Yankees Lower Seat Prices, Dan Gilbert Laughs

The Yankees are learning what Cleveland Cavaliers owner Dan Gilbert already knew.  In order to maximize profits from ticket sales, you don’t want to give up all those proceeds that occur on Stubhub, Ebay and Craigslist.  So the Yankees decided when they opened their new ballpark, that they would outsmart the scalpers and just raise ticket prices to levels where the tickets had normally sold on the secondary market in previous years.  It seemed pretty smart at the time and then the first 6 games happened and the seats were glaringly empty at new Yankee Stadium.  Now the Yankees have announced that they are going to go ahead and lower some prices.

Some will just say it is the result of the downturn alone.  That certainly is a factor.  Yankees fans that normally would have purchased Yankees tickets at the old stadium had tough choices to make this year presumably, even without the exorbitant ticket price increase of the brand new stadium.  Now with a downturn and lost jobs, it makes sense that tickets are going unsold.  Even at the old prices, some tickets would have gone unsold in this economic climate.

That is why Dan Gilbert’s strategy was perfect.  Gilbert created Flash Seats which allowed easy transfer and sale of Cavaliers tickets for season ticket holders.  If you wanted to give your seats to a friend for a night, you could transfer them electronically to that friend.  They print out a simple piece of paper and they walk into the game.  If a season ticket holder wanted to sell their seats for above face value, they could do that too.  Of course Dan Gilbert and his company Flash Seats would take a percentage of the profits.  Flash Seats had to stop this last practice of selling on the secondary market because of a prior deal in place with Ticketmaster.  But until that happened it worked out perfectly for Gilbert in the Cavs as they made money in both primary and secondary ticket markets.

Dan Gilbert realized that he wanted in on the profits in the secondary market while not risking an empty stadium.  Tickets need to be priced in such a way that when a team is slightly above average to elite that the arena or stadium will sell out.  That is the idea anyway.  If the team is awful, they won’t sell out anyway.  Once you take care of that then the secondary demand which drives scalper prices through the roof can be variable.  If a great team is in town maybe seats will sell at three times face value.  If a scrub team is in town then it will be significantly less.

The point is that you never quite know from year to year exactly what the economy is going to be like or what kinds of teams other cities are going to have?  The Yankees went ahead and priced their tickets too far up the scale and killed the demand across the board.  They killed the demand for the primary market, and they took all the profits away from players in the secondary market like brokers and scalpers.  While that might seem like a good thing, it creates embarrassing television broadcasts with empty seats. 

Dan Gilbert had it right even though he had to stop due to contractual obligations with Ticketmaster. I expect when it comes time to negotiate new contracts Gilbert and company know how to make it work for them.  Maybe by that time the Yankees will have figured it out too.  Unfortunately for them, the Yankees have already endured an embarrassing false start by being too greedy.