Amid Stubhub Layoffs & Liquidity Crisis, Ticket Brokers Push for a Bailout
Do scalpers need a bailout? Groups like the National Association of Ticket Brokers are floating the idea as a possible solution for the ticket resale business, hit hard by the coronavirus pandemic…
Do scalpers need a bailout?
Groups like the National Association of Ticket Brokers are floating the idea as a possible solution for the ticket resale business, hit hard by the coronavirus pandemic and the mass event cancellations it has caused. With sales virtually dead on resale sites like Stubhub and Gametime, brokers are being asked to refund customers for canceled events. Problem is, they can’t get their own money back on the tickets they bought directly from sports leagues and Ticketmaster.
That’s because teams and promoters are trying to reschedule games, postpone concerts and do everything they can to avoid paying back tens of millions of dollars worth of tickets. The reluctance to issue refunds is causing a liquidity crisis for brokers and resale sites like Stubhub, which has tightened payout rules and is trying to clawback millions already paid to brokers to help process refunds and exchanges. Earlier this week Stubhub announced it was temporarily furloughing two-thirds of its employees — about 300 people — while sites like TicketNetwork have had to “enact adjustments and cost cutting measures” in response to the crisis.
“I think some marketplaces are going to go under — it’s similar to what happened with the financial crash of 2008 without the prospect of a bailout,” says Barry Kahn, chief executive for ticketing and sales data firm Qcue.
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Kahn says an ongoing liquidity crisis at Stubhub and other marketplaces may be compounded by how the National Basketball Association, the National Hockey League and others decide to treat their postponed seasons. “Once the first marketplace falls, it’s hard to imagine how brokers and the rest of the marketplaces don’t follow. This crisis is exposing real vulnerabilities in the entire industry.”
He added that Stubhub’s decision to cut their staff by two-thirds misses the larger existential risk the company faces. If fans en masse demand refunds from resale sites like Stubhub, including fees, Kahn says, “We could see an entire side of the business come crashing down in a way that the banks went down in 2008. The only difference is that the banks got a bail out, and [the ticket resale business] probably wont.”
Gary Adler isn’t so sure. As the executive director of the National Association of Ticket Brokers, he’s been floating a proposal for several ticketing companies to consider approaching Congress and the White House about being included in a bailout for the airlines and hotel industry.
“The number of canceled events due to COVID-19, including some of the biggest that exist, has made it extremely difficult for those in ticketing (and live events in general) to stay afloat,” he tells Billboard. “We would like to see ticketing and live events put in the same category as airlines, hotels and cruise lines when it comes to applying relief. Right now, the ticketing industry is essentially at a complete halt with no end in sight. Income for the people working in this sector and providing valuable services to consumers is essential and warranted.”
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Not everyone is on board.
“Wow that’s rich. I don’t put them on my list of people who are in great need,” says Michael Marion with the Simmons Bank Arena in Little Rock, Arkansas. Like many venue managers, Marion has been a critic of the secondary market and sees it mostly as a nuisance, telling Billboard, “It would probably be good for our business if they went out of business.”
Stubhub officials say they are managing costs and dealing with the crisis, which comes at a difficult time for the company as it attempts to complete a heavily leveraged $4 billion buyout from Viagogo. While Viagogo announced in February that it had “completed its acquisition of StubHub,” its merger with the company has been held up by the U.K.’s Competition and Market Authority. On Feb. 7 the CMA issued an enforcement order instructing Viagogo CEO Eric Baker and Stubhub CEO Sukhinder Singh Cassidy to delay merging the companies while it reviewed the deal and warned both against take actions that would “otherwise impair the ability of the StubHub business or the Viagogo business to compete independently in any of the markets affected by the transaction.”
That means Stubhub is very limited in how it is able to coordinate its response to the coronavirus crisis with Viagago. “We are currently operating as an independent company, no longer under the support of eBay but not yet operated by Viagogo,” a Stubhub spokesperson wrote in an email.
Other companies are also struggling.
“As the list of event cancellations grow due to COVID-19, Gametime must work with sellers for repayment of cancelled orders that were previously paid,” Gametime said earlier this week in an email sent to brokers. “Normally we deduct for cancelled events as adjustments to your weekly payout but given the lack of any recent foreseeable live events, there is now a negative balance owed to Gametime.”
Officials with Gametime tell Billboard, “our position within the industry remains strong.” But several sources tell Billboard that upcoming announcements from the NBA and NHL could mean the difference between a manageable crisis and an existential threat for the secondary business. Brokers have already sold millions of dollars for tickets to future games on sites like Stubhub. If both leagues cancel their seasons and try to push fans seeking refunds into accepting credits for next season, the site could face a crush of requests for refunds from consumers not interested in waiting until the fall or 2021.
Stubhub and competitor sites like Vivid Seats and Gametime allow brokers to collect proceeds from the sale of tickets after the transaction, instead of waiting until the event or concert took place. Anticipating a massive influx of requests for refunds, Stubhub has changed how brokers are paid — going forward “all sellers, including brokers, are paid after event date” according to an email from a Stubhub spokesperson. Other marketplaces like Vivid Seats and Gametime are enacting similar policies. And instead of refunds, buyers of tickets for canceled events will now be given a credit on Stubhub for 120% of the original ticket, according to an email from a company representative. Only when “required by law, we will provide refunds to buyers,” the spokesperson explained.
But that tactic could backfire explains Kahn, who said brokers could retaliate by refusing to fulfill orders, especially if they feared one of the marketplaces was at risk of insolvency. In 2016, now-defunct ticket seller Scorebig was placed into receivership after finding itself short on cash and unable to raise new money. Many brokers were never paid for tickets they listed and sold on the site, resulting in six and seven figure losses. Many brokers canceled the tickets they sold on the site leading to fans unwittingly showing up to games and concerts and being being denied access.
“That’s why I think a bailout is unlikely — ticket brokers will do anything to protect their losses, even if it hurts the business long term. That will anger the politicians and make any kind of aid unpalatable,” said one secondary market consolidator who wished to remain anonymous. “And that’s too bad because they could use the help — there will be more cancellations in 2020 than the previous 30 years combined.”
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