Why $75,000 playoff tickets are a good thing

Sites like StubHub may let people sell some World Series tickets for eye-popping prices. But letting the free market work actually leads to cheaper prices for fans.

A weekly column by Chris Isidore, CNNMoney.com senior writer

NEW YORK (CNNMoney.com) -- Think of it as playoff ticket arbitrage.

Chicago Cubs fans flocked to Phoenix this week, drawn by significantly lower prices for tickets to the team's first two playoff games against the Arizona Diamondbacks than they could find for tickets to games 3 and 4 back in the Windy City .

The new business partnership between StubHub and Major League Baseball is just one of the factors in the likely record prices we'll see for postseason tickets being sold online this year.
The new business partnership between StubHub and Major League Baseball is just one of the factors in the likely record prices we'll see for postseason tickets being sold online this year.

StubHub, the leading online ticket resale service, reports the average price of a ticket being sold on its site for games at Chase Field in Phoenix was $105. Some tickets sold for as little as $22.

But back at on the Northside of Chicago at the friendly, but pricey confines of Wrigley Field, a larger fan base and more limited supply of tickets had driven the average resale price up to $334, with some tickets selling for as much as $2,177, and standing room tickets going for $100.

The difference made it worth it for Cubs fans to catch a plane rather than the Chicago L to a game, especially if they could cash in frequent flyer miles. So about 11.3 percent of the Arizona tickets being purchased on StubHub were going to Illinois buyers, while only 0.5 percent of the Wrigley tickets were being sold to fans from Arizona.

And while Cubs fans couldn't be happy with the results of the games they saw in the Valley of the Sun, (the Cubs lost both games and are one game way from being eliminated in the series), this is the way that markets are supposed to work -- willing sellers setting the price they want to attract willing buyers.

Some will look at the prices that World Series tickets are already going for on StubHub and cry that this makes it tough for the average fan to afford tickets.

A pair of seats five rows behind the first base dugout at Wrigley for one World Series game have already sold for $6,000 each, already topping the highest price for a ticket sold on StubHub to last year's World Series-- $5,883 each for four seats in row B behind home plate for Game 3 in St. Louis.

And if the Cubs rally and somehow make it to the World Series, we are likely to see even higher prices. One seller is already listing a pair of tickets for $75,000 each.

But the fans paying those insane prices would have found a ticket broker to buy from in the past. The fact that there are services like StubHub only increases the supply of tickets that can be sold on the secondary market, thus lowering the price.

If the Cubs meet the Boston Red Sox in the series this year, it might drive prices to unprecedented levels (though I have my doubts they'll ever reach the $75,000 listing price of that one optimistic seller).

Both teams have large fan bases, small stadiums and a history of postseason frustration that has created pent-up demand for a chance to see their team win the series. While the Red Sox won a championship in 2004, the Cubs haven't been to the series since 1945 and haven't won in nearly a century.

"The dynamics for a Cubs-Red Sox World Series is something that the secondary market has never seen before," said Greg Bettinelli, senior director of business development for StubHub. "But it might not be the most profitable for us, because of the limited supply of tickets for sale. If you have a Yankees-Cubs series, it will help the pricing and sales volume."

But Bettinelli said that he really doesn't see a bad World Series match-up.

"Even if it was the Rockies versus the Indians, those markets will come alive," he said. "Very few of either teams' fans have ever seen them win a World Series." In fact, Colorado, which just joined the league in 1993 has never been to a World Series; this is only the second time the team has made it to the playoffs. The Indians last won a World Series way back in 1948.

It also helps that this year, Major League Baseball and more and more states around the country are finally acknowledging that it is in everyone's best interest to have a true transparent secondary market for ticket sales.

As recently as a year ago, teams such as the Yankees were going to war with their best customers, pulling renewal and postseason ticket rights from their season and partial-season ticket holders if they were caught reselling their tickets. Teams mistakenly believed that the secondary market was competition for their own ticket sales.

But Bob Bowman, the CEO of MLB Advance Media, the arm of the sport that runs MLB.com, said most teams have come to the realization that the secondary market is a benefit, not a blow.

"We're in the secondary market whether we embraced it or not," he said. "There's no one who can go to all 81 games. The clubs don't benefit from tickets in the drawer."

Bowman acknowledged that at least some of the credit for teams selling a record number of tickets again this year is due to the rapid growth of online ticket resales on StubHub and similar services.

"Without question, the increasing knowledge that there is a vibrant, safe, legal liquid market for the tickets encourages our fans to buy season ticket packages, since they know they can recoup some of those costs."

So in August, MLB reached a ground-breaking sponsorship agreement with StubHub, which is a unit of eBay (Charts, Fortune 500).

The full effect of the partnership will not begin until next year, but already in the last two months of the season, MLB.com started providing links to StubHub on team pages on the MLB.com as well as at individual team sites that fans go to when they're looking to buy tickets.

Baseball ticket sales on StubHub soared, and the site is now on pace to sell 5 million tickets this year alone, after selling a total of 5 million tickets in its first six years of existence.

The deal with baseball was beneficial enough to StubHub that it gave the sport something it never granted other teams or sports in its sponsorship deals -- a cut of the 25 percent combined commission that StubHub gets from the buyer and seller when a ticket is sold.

In addition, New York this year joined states such as Florida and Illinois in dropping the so-called anti-scalping laws that attempted to prohibit the resale of tickets for more than a nominal increase over face value.

The laws were among the most worthless on the books. If anything, they drove ticket prices higher by limiting supply as the laws made some potential sellers reluctant to put tickets up for sale. Numerous studies have shown ticket resale prices drop once anti-scalping laws disappear.

So even though few can afford to shell out $75,000 to root, root, root for their home (or road) team in the playoffs, having an open secondary market for ticket sales makes it less likely that anybody will ever have to pay such a high price in the first place. Top of page

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.