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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New Ticket Offers: Innovative or Another Reason to Worry?

In this blog, I’ve previously lauded the Cleveland Indians for cross-marketing deals with the Browns and creating ancillary revenue streams by hosting dinners on the field and additional events outside the game. However, after the Tribe recently announced another cross-marketing deal, this time with the Blue Jackets, a few weeks after owner Charles Dolan claimed the team would lose $15-20mm this season, I’ve started to question how far teams should take these off-field deals.

Cleveland is not alone, as most major league teams are trying creative ways to move ticket inventory – and many continue to struggle as much or more than the Indians, notably Pittsburgh, San Diego, and Tampa Bay. When evaluating company stocks, I always feel that when a company starts introducing products or services it has maxed out a saturated market (i.e. Coke/Pepsi moving outside Colas) or its struggling and started to scramble. The day the ice cream shop down the block started selling potato chips and sandwiches, it was clear the ice cream business was not doing well and the store was doomed. Best Buy selling outdoor patio furniture is another example of a sign that a company may be struggling with its core competencies and in for a rough patch.

It’s no secret Cleveland is struggling, but have they become desperate? Running cross promotions with the local hockey team a month after trading away your two best players for financial reasons may come off as more gimmicky than value-add to fans and customers. I’m sure team management asks these questions of themselves before embarking on these initiatives – does it align with the brand, what is the benefit to the fans, what does the cost-benefit trade-off look like, etc. In addition to the quantity of these non-baseball deals serves notice that the team is really struggling, the totality of the deals also serve notice with fans, and can dilute the brand as it becomes less about baseball.

The Indians face a tall order. The region has a number of cities struggling due to the recession (a recent news publication listed 8 of 10 top struggling cities in the Rustbelt area) and due to its on-field struggles Cleveland unloaded its most recognizable stars at the last two trade deadlines. Now its left with a team of disappointing signings (Hafner) and many unknowns, struggling to sell tickets, bleeding money, and no saving grace evident. It’s somewhat haunted by signing Fausto Carmona and Hafner to early contracts with the good intention of locking them up, but the lasting effect of clogging payroll on two underachievers.

They can’t blame the ballpark like a Florida Marlins or Minnesota Twins, though the Twins don’t have the same attendance problems. At this point, do these additional business deals risk diluting the baseball brand and losing more core fans, while not attracting new fans who view the promotions as gimmicky. Or can the team actually use these marketing deals and promotions to remain sustainable while rebuilding the team? An interesting question that will play itself out in baseball over the next season or two in cities like Cleveland and San Diego, with business savvy staffs and struggling teams.

Teams Not Adding Value, Exhibiting Innovation With Ticket Offers

Darren Rovell wrote this week that only a handful of teams immediately offered partial season ticket plans following the release of the full NBA schedule, a somewhat surprising revelation given the expected difficult ticket market projected for the upcoming season. It begs the question if teams are doing enough, and how risky is lowering prices on the long-term stability of ticket sales.

First, I’m shocked that in this day of emerging social media and fan engagement that no team (from the information I gathered) ran any prediction contest to win tickets. Here’s 41 home dates, pick who we play on which dates, most right gets tickets to the game of their choice, second best gets the option to buy tickets to any game at any price point, or something along those lines – what day will the team first host Lebron, closest date wins tickets, etc. That would at least serve to stir up engagement, incentivize fans to start to following on its various platforms building the customer database, and serve as a platform to publicize ticket offers. The perfect engagement opportunity during what amounts to a dead period in the NBA, but little action.

Next, teams should be wary of aggressive price cuts this early in the sales cycle, yet need to flex innovation to move tickets. Creating multi-game plans that force fans to buy 6 games in order to see Lebron or Kobe is old hat. A still fledgling, unproven is bundling tickets from multiple sports – a Hawks-Braves partnership, or a Rangers-Mavs bundle. Another popular plan is the “Pick-A-Plan”, essentially an a la carte multi-game ticket package. Teams could put a different spin on this, allowing fans that purchase this a la cart plan before a specified date to create a theme around the games they pick, then the team can pick the best four and put them for sale for one month, the person whose plan sells the most gets a full refund on the tickets. You can try to unify the fans that buy each of these ticket packages into the same section, create some camaraderie, and make the experience meaningful.

What teams should avoid is slashing prices too early or without recourse. This week, the Texas Rangers announced discounts up to 75% on some weekday games the rest of the season – mind you, this is a team in the playoff race with improved attendance over last season. But offering these cheap tickets without adding value to the early buyers sets bad precedent for future fan action. In conjunction with this offer, teams unloading last minute ticket inventory should offer current ticket holders seat upgrades at low prices, making upgrades available only to fans that purchased prior to a certain date, or to season ticket holders in less preferred ticket positions. Provide an incentive to hold a ticket, and give those that purchased an advantage. Then back fill available tickets that upgraded in the low price, last minute offering. It’s possible to double incremental revenue, while maintaining the incentive for early purchases.

Many teams are publicly stating financial losses. It will be interesting to see what, if anything, struggling baseball teams due to lure fans out down the stretch, and what the numerous NBA teams that did nothing to improve during the off-season

Cowboys Prove Ticket Demand Still Exists – At the Right Price

…and that price is different in every city for every team at every stadium. The Cowboys are the team in Dallas. Though the Mavs sell out and the Stars usually do well, the Cowboys headline that city. Jones built a palace, charged the highest prices around – $16-150k per PSL as reported by SBJ – and he is still on the brink of selling out the Stadium, coming off a disappointing season no less. Jones knew the market and did an excellent job of extracting maximum value.

On the other hand, look at the NY market. The Yankees, Mets, Jets, and Giants have all failed to an extent, mispricing tickets and leaving revenue on the table. If you view ticket pricing and ticket plans as a negotiation with your fans, as with any good negotiation you need to wait for the best opportunity to come with your best offer. Its arguable that both NY baseball teams came to fans with an offer to benefit the teams at a time when neither had any leverage in the situation.

First, the economy clearly hurt, but that’s out of the teams control, though they could have reacted better by making changes on the fly and won some equity with fans. Second and somewhat overlooked, they are all entering the market at the same time. Part of the allure of new stadiums is the differentiation factor. The NY sports market essentially offset each other on this factor by opening stadiums and selling PSLs all within a few months span – that’s four fan bases, with a lot of overlap smacked upside the head at the worst possible time. Another point, which is minute in this instance is that outside of the Giants none is coming off a recent championship or even a playoff season, and no player has arrived that can move the needle on ticket sales since A-Rod. Since all four teams do spend in free agency and have star players the argument holds less weight, but it’s another point to keep in mind.

The point here is that the lack of differentiation in the NY market for new facilities and the current situation gave the fans leverage in the ticket pricing “negotiation”. This leverage drove down demand, however the teams priced tickets at the point where demand may have been if their stadium was the only new one and they were the only game in town – similar to the Cowboys. It’s not that today’s sports market can’t yield these prices, its that teams can’t operate in a bubble, they need to become more keenly aware of the external environment and remain flexible.

This applies to smaller market teams, who may not receive criticism for high prices, but still play to half empty stadiums. Think bigger than just your team. Management is smart enough to do this and always talks about, yet it often does not show up in practice.

Smart Trend: Intra-City Team Business Partnerships

It makes so much sense you wonder why it didn’t happen sooner. Yet, its still an odd pairing that could be viewed as befriending the competition. Last week in Cleveland, the Indians and Browns announced a ticket partnership to bundle suite sales for baseball and football games into a few select packages. That followed the joint marketing effort started a few months ago in St. Louis that had the Blues and Cardinals providing each other signage and in-stadium promotion to help push ticket sales.

Though teams in the same city compete for the same entertainment dollar from mostly the same fan base, a partnership opens the door to add more value for both parties than could be done alone. First, it creates new ticket bundling plans that combine games in both sports, similar to the Browns-Indians deal. It’s a value add for customers who may only attend a few games per year, particularly family plans.

As the Cleveland package does, it’s a way to sell suite inventory for individual games, which I’d assume is tough inventory to move since it does not appeal to the everyday fan, and most corporations and wealthier fans probably opt for season packages.

Intra-city partnerships also open the market for road trip packages, currently sold mostly through ticket brokers and sports travel companies. While teams probably would not earn any additional revenue for selling directly relative to through a sports travel firm, however if the teams create the offer they have more marketing muscle to put behind the initiative, which would likely increase sales and the teams can easily add more value to make the package more appealing.

Another benefit, teams immediately double their ticket sales staff. I know that’s a bit of a stretch, but in essence you now have another entire sales staff pushing tickets to your game. More manpower never hurts.

The St. Louis deal focuses more on promotion and marketing, and what better way to reach your target market than at another major sports event in the same city. While every fan may not cross-over between sports, it’s certainly a high correlation. Advertising during a game (in arena or on radio/TV) probably reaches a higher percentage of potential fans relative to the overall reach of the message than any other advertising, other than during a team’s own games. Given the current state of advertising, if exchanging some ad time and in-arena signs can help sell some season-ticket packages and suites, it results in a net revenue gain. Plus, new customers have higher expected future revenue and ancillary in-arena revenue opportunities that far exceed advertising revenue.

Don’t expect the Mets and Yankees to start jointly selling tickets, or maybe any New York teams to partner, but teams in many markets can mutually benefit from this arrangement, particularly smaller-market, lower-revenue teams, such as Cleveland. And it makes more sense to partner with teams that have opposite seasons – for example baseball and football, or baseball and basketball or hockey. Teams like Pittsburgh or Kansas City would likely benefit from the strength of the football team, while a place like Buffalo with only two professional teams is also a logical spot. The possibilities are endless, the benefits definitely tangible.

Tampa Rays Attendance Just Fine

Not many teams win a division and finish in the bottom five in attendance in the same season. Tampa Bay is on pace to do that – and they should be ecstatic with the numbers. Rome was not built in a day – Rays fans can attest to that. Using average per game attendance and percent capacity as indicators, Tampa is up over 25% per game from last season, approximately a 10% capacity increase. Those numbers deserve applause, both for the teams improvement and the fans for coming out.

The last time Tampa didn’t finish last in percent capacity, the Expos still existed. Standing 26 out of 30 doesn’t sound like an accomplishment until its compared to finished a distant 30th each season.

Last week star pitcher Scott Kazmir criticized fans for not turning out for a first place team embroiled in a pennant race. Critics argued Tampa-St. Pete does not deserve a professional team because they don’t support it. Timeout, hold the bus. The Rays were a disaster since their inception, never finished above .500, and only topped 70 wins once. Ownership didn’t spend smart, the stadium stinks, the franchise was a laughingstock. Meanwhile, its expansion-mate Arizona paraded to a World Series and subsequent playoff appearances and down state the Marlins won a title. Rays fans got the middle-finger for the first ten years of the franchise.

It takes more than 5 months to undo ten years of damage. Players, management, and critics need to remain patient. The team should – and observing how their new management operates, they will – view this as a stepping stone to catapult attendance next season and going forward. Come playoff time, fans will sell out The Trop, more than some other teams can boast (ahem, Atlanta).

They will finish with by far the biggest year over year attendance increase. Instead of spewing negativity, commend fans for not throwing the towel in on the franchise. Commend fans for showing up at a god awful stadium that has no right housing a professional team, or any team for that matter. Rome wasn’t built in a day, neither is a brand or a franchise. Ten years of damage take more than a few months to overcome. Hold judgement until playoff time and next years season ticket sales. Things are heading up in Tampa.

Inject Interest Back Into The Derby: Integrate Community and Sponsors

News circulated late this week that batches of empty seats remain on sale for Monday’s Home Run Derby at Yankee Stadium, despite baseball stating that the event is sold out. Especially with the ultra-inflated prices of this year’s All-Star week festivities, why would 55,000 people want to buy through the roof to watch a handful of players the casual fan needs an introduction to.

Star players shun the Derby, of the 7 confirmed participants only two are repeat All-Stars. What happened to the days when the stars came out, Junior Griffey off the warehouse in Baltimore, McGwire bombing away at Fenway, Bonds with his walk-off win, Giambi back in his hay day. All memorable moments. ESPN says its the highest rated event of the year outside football season. Ratings aside, the event needs fresh blood or it’s at risk of hitting a downslide.

State Farm currently sponsors the entire event, however with 8 individual players hitting, additional marketing and sponsorship opportunities exist. One idea that may entice more players to participate is allow them to play for their chosen charities. Most players already work with a charity or run a foundation, the opportunity to publicize their message and earn corporate dollars could bring more stars to the table.

Taken a step further, get a sponsor for each player. Talk about valuable marketing. The five or ten minutes that a player bats, then gets interviewed, is valuable advertising time. SInce most players already have marketing deals, using one of their pre-existing sponsors would make the most sense, and an arrangement must be made with State Farm to not infringe on their sponsorship of the event.

Tying the two ideas together, the sponsor for each player can donate a set amount of money per homerun to the selected charity or foundation. Another twist on this is to select a team from 8 local Little Leagues to be on the field, each supporting one of the players. That player could play for the Little League supporting him. A great community outreach opportunity. Baseball can’t provide on-field incentives for home run derby, as they do for the actual game to entice players to play hard, however a few other ideas could help generate interest.

My mantra with sports is always interactivity. Fantasy games are everywhere else, why not integrate the in-stadium and home viewers with the event. Start fantasy homerun derby game, pick the winners, pick a team with the most home runs given a set salary cap (obviously each player will have a fictious salary number attached based on home run prowess). Play against your friends, play against all fans, or play against other All-Stars not participating. They always sit on the field and cheer for fellow All-Stars, have them involved online with the fans. Perhaps even a live blog by a player sitting on the field.

A lottery promotion could be interesting. Fans submit a set of numbers as their guess for either the home runs by round of the champion, or total home runs hit in each round, or most home runs hit by an individual in each round, possibilities are countless. Of the winners, pick a grand prize winner to get a signed bat from the champion and a promotional gift from one of the sponsors.

Home run derby needs an infusion of energy. While it’s great to introduce Evan Longoria and Ryna Braun to the world, the fans want to see A-Rod go head to head with Pujols, get Ryan Howard against Prince Fielder in a heavyweight battle – that brings up another point, throw out the rule that only All-Stars can participate. If the big names don’t want in, open it up to the best home run hitters period. Fielder and Howard are names that draw interest.

Now that I think of it, one-on-one matches, like the old school home run derby show from the ’50’s and ’60’s would add spice to the event. Set it up tournament-style, AL players face off against each other, NL players likewise, then winner of each league in the Derby Series. It opens a whole new world of outside interest. Heck, Vegas can even put a line on each matchup – not that gambling spurs any interest.