Agoracom

NEW YORK -- There is no such thing as a true sellout anymore.  A sellout used to mean that sports fans and concertgoers would be relegated to watching their favorite events on TV because the demand to attend in person was too high and the event ran out of tickets.

Thanks to the recently legitimized secondary-ticket marketplace, however, fans can now see their favorite bands front row or catch playoff football without having to camp outside stadiums or secure tickets from scalpers. The catch, of course, is that they will have to pay extra in markup – sometimes exorbitantly.

Last year, StubHub, the leader in the online secondary-ticket world, sold a single seat to the Super Bowl for a whopping $10,287. In case you were wondering, StubHub made more than $2,500 on that sale alone because of a 25% commission charge (10% from the buyer and 15% from the seller).

So how does it work and does it benefit anyone other than the middlemen?

Many of the tickets sold through secondary-ticket sites are posted by season-ticket holders looking to get rid of tickets, rather than just eating the cost. The buyers are fans that are hoping to get into a sold-out event or simply upgrade their mediocre seats. Meanwhile, the ticket companies charge a commission for access to the market.   

The winners in this deal are those who have no time to wait in line but have the means to buy more than face value, said Alan Krueger, an economics professor at Princeton University who studies the industry. While paying hundreds to see Bruce Springsteen’s tour this past fall might sound like a lot, Krueger said it’s just a market adjustment. He said the primary market undervalued the tickets and the secondary market is simply correcting it. Krueger and others also predicted that the primary market will catch up and eventually those tickets will be more expensive.

Experts said fans can benefit from the increased options found in the secondary marketplace but have to be careful to watch for fraudulent tickets. Angie Hicks, founder of the widely used consumer site Angie’s List, recommended several precautions that should be taken before purchasing tickets online.

“The guarantee is going to be very important. You want to go to a very trusted site,” said Hicks.

Many of the big online companies do offer a guarantee, but Hicks warned to be careful to read the fine print.

Hicks also said to shop around to check the supply and demand. If the supply is great and the demand is low, the prices will go down before the event. Also, Hicks said you should check out the venue’s seating chart to make sure the seats don’t have an obstructed view.

StubHub, which was bought by eBay (EBAY: 27.13, -1.20, -4.23%) earlier this year, shares the market with TicketsNow, RazorGator and dozens of smaller companies. The gap between StubHub, which had more than $400 million in sales in 2006, and the rest of the group may be widening.

“We are on pace to sell more actual tickets in 2007 than we have sold in the entire company’s (seven year) history,” said Sean Pate, a spokesman for StubHub.

Incredibly, the site sold nearly 10,000 tickets to a single Red Sox-Yankees regular season game in August. That’s nearly one-fifth of the total tickets sold to the event. While the demand may not have increased, the new accessibility to the secondary market has helped StubHub and its competitors set new sales records each year.

StubHub recently entered into an exclusive five-year deal to be the official secondary online marketplace for Major League Baseball. Specific terms of the agreement were not released, but it is clear that MLB teams that join in this venture will now have the ability to profit off of these sales.

“The secondary-ticket marketplace exists and has for a while. I don’t think there is any denying that. If it’s out there, let’s make this the best possible experience for the fans,” said Matthew Gould, vice president of communications for MLB Advanced Media.

There are legal issues tied to this industry, as several states and cities have restrictions about selling tickets for more than face value, but that too is changing.

“These are becoming more and more the exceptions," said Joe Freeman, vice president and assistant general counsel for Ticketmaster, a unit of IAC/InterActiveCorp (IACI: 23.92, -0.20, -0.82%). "These (laws) are very rarely if ever enforced.” 

Experts said by the time the legal aspects are settled, fans and concertgoers should be comfortable with the secondary market.

Even Ticketmaster, the number-one ticket company in the primary market, has gotten into the resale industry with a program called TicketExchange. It’s a part of Ticketmaster’s efforts to level the playing field and get a piece of the resale market that has taken off because of the Internet. “We recognize that if you don’t embrace the changes that technology brings, you run the risk of becoming irrelevant very quickly,” said Freeman.      

StubHub, RazorGator and others have worked to separate themselves from Ticketmaster by paying extra attention to fans through innovative Web sites and investing in new technologies.