Today, eBay announced that its subsidiary, StubHub, had reported record revenues in the 4th quarter.
$279M which is up from $232M in the same quarter of 2015.
This is great news for eBay and I’m sure Wall Street was elated in that way that completely irrational things drive market results.
But a few things about this and tickets in general have me scratching my head.
First, I know that eBay as a whole hit their earnings targets, or expectations, with Wall Street you can never quite know what they expect.
But from the vantage point of StubHub, what does their profit margin look like?
How much are they spending to acquire customers?
How much are their partnerships costing them?
But a bigger question I have about the business model is, how sustainable is it.
One of the topics that comes up when I talk with teams and brokers is what impact is StubHub having on the industry.
On the primary side, teams are still struggling how to effectively use the secondary market as a sales and marketing tool. That makes them skeptical of almost everything that StubHub for one, but other brokers are doing.
Why?
Well, they are trying not to devalue the product for one. Even though I would suggest that their embrace of outdated business models that rely too heavily on cold calling along with too many silos in their businesses is having just as much of an impact in that regard, thank you very much.
Second, they don’t really control the customer…StubHub does. Granted, whether or not teams could or would do a good job of managing that relationship is another question that we could rightfully ask.
Third, teams are also a little unsure of the business model of the secondary market, which drives some unwise decision making processes.
Why do I say that?
Because I know that many teams are sitting there scrolling through the secondary market sites and seeing really stupid prices listed for tickets that sellers will never get, but thinking to themselves…”I should be getting that revenue, not the other way around.”
When in reality, a lot of these outrageous prices are Hail Mary’s. And many times, the high prices help mitigate the losses of a lot of the other games that brokers are taking losses on.
On the broker side, brokers are really concerned because StubHub’s model is really squeezing them.
Its fantastic for fans, but for brokers, it is squeezing their margins…making many brokers glorified penny stock traders.
Which makes them a partner in the concern about who has control of the customer.
As it is now, the customer is, again, controlled by StubHub. The inventory costs, the risk, are all placed on the brokers…while StubHub has technology and infrastructure costs, plus the costs of marketing. But they come out looking great in the long run, provided that they have brokers willing to post tickets on their site.
Which begs the question, is StubHub in a long term healthy position?
I know that they are expanding their reach to work with primary market teams like the 76ers. And, that’s great…that’s innovative, and, I can almost guarantee, there is a loophole in the agreement that will burn StubHub in some way when the 76ers are good again.
I’ve also seen Scott Cutler talk about branching out into products, merchandise, and other revenue streams that are ancillary to the main thing, tickets.
In a way, this is a great idea.
But, in a way, it feels like they might be taking their eye off the ball.
Finally, the overall question becomes, what’s the health of the overall market? We see more and more empty seats in venues around the country. I’ve seen the number thrown around that somewhere between 40-50% of tickets are unsold.
Which, if you add in comps, I bet skews even slightly higher.
Combine empty seats with lower TV ratings, you have a tough situation. One that may or may not be reflected in StubHub’s revenue report. But I know people will look at that number and be happy, but there are is a lot of missing information in that report. And it will tell you a lot about the health of StubHub and the health of the live entertainment industry right now.