A question that has been coming my way a lot the last three or so weeks is: “what comes next in tickets, sports, and entertainment?”
For a lot of folks, the initial thinking goes right for the combination of a pandemic and a financial crisis must mean that everything will be different. But history shows that this isn’t really the case in most instances.
After initially finding myself going down that rabbit hole as well, I snapped myself out of it and moved past what everyone is thinking to get to the point of what exactly I was thinking.
For me, I’m often looking at the next opportunity and the next way to add value, I think the biggest change we are likely to see out of the pandemic and the financial crisis created by the virus is that certain trends that were already visible are going to become more pronounced.
Two big ones stick with me. So I’ll talk about those two and offer up a few suggestions on dealing with them at the bottom of the page.
Too much debt! Too little cash!
Over the last few weeks, we’ve learned that the world of tickets and entertainment is driven on a lot of debt.
A lot!
And, that most of the time, companies have less cash on hand than you may have imagined.
Or, this seems to be the lesson we learned from the bind that StubHub finds itself in at the moment. One day, they pay out sellers on demand and offer a strong customer refund and guarantee program.
The next day, they don’t.
On the third day, they are offering coupons for 120% of the value of your purchase unless you live in a state where refunds are required.
It is a lot to take in, certainly.
But it lays open how much the ticket system is built on trust and how little disruption to the “normal” flow of things is needed to make the entire system break down.
This break down now helps StubHub find itself in a trap because we have all realized that a lot of money is generated by the secondary market through the purchase of tickets, the fees to sell, the fees from buyers, and on. But I think people didn’t realize the extent of which a lot of these brokers businesses were also built on the back of flipping tickets using credit cards, miles, and other short term measures to mask the reality that a lot of these businesses were revenue rich and cash poor.
This combination has had any number of unintended consequences like overreliance on fees for many ticket platforms, a pushing up of the prices of “hot” tickets and a race to the bottom of less attractive tickets, and, in part, a reliance on debt to drive business growth.
This isn’t just a StubHub problem either because we’ve also seen Live Nation’s credit rating called into question due to over $3B in debt and we’ve seen Eventbrite lay off a huge amount of staff while they’ve been operating at about a $70M loss over the course of 2019.
Busted Business Models:
The second point the current state of the ticketing business highlights is busted business models that should have had folks scratching their heads and taking action, but didn’t.
I chatted with my friend, Stephen Glicken, a while back on my podcast and the number he gave me at the time was that the amount of unsold inventory was around $56B each year.
We never quite know the exact amount of revenue we can attribute to live entertainment in any given year, but let’s use Stephen’s number as a jumping-off point and say that even if his number is off by 90%…you are still talking a lot of money.
If you read the investor filings of companies like I do, you would notice that behind the PR buzz of “greatest quarter ever” and increased revenue and tickets sold, you’d see that so much of this growth was being generated by increased prices on tickets.
I’m not sure about the rate of inflation, but I can say for sure that tickets and attending a game or a concert is definitely outpacing that number. Recently, the Los Angeles Times investigated the prices of the 11 LA area teams and found the idea of a family of four being able to attend a game for $100 or so laughable…not even in the nose bleeds.
What does this tell us?
If you read the report from LA, talk to regular folks, and visit a game or concert with the eye of a consumer, you are likely to recognize that the value to the customer isn’t there at the prices being charged and that even if that weren’t the case, the average fan maybe doesn’t have the disposable income needed to go to a game.
This goes right to the heart of the business models that are being used in a lot of places.
We have an over-reliance on phone calls and inside sales teams that haven’t changed their approach much since Alec Baldwin was first becoming famous for uttering the line, “Coffee is for closers.”
This old-school sales methodology and approach is combined with markets that have changing tastes and purchasing habits and organizations aren’t keeping up with digital marketing, sales, and purchasing capabilities that have become expected by almost all modern consumers.
Combining these two, you then get to the world of consolidators, brokers, and the few fans that still buy full-season tickets, all being charged premiums. In the case of the consolidators and brokers, these premiums are often being driven by supply, the team has it and the secondary market needs it.
And, in the case of the fans, who knows why they are still buying and many of them will voice that exact sentiment if you spend a few minutes talking with them and drinking a beer or two.
What are the solutions?
I think what has taken me so long to get around to writing about this is that I was looking for a more complicated answer than was really needed.
But I think we need to get back to basics.