Ticketmaster Takes On Scalpers And eBay With Online Reseller System

By JULIA ANGWIN

The Associated Press

Meet the newest competition for ticket scalpers: Ticketmaster.

Since January, Ticketmaster has been quietly allowing season ticket holders to the Columbus, Ohio, Blue Jackets hockey team to resell tickets they can't use on a special portion of the team's Web site.

Now, Ticketmaster plans to roll out this feature, which it calls Ticketmaster Marketplace, to more teams and events. The system is designed to compete with the scalpers, ticket brokers and online auction houses like eBay Inc. that are the main sources of last-minute tickets to sold-out games and musical performances.

It's the beginning of a massive shift for Ticketmaster, the Los Angeles-based industry giant that is majority-owned by USA Networks Inc. Ticketmaster has already moved about one-third of its business to the Web. Now it's using the Internet to force some changes on the traditional ticketing business.

Its first venture takes on the so-called secondary market for sports tickets. Later this year, Ticketmaster plans to launch "dynamic" pricing, which could allow fans to bid for concert tickets rather than sleeping in a line overnight to be among the first to get a seat.

Ticketmaster can make the reselling of tickets more "transparent and fair," says its chief executive, John Pleasants. "Right now, there's a perceived shadiness to this market," he says.

Ticketmaster hopes that fans will prefer to buy tickets from a team- or event-sanctioned site, where they can be sure the tickets are legitimate and can get the tickets sent to them by e-mail. It believes that market of buyers will lure sellers, who might otherwise have posted their tickets on eBay for a higher price.

But critics say Ticketmaster, the leading ticket distribution system in the U.S., already has too much power and shouldn't be allowed to enter so many segments of the market. In particular, they worry that Ticketmaster could set aside some seats from its initial ticket sales in order to sell them at higher prices through secondary bidding. "If Ticketmaster holds back all the good seats for itself and never makes them available for the public, then it makes it harder for us," says Dan Nichols, manager of TicketBroker.com of Deerfield, Ill., which buys tickets and resells them at higher prices.

Ticketmaster's Mr. Pleasants responds that "we absolutely 100 percent would never do that. We don't manipulate inventory; it's illegal."

Here's how the Ticketmaster system works: The ticket holder who wants to sell posts the ticket on the team's or event's Web site, which is run by Ticketmaster. Each team or event decides whether to allow tickets to be resold for more than their face value — something that is against the law or otherwise regulated in certain states. (The Columbus Blue Jackets, for instance, set the resale price at 5 percent above face value.)

Sellers may not end up benefiting from any price above a ticket's face value. In fact, sellers of Blue Jackets tickets get only 90 percent of the face price (this figure could vary by team). That means if a fan of the National Hockey League team bought a ticket for $100 and sold it for $105 (with the team's markup) he or she would get $90, while the buyer would pay $105 plus a Ticketmaster fee of $4.

The portion of the sale price that is between what the purchaser pays and the seller gets ($15 in the above example) is split by the team or event and Ticketmaster.

Once the ticket is sold, the old ticket is canceled and a new one is issued to the purchaser. But because the whole transaction takes place online, no paper ticket is exchanged. The buyer just prints out a piece of paper containing a bar code that can be scanned using special Ticketmaster hardware at the stadium. The system is available only to teams that have purchased Ticketmaster's print-at-home ticketing software and installed the bar-code scanners at their stadium.

Since the system involves printing a new ticket it's in a legal gray area — the ticket is not technically being resold and therefore is not covered by the antiscalping laws in many states. However, Ticketmaster says it will respect the laws and comply with the caps imposed on reselling tickets in many states. Buyers and sellers will be screened by ZIP Code to determine the laws that apply.

So far, about 17 National Basketball Association teams have installed the online ticketing software, which allows customers to receive tickets by e-mail and even forward the tickets to their friends through e-mail. During the NBA playoffs next month, Ticketmaster is planning to waive the fees for those e-mail tickets. "We want people to try it and see how good the system is," Mr. Pleasants says.

These kinds of online transactions help solve the thorny economic dilemma of the sold-out arena. Economists have long been puzzled why sports teams and music acts would rather turn away fans than raise the price of their tickets to limit the number of buyers. It would make better economic sense for the teams or acts to raise the prices, but many fear angering their fans. Allowing fans to legitimately resell their tickets appears to be a way to do a little of both.

"The use of the Internet is a way of making a market more perfect, in the sense of getting the tickets into the hands of people who at any moment are willing to pay the most for it," says Nobel prize- winning economist Gary Becker, a professor at the University of Chicago.

Indeed, the idea of tapping the secondary market is catching on in the ticketing industry. The practice was pioneered by the San Francisco Giants in 2000, when the team launched its "Double Play Ticket Window," allowing fans to resell their season tickets.

A few start-ups offer the service. One is LiquidSeats Inc. of San Francisco, whose clients include the Seattle Mariners, Arizona Diamondbacks, Los Angeles Clippers and Indiana Pacers.

Mainstream ticketers are trying it as well. Irvine, Calif.-based ticketer Paciolan, which dominates the selling of college sports tickets, says it is testing a similar product with the University of California at Los Angeles and the Denver Center of Performing Arts.

But Ticketmaster has one clear advantage: Its ticketing software already is used by the majority of professional sports teams and large concert venues in the U.S. That gives it an edge in selling the secondary ticketing feature.

Indeed, that's what lured the Columbus Blue Jackets to Ticketmaster. "The reason that Ticketmaster makes sense is that it's all integrated," says Andrew Silverman, vice president of ticket sales for the team. "We don't have to lift a finger."