Ticket brokers and the Super Bowl

This article caught my interest.  It addresses speculation in the market for Super Bowl tickets.

In ticketing, short selling works like this: A speculator offers to sell a ticket they do not own, for a price above where he thinks the market will ultimately end up. At the time of the sale, this may seem like a good deal. Following the normal ticket market demand curve, as the event gets closer, prices drop…

…For last year’s Super Bowl in New York, the cheapest ticket on game-day was going for around $1,500. If the same pattern held this year, a spec seller who sold their ticket for $2,000 after the conference championship would pocket $500 and a 33% return for their week’s worth of work.

A 33% return is nice for one week’s worth of work, except when the market goes the other way:

With the cheapest pair to the 2015 game now going for $10,000, those same sellers are now looking at losses of up to $8,000—for each ticket. 

Oops.

The cheapest face value ticket for this year’s Super Bowl was $1,200, which is $8,000 less than what you can get now on the secondary market. With nothing particularly different about the match-up, the participants or the location, those kinds of numbers suggest that the market is rigged.

The alternative explanation is that ticket brokers went heavily into short positions, unexpectedly encountered  unfavorable market conditions (538 has historical pricing) and consequently ran up ticket prices when trying to cover losses.  Simple as that.

While those with access won financially this year, they’ve done so at the expense of the fan, their own integrity, and the consumer’s trust in the ticket market. 

Please.  The same can be said for last year, and we know that the winners in last year’s markets are the losers in this year’s market.

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43 thoughts on “Ticket brokers and the Super Bowl

  1. I am trying to think of an event where I would be willing to pay 1200-1500 dollars for a ticket. I can’t really think of one.

    And people complain about how theatre tickets are too expensive.

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    • I’d venture to guess that is because the events you are likely to picture are not unique in the way that sporting events are.

      There is only one Super Bowl every year. Imagine how much tickets would go for if a given play, concert, or opera were performed once a year.

      Furthermore, this Super Bowl will be nothing like the 40-some-odd Super Bowls beforehand and nothing like the Super Bowls to come. It is literally a once-in-a-lifetime event. Now, it could suck. It could be great. It could be middling. No one knows! You can make reasonable assumptions about both the entertainment level of the game AND the historical legacy of it based on the participants and other factors, which is why you see some ebb-and-flow in pricing year-to-year (other variables also factor in, primarily location).

      So, now move beyond that play being performed but once a year, and imagine that this year’s rendition has Kristoff Waltz and Jennifer Lawrence and this might be the only time they appear in the performance — either together or individually. And they’re doing your favorite show! Sure, they might bomb or have no chemistry. But, holy crap, they might totally nail your favorite show and offer a transcendent performance! Suddenly, you might be thinking, “Ya know what… $1200 for a literally once in a lifetime performance of my favorite show doesn’t seem so bad.”

      Now… I will say that I don’t think I’d ever pay that much to attend the Super Bowl unless I attained a degree of wealth in which that was a rounding error. But I understand why others might and, more importantly, why the Super Bowl specifically and sporting events in general aren’t comparable to most other types of performances.

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  2. I hereby preemptively declare that this is one item which can completely, and justly be left to the marketplace.

    That is all.

    P. S. And I denounce Stalin.

    P. P.S. And Sharia Law.

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    • See the link I provide below, wherein a number of people are not only missing out on an experience they were looking forward to, but also might be out thousands of dollars they spent on flights and hotels with possibly no opportunity to recoup. All because (potentially) of vague fine print.

      I’m generally a pro-market guy. But when the fine print — which is written by the side with the balance of power in the negotiation — is vague, I support resolving these matters in the court and deciding on behalf of those who didn’t write the contract, who couldn’t have been expected to know better, and who didn’t attempt to mislead anyone.

      You want to write 30 page of fine print? Fine. But be perfect about it. If you fuck up, that’s going to be on you.

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      • On the other other hand, if your rich enough to afford a 1000 plus buck ticket (and the concomitant expenses for meals, travel, and lodging), you should have the wherewithal to rad all the fine print – and if you don’t want to do it yourself, hire someone.

        They definitely should have the wherewithal to hire someone after the fact. Thus, given that relative equality in socioeconomic and political power, I’m *still* fine with leaving it to the market. The people that are able to buy these tickets are like the privileged investors that are able to invest in firms without the SEC getting involved.

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      • That totally misses the mark. How many of us have taken a $3000 vacation in the last year? And, again, if the buyer wrote the terms, so be it. But the seller wrote the terms. So he is responsible for everything in there. Failed to acknowledge that tickets are not guaranteed? Guess what… that makes them guaranteed and you liable for failing to fulfill the contract.

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  3. What people are angry about isn’t who made or lost money in this market. It’s that they thought they had a ticket, and then found out at the last minute that they didn’t, because their broker either couldn’t find a ticket at all or couldn’t find one at a price they were willing to pay, so they offered a refund instead. (This particular story does a terrible job of making that clear.) And a refund is not very appealing if you’ve already paid for a hotel room (not cheap during the Super Bowl) and flights, none of which is going to be refunded.

    The question, which none of the stories I’ve read about this describe well, is how clear these brokers make it that there’s no guarantee that you’ll ever receive the ticket you just “bought”. When I’ve bought sports tickets on the secondary market, they’ve been for specific seats and I’ve been able to see them immediately, so I have no experience with this sort of speculative “purchase”.

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    • http://espn.go.com/nfl/playoffs/2014/story/_/id/12255886/hundreds-super-bowl-tickets-fall-through

      Some brokers offered three times the price paid while others offered a 20% bump over price paid. Others are still in negotiations.

      It seems that the ‘fine print’ often did not explicitly say that tickets were not guaranteed, but nonetheless excused the brokers of any liability. Which to me seems like a break down in how we handle contract law. You should not be able to exclude one’s self for liability for actions not actually covered by the contract. If the contract said, “Tickets are not guaranteed. In the event we can not secure your ticket, here is how we will respond. This is non-negotiable and we are not liable for any damages as a result of failure to secure the ticket,” so be it. But if the contract says, “$3000 for a ticket. Also, we’re not liable, ohbytheway,”… well, not liable for what exactly? I would interpret that as, “I can’t complain about a refund if my seat is in the nosebleeds.” I would not interpret it to mean, “I could get stiffed on this deal and all associated costs for what seemed like a guaranteed offer-to-sell are wholly my own.” And the brokers themselves should not get to unilaterally decide which interpretation is valid. That should be a matter for the courts and I hope the stiffed buyers sue and, if the language was deliberately left vague, the matter is decided in their favor.

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      • It seems that the ‘fine print’ often did not explicitly say that tickets were not guaranteed, but nonetheless excused the brokers of any liability. Which to me seems like a break down in how we handle contract law.

        Other than failure to produce the ticket, what other kind of liability could it be?

        I would interpret that as, “I can’t complain about a refund if my seat is in the nosebleeds.”

        Unless a specific seat is promised, then I don’t think that would apply. If a broker promises a ticket for a TBD location in the stadium and produces a ticket, then the broker has met the terms of the deal.

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      • Dave,

        I’m referring to what the buyer understands. Yes, one should do his/her homework when spending thousands of dollars. But if Page 1 says “Buy your tickets!!!” in size 72 and page 47 says “Tickets not guaranted.” in size 7, two different claims are being made. One tells me I bought a ticket, one tells me I didn’t. Why give deference to the seller and the deliberately obscured claim?

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      • But if Page 1 says “Buy your tickets!!!” in size 72 and page 47 says “Tickets not guaranted.” in size 7, two different claims are being made. One tells me I bought a ticket, one tells me I didn’t. Why give deference to the seller and the deliberately obscured claim?

        I wouldn’t give a seller any deference in that situation. I’m a fan of disclosure laws for reasons such as this.

        My point is that I’m not sure how much is being obscured, deliberately or otherwise. I’m also not sure whether or not buyers are ignorant to this sort of thing. It’s not an uncommon practice.

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    • Exactly. But what the “buyers” fail to understand is that they didn’t make a purchase, they made a speculative purchase. If I was selling tickets, I’d not be so fired up to point out that there was a risk they wouldn’t get the ticket if I couldn’t get it first, but hey, you’d think the fans wanting tickets would understand this…after all…like you said, the seller most certainly DOESNT have the tickets in had to show the buyers….

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      • If I was selling tickets, I’d not be so fired up to point out that there was a risk they wouldn’t get the ticket if I couldn’t get it first,

        That is, you’d be in it to find suckers rather than customers? Actually, I don’t believe that. I think you like to talk tough, but you’re really quite a decent person.

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    • (This particular story does a terrible job of making that clear.)

      The author is a ticket broker himself. That would explain why the story lacks any accountability on the part of ticket brokers.

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  4. The story is much more clear to me now. I read spec as just another form of scalper and the story provided more ins and outs of who gets Superbowl tickets and when.

    Yeah, I don’t think Superbowl tickets should be allowed on a short sell.

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  5. Am I the only person here who doesn’t understand why ‘ticket brokers’ *exist*?

    If you’re willing to buy tickets months in advance, why is there someone acting as a delayed middle-man?

    The unstated assumption here seems to be that tickets will *become* available before the game for $1500, and brokers can hand them off (And that failed here), which is completely baffling to me.

    Were they not available earlier? Were they more expensive earlier?

    How does this make any sense as a business model?

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      • Doesn’t work that way. If an asset’s price predictably rises faster than the risk-free rate of return, then you can easily make money by buying it long. If you can easily make money by buying it long, then investors will do so until the current price is high enough that this is no longer true.

        All of which is to say that price of tickets a year before the event is roughly equal to the net present value of the expected price of a ticket shortly before game day (or whenever it peaks). Since expectations of the peak price fluctuate, so does the current price.

        Look up Hotelling’s Rule, and of course the EMH.

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      • Yeah, this is all well understood. The fact that the market in Super Bowl tickets acted quite entirely differently last year and this year is just an irrelevant detail.

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      • Well, yes.

        My claim is that the market price of a ticket does not predictably rise at a rate significantly exceeding the risk-adjusted interest rate. The fact that it does that sometimes (i.e. unpredictably) is entirely consistent with that claim. Clearly the brokers weren’t predicting it.

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    • It worked last year. And I’ve seen other situations where it would. Consider some big event like the Super Bowl or a Stones concert. Say a ticket’s face price is $500. After all of the tickets have been bought up, there’s a wide range in the price of tickets for resale, The cheaper ones get bought, and the more expensive ones in general don’t, so the cheapest available ticket might be (say) $2000. As the event gets closer, prices start to come down, because sellers do not want to get stuck with unsold tickets. They might even get sold for a loss, because getting $200 for a $500 ticket is still better than getting nothing.

      So say we’re well in advance of the event, and the current price is (as we guessed above) $2000. If the broker expects the day-of-event price to be $1000, and he can sell the promise of a ticket for $1500, he’s made $500 and his buyer has saved $500. Win-win. If he’s wrong, and day-of-event is $1500, the broker breaks even (minus transaction costs) and the buyer still saves $500. If there’s way more demand than anticipated (possibly because there are now way more brokers), day-of-event is $3000 and the broker is totally screwed.

      Now, if this were a local event, not that big a deal. The broker refunds the $1500 (really, he should refund some interest as well), and the buyer learns that if you want a ticket you should buy a damned ticket. It’s the fact that the buyer has spent a significant amount of money for now pointless travel and lodging based on the unfulfilled promise of a ticket that makes the situation so ugly.

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      • As the event gets closer, prices start to come down, because sellers do not want to get stuck with unsold tickets. They might even get sold for a loss, because getting $200 for a $500 ticket is still better than getting nothing.

        …except that there is last minute market that should need tickets desperately: *The ticket brokers*

        Which means this entire operation is, basically, premised on a scam. You point out that below that it is a cool (aka, scammy) business model to short-sell things and not be on the hook for actually supplying them, but it’s even scammier than that.

        If brokers *had to* supply the tickets they had supposedly short sold, then prices would *not* drop at the last minute. People would hold the line on the price, hoping a broker gets desperate enough to buy one.

        The only reason the brokers can even exist is that they can threaten to walk away from a transaction they already made. If they couldn’t, and people knew that, then people would gouge them, rendering the entire model nonsensical.

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      • You’re leaving out one important factor: the percentage of tickets that go through brokers. If it’s small enough, they’re not driving up each other’s prices. Which makes it a successful business, which brings in more competition, which raises that percentage, and so on until this year, when it all went boom.

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      • There are already lots of sites that match buyers and sellers directly. These guys exist specifically to arbitrage price movements.

        But if you think about it, it’s a really cool business model, effectively short-selling with no margin calls and the right to cancel the whole transaction if it’s not going to be profitable for you.

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      • Well, yes, such a person would be called a ticket broker. But that wasn’t what was described here.

        My question was more ‘How does a system in which people short-sell tickets to the Super Bowl…operate?’.

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    • Like all futures markets, it’s a way of arbitraging risk. The buyer locks in a price, and the broker either makes a profit or loses money based on the price at which he is actually able to obtain a ticket.

      The only real problem here is the lack of a good escape clause. If brokers are contractually obligated to provide 11,000 tickets out of 10,000 available, then it doesn’t matter how much loss they’re willing to eat—it’s just not happening. Ideally, buyers would specify in advance how much they would accept as compensation for failure to produce the ticket and pay based on that. So if you pay $2,000 you just get the $2,000 back, but if you pay $2,500 then you get $5,000 in the event the broker can’t get you a ticket. Or something like that. I’m just making up the numbers.

      This is a win-win proposition. The buyer pays the broker to take on risk instead of the buyer.

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      • I’m not getting how the buyer benefits from this transaction more than by buying a ticket directly and having 100% surety that they now possess the ticket. Seems to me they benefit less, because they might never get a ticket and have to eat all the lost costs.

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      • The price that the buyer pays is less than the price of currently available tickets, so they get the price reduction in return for the risk of not winding up with a ticket. (Though it’s not clear that the brokers made it clear that that risk existed.)

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