OptionIt Allows Teams to Combat Secondary Market

Last week OptionIt, a ticket futures marketplace, inked the Boston Celtics to a pilot deal, their most high profile team yet. It’s a small deal – only 15 games and a handful of seats at each game, but it’s a direction more teams need to seriously assess, given the amount of value they currently relinquish to the secondary ticket market.

OptionIt functions similar to the option market for stocks. Customers can purchase an option to buy a ticket to a certain game for a set price. The option carries a cost and has an exercise date by when the customer must decide to purchase the ticket at the exercise price or let it expire and lose the option price. OptionIt will only sell as many options as it has tickets, so every option is guaranteed a ticket, which makes sense since capping supply will boost prices. If OptionIt allows this to function like a true marketplace, more popular, marquee games will see option prices increase from the higher demand, and they could also increase the exercise price for tickets, essentially replicating the auction process StubHub uses through a different approach.

While teams continue to struggle at the gate, continue to cry poor about revenue numbers and economics, they move at a snails pace relative to other industries to try to fix the problem. A former President of Business Operations for a baseball team once told me that teams fail not when they are trying to sell tickets with a bad team, but by not fully capitalizing when they field a good team. In line with that, it’s a wonder why more teams have not integrated dynamic ticketing and simple, yet intuitive concepts like OptionIt.

Without even introducing the dynamic pricing through market conditions, teams capture a new revenue stream by introducing the option fee, which a third party collects today. For playoff games, or marquee games against big draws, that can net a comfortable six-figures without any cost attached (assuming a straight revenue share type deal with OptionIt). Start using market-based dynamics on the exercise and option price, then teams can begin to capture more of the ticket value they currently give away to the secondary market and ticket brokers.

Teams need to shift their focus from creating new ticket promotions and all-you-can eat packages to controlling a market in which they are the content owner, or at least balance it between the two. As much, if not more money is left on the table from not capturing full value when demand is high as is lost by not selling tickets some tickets at today’s discounted prices. If teams focus on the higher margin opportunity, they can help bolster revenue without even selling a seat.

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6 Responses

  1. I think the sporting Industry will find that using a system such as optionIt not only will allow the team to capture secondary market revenues but also will ingratiate themselves with fans by empowering the fan with the flexibility to fine tune the risk of purchasing tickets with a smaller up front cash outlay. I think that everyone at one time or another has been stuck on tickets they bought for friends, buying the option not the ticket and providing a market place for it gives the fan an easy out in case some pass on the event come game time. The guys at optionIt are simply providing a service that has already proven itself a thousand times over in the financial world. Recently a wonderful paper was written on just this subject by University of North Carolina’s Kenan-Flagler Business School entitled “Consumer Options: Theory and an Empirical Application to a Sports Market,” I will leave a link to it for all that are interested. I think this is the tip of the iceberg on this optionIt story.
    http://newsinfo.iu.edu/news/page/normal/10464.html

  2. Tom,

    Really nice of you to say that. We are getting good results and traction with our business model and have been embraced by fans.

    If fans can’t get tickets via the primary marketplace and are forced to buy from the secondary, they much rather pay an option premium with the knowledge that the revenue is going to the team that is putting the product on the court/field/ice, etc. And the flexibility and convenience is something that has actual value for the fan, as you point out.

    Regards, Mark (CEO, OptionIt)

  3. The manner in which OptionIt’s website is designed is at the very least confusing and arguably deceptive. I made a purchase believing that I would (if I chose to exercise) pay the option price, then the difference between the option price and the advertised face value. What I was mistakenly getting myself into was purchasing two tickets with a face value of $78 each for a total of $382. When I was referred to the ticketmaster website to pay the balance I was certain there had been a billing error. Not only did I pay $150 for the option of spending another $156, OptionIt had the nerve to tack on a $22.00 “service fee” as well. I emailed OptionIt for clarification and the response was a terse reference to the Terms of Service. I asked how I could go about selling my option and was told it was too late because I had already attempted to exercise it.

    I’ll be sending a letter of complaint to the SJ Sharks and hope I get some TV time while trying to enjoy my $382 tickets wearing my “OptionIt is a ripoff T-shirt”.

    • Sorry you did not have a good experience– we try to make our website as clear as possible. What you failed to mention is we spoke on the phone and once I explained everything to you, you seemed to be satisfied and clear about how the system works.

      Being a season ticket holder, I’m sure you know that tickets are incredibly difficult to come by, and that tickets on the secondary market sell for far more than face value, particularly for the Penguins game. Using OptionIt, the option premium plus the face price of the ticket is significantly less than the secondary market.

      As for the service fee, we do not charge that. It is charged by the team’s primary ticketing provider, which is also stated clearly on our website.

      Sorry we did not make things clear enough for you and that you can’t be satisfied.

      • Mr. Mastalir,

        You must have me confused with another dissatisfied customer as I never spoke with anyone from your company by phone. Perhaps you’d like to publicly offer a justification for charging a $22.00 (actually I believe it was $22.50) service charge on top of the $150.00 fee for the option of spending another $156. Isn’t 100% of the face value enough!?

        Your representative suggested (by email) that I attempt to sell the tickets elsewhere. Who is going to pay $382 for a pair of $78.00 tickets?

        People are hurting in this country and they are tired of being ripped off. You have an interesting concept but ought to re-examine your business model. How long can you sell second-rate regular season tickets at 100% markup(with a 15% service fee tacked on as well)? Eventually, even people with money to burn are going to get better seats for less in the secondary market. Are you not trying to capture that secondary market?

        In the meantime, I’ll continue to spread the warning as best I can. There are bound to be more like me out there. It’s just a matter getting out the word.

  4. I have used OptionIt as well and I have to say I had a completely different experience then the person who calls option it a rip-off.
    First of all I think that this statement posted on the OptionIt web site makes things pretty clear
    “The amount you pay to exercise your option is in addition to your initial option purchase. For example, if you purchase an option for “2 Glass Seats plus 1 Zamboni Ride” you would pay $150. If you exercised your option, you would pay an additional $750, meaning the total amount paid would be $900 (please note that for Zamboni Rides, only one person can ride).” Option price + face value = ticket price
    I know there are three pieces to this puzzle but I believe they fit together pretty easily. The game I purchased options for I have already been in attendance so I thought it best to just use a current market value and availability for my example. As of this morning 11/02/09 on OptionIt there is a option available for a Ravens Ticket on the Ravens Pittsburgh game on 11/29/09 (ticket sec 527 row 31 seat 11) with a option price of 89.$ for a face value ticket of 95.$ dollars. So 89.$ + 95.$ = 184.$, then the primary ticket provider charges a convenience charge and a processing fee that adds up to roughly 15% of the face value of the ticket, that is 15% of 95$ = 14.25$ so option value 89$ + face value 95$ + fees 14.25 = final price of 198.25.
    Now if go over to a very large secondary market like stubhub we find that in sec 527 for that game there are three tickets available the least expensive being 259$ for ticket sec 527 row 27 seat ? (No seat # provided). So 259$ + 10% service fee 25.9$ = 284.9 final ticket price. Well my OptionIt ticket would end up 86.65 less than stubhub or roughly 30% less, I will gladly pay 30% less from one website to the other on something I want, that’s just good comparative shopping makes a lot of sense to me. I do feel for the guy who had a difficult experience, but come on 30% less is great. Please don’t stop what you’re doing OptionIt I will be gratefully using that website over and over again.

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