, private startup.  Realizing that EasySeat had a big moment, I decided to try to capitalize on it by trying to sell the company.  In the midst of the Great Recession, it was a stand-out moment that could be used as additional leverage over and above our great financial performance.  The moment never led to a sale because the additional publicity fueled additional growth that made selling the company a far less attractive option for me.

The stage doesn’t need to be as large as the Super Bowl or even the Inc 500.  In 1996, when running my first business, an exterior painting business, we were featured in the Patriot News .  This one article was the single biggest source of new sales leads for the year.  The lesson embedded here is that anyone, even cultural icons like Madonna, can use additional exposure to achieve business goals.  Additional visibility can be used to fuel growth, increase sales, or penetrate new markets.   The only thing not to forget is that attention can be fleeting.  Madonna’s 2012 World Tour was announced less than 24 hours after her Super Bowl performance; I started seeking potential acquirers before the Inc 500 list hit newsstands; incremental sales from the article in the Patriot News were confined to one year.  Find your moment in the sun, and capitalize on it quickly because the sun sets at the same speed it rises.

The B

For the first time in nearly 3 years, the Boss, Bruce Springsteen, is heading back out on tour with the E-Street band.  The tour was announced on January 24^th and went on sale to the public only 3 days later on January 27^th.  Like any Bruce tour, he’s playing 6 shows in the New York Metropolitan area, with 2 shows apiece at Madison Square Garden and Izod Center and 1 show at the Prudential Center.  Each venue seats a total of about 20,000 people for concerts, which equates to approximately 120,000 tickets for these shows.  Just over 100,000 tickets for a Springsteen-crazy region that, according to the 2009 census, has a population of over 22 million people.  Simple math will tell you that there’s a potential for a supply issue, and not surprisingly, tickets sold out in minutes.  EasySeat has tickets for Bruce Springsteen because, understanding the potential pitfalls, EasySeat planned for all possible contingencies, especially the biggest of them all, The Bruce Contingency.

Ticketmaster, however, did not seem to have any contingency plan for the potential demand these shows would create, and as a result, experienced some major technical difficulties during the public on sale.  In an announcement on Friday, Ticketmaster claimed to have been hacked.  From years of experience in both the ticket industry and IT, I can tell you that this is just misdirection from a bad public relations moment.  As of today, there are currently less than 3,000 tickets available on the secondary market for SIX New York area shows.  That’s less than the 2,262 seats that Bruce Springsteen and his management group held back from the public for TWO shows in 2009.  So, if there was a hacker attack, it did not result in tickets ending up on the secondary market.  To the contrary, it would seem that Ticketmaster’s web site problems have REDUCED the number of tickets available on the secondary market.  This dearth of tickets is what has led to higher prices.

So, if they were not hacked, what actually happened?  In simple terms, Ticketmaster’s systems could not handle the load due to lack of resource planning.  In most cases, when a major event like Bruce Springsteen goes on sale to the general public, ONLY that one event will be made available for sale.  For example, when Van Halen’s tour dates on the east coast went on sale on January 14^th, it was the only major artist that went on sale that day.  Conversely, on January 27^th, in addition to Bruce Springsteen, Elton John, Van Halen, Red Hot Chili Peppers, Daughtry and Death Cab for Cutie ALL had multiple dates for the east coast alone that went on sale on Friday.  The Bruce Springsteen shows were interspersed throughout the day rather than all going on sale at the same time, but the Boss still managed to drag down the purchase process for every east coast concert that went on sale that day (concerts in other regions appear to have been unaffected).

All in all, it just appears that there was poor contingency planning somewhere in the process at Ticketmaster.  EasySeat, however, did not make that same mistake for a critical event.  As a company that focuses on the Northeast market, Bruce Springsteen is a big event, so EasySeat pre-arranged multiple methods for obtaining tickets.  No, EasySeat didn’t have any “sophisticated computer programs” to hack into online systems.  But, EasySeat did pay college students to wait in line in ticket outlets and a handful of stay-at-home moms to sit at their computers and buy tickets.  The result of this planning was that EasySeat ended up purchasing between 12 and 16 tickets per show. That’s it.  No massive hoard; No back room deals.  However, thanks to proper planning, EasySeat will be able to serve its customers.

In a case where there is a single, critical event for your business, you must have a contingency plan.  If you have a single supplier for your inventory, what will you do if that supplier goes out of business or is impacted by a natural disaster like Hurricane Katrina?  If you have a key employee, what do you do when he or she takes another job or relocates with a spouse?  Identify the Bruce Springsteen in your business.  Whether it’s having a backup supplier, like EasySeat did, or documenting operational procedures such that anyone can use them, part of your job as a business owner is planning for contingencies.  With the proper planning, when the Boss shows up at your place of business, you can still get tickets, metaphorically speaking.

The Price of Fear

With the Super Bowl matchup set between the New York Giants and New England Patriots, two teams EasySeat deals with on a regular basis, I have had many conversations regarding the price and availability of tickets for the game.  The thing that struck me is that I keep having the SAME conversation: prices are really high right now, but they will drop.  As a ticket broker, I know that prices will drop.  And this got me to thinking, why do Super Bowl ticket prices always start high and then drop as the game gets closer?  And the answer is simple: prices are based on fear.

First – a little background on the Super Bowl.  In the ticket business, it is the biggest single event of the year.  Average Super Bowl orders run in the thousands of dollars, where sports and concert tickets typically run in the hundreds of dollars.  In addition to being the biggest, it is also the riskiest.  Tickets aren’t printed or issued until the teams are decided which means brokers have less than 10 days to acquire tickets and find buyers.  To complicate matters further, there is a much higher than normal incidence of fraud due to the extremely high value of the tickets.  These combined risk factors can and do lead to some very public failures like FirstDIBZ.

Failures like these happen every year around the Super Bowl, and it’s not uncommon for at least a handful of brokers to go out of business.  The net effect of these failures has led pricing by fear in the secondary market.  Every year, tickets start at $2,500ea just after the teams are finalized and settle down to around $1500ea the week of the game.  The average ticket prices settle out somewhere around $2,500 per ticket nearly every year.  In some extreme cases, tickets have fallen as far as $100 per ticket.

Why is it that, when the AVERAGE Super Bowl ticket typically sells for $2,500, prices annually START at that value?  Quite simply, it’s because of fear:  Fear that you might not be able to locate tickets; fear that “the other guy” is going to buy them at that price and shut you out.  Ironically, the exact opposite happens as the game gets closer.   Fear of not selling tickets in stock or being undercut by the competition drive prices downward.

At the last Patriots-Giants Super Bowl in 2008, these same fears cost EasySeat a really profitable event.  Early in the weeks before Super Bowl XLII, prices were still hovering around $2,000 a ticket, and season ticket holders wanted to sell them for close to that price.  It was getting late in the week, and after hundreds of phone calls, EasySeat still didn’t have any tickets in stock.  Instead of passing on deals that I knew were too expensive, I bought tickets anyway.  Less than a week later, I liquidated every ticket I had purchased at a substantial loss.  I took a loss because tickets were not selling, and fearing the worst, I wanted to cut my losses.  On both ends of the transaction, unwarranted fears cost EasySeat money.

With potential sales and profits staring you in the face, it’s very easy to let fear guide pricing decisions.  Whether selling tickets or widgets, you have methodology that you used to determine your prices.  Your prices should be based on being able to sell your products or services in a profitable manner (if they’re not or you haven’t examined this concept, then that’s a whole different blog post entirely).  Why would you want to accept an unprofitable sale just for the sake of closing a deal?  Why would you want to lose a customer just for the sake of “getting what the other guy” is getting for prices?  When fear rules pricing strategy, you will either end up with a deal that makes no money by charging to little or just not get the deal by charging too much.  As entrepreneurs, we hate failure, and losing a sale or a customer runs counter to our DNA, but in my experience, some of the best deals are the ones that you walk away from.

The Fallacy of the PSL and Emotional Math

With the New York Giants set to travel to San Francisco this weekend for the NFC Championship Game, it reminded me that the San Francisco 49ers recently announced the Personal Seat License (PSL) fees for their new stadium in Santa Clara, CA.  PSLs are the fees teams charge season ticket holders for the right to purchase season tickets.  This post comes a bit too late for Giants fans who went through this process in 2008, but hopefully it’s in time to help 49er fans.  I purchased a PSL for MetLife Stadium, and the decision to purchase was deeply flawed due to something I’d call Emotional Math.

First, lets’ look at some actual math using lower end zone seats for the New York Giants:

PSL Price: $5,000 per seat
Face Value:  $120ea ($1,200 per season for 2 preseason and 8 regular season games)
EasySeat’s Average Sale Price:  $149ea

NOTE: We’ll ignore playoff tickets because, since 1980, the Giants have had only 10 home playoff games in a VERY successful run that includes 4 SuperBowl appearances.

Based on these numbers, EasySeat could regularly expect to earn $290 per year (10 games X $29 profit per game).  Likewise, a season ticket holder could “save” this amount by having season tickets instead of buying them on the secondary market from a ticket broker.  Using these numbers, it’ll take 17 years to recoup the cost of the PSL.

Next, let’s address the elephant in the room when it comes to PSLs: they’re far from a guarantee of anything.  In every contract for PSLs, the PSL is only valid for the new venue, so when the team builds a new stadium in 25-30 years, the PSL will no longer be valid.  In addition, PSLs are a relatively new phenomenon, so there’s no longitudinal data to support the long term value of a PSL.

Finally, should you fail to purchase season tickets or post-season tickets, your PSL can be revoked without a refund or compensation.

So, the real math tells me that we have an approximately 6% return coupled with some pretty high risk factors.  But, entrepreneurs, like sports fans, allow external factors to creep into the decision making process in something I’d call emotional math.  What if the Giants get to the Superbowl and I get Superbowl tickets?  We have customers that buy Giants tickets, so we really should have some available, shouldn’t we? These factors are completely intangible and non-quantifiable “adjustments” to what are poor ROI numbers.  But, in my case, these factors led me to ignore the quantifiable measures and purchase Giants PSLs.

How do you avoid using emotional math when making business decisions?  The best way is to get objective feedback from other entrepreneurs outside your industry.  In discussing business issues with a colleague, like Carl Manni from Linda’s Online, he doesn’t have the entrenched emotional attachment to the Giants that I have.  As a business owner, he can evaluate the numbers for their face value.  Why would you take an 6% return on equity (ROE) when that same capital deployed elsewhere, with less risk, could generate a 25% ROE?  A 3^rd party perspective can remove the personal bias that allows you to equivocate when the numbers don’t justify your emotional attachments.

When you boil it down, you don’t have to be a ticket broker to see that there are flaws in the emotional math that led me to purchase a Giants PSL.  Every entrepreneur has made one of these decisions, like leasing more space than you need because you might experience rapid growth.   Sometimes, all it takes to improve your math skills is an objective 3^rd party that will remind you 1 + 1 always equals 2, no matter how many times the Giants make the playoffs.

Van Halen and Entering New Markets

What could Van Halen possibly have to do with entering new markets you ask?  Well, to an eager entrepreneur, it meant an opportunity to expand nationally.  After the better part of 20 years apart and a 2007 induction into the rock and roll hall of fame, famed front-man David Lee Roth was reuniting with the band to tour the US.  You didn’t have to be a ticket broker to know that it was going to be a big deal.  It just so happens, I was and am a ticket broker, so not only was it a big deal, but it was the opportunity to take a new step in my fledgling ticket business by expanding nationwide.   Armed with little else than the knowledge that this would be a big deal, this was the launching point of a run that landed EasySeat on the Inc 500. 

Happy ending, right?  It is, but on the eve of the launch of Van Halen’s 2012 tour it’s given me the opportunity to reflect on the fateful decision to enter a new market, which in my case meant expanding nationwide.

It’s hard to imagine that a business decision that results in 16-fold growth could have been wrong, but if you examine it objectively, I was extremely lucky.  In deciding to expand nationally, I failed to do any substantive homework on the markets I was entering.  The extent of my research was to take a list of the media markets in the US, draw a line at Hartford, and say to myself, “well, if it works here, it’s gotta work in cities/metro areas that are bigger than here.”  That, my friends, is flawed logic.  With the benefit of hindsight and actual actionable data I have collected from my mis-steps over the years, I now know that some markets, like Los Angeles, perform poorly due to traffic and transportation issues related to attending downtown events and some markets, like Las Vegas and Florida, have large transient populations that rank them high on the list of population, but low on the profitability scale.  Today, EasySeat has data and metrics on every media market and even differences in venues in each market, data that comes from taking losses and absorbing bad decisions.  We now use this data every day to make smart strategic decisions on how to allocate resources to each of those markets that we entered in 2007.

The lesson here is this: do your research before entering a new market or territory.  Research the demographics of your target marketplace and ensure that your customers exist in the market you plan to enter.  It’s awfully hard to sell tickets when the closest entertainment venue is a 4.5 hour drive, and contrary to what Zig Ziglar would have you believe, Eskimos don’t buy that many ice cubes…no matter how good of a salesman you are.  In EasySeat’s case, simply evaluating the per capita income of a state like Connecticut (over $50,000 in 2006) versus Indiana (just over $32,000 in 2006) would have been hugely revealing. 

Beyond data, I KNOW people, like my brother who owns the ad agency Brandwidth and lives in Indianapolis, that could have given me a firsthand perspective of the markets I was going to enter.  A simple phone call could have given me some boots-on-the-ground empirical data to work from.  Today, more than ever with tools like LinkedIn and Facebook, we all have a great, usually untapped network.  Spending an afternoon working through your digital rolodex will most likely yield more than a few people that you can reach out to gather information.  In EasySeat’s case, a simple phone call to my brother could have told me that it’s a sprawling city, and even though he live IN Indianapolis, he doesn’t get to many events IN Indianapolis just because it’s not very close to where he lives.

Despite huge holes in our logic for expansion, it was the launching point for a wildly successful run.  As I mentioned, I got incredibly lucky in that my gut instincts were right.   More importantly, I chose an appropriately large opportunity to expand nationwide.  Even with a large opportunity, we still lost money in markets like Indianapolis, San Diego, and Las Vegas; data that EasySeat uses to this day to make strategic decisions in each of these markets and some of which could have been obtained before ever buying a single ticket.  But, by going after a large enough opportunity, EasySeat found enough successes to outweigh the failures. 

With the announcement of their 2012 tour along with a new album, Van Halen is book-ending a chapter in EasySeat’s history.  Easyseat will most certainly have tickets for the majority of the tour dates, and the ones we don’t, we’ll find the people that have them so we can offer them to our customers.  The markets we serve are direct result of some hard-won market intelligence acquired over the last 5 years, plus some extra time scouring the web and working the phones for market intelligence opportunities.