The Super Bowl Fraud: Who Was Affected & How You Can Stay Safe

February 4, 2015 The Super Bowl Fraud: Who Was Affected & How You Can Stay Safe

By Tony Knopp

As featured on The Fields of Green

This past Sunday, we were all treated to a Super Bowl for the ages between the Patriots and Seahawks. Unfortunately, thousands of fans arrived in Phoenix for the trip of a lifetime only to find that they weren’t getting the tickets they were promised. As the Super Bowl ticket market broke-down before our eyes, ticket prices climbed to over $9000 for a ticket and globally known companies who had planned their outings months in advance were left outside. Multiple companies were trying to get the customers they had flown into Phoenix into the game, with large groups left out of the game by even the biggest names like SeatGeek, Capital City Tickets, and Vivid Seats.

At TicketManager, we advise our customers and partners on all tickets, those they own and those they buy. Our executives have over 15 years of experience in the ticket market, ranging from major primary providers to early entrants at StubHub and at no time was this experience and market knowledge more important to our partners than over the past month. I’m proud to say that every single TicketManager customer gained entrance to the Super Bowl and none of them were exposed to the ridiculous prices we saw as the game neared. So what exactly happened, how does it affect your events going forward, and how can we help work together to protect you, your staff, and your customers. As you will see below, what we wrote in Yahoo! Sports about 4 Rules For Buying Super Bowl Tickets over a year ago would have spared all of these customers the nightmare they experienced.

The Super Bowl Market Sets-Up

The Super Bowl market has been relatively stable for the past ten years as many have begun to understand how tickets are distributed, who gets them, and when. We outlined the Super Bowl Ticket Market in detail last week in our piece for USA Today Sports: “The Truth Behind Super Bowl Tickets.”

The tickets are given out to the teams, leagues, and sponsors, who then re-sell them to brokers, mega-brokers, and customers. The breakdown is similar every year and was the cause for this years disaster:

  • ~17.5% to each participating team (Seahawks and Patriots)
  • ~8.5% to each losing Championship week team (Colts and Packers)
  • ~5% to the host team (Arizona Cardinals)
  • ~1.2% to each non-participating team
  • ~11% to the league

Most large events have matured following the Super Bowl, where “events companies,” ticket brokers, and travel firms claim to have “exclusive access” to the game. These providers, many of which seem reliable and have been around for decades, sell tickets they don’t yet have. They have to, as you can see above, as more than 50% of the tickets don’t even get allocated until three weeks before the game. They take orders at the price they think they can get tickets at and then fill those orders as the game gets near. This is called market speculation or “spec.”

Market Collapse – The Perfect Storm

Once the Seahawks and Patriots got in, we knew there would be a big problem. The Cardinals and Seahawks have pre-negotiated deals with a major broker to sell them all of their tickets. The Patriots have the same deal, only with another broker (Ace Tickets). Over 40% of the tickets were controlled by two companies who could now manipulate the market however they chose, PrimeSport, a long time broker with a troubled past (see here) who has changed ownership multiple times, and Ace Tickets. We knew this was the case and advised all of our customers asking for connections to fill their orders ten days before the game, which we helped them do at great prices from vendors who can be trusted.

By six days before the game, mayhem had set in. “Events companies” and ticket brokers realized they weren’t going to get tickets they usually got and had a choice: 1) buy the tickets from the mega-brokers with team deals for 5x the price and take a huge loss or 2) Simply walk away and tell customers there are not tickets, here is a refund. The industry calls this a “broken order.”

All of our customers are corporate partners who know that scenario #2 is simply not an option. Not when top customers have already been booked for the weekend in Phoenix.

How bad was it? We connected one customer with 34 tickets ten days prior to the game in the best seats in the house for $220,000. Just six days later we were called by another broker looking to fill his broken order offering us $600,000 for the same tickets.

What Really Happened

In the not-so-distant past, major marketplace sites like StubHub, SeatGeek, and VividSeats would require any seller of Super Bowl tickets to have those tickets in their possession before listing them for sale. As there has been more competition in the ticket marketplace space, those rules were weakened. The major marketplaces, who would ‘guarantee’ purchases would allow brokers and event companies they knew to list tickets on spec.

Once the teams were set, the major providers knew they had the inventory and everyone else was holding orders they had to fill with nowhere to go. They could dictate the market, sit on the inventory, and wait for brokers and events firms to default on their promise. Once that occurred, StubHub and the major players would have to overpay or suffer some serious brand damage by walking away. StubHub chose to fill the orders, paying millions to the official resellers to do so. Other major companies, like SeatGeek, decided to break, which we were surprised by. A number of brokers “took their beatings” and their losses knowing this event will thin the herd and they will keep their reputation with their buyers.

Lessons Learned

The secondary ticket market is still evolving. As it does, there will be price wars as the Seat Geek, Ticket Evolution, Vivid Seats, Gametime crowd cuts fees to try and take market share from StubHub. Other players, like PrimeSport, DreamTix, Ace Tickets, and Ticket City will attack StubHub and the other in a different way, by signing deals direct with the teams to get the inventory before it gets to the StubHub’s of the world.

Both approaches have serious risks. Cutting fees in a marketplace to compete with a monolith like StubHub makes it awfully difficult to have enough cash on hand to cover customers in an event like the above, which we just saw. Taking on inventory seems like a terrific idea given this Super Bowl, but it can go south very quickly and dramatically as it did in this year’s College Football Playoff and, more famously, when the 2010 World Cup broke PrimeSport causing massive layoffs and a change in ownership for the firm.

As we’ve written in the past, and please note the date on the publication, there are four easy rules to avoid getting burned:

  1. If its too good to be true….it is: If the deal you see is that much better than anything else, it’s fraud.
  2. You get what you pay for: Trying to save money from a company you don’t know is not worth the risk.
  3. Steer clear of speculation
  4. Don’t try to beat the market: There are professionals with 30 years experience in this market, you will not beat them.

Families, fans, and businesses traveling to a dream event and getting left in the cold by deceiving brokers is an avoidable shame. If you have questions, please call us. These same tragedies happen at the Master, the Final Four, the World Series, and every other major national event. We are very happy to help you navigate these markets and protect your business.