The world of secondary tickets for sporting events, shows and concerts is murky at its best, and downright fraudulent at its worst. I have first hand knowledge of this industry and wrote about it a year ago.
A lot of cash changes hands, making accounting difficult and tax evasion a competitive necessity for ticket brokers that want to stay ahead. A common practice among brokers is to sell a ticket to a consumer first and then go and find the ticket afterwards. If the broker misjudged the pricing - which is common - they often back out of the transaction. And since many states regulate or outright prohibit the secondary sale of tickets, the whole market tends to be a grey area, leading to further erosion of consumer confidence and even higher prices. Adding to the confusion - counterfeit tickets are still very common.
That never stopped eBay from diving into the business head first (while avoiding relatively tame markets like virtual goods). And they doubled-down last January with their $310 million acquisition of secondary ticket marketplace Stubhub.
But a new class of startups is emerging that is starting to securitize the ticket industry in ways that work very similar to the stock market. One startup, Yoonew, is pushing the envelope more than most.
For now Yoonew is focusing on football tickets, and the Super Bowl is their big event. People pay $2,000 or more (lots more) for Super Bowl tickets. If you want a good seat, and buy from a reputable broker (this is a relative term), you are quite simply going to be paying a staggering amount of money. If you wait to the last minute you might get a deal, particularly if the teams aren’t a draw. But you also run the risk of paying a lot more, or not getting in at all.
Behind the scenes are the market makers - the very select few individuals who actually have their hands on the tickets. These include players and NFL officials, official partners to the NFL, and the people who purchase tickets from them. How much they pay for those tickets is based on their analysis of the game economics, and they are putting serious capital at risk every year. They then turn around and sell those tickets to the public. If they’re good they make a lot of money. If not, they can lose their business over a single game.
Yoonew is productizing that risk and bringing it down to the level of the individual ticket buyer - people who actually want to attend the game. Instead of buying a ticket early and not knowing if your team will even make it, people can simply buy a contract that delivers a ticket at no additional charge if their team makes it. If the team doesn’t make it, they’re out whatever they paid for the contract.
Prices are market based - and contracts can be purchased for as little as a few hundred dollars (prices are rising steadily now as the chances of any particular remaining team making it go up dramatically). That’s a big lure for rabid fans who can’t otherwise afford to attend the game. They pay now, and hope for the best.
Yoonew says they guarantee their contracts, and have never had an incident of fraud or non delivery. But I can’t find a link anywhere on the site to exactly what that guarantee is. An article in Forbes suggest it’s three times the price paid, but I don’t see evidence for that on the site. Even 3x your money won’t make up for the losses if your team makes it and you don’t get a ticket. So, as they say, Caveat Emptor.
There’s a good overall history of the company and founders here. The company was actually founded in 2004 but seems to have gone through some contractions and near bankruptcies as they perfected their model.
See all
Post
this is a joke, super bowl for a fraction, impossible.
so how is this web 2.0?
Most probably because it proves to be more than just a simple website …
This will be in deadpool soon, stupid scheme
~ CARversation.com
Swindle? gotta be kidding…
Nhick
http://www.itrush.com
I’ve had a chance to meet this team in New York. They’ve put a lot of research into this project and also have some very innovative technology that is still being privately tested. I also think this can be looked at as a platform play as well…their technology can be applied to other inefficient markets. They have solid technology and a smart and dedicated team. I expect them to make this a success.
I actually think this is a great idea. I wouldn’t be surprised to see more of these types of businesses exist in the future. For example, a contract to buy the latest holiday toy before it hits the shelves. It seems to me that we’re moving into a world where things that didn’t seem to have value before (e.g., the right to a ticket only if my team makes it) can now be monetized through the Web. I don’t see how that’s a bad thing as long as it’s done legitimately.
If you don’t care about the pre-game show or the national anthem you can get tix at face value or below in the parking lot at game time.
Prices plunge in the last 5 minutes before kick off.
If you go to http://yoonew.com and click on “For Fans”, you can watch their video about the family that THEY took PERSONALLY to the Super Bowl when their Pittsburgh Steelers went all the way. Listen to the family talk about it in their own words. I’m sure THEY consider it a SUPER DEAL!
I agree that a link to a specific “guarantee” page would be beneficial in making people feel confident that YooNew was going to come through with the tickets it promises. Other than that, none of the rest of this article has to do with YooNew as a company, but rather their niche in general.
It seems like exactly what they say it is… your *chance* to get tickets to the Super Bowl if you knew your team was going. They have an example of their success on their site. Real people who Really received the tickets they purchased and Really went to the Super Bowl who you can Really ask about it to this very day.
~Bill
I’ve had an in-depth conversation with Yoonew’s founders about their business model, and there’s really no magic to this. Imagine you have 15 teams in a conference and in the beginning of the year their odds of going to the super bowl range from 0.5% to 20%. You know a super bowl ticket costs $7,000. If you set the IPO price for the tickets at 10% above the odds, then you get $7,700. Now, if you’re the guy that bought a contract for $38.50, and your team makes it, you’re thinking WOW. If you’re the guy who bought a contract for $1540 and your team doesn’t make it, you’re pissed.
But that’s like any other options market.
The cool thing is, you don’t just hold your contracts - you can keep buying and selling as the season goes on. So if your team’s doing great, you can sell those $38.50 contracts for $400 after five games, and you’re in the money. Similarly you can jump ship on your $1540 contract after a game or two and you’re only out the difference.
- Brian
The largest risk for this Yoonew is not being able to deliver on the tickets that they promised. My concern is that the Company will be faced with a moral dilemma — deliver on their contracts or pay out on their 300% guarantee. In the former example, the Company will build its reputation for always delivering on its contracts, but at a cost to its profitability which was evidenced by Gerry Wilson having to liquidate his 401(k) to make good on Final Four contracts. In the latter example, the Company will be able to manage its profitability by paying the 300% guarantee if it is cheaper than purchasing tickets at an exceptionally high premium, but risks damaging its reputation and isolating its customer base.
I tend to agree with the Forbes article that this is a service that can be provided by a much larger company, who can mitigate the risk of escalating ticket prices through its other revenue streams. I also think that @Eric Willis (6) is correct to look at this as a platform that can be licensed to other exchanges, which would diversify the Company’s revenue streams and mitigate the risk of escalating ticket prices.
I have been using this site for over a year. I bought and received Colorado Rockies world series tickets this year and paid less then $20 a piece for them. I’ve bought and sold SuperBowl/Word Series tickets and never had a problem with them sending me my profits. I wish I knew about this site when my Steelers played in the SuperBowl a couple years ago, I would have saved a fortune.
the 300% guarantee actually screws with the pricing mechanisms of the option market. Until an investor know the probability of 300% payout vs. actually getting the ticket for any given option contract(aka event), the pricing of such an option contract will not only be dependent on the likelihood of the team to “win/reach the superbowl” but also yoonew’s ability to procure the ticket or give up and give out 300% instead. . .
a simpler way to explain this is . . . if I know for a fact that Yoonew will payout the 300% whenever they know the cost of the ticket is above that 300% . . . the price of any given contract will never be worth more than 3x of what it is today. This puts a cieling on the option contract. Using backwards induction, this means no contract is worth more than 3x the face value of ticket. . . even the superbowl . .. . eeks!
@13:
Its even worse than that, say you paid $24 for the ticket because the odds of your team making it are something around .05% or something, if the ticket’s face value is $150 then they’re better off paying you the $72 instead of even attempting to obtain the ticket.
This is ultimately a consumer confidence thing, its bad PR to not deliver on the tickets that you say you’ll guarantee up to 300%. They may be able to pull something like this off on a small scale, or on a large scale for one big game, but over the long term the bad press will not make them any money.
Great read. Thanks!!!
Michael, do you know the extent of relationships the founders have with teams and other brokers in the secondary ticket market? I worked at Razorgator long enough to know that nobody cares about a money back guarantee, just whether or not they receive their tickets. My concern is the founders are business guys, not ticket guys and if they don’t know the right people it’s a question of when, not if, they will default on an event.
Thanks Michael,
I’m thrilled that we were profiled on Tech Crunch today! There were some great points raised in this article and in some of the comments that I’d like to take a moment to respond to.
“Super Deal or Super Swindle”?
It’s a catchy title – and I’m happy to say it’s really a super deal. We’ve fullfilled 100% of our Fantasy Seat obligations since we founded the company 4 years ago, and we’ll keep doing so.
The 401(k) story
One of the comments on the post talked about how Gerry, my co-founder, had to pull money from his 401(k) to fulfill ticket obligations. You know, we’re proud of this. We were pre-funding, pre-staff, pre-experience, pre-relationships and pre-exchange - we were a couple of business school students with a big dream – and by sacrificing Gerry’s retirement funds, we delivered every ticket we said we would. I think this says a lot about the kind of people we are and the kind of business we run. And, as often happens, the adversity resulted in several valuable lessons learned which have since improved our ability to price, secure, and deliver tickets.
The 300% Guarantee
Back in 2005, we were trying to figure out how to make people feel comfortable that we could actually get tickets to big games. The 300% guarantee seemed like a good idea, and Forbes wrote about it in the story that was referenced. However, as it turns out, there’s an economic impact to this that screws up the exchange dynamics (see comment #13). Realizing this, we went back to the drawing board and developed relationships with ticket brokers and other intermediaries that make it possible to simply guarantee that we can acquire seats to games. It may cost us a bit more or a bit less than we had planned, but we’ll get them.
On the whole, it’s great to start getting this kind of attention. As with any new business model, there are kinks that have to be worked out, and based on what we’re seeing, I think we’ve done a pretty good job dekinking. I’d encourage any skeptics to sign up and log in and watch the market in action – it’s free, and it’s amazing how agile the market is at responding to even in-game events (You can see charts from yesterday’s playoff games at http://yoonew.blogspot.com/200.....yoffs.html).
Thanks,
Hagos
–
Hagos Mehreteab
President and Co-founder
The guys at yoonew are great people with a lot of integrity. I have no doubt they will deliver on the tickets they promise.
Furthurmore, I would suggest that you check out their site. I am seldom wowed by new websites, but they have done an amazing job of incorporating advanced technologies that are completely relevant to their business instead of what so many other companies do with worthless widgets.
I wish them the best!
I sell tickets to all major sporting events i have links on all my site to all the major ticket websites so people can see and compare prices.There are a lot of scammers out there it is allready starting on craigslist.Make sure you buy from people with good reputations.Dont get scammed.I live in tempe and i have access to private housing.
Sorry, but that’s a pretty dumb name!
Another site ticketsnow.com is one of the nice site to buy tickets online.
Another article about yoonew that was printed in the New York Times a couple year’s back. Pretty similar to the Forbes story, but still, I don’t really know too many scammers that get published in these kinds of places.
http://www.nytimes.com/2006/02.....ref=slogin
This is a great discussion, and hopefully it generates some good word of mouth publicity for the business.
I know the founders very well, and have followed the growth of their business since the modest beginnings. Hagos (comment #17 above) and Gerry have come a long way, and are executing very well on a great business idea.
I can personally attest to a few things -
1. These guys are totally passionate about what they are doing, and their knowledge of the ins and outs of this fuzzy space is now extremely impressive
2. It is a great business idea – bad ideas do not gain traction at the MIT 50K (now 100K I guess…), and this was a finalist, if I remember correctly.
3. These are people with integrity and good business sense. They will always deliver for the fans before thinking about short term profits. So while the ‘they will default and pay 3x’ idea makes good food for theoritical thought, that transaction is probably npv negative with lifetime value of the customer figured in, and Yoonew seems to get this.
And now that they are on the Arrington radar, they have to be positioned at the sweet spot on the S curve and poised for explosive success
I am a Yoonew net promoter… and wish them all the luck for success.
Disclaimers – unprompted post, no financial interest in the co.
@Hagos
I’ve been buying/trading tickets on the internet for about a year now and of all the sites I used yoonew is by far the best one in terms of prices, reliability, fees, and technology.
You guys are head and shoulders above ticketreserve and some of those other sites out there. Keep it up
Both Hagos and Gerry are standup guys. We went to Princeton together and they are definitely not swindlers. They’ve assembled a great team and they’ve invested years into creating a great product/service. I’ve seen the progression of their business over the years and it is truly inspiring.
Actually, I think this is a great product and a revolutionary idea. I see a great future in this and I heard that they are also expanding this idea to other products such as concert tickets and such.
I found the site a little to tricky to use… maby its because im not american.
I dont get what the difrent teams have to do with the superbowl ticket? or do they give free tickets to fans with season passes to spacific teams, and the ticket is only valid if te corasponding team is there. Or am i way off track?
I think it’s a great idea, and I think if a true fan is unwilling to buy a ticket future for their team making the championship game, then they are essentially casting doubt on a team they profess to be a die hard fan of. As an avid basketball fan, I would definitely purchase a ticket future for my team getting into the finals if it was offered on the site.
It is a great idea, but there is a lot of waffleing with regards to the ticket delivery. The delivery policy is EXTREMELY wishy-washy. They state, usually 48 hours, but it could be right before the game depending on the event. Just what does that mean. Do they fulfill their obligation if they deliver it to you in the parking lot 15 minutes before the game. Peace of Mind- I dont think so. Many ticket brokers who short tickets want delivery as late as possible as the price of tickets GENERALLY, but not always goes down as game time approaches.
I’ve used yoonew and other sites like this for the last couple of years with lots of success…
I paid $140 each for 4 options for the Red Sox World Series and received great tickets a couple of days before game 1. There would be no other way for me to get tickets like that on my own… unless ofcourse I paid what a broker wanted which was about $1400/ticket for game 1… I really thought I’d never get a chance to see my Sox in a WS after 2004. I was able to treat some special people in my life with a once in a lifetime experiance…
I also bought 2 options for the Patriots on the first day avaiable for $530 each… I sold them the week before Thanksgiving for about $2000 each ( I personally thought they were overvalued at $2000 and thought I could get them cheaper later in the season….) I cashed out and got a check within days (didn’t want to pay the 3% paypal fee).
I bought back again this weekend, which is more of a gamble because I bought 4 of the Patriot vs. Giant matchup options for around $350 each. I’ll figure out this week if I will keep 2 and cover my costs or keep 4…. Anyways so far they have been top notch people to work with and there is so much more transparancy than the other two companies offering service similar to this with their blogs and newsletters…
Michael Arrington you are an absolute moron who is very misinformed. you’re not even worth the time to correct the tons of mistakes in both of your articles
This is interesting, but I think there needs to be a lot of volume for a site like that to work well, and I’m not sure event tickets provide that kind of a volume.
I still believe comparison shopping for event tickets is still the best way to get a good price on an event ticket, at a site like http://www.ninjatickets.com