Yankees opting-out of MLB’s StubHub deal is good business

The New York Yankees are one of three teams, the Los Angeles Angels and Chicago Cubs are the others, who have decided to not participate in Major League Baseball’s new five-year agreement with StubHub to act as the leagues’ “official” ticket re-seller. Further and not yet confirmed with an official announcement, the Yankees will use Ticketmaster as their re-selling agent beginning in 2013. Is this yet another money grab for the Yankees? Of course, and as a business entity, can you blame them?

Here is the Yankees’ perspective on StubHub’s affect on the re-seller’s market:

• The Yankees were getting complaints from season ticket holders who saw their tickets sell for well below face value at times unless the game was against a marquee team like the Boston Red Sox or the New York Mets.
• The fees that StubHub charged were above those found on Yankees.com.
• There was no floor price for tickets.
• Tickets could be purchased right up until game time.
• Many tickets would go unused because fans felt they could purchase from StubHub at a fraction of the cost along with the last two factors in play.

The last part is extremely important. If the consumer knows that there will be an abundance of tickets in the marketplace ready to be sold for well under face value then why bother looking for full price games? The reluctance and surplus which results leads to less season tickets being purchased as well as planned individual game tickets. The fact that there was not a low-limit on the price a ticket could be sold for and that tickets could be purchased and printed right up until game time, also allowed fans to become less enamored with getting their tickets ahead of time to ensure a seat.

The New York Post said a source told them the Yankees could sell 5,000 more seats per game in 2013 (or 405,000 per 81 home games) than they did in 2012. The Yankees averaged 43,733 fans per game this season, which was second in MLB (the Philadelphia Phillies averaged 44,021). With the average price of tickets for a Yankees game $53 per seat that would bring in just under $21.5 million in ticket revenues alone. That doesn’t include what the average fan pays for parking, concessions and merchandise at the ballpark.

The Yankees will likely increase revenues by using Ticketmaster instead of StubHub for re-selling tickets in 2013.

Season ticket holders were forced to use StubHub to re-sell their tickets and sometimes they had to take less than 20 percent of the face value in order to get anything. This, the Yankees argue, reduced the number of season ticket purchases, because the buyer was wary of not being able to recuperate a sufficient value due to StubHub’s lack of policy structure. In the not yet official agreement with Ticketmaster, the two parties have agreed to a price floor for some tickets and to stop selling some tickets well before game time. This would appeal to both sides of the purchase spectrum. Owners of season tickets and higher priced seats will be assured of selling for closer to face value than they were able to with StubHub and owners of lower priced tickets could still take a very reduced rate if they wanted to as the restrictions are likely to be placed on the higher priced seats.

The theory for the Yankees is that if fans know they will not be able to wait around for tickets until the last minute and that the tickets will not be grossly undervalued, the demand will increase up front. There will be more fans willing to pay for the season ticket plans knowing they can recoup a good portion of the value of the ticket should they have to miss a game. Once season tickets are sold the Yankees have no vested interest financially speaking afterward on the ticket sale itself (they do lose out on other fan expenditures related to the game), but they need to be able to market the high priced seats and season tickets to fans with the caveat that if the fan cannot make a game, they will be able to get most, if not all of their investment back.

For fans who don’t care when they go see a game, not much will change other than the cost and who they purchase from. Certainly, the Yankees will lose some fair weather fans this way, but in the end if a fan wants to see a game on a particular day they’ll go through the available means and that is how the Yankees will drive demand again. Fans who purchase season ticket plans — full season, half-season and alternate packages alike — will now feel they can comfortably do so and not lose their shirts if they need to sell their tickets for any reason.

The Yankees of course are counting on fans wanting to be at the ballpark even if the price they’ll have to pay goes up, for example from $6 to $20, simply because it is a Yankees’ game. The Yankees are also hoping that fans who once were willing to pay 50 percent of the cost on a premium seat through StubHub (a ticket already purchased as far as the Yanks are concerned) will instead buy a face value ticket elsewhere in the Stadium for the same outlay. For example, instead of paying $200 for a premium seat which was valued at $400 face, the fan will buy a ticket for face of $200 instead (a new sale for the Yankees). A $200 seat is still pretty nice at the Stadium — it’s not like heading to the tier.

So, season ticket holders will be happier and if the Yankees are right more plentiful in 2013 and beyond. The Yankees also stand to make out financially on the fans who still want to pay less for their tickets. The fan who wants to pay $6 for ticket may be upset, but the Yankees would be happy to recapture 50 percent of those fans under the new arrangement. Let’s say there were 2,000 fans each game in 2012 that paid $6 per seat. If the Yankees can turn just 1,000 of those fans per game into a $20 ticket purchased on Ticketmaster.com or on Yankees.com, it equates to $648K more in the team’s pocket for the tickets alone. That pays for a rookie salary and benefits for one season. If you don’t think that matters to the Yankees, you have not been paying attention.

Will there be unhappy fans? Yes. But the Yankees are not out to make it easy for fans to get into Yankee Stadium. They want the experience to matter to people. They want fans to feel like they are getting to see something special on the field, not something on par with what it costs to see a minor league game. There are more than enough Yankees fans who will find a way to unload full price for tickets, or close to it. Plus, it is now more likely that some of the premium seats will be sold in advance, knowing there is a chance to regain some investment if the owner cannot attend a particular game. In the end, the Yankees will generate more revenue and as a business organization that is the bottom line.