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An innovative approach to selling NFL (including Vikings) tickets

  • Blog Post by: Michael Rand
  • August 27, 2009 - 1:18 PM

The re-sale market for sports tickets has become more sophisticated and yet easier in recent years thanks in large part to the Internet. If you really want to see an in-demand game and are willing to pay the price, you don't have to stand on a street corner before the game. You can go online and generally find what you are looking for.

With that model fairly well perfected, a new company has developed the next generation: buying an option to later buy tickets to a game.

OptionIT is the company, and they are banking on a few factors that seem to work in their favor. According to Michael Proman, OptionIT's vice president of marketing, partnerships and development strategy:

*There is never an obligation to buy (the ticket).

*Fans purchasing an option and then buying the face-value ticket will pay roughly 30% below reputable secondary sites like StubHub.

*Moreover, all inventory is backed by official partnerships with teams, Leagues and other rights-holders so we’re not a ‘ticket broker,’ but rather an options provider.

Those points came in an initial e-mail contact with Proman. A follow-up e-mail was an attempt to clear up how exactly such a thing would work -- who gets the money, what if an option to buy is traded more than once, etc. He responded with a pretty thorough breakdown (all dollar figures are hypothetical and to be used for illustrative purposes only):

1) Fan purchases a $10 option to buy a face-value ticket -- effectively, reserving exclusive access to the ticket now and deciding later if they want to buy. This $10 (we don’t charge transaction fees on initial purchases) is split between OptionIt and the team/rights-holder that backs the inventory (for sake of discussion, let’s assume a 50-50 rev-split so the team sees $5 and OptionIt sees $5)

2) Fan elects to sell his/her option and find a buyer for $20. We have a very traditional model for secondary transactions that matches sites like StubHub (seller pays 10% of the transaction price and buyer pays 7% of the transaction price); in this case, this 17% equates to $3.40, which is once again (for discussion purposes) split 50-50 so OptionIt sees $1.70 and the team sees $1.70

3) Per your thoughts, let’s assume there are two more secondary transactions on this option (one happening at $25 and the other at $30). Based on the 17% transaction fee model, $4.25 is generated on the first transaction (OptionIt sees $2.12 and the team sees $2.13) and $5.10 is generated on the second transaction (OptionIt sees $2.55 and the team sees $2.55)

4) The final holder of the option ‘exercises’ it and pays face-value ($60) for the ticket… this purchase follows traditional purchasing procedures (e.g., team’s primary ticketing provider). Please note that the team has held the physical ticket the entire time; therefore, if the person elected not to exercise the option, the team has the ability to re-sell the ticket just as they would have before the game takes place … all ‘exercise windows’ conclude roughly 5-7 days out from the game to give the team enough time to do this).

The net-net based on the above is as follows:

Team - Face-value Ticket Revenue (what they would have received irrespective of OptionIt): $60 - Rev-share on Initial Option: $5 - Rev-share on three secondary transactions (total): $6.38 ------ TOTAL: $71.38

OptionIt - Rev-share on Initial Option: $5 - Rev-share on three secondary transactions (total): $6.38 ------ TOTAL: $11.38

In sum, the team makes an additional 19% on the ticket by providing the fan added convenience and flexibility. Arguably, the best part of the options model is that we don’t touch or rely on physical tickets; therefore, assuming we know something is taking place (e.g., Vikings-Packers game in the 2014 season), we could sell an option today that could trade hands an infinite number of times… meanwhile, the team in monetizing something today that isn’t taking place for years – something we feel is a pretty compelling proposition.

Indeed, we think it's a pretty interesting idea. It clearly works better when games become "in-demand," such as a Vikings-Packers game this year after Brett Favre signed with the Vikings. OptionIT works with specific teams and leagues, and gets limited quantities of tickets for each game. They have partnerships right now with the Baltimore Ravens and St. Louis Rams -- two teams Proman notes play the Vikings in back-to-back weeks in October (the 11th in St. Louis and the 18th in Minnesota). Options are available for both games, Proman said.

It's hard to say whether this will catch on, but it does seem to have some legs. If it can provide ticket flexibility while also potentially offering a lower price for in-demand games than re-sale sites (as Proman suggests) while bringing additional revenue to the teams themselves, it could be win-win (though not win-win-win if you are a ticket broker).

Does it seem overly complex, or do you think it is right up the alley of sports fans used to dealing in numbers (both in the statistical and ticket-buying realms)? Is there enough revenue generated to carry it? Would you imagine it being used more by fans looking for flexibility or invisible brokers looking to turn a profit? Would you use it?

Your thoughts welcome in the comments.

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