Idea Submission Impossible? A Brief Overview on Ticket Scalping

retrieval system without the express written consent of the American Bar Association.

A PublicAtion of

the AbA forum on

the entertAinment

And SPortS induStrieS

Volume 30, number 2

noVember 2012

User-Generated Content: Recent Developments

in Canada and the United States

Idea Submission Impossible?

The Battle between Copyright and Breach

of Contract

A Brief Overview on Ticket

Scalping Laws, Secondary

Ticket Markets, and the

StubHub Effect

PROFILE

Outgoing

Editor-in-Chief

Vered Yakovee

by Shelly roSenfeld

by eric Schroeder, JoSh fiSher, John orbe, And John buSh

by tyrrell duPey

“There are only thirty-six fundamental dramatic situations, various facets of which

form the basis of all human drama.”

—Georges Politi, The Thirty-Six Dramatic Situations

JERRY: So, we go into NBC, we tell them we’ve got an idea for a show about nothing.

GEORGE: Exactly.

JERRY: They say, “What’s your show about?” I say, “Nothing.”

GEORGE: There you go.

(A moment passes)

JERRY: (Nodding) I think you may have something there.

BACKGROUND AND THE ECONOMICS OF TICKET SCALPING

he forces of supply and demand interact to help set the price on goods. In a

perfect market situation, a good that is in limited supply, such as a ticket to

a baseball game, would be sold by the supplier for the highest price that the

market can stand. However, ticket suppliers (i.e., teams) routinely sell tickets for less

than the highest price the market can stand. There are various reasons for this prac-

tice, including the desire to have consistent sellouts or develop a sustainable fan base.

ered Yakovee did not always

think she would get into sports

law, but had always hoped that

she would. “It has always been ‘I need to

make this happen,’ instead of ‘It will just

happen.’ I worked hard to learn about

the industry and to meet people.” Her

hard work has paid off. Today, Yakovee is

a prominent lawyer in the areas of sports

and insurance coverage law.

Even when applying to law school,

Yakovee did so because she hoped she

would work in sports, which were always

a part of her life. In high school, playing

basketball was central to her assimilation

after she moved from Athens, Greece,

to Los Angeles after ninth grade. In col-

lege, she interned for San Diego’s ABC

afliate in the sports department, and sub-

sequently worked as a runner for ESPN’s

X Games. After obtaining her Juris Doc-

torate from the University of Southern

California (USC), Yakovee continued on

that path, including volunteering for the

Southern California Outrigger Racing

Association (SCORA).

Yakovee rst started volunteering for

SCORA as its insurance coordinator.

She read insurance policies for ade-

quacy and gured out what an insurance

continued on PAge 22

continued on PAge 26 continued on PAge 33

retrieval system without the express written consent of the American Bar Association.

Because the tickets are sold for less than the market can bear,

a situation of excess demand is created. The existence of the

excess demand is responsible for the secondary ticket market.

Traditional ticket brokers, Internet sites such as StubHub,

and individuals selling tickets outside of venues comprise what is

known as the secondary ticket market. Despite attempts to regu-

late the secondary ticket market, which is sometimes referred to

as scalping, the market continues to grow. Some estimate that

the secondary ticket market is a $5 billion dollar industry, with

a forecasted annual growth rate of 12 percent. As the monetary

value of the industry increases, so do lobbying efforts by both

sides. Ticket companies such as Ticketmaster and large ticket bro-

kers such as Stubhub have stepped up their efforts in statehouses

across the nation and inside the Beltway, as part of an effort to

align the laws with their respective interests.

STATE-BY-STATE SUMMARY OF CURRENT TICKET SCALPING LAWS

The current trend in ticket scalping regulation is toward

leniency and acceptance of the practice. This movement has

taken hold in Congress where The Ticket Act (H.R. 950) seeks

“to prohibit restrictions on the resale of event tickets sold in

interstate commerce as an unfair or deceptive act or practice.”

Although The Ticket Act has remained dormant in committee,

the issue of ticket scalping has received greater attention from

state legislatures across the nation in recent years. Although

some states attempt to regulate scalping by introducing buf-

fer zones around venues or requiring brokers to be registered,

very few states completely ban ticket scalping. Instead, many

states, such as Missouri, Minnesota, and Connecticut, have

recently repealed their prohibition against scalping. (Note that

some cities have local municipal ordinances which restrict

ticket scalping beyond state regulations.) Additionally, state

bills attempting to regulate the secondary ticket market fur-

ther are generally unsuccessful as recently occurred in Colorado,

North Carolina, and Arkansas. It remains to be seen what out-

come awaits legislation pending in Massachusetts, New Jersey,

Tennessee, and Minnesota. However, given the current trends

toward allowing scalping, any attempts to ban the practice are

likely to be unsuccessful. For a brief state-by-state analysis of

current ticket scalping laws, see the chart begining on page 27.

RECENT LITIGATION AGAINST STUBHUB REGARDING TICKET

SALES IN THE SECONDARY MARKET

To date, two court decisions consider StubHub’s busi-

ness practices and whether StubHub is immune from suit for

enabling ticket scalping under Section 230 of the Communica-

tions Decency Act. The cases are summarized below.

NPS, LLC et al. v. StubHub, Inc. et al., No. 06-4874-BLS1,

25 Mass. L. Rptr. 478 (2009)

Summary. Defendant StubHub, which provides a web-

site through which people can resell tickets, including to NFL

games, moved for partial summary judgment on the claim of the

plaintiff, the New England Patriots (Patriots), who, along with

their co-plaintiff, had seating rights in NFL games, claimed that

StubHub intentionally interfered with advantageous relations.

Among other things, StubHub argued that the immunity of the

Communications Decency Act (CDA) shielded it from liability

to the Patriots. The Massachusetts Superior Court denied the

motion, holding that immunity under the CDA did not apply

and that the Patriots could still establish the elements of their

claim for intentional interference with advantageous relations.

Relevant Facts. The Patriots provide tickets to their home

NFL games in exchange for payment. Each ticket styles itself as

a license that cannot be transferred without the consent of the

Patriots. The Patriots had a relationship with TicketExchange

wherein a season ticket holder to Patriots games could submit

his ticket for resale to another interested attendee. Upon identi-

cation of a buyer:

1. The former ticket holder would be reimbursed for the cost

of his ticket,

2. The former ticket holder’s previously issued ticket would

be electronically voided,

3. The new ticket holder would be issued a new ticket, and

4. The new ticket holder would pay the cost of the ticket

plus a nominal fee.

StubHub provides a website through which people can sell their

tickets to those willing to buy them. The seller is required to send

the ticket directly to the buyer. StubHub, which is not licensed by

the Patriots to sell tickets, does not ensure that the sale complies

with anti-scalping laws. In return for providing its service, Stub-

Hub charges a fee based on the nal sale price and has a program in

place to provide benets to more frequent resellers of tickets.

The Patriots contended that a number of its fans had pur-

chased tickets through StubHub that were not valid. The

Patriots further contended that such invalid tickets damaged

the fans’ goodwill toward the team and increased the team’s

administration costs. The Patriots also contended that Stub-

Hub hid the actual location of seat sales on its website so that

the Patriots could not void the seats of those ticket holders who

were reselling their tickets through StubHub.

Procedural Posture. StubHub moved for partial summary

judgment solely on the Patriots’ claim for intentional interfer-

ence with advantageous relations.

Overview on Ticket Scalping Laws

continued from PAge 1

trAditionAl ticket brokerS, internet SiteS

Such AS Stubhub, And indiViduAlS Selling

ticketS outSide of VenueS comPriSe whAt

iS known AS the SecondAry ticket mArket.

retrieval system without the express written consent of the American Bar Association.

ALABAMA

Ticket scalpers must pay a

$100 license tax. (Ala. Code §

40-12-167)

ALASKA

No state ticket scalping laws.

ARIZONA

It is unlawful to sell tickets for

more than face value if within

200 feet of the venue, or to

change face value of ticket.

(Ariz. Rev. Stat. § 13-3718)

ARKANSAS

Scalping tickets to high school,

college, or charity events is

prohibited. Ticket resellers may

not mark up prices of tickets

to musical events but may

impose a reasonable service

charge, de ned as the greater

of a handling charge or a credit

card fee. (Ark. Stat. § 5-63-201)

CALIFORNIA

Without written permission,

may not resell a ticket for more

than face value while at the

event venue. (Cal. Penal Code

§ 346)

COLORADO

Bill to cap scalping prices

failed to pass in 2009.

CONNECTICUT

Connecticut’s prohibition on

ticket scalping was repealed

in 2007, and a bill introduced

to impose new limits failed

to pass in 2011.

DELAWARE

May not sell tickets for higher

than original price on the day

preceding or on the day of an

event at the Bob Carpenter

Sports/Convocation Center

on the South Campus of the

University of Delaware or of a

NASCAR Race held at Dover

Downs, or on any state or

federal highway artery within

Delaware. (11 Del. Code § 918)

Legal Analysis. The Patriots’ claim

was an amalgamation of (1) tortious

interference with contract, and (2) tor-

tious interference with a prospective

contractual relationship. The court iden-

ti ed the following elements for this

claim:

1. The Patriots had an advantageous

relationship with a third party

(e.g., a present or prospective con-

tract or employment relationship);

2. StubHub knowingly induced a

breaking of the relationship;

3. StubHub’s interference with the

relationship, in addition to being

intentional, was improper in

motive or means; and

4. The Patriots were harmed by Stub-

Hub’s actions.

For purposes of summary judgment, Stub-

Hub conceded that a material issue of fact

existed as to the second element but con-

tested the other three.

As to the  rst element, the court

found that the Patriots had an existing

business relationship with their ticket

holders and had a prospective business

relationship with people on the wait-

ing list to purchase tickets. As to the

third element of improper means, the

court found that StubHub’s program for

more frequent resellers might encour-

age violation of the state’s anti-scalping

statute. The court reached this ruling

despite StubHub’s policy that banned its

users from using its service unlawfully.

Moreover, the court rejected StubHub’s

claims that the CDA shield it from

liability. The court paid particular atten-

tion to the appellate decision in Fair

Housing Council of San Francisco Valley

v. Roommates, LLC, 521 F.3d 1157 (9th

Cir. 2008), wherein a website could not

apply for the immunity under the CDA,

47 U.S.C. § 230(c)(1), when it pro-

vided a search engine that segregated

individuals based on unlawful criteria.

The Massachusetts Superior Court con-

cluded that StubHub’s use of a frequent

seller program and apparent knowledge

of illegal scalping by those frequent sell-

ers foreclosed StubHub from applying

for immunity under the CDA. The court

surmised, however, that if StubHub had

merely provided a service and knew

of scalping through that service, then

A STATE-BY-STATE ANALYSIS

Current Ticket Scalping Laws

continued on PAge 30

retrieval system without the express written consent of the American Bar Association.

FLORIDA

Resellers may only charge $1 more

than face value for tickets (1) for

passage on common carriers, or (2) to

multi-day or multi-event tickets to a

park or entertainment complex.

Generally, tickets may be resold at

any price on a website if such resale

is authorized by the original seller.

Unless authorized by the original

seller, a website may resell tickets

at any price as long as it makes and

discloses the following guarantees:

• A full refund if the event is

cancelled, the purchaser is

denied entry for reasons other

than his own fault, or the

ticket is delivered in a way not

requested by the purchaser,

and this delivery results in the

purchaser’s inability to attend

the event.

• That the seller is not the original

issuer, seller, or reseller and does

not control pricing. This provision

is notable, as it seems to authorize

only a website that facilitates

third-party transactions (such as

Craigslist or StubHub) but not

direct resale by ticket brokers. (Fla.

Stat. § 817.36)

GEORGIA

Unlawful for anyone other than a

ticket broker to sell tickets for more

than face value.

May charge a $3 service fee when

tickets are sold by an authorized

ticket agent through places of

established business.

Owner/organizer of event may

authorize in writing any person to

charge a service fee for the sale of a

ticket in excess of the face value.

A sponsor of an athletic contest may

contractually restrict the resale of

a ticket to such contest by giving

notice of such restriction on the back

of the ticket. In addition, a sponsor

may contractually restrict the resale

of the right of occupancy of any

specic suite, seat, or seating area

by giving notice in writing of such

restriction.

Ticket broker requirements:

• Must apply to commission for

license and pay $500 annual fee.

• Must maintain permanent place

of business.

• Must disclose difference between

face value and amount charged.

• May only sell at permanent place

of business, or through Internet.

• Each broker, including afliated

brokers, may not purchase more

than one percent of total tickets

allotted for a contest.

• No person with a felony conviction

may be a ticket broker.

• For venues that seat less than

15,000, may not offer tickets for

resale within 1,500 feet of the

venue. For venues that seat over

15,000, may not offer tickets for

resale within 2,700 feet of the

venue.

People who buy tickets for personal

use may resell them at any price,

provided that such person does not

sell or offer to sell such tickets within

2,700 feet of a venue which seats or

admits 15,000 or more people.

Event organizer may provide an area

within the prohibited zone where ticket

brokers may lawfully sell tickets.

With regard to any single athletic

contest or entertainment event which

occurs no more often than once

annually and with regard to any series

of athletic contests which occur no

more often than once annually and

which occur within a time period not

exceeding 10 days, the municipal

corporation in which such contest,

event, or series of contests is to

be held, or if the contest, event, or

series of contests is to be held in

an unincorporated area, the county

of such unincorporated area, is

authorized to enact by ordinance

regulations governing ticket brokers

for such contest, event, or series of

contests which are more restrictive

than the provisions of this article.

The municipal corporation in which

an athletic contest or entertainment

event is to be held, or if the contest

or entertainment event is to be

held in an unincorporated area, the

county of such unincorporated area,

is authorized to enact an ordinance

prohibiting the resale or offering for

resale of one or more tickets by a

ticket broker or by a person who is

the original purchaser for personal

use of one or more tickets within

2,700 feet of a venue which seats or

admits 15,000 or more persons.

(Ga. Code §§ 43-4B-25 to 43-4B-31)

IDAHO

No state ticket scalping laws.

ILLINOIS

May not sell tickets at more than face

value unless sold by registered ticket

brokers, Internet auction houses, and

Internet websites.

Internet auction sites must register

with state.

Ticket brokers must register with the

state and pay $100 annual fee.

Ticket brokers may not sell tickets

“near” the venue or event.

A ticket seller, with consent of the event

sponsor, may charge a service fee.

An event sponsor may not restrict a

purchaser’s ability to resell a ticket if

the reseller is registered.

(720 ILCS §§ 375/.01 to 375/4)

INDIANA

Ticket scalping is not allowed for

boxing matches, sparring, or other

unarmed combat events. Whether this

would include professional wrestling is

unclear. (Ind. Code § 25-9-1-26)

IOWA

No state ticket scalping laws.

KANSAS

No state ticket scalping laws.

KENTUCKY

May not resell ticket for more than

face value unless authorized by ticket

issuer. (Ky. Rev. Stat. § 518.070)

retrieval system without the express written consent of the American Bar Association.

LOUISIANA

Tickets may not be sold for more

than face value except via the

Internet and, then, only if authorized

by the original seller and the reseller

makes and discloses guarantees that

it will issue full refund if the event is

cancelled, the purchaser is denied

entry for reasons other than his own

fault, or the ticket is delivered in a

way not requested by the purchaser

and this results in the inability to

attend the event. (La. Rev. Stat. § 4:1)

MAINE

No state ticket scalping laws.

MARYLAND

Selling tickets for more than face

value is prohibited in Baltimore. (B.

City Ord., Art. 19, § 55-1)

Boxing, wrestling, and kickboxing

promoters may not allow the sale of

tickets for more than the admission

price. (Md. Code § 4-318)

MASSACHUSETTS

Ticket resellers must have and

maintain a license issued by the state.

Licensed resellers may not charge

more than $2 higher than face value

but may impose a reasonable service

charge, dened as the reseller’s costs

incurred in procuring and reselling

the ticket. (Mass. Gen. Laws Ch. 140

§§ 185A–G)

MICHIGAN

May not sell tickets over face

value without the event sponsor’s

permission.

If a ticket states that it is

nontransferable and sold only to

the person whose name appears on

the face of the ticket or is registered

with the original seller, it may not be

resold. (Mich. Comp. Laws § 750.465)

MINNESOTA

Minnesota’s prohibition on ticket

scalping was repealed in 2007, and

new legislation governing the resale

of tickets failed to pass in 2011.

MISSISSIPPI

Unlawful to sell tickets for college

games or any event held on state

property for more than face value.

(Miss. Code Ann. § 97-23-97)

MISSOURI

Missouri’s prohibition on ticket

scalping was repealed in 2007.

MONTANA

No state ticket scalping laws.

NEBRASKA

No state ticket scalping laws.

NEVADA

Nevada has no state ticket scalping

laws, but the city of Las Vegas

prohibits ticket scalping. (Las Vegas

Mun. Code § 12.38.020)

NEW HAMPSHIRE

No state ticket scalping laws.

NEW JERSEY

Ticket brokers must maintain a

permanent ofce, obtain a certicate

to resell tickets that is good for two

years, and pay a fee not to exceed

$500 every two years.

No person, other than a registered

ticket broker, may resell a ticket for

more than a 20 percent premium or

$3, whichever is greater, over the face

value.

Ticket brokers may not resell tickets

at a premium in excess of 50 percent

of the price paid to acquire the ticket,

plus lawful taxes.

There is no limit on the price of

tickets sold by people, other than

ticket brokers, over the Internet.

May not resell tickets in the vicinity of

an event, except in designated areas.

May not give anything of value to an

employee of a place of entertainment

as an inducement for special

treatment in obtaining tickets.

Original sellers may not hold back

from the general public more than ve

percent of the tickets for an event.

Requires the licensing agency and

event sponsors to create a way for

season ticket and other ticket holders

to legally sell their tickets back to the

venue.

Unlawful practice for a person to use

a “digger” to acquire any ticket.

(N.J. Rev. Stat. §§ 56:8-26 to 56:8-38)

NEW MEXICO

Ticket scalping is prohibited as to

college sports, but resellers may

impose a service charge. (N.M. Stat.

Ann. § 30-46-1)

NEW YORK

May not resell tickets within 1,500

feet of a venue that seats more than

5,000 people and within 500 feet of

a venue that seats less than 5,000

people. However, an operator may

designate an area to resell tickets

within the venue’s property line.

Must obtain certicate from secretary

of state to resell tickets.

It is unlawful for any person to utilize

automated ticket purchasing software

to purchase tickets.

(N.Y Arts & Cult. Aff. §§ 25.01–.35)

NORTH CAROLINA

Scalping tickets is prohibited, but

resellers may impose a reasonable

service charge. (N.C. Gen. Stat.

§ 14-344)

NORTH DAKOTA

No state ticket scalping laws.

OHIO

State law allows municipalities to

regulate or establish scalping laws.

(Ohio Rev. Code § 715.48)

Columbus has no scalping

ordinances in force. Cleveland allows

tickets to be sold over face value.

Cincinnati prohibits the sale of tickets

over face value.

OKLAHOMA

No state ticket scalping laws.

Ticket scalping is prohibited in

Oklahoma City.

retrieval system without the express written consent of the American Bar Association.

continued from PAge 27

StubHub would have been eligible for the CDA’s immunity.

As to the fourth element of damages, the court was reluctant

to nd that the Patriots could allege damages but nonetheless

found a “toehold.” Specically, the Patriots contended that the

sales of invalid tickets through StubHub increased the Patriots’

administration costs. Therefore, the court held that this conten-

tion was sufcient to survive summary judgment.

Hill et al. v. StubHub, Inc. et al., No. COA11–685, 2012

WL 696223 (N.C. Ct. App. Mar. 6, 2012)

Summary. Plaintiffs were customers of Defendant StubHub,

which provides a website through which people can resell tick-

ets. The customers used StubHub to purchase tickets priced

in violation of North Carolina’s anti-scalping law and subse-

quently sued for unfair or deceptive trade practices. The trial

court granted the customers’ summary judgment on liability,

but the North Carolina Court of Appeals reversed, nding that

StubHub could avail itself of the immunity of the Communica-

tions Decency Act (CDA).

Relevant Facts. As stated in the decision:

In September, 2007, Plaintiffs decided to buy tickets to

a “Miley Cyrus as Hannah Montana” concert to be held

at the Greensboro Coliseum in November, 2007. After

unsuccessfully attempting to purchase tickets to this event

using the Coliseum’s website, [a customer] purchased

four tickets to the concert through [StubHub’s] web-

site for $149.00 each. In addition to the aggregate ticket

price, Plaintiffs paid a shipping charge of $11.95 and a

fee for Defendant’s services of $59.60, increasing the total

amount of her order to $667.55. Tickets to the Hannah

Montana concert had a face value of $56.00 apiece.

Meanwhile, North Carolina law barred any resale more than $3

above the face value of the ticket.

The seller lived in Massachusetts and selected the sales price

to the plaintiffs. The seller had agreed to StubHub’s user agree-

ment, including that he would not engage in unlawful activities.

StubHub provided several services that facilitate the transaction

between the seller and the customer. First, StubHub acted as a

broker in providing a marketplace for sellers to meet customers.

Second, StubHub provided shipping labels for the seller to send

the tickets to a customer. Third, StubHub collected payment from

the customer and distributed the appropriate amount to the seller.

Procedural Posture. The trial court granted the customers’

motion for summary judgment against StubHub on the issue of

liability. StubHub appealed the decision on several procedural

bases, and the North Carolina Court of Appeals granted certio-

rari to consider the appeal.

Legal Analysis. After addressing whether it had jurisdiction

to consider the appeal, the North Carolina Court of Appeals

focused its legal analysis on the immunity provision of CDA

§ 230(c)(1), particularly whether StubHub functioned as an

OREGON

Use of software to interfere with ticket

sales is prohibited. (O.R.S. § 646a.115)

PENNSYLVANIA

Unless using the Internet to resell

tickets, must obtain license from county

where intend to resell the tickets for a

$50 annual fee.

Internet sellers must have a business

presence in the Commonwealth, a

foreign business license, or a certicate

of authority issued by the Department

of State.

May sell tickets for more than face

value.

Illegal to purchase tickets using ticket

purchasing software.

(4 P.S. §§ 201–15)

RHODE ISLAND

Ticket scalping is prohibited by

resellers, who may impose a reasonable

service charge up to the greater of $3

or 10 percent of the ticket’s face value.

(R.I. Gen. Laws § 5-22-26)

SOUTH CAROLINA

May not resell tickets for more than $1

over price charged by original issuer.

For noncollegiate events, scalping law

does not apply to Internet sales, or for

sales at a permitted physical location

when the reseller guarantees a refund.

(S.C. Code Ann. § 16-17-710)

SOUTH DAKOTA

No state ticket scalping laws.

TENNESSEE

Illegal to use ticket purchasing

software. (T.C.A. § 39-17-1105)

TEXAS

No state ticket scalping laws.

UTAH

No state ticket scalping laws.

VERMONT

Use of software to interfere with

ticket sales is prohibited. (9 Vt.

Stat. § 4190)

VIRGINIA

Localities are authorized to

prohibit non-Internet ticket

scalping except by religious or

charitable entities engaged in

fundraising. (Va. Code Ann. §

15.2-969)

WASHINGTON

No state ticket scalping laws.

WEST VIRGINIA

No state ticket scalping laws.

WISCONSIN

May not scalp tickets for the

state fair. (Wis. Stat. § 42.07)

WYOMING

No state ticket scalping laws.

retrieval system without the express written consent of the American Bar Association.

“information content provider” with respect to the ticket price

at issue. The court began its analysis by turning to Fair Hous-

ing Council of San Francisco Valley v. Roommates, LLC, 521 F.3d

1157, 1172 (9th Cir. 2008), wherein a website could not apply for

the immunity under CDA § 230(c)(1) when it provided a search

engine that segregated individuals based on unlawful criteria. In

reviewing the Roommates decision, the court emphasized that

the users had no choice but to answer the questions that would

then be the basis for the unlawful search parameters. Later, the

court focused on FTC v. Accusearch, Inc., 570 F.3d 1187 (10th

Cir. 2009), where researchers were paid for information about the

telephone records of third parties and immunity did not extend

to the website provider for these illegal acts. In addressing Accuse-

arch, the court emphasized the absence of any legality to the

underlying endeavor of obtaining telephone records.

The North Carolina Court of Appeals treated Roommates,

Accusearch, and other similar decisions as distinguishable in light

of the approximately 300 reported decisions that it had found

addressing immunity under the CDA. The court noted that most

courts had found liability and that the trend was to bring a web-

site operator within the immunity provision. Therefore, the court

concluded that StubHub’s not requiring its users to engage in

unlawful activity and the ability to use the site in a lawful manner

enabled StubHub to avail itself of the CDA’s immunity.

BRIEF THOUGHTS ON WHAT THE FUTURE HOLDS FOR TICKET

ISSUERS

Original ticket issuers, such as professional sports teams,

understandably cast a skeptical eye on the secondary ticket

market. Some organizations, such as the New England Patri-

ots, have taken proactive measures to restrict ticket sales in

the secondary market. A typically contrarian Mark Cuban,

however, told The New York Times in 2008 that his Dallas

Mavericks were then considering selling some of their own

tickets through a site like StubHub “as a means of conrming

the ‘actual value’ of the game; it allows us to be smarter in our

ticket pricing.”

Conrming Cuban’s sentiment, Kansas City

Royals Senior Director of Ticket Sales and Customer Service

Steve Shiffman said in a recent interview that the high level

of activity on the secondary market can be an indication that

the industry is “not pricing [its] product correctly.”

Given the

ever-increasing amount of data available to savvy consumers,

teams and event organizers must be more exible than ever

before. Certainly, a team considering a new approach to its

ticket sales must consider several factors.

The most obvious way for a team to discourage secondary

market sales is to allow only a ticket’s original purchaser (or a

permitted transferee) admission to the game or event for which

the ticket was issued. One way to implement this approach is

to require the purchaser of tickets to present photo identica-

tion upon redeeming the tickets at the venue. Not giving ticket

purchasers a required element to engage in a sale on the second-

ary market (the ticket itself) until present at the venue would

discourage secondary market sales. Alternatively, an event

organizer could try to outpace the technology of the second-

ary market and offer admission by scanning unique bar codes

that are not, as yet, hosted by StubHub or similar entities and

not revealed to the purchaser until a time close enough to the

event to make a secondary market sale impractical. However,

heavy-handed methods to restrict sales on the secondary market

present two key problems.

Most immediately, imposing impediments to a consum-

er’s purchase of a ticket on the secondary market may deprive

the event organizer of critical day-of-event revenue from

streams such as concessions, merchandise, and parking. Poli-

cies that reduce the transferability of tickets may have more

latent consequences, as well. With the rapid dissemination

of information through Internet news sites, blogs, Twitter,

and other social media, any measures taken that are even per-

ceived as anti-consumer will be condemned minutes after they

are announced. Because of the importance of day-of-event

revenue streams and the less immediate but potentially lon-

ger-lasting consequences of brand damage, event organizers

seeking to recapture the value of tickets sold on the second-

ary market should consider approaches that recoup ticket sales

revenue, maintain day-of-event income, and provide a service

consumers may nd valuable.

In the sports context, teams face the difcult issue of balancing

a season ticket holder’s desire to recover at least a portion of his

cost for games that he cannot attend (or otherwise use the ticket

for valuable business or social purposes). Teams have employed

a number of strategies to serve the customer without driving

down the value of their walk-up, single-game ticket offerings.

Many teams allow season ticket holders to return their unused

tickets—even after the game has been played—and allow the

season ticket holder to select additional tickets to future games.

Another approach rapidly gaining popularity is for teams to run

their own secondary market in-house. This practice is currently

in use throughout the NFL, NHL, and several other professional

and collegiate teams. It is being explored by several high-prole

MLB teams, including the New York Yankees. By allowing season

ticket holders to sell their unwanted inventory through a team-

sponsored marketplace, the team can at least recover a certain

amount in fees and handling charges that would otherwise be

diverted to third-party ticket resellers.

One novel approach may be for teams to use season ticket

holders’ unwanted inventory as a valuable marketing opportunity.

Teams that do not consistently sell out may consider allowing

season ticket holders to sell excess inventory rst to existing sea-

son ticket holders, limiting the market for returned season tickets

in such a way as to minimize cannibalization of the team’s walk-

up sales. In one conception of this approach, an existing season

ticket holder who needs more tickets to a particular game can

obtain high-quality seats, perhaps at a price point in between

the season ticket price and the single-game price. This approach

could have particularly useful application in the context of par-

tial season ticket holders. A team could allow partial season

ticket holders to buy a certain amount of additional single-game

returned season tickets depending, perhaps, on the number of

tickets purchased in the partial plan. This approach potentially

benets each party involved in the transaction. The returning

ticket holder has a mostly painless way to recover some costs,

the partial ticket holder gains exibility and the opportunity to

attend more games, and the team gets the benet of the resale,

maintenance of game-day revenue streams, and a ready-built mar-

keting strategy with respect to season tickets.

retrieval system without the express written consent of the American Bar Association.

Another hot-button issue in the sports ticketing world is

the often-benecial, often-tenuous relationship among teams,

leagues, and ticket brokers. Once spoken of in the same breath as

ticket scalpers, ticket brokers represent to consumers an increas-

ingly attractive alternative to scalpers (on one end) and team

websites and box ofces (on the other). Russ Lindmark, who cre-

ated the e-commerce platform on which StubHub was rst based

and later founded national ticket broker Ticket Solutions, says

that fans do not have the same authenticity concerns with an

established broker as they might with someone hawking tickets

outside a stadium. “Where do you nd them the next day?” Lind-

mark asks, referring to the anonymous peddlers of last minute

tickets. Brokers may have an advantage, too, over teams in that,

compared to team websites, brokers’ platforms are often more

streamlined. Providing even an incremental efciency advantage

can prove to win a consumer’s business.

Although some teams are understandably wary of brokers

as competition, many—if not most—form mutually advanta-

geous relationships with such supposed competition. “Brokers

are not bad people—just business people,” says Shiffman, who

points out that resellers view tickets not as fans might, but as

traders. Indeed, the Royals, like many professional and colle-

giate teams, release a certain amount of inventory to brokers as

another method of moving tickets. Such relationships require a

good amount of business savvy and an even greater amount of

trust. The teams certainly desire to bring customers to the sta-

dium—Shiffman: “an empty seat doesn’t make you a dime”—but

ill-conceived sales to brokers can have a deleterious effect on a

team’s relationship with its valuable season ticket holders. After

all, no purchaser of a $50 season ticket wants to go to the park

and discover that his neighbor in the stands bought an equiva-

lent ticket from a broker for $20. For this reason, teams often sell

to brokers inventory not located in sections heavy on seats pur-

chased as season tickets, or require the brokers to sell tickets at or

above a certain price point.

One relatively unexplored secondary ticket market is that for

suites. While pairs of seats in premium sections—think Yankee

Stadium’s Legends Club—hit the secondary market with regular-

ity, single-game rights to enjoy a club’s luxury suites are a much

rarer sight on ticket resellers’ web pages. Neither teams nor bro-

kers are unaware of this unlled space in the secondary market.

Brokers are actively recruiting corporate suite holders with the

enticement of recovering value for dates on which their suite goes

unused, and teams in certain cities are discussing the notion of

suite exchanges, whereby the holder of a suite for an NFL game,

for instance, could exchange the rights to one NFL game for

the rights to a certain amount of NBA or NHL games, or other

events such as concerts, shows, or collegiate tournaments.

Lindmark, for his part, supports the application of pure prop-

erty rights to tickets, and advocates for a “free market that is fair

to everybody. Part of that is being fair to the consumer. The con-

sumer has to be able to hold [his seller] accountable.” This sort

of consumer protection argument has become a favorite of ticket

brokers in their lobbying efforts, and has found support from law-

makers. As a result, ticket scalping laws continue to be relaxed

under the guise of consumer protection.

In reaching a comprehensive, multi-faceted approach to the

issues presented by ticket sales on the secondary market, the

most successful organizations will be the ones that creatively and

simultaneously benet the consumer and the organization.

The ideal solution will recapture the value of secondary market

sales in a way that positively engages both existing and new

customers. v

Eric Schroeder is a partner and John Bush is an associate in the Atlanta ofce

of Bryan Cave, LLP. Josh Fisher is an associate in the Kansas City ofce of

Bryan Cave, LLP. John Orbe is an associate in the St. Louis ofce of Bryan

Cave, LLP.

ENDNOTES

1. Joe Nocera, Scalpers Are Arbitragers of the Arena, N.Y. T, January 18,

2008.

2. Telephone Interview by Josh Fisher with Steve Shiffman, Senior Director

of Ticket Sales & Customer Service, Kansas City Royals (July 18, 2012).