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Costco-Like Seat Club Bringing Transparency, Savings to Ticket Resale Market

“Super Bowl ticket season is where I'm annually reminded [of] just how sleazy the hiding of fees is by a number of secondary sites. I know how it works. It’s just gross,” Ticket Manager founder and CEO Tony Knopp tweeted on Jan. 30.

Of course, the practice of failing to disclose service charges until checkout, and/or of misleading consumers about the true cost of a ticket happens throughout the year on multiple platforms. That is why the White House has proposed outlawing ‘junk fees’ and why it is working to ensure secondary marketplaces are required to disclose the full price of their inventory up front.

Seat Club isn’t waiting for government legislation to bring transparency –and savings– to the secondary ticketing business. The startup recently went to market with a simple, and familiar, approach targeted at price-conscious consumers.

“Our model is basically Costco,” Cole Rubin (founder, Seat Club) said. “You pay us a [$99/year] membership fee, and you get [access to] tickets at our cost.”

If you have ever shopped for tickets on competing secondary market websites, you may have noticed that much of the inventory is the same. That is because teams, artists, venues, and professional resellers all post their seats across a multitude of channels. They’re almost incentivized to.

“Let other peoples’ marketing dollars sell your tickets,” Rubin said.

Oftentimes, the only unique supply on a given secondary marketplace is the relatively small percentage of seats controlled by individual season ticket holders (who may be tied to the platform by an exclusive team/league deal).

The product’s commoditized nature explains the lack of loyalty to secondary sites amongst the ticket buying public, and ultimately why the largest marketplaces maintain expansive search marketing budgets.

“Google makes more money from ticketing than any of these [marketplaces],” Rubin said.

Fans who have searched for and/or compared tickets on multiple secondary marketplaces likely recognized a second commonality between them.

“You go through their processes and are hit with these huge fees at the end,” Rubin said.

Some sites will promote themselves as fee free and imbed profits in the price of their tickets. Either way, the consumer has been misled–and the price of the seat likely rose 20-30%.

The secondary market leaders charge exorbitant fees so they can cover large customer acquisition and/or ticket access costs and still turn a profit for investors. Seat Club has no plans to compete on paid search, and it does not have any investors; at least, not yet.

Rubin, who has had a couple of successful exits in the ticketing space (including from his last endeavor, Dynasty Sports & Entertainment, which has since been rebranded as Logitix), has bootstrapped the startup to date.

Strategic capital might be a way to alter the company’s growth trajectory. But it won’t change Seat Club’s subscription business model, or its underlying UVP: the company does not make money selling seats.

So how will Rubin go about acquiring customers?

Through a mix of micro-influencer marketing, targeted social ads, incentive-driven affiliate programs, and group partnerships.

“There are [a ton of] fan clubs and youth sporting groups that we can find partnership models for,” Rubin said.

And he’s betting once someone becomes a member, they’ll stick around for a while.

“Forget about the money [saved],” Rubin said. “It’s a time suck to compare the same tickets across all these different marketplaces.”

But getting someone to try a new product or service is always more difficult than it sounds.

To do it successfully, Seat Club will need to convince a buyer that the bulk of tickets available on competing secondary marketplaces are the same. Then it will need to be able to show it can get that same inventory.

Tapping into major broker feeds and gaining access to tickets shouldn’t be an issue for Rubin. He has relationships from 20 years in the business. The challenge does help to explain why the concept has never taken off before though.

Seat Club’s target customer spends $500-$700 or more on tickets each year.

“That’s often the break-even point on the $99/year membership,” Rubin said. “Everything over and above that is savings.”

So, the math should work out for volume live event attendees, fans who buy premium seats, and those attending marquee events.

“We sold a lot of tickets in San Francisco for the NFC Championship Game, where the average order size was over $2,000,” Rubin said. “Those people have [already] paid for like four years of membership fees with [their savings on] that one transaction.”

But in a world where the average ticket price for an MLB game is now $53, and most people are buying more than one ticket at a time, a Seat Club membership just might appeal to some infrequent live event goers too.

“We're a family of five. Based on the savings, going to one event, one of my kids gets to go for free,” Rubin said. “Buying five tickets on Seat Club is the equivalent of buying four tickets on StubHub or SeatGeek or Ticketmaster.”

Rubin recognizes that an upstart subscription business, that isn’t doing paid search, will likely never be the market share leader in the category. That isn’t his ambition.

“There [are] 20+ million people buying secondary market tickets,” he said. “If we can get a 1% market share, it’s a nice business.”

250,000 subscribers would generate ~$25 million/year in re-occurring revenue. And that’s before Seat Club adds any additional services or features it can upsell to members, or explores any price elasticity.

Its overhead is minimal too. The company is not actually buying the ticketing inventory, and Rubin can run the business lean since he built much of the tech that underpins it.

While Seat Club may never be a unicorn (it would likely need ~5% market share with the existing model), one could imagine it finding an audience.

“There is always space in ticketing for creative solutions to connect fans to inventory,” Patrick Ryan (co-founder, Eventellect) said. “It’s great to see new innovation and investment.”

And a profitable secondary market ticketing platform with a sticky 1% TAM and the ability to grow should be able to conservatively command a 10x plus EBITDA multiple.

“While these brands have been very hard to build, they do have tremendous value," Ryan added.

This one should be no different if can deliver on its promise to bring fans transparency and savings.

(JWS)

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Ticketmaster scandal breaks national; international - Toronto Star, Rolling Stone, Los Angeles Business Journal, The Hollywood Reporter, wires...

Live Nation’s Ticketmaster Sued for Alleged Partnership with Ticket Scalpers - 1st October 2018

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A lawsuit alleges that Ticketmaster partakes in unfair business practices by encouraging scalpers to buy tickets in bulk, and then resell those tickets, a practice that enables Ticketmaster to collect a fee on the original sale plus the resale of the ticket.

The proposed class action lawsuit on behalf of live event consumers against Ticketmaster, a subsidiary of Beverly Hills’ Live Nation Entertainment Inc., was filed in Northern California federal court Sept. 28.

The complaint seeks to stop Ticketmaster from its alleged work with scalpers, and repay consumers for money lost in additional fees.

“Companies should treat consumers fairly,” reads the opening of the lawsuit filed by Hagens Berman Sobel Shapiro, a prominent plaintiff-side law firm. “But a company fails at this when it accepts kickbacks for secretly facilitating a shortage of its product and then a sale by a third party at a higher price.”

The action comes two weeks after the Toronto Star published an article in which reporters went undercover in Las Vegas as scalpers.

According to the Star, Ticketmaster officials informed them of a professional reseller program in which Ticketmaster partners with scalpers. The purported program runs contrary to Live Nation’s stated position that it is working to rid the live concert industry of scalpers.

A message left with Live Nation Oct. 1 was not immediately returned.

(Los Angeles Business Journal)