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What will ticketing look like after StubHub files for bankruptcy? It’s Time To Decide.

Updated: Apr 30

The world’s major event promoters and ticketing companies must work together now or the whole system will blow apart.


What happens when a worldwide industry which promotes and tickets every live event freezes because everything is cancelled for an indefinite time, starting tomorrow? What is the plan to refund the tickets sold, absorb the losses and maintain consumer confidence so the fans return when this public health crisis resolves?


I believe that StubHub, the company which was just acquired by Viagogo for $4 billion is on the verge of collapse. What I’m hearing suggests they’ll file a bankruptcy petition around April 15th. That makes sense. Ticket sales are on pause worldwide. No one knows when sports, concerts or theater will resume. Consumers are out of work. And, if you’re StubHub selling $5 billion of tickets a year and you are looking at having to refund that money, where’s it going to come from? Likely every reserve you had went toward the purchase of StubHub from eBay.


There’s an old saying about the process of going broke. It happens slowly at first, then all at once. The live entertainment industry is essentially bankrupt. But, true to its go big or go home nature, it skipped the slowly part. Due to COVID-19, everything from concerts to sports to theater all stopped at once. Billions of dollars of tickets have been sold for concerts, shows and games which either won’t ever take place or will be delayed at least six months and more likely a year. As the reality settles, so will the accounting nightmare of who gets left with the bill. Here’s a hint: it’s the credit card companies.


In the second half of this article I’m going to talk about how to lose $4 billion in less than a month and what that could mean for the entire ticket industry. But first:

The only way to survive is to perpetuate the systemic trust among all players in live entertainment eco-system


As in all crises, the first to break trust brings it all down. Lines stay orderly until someone at the front starts slipping in their friends. Everyone acts in the collective interest until it becomes apparent that those at the front of the line are taking more than their share and those at the back figure out they’d better react quickly or be left with nothing.


As entire countries move to lock down their citizens the idea of live events resuming quickly reveals itself to be a mirage. As a result, we have to end game various scenarios to plan for the foreseeable future.


I both write about this industry and consult for companies within it. Sometimes, I give advice before it was even requested. Two weeks ago I sent StubHub a strategy to help save the resale business.


A simple plan to save resale:


How do we handle settling payments when tickets which have been sold for shows which are cancelled mix with tickets which have been sold for shows which are postponed or questionable?


It’s really this simple: carry some credit risk across a broad category of ticket suppliers, or shut off all risk and quickly find the consequence is a startling drop in supply.


Ticket supply at present comes predominately from brokers who risk their own capital buying from primary markets in hopes of profiting by reselling at profit on secondary markets. This is a capital intensive business with thin margins. Most events generate a small profit or a small loss. The idea is, by applying margin against volume, and adding in incentives such as cash back or reward points from credit cards, to earn a return in excess of the costs of operation.


Buying tickets to resell on markets is unsustainable unless capital is quickly returned.


Historically, most brokers have been paid by markets when tickets are delivered. Larger, more credit worthy brokers are paid when the sale is made. The model is trust based, with bad actors expelled from the system. It has worked while the business exploded globally with supply growing to support $15+ billion in sales.


Imposing a pay upon event completion delay will destroy supply. No one can afford to risk their capital for future events. The business is based on turning inventory. Capital would be better deployed flipping houses or buying stocks. We have seen volatility in both these markets too, but you can recover capital and reallocate quickly. With tickets held for payment until after the event, there’s no exit strategy to recover and reallocate funds.


StubHub is by far the market leader now, post-acquisition by Viagogo. Its volume is close to half the worldwide volume of resale tickets. What it does will be copied immediately by all other ticket markets. If StubHub returns to its prior payments policy, every other market will be forced to follow. Liquidity will return and supply will remain. There is even an opportunity to pressure primary markets to make the concession to move away from delayed delivery and return to immediate delivery of tickets.


We can monitor performance of individual brokers like a bank which has an extended credit facility. You’ve already vetted most of the brokers’ credit when they were enrolled in your early payment program.


Install a team to track events which cancel and immediately claw back those funds from future sales. Understand that primary markets will postpone whenever possible to avoid returning proceeds of sales. We already know what the major 2020 cancellations look like through Q2. Make a decision as to whether or not to allow sales of sporting events for Q3 or Q4. Our suggestions:


1. For music and theater events, pay upon sale or delivery of tickets as before.


2. For sporting events, pay up to the face value of the ticket upon sale or delivery, and hold the balance until the season begins. If the season starts, pay out the profits.


3. Require a personal guarantee from sellers who receive payments prior to event.

Understand in a total melt-down these guarantees will not be collectable. But, they will separate the honest from the opportunists.


4. Lower your fees to no more than 20% mark-up on events to incentivize consumers to purchase more events which may or may not occur.


5. Take a page from the broker community and cut your overhead as quickly as possible.


6. This may be an opportunity to reduce substantially Google/Facebook spend — a separate discussion for us in the near future.


7. Work together with us to build a trade association of secondary markets which has its own internal credit alert system for whenever anyone has a broker supply issue as an early warning for everyone. Self-reinforcing systems are effective. It was the foundation of eBay.


8. Understand that, otherwise, all markets are at risk of losing their supply as brokers fail, and worse: lenders to brokers can band together and force an involuntary bankruptcy filing.


The terms and conditions under which tickets have been sold through brokers don’t contemplate the pay after event steps which have been taken. Any three creditors can file an involuntary bankruptcy petition. It may be rejected but the damage to consumer confidence will be unrecoverable.


9. Recognize this is one ecosystem with commonality between supply and distribution. Brokers are supply. Markets are distribution. Each requires the other. A Reese’s peanut butter cup only succeeds with both chocolate and peanut butter. They’re intertwined and interdependent. Trust that commonality will bind behavior to the common good.

There is a very short timeline to resuscitate supply before the entire marketplace grinds to a halt. That same window is short to rehabilitate behavior by primary markets. This is the chance to save a business or kill it. Now, with the viability of the entire business hanging in the balance is not the time to change. It’s the time to lead.


We never heard back from StubHub, but at that point they were busy laying off 70% of their staff. Probably that number should have been more like 95%.


Reversing transactions in the ticket marketplace is complex. Tickets are bought, sold and resold. Some shows are canceled, some are postponed. Some promoters offer refunds others only give you the ability to attend the rescheduled date. For many who own season tickets to NBA, MLB, NFL, NHL, MLS or other professional sports, seeking a refund for your unusable tickets this year only gets you a credit against next year’s season tickets.


The resale marketplace for tickets exceeds $15 billion. I will fully explain the cash flows a little later in this story. But, for now, here’s all you need to know:


When a seller gets paid by a resale market for tickets, the money goes to buy other tickets and to pay operating overhead. It’s not sitting around waiting to pay a refund toward half a year or more worth of cancelled shows.


When the markets wind up refunding their buyers, they are going to have to work with the sellers whose tickets they sold in order to recover those funds over time.

Reportedly Vivid Seats has acknowledged this truth and is prepared to finance carrying the deficit into the future by working with brokers by allowing them to pay back money they’ve received for subsequently cancelled events over time once the market unfreezes. The resale division of Ticketmaster appears to have the same attitude. This is a problem affecting everyone. No one can front run the line or the whole system comes down.


Other smaller companies are similarly working to protect the collective interest. TickPick, a smaller marketplace continues to pay sellers upon delivery of tickets while the big markets are holding onto their proceeds from selling a ticket and not paying the seller until the event takes place thereby causing a cash crisis for sellers who have to pay their credit cards used to buy the tickets or suffer huge interest charges. TEVO, a broker owned marketplace is constantly adjusting their payment metrics to make certain they’ve returned as much as possible to normal in paying for tickets as delivered rather than when events occur.


I fully understand the dilemma. Either it’s the seller who is at risk of the event cancelling or it is the market. One or the other has to be prepared to refund the ticket price to the consumer. But, unless we return to the trust which has already existed throughout the system, supply will dry up as we force the brokers out of business thereby leaving the markets at risk of having much less supply to sell.

Instead, the leading companies in live entertainment need to work out a recovery plan which balances risk and utility among everyone.


The following companies should seek anti-trust exemption to jointly plan a path to save themselves and the entire system of producing and selling live events:


1. Live Nation — ticketing company, promoter, and venue owner/operator, tour logistics


2. AEG — ticketing, venue owner/operator and promoter


3. NFL


4. NBA


5. MLB


6. Oak View Group — venue owner/operator, publisher


7. Viagogo/StubHub — global resale marketplace, ticket partner with major sports teams


8. VividSeats — global resale marketplace


9. Endeavor — Artist representation, UFC owner, On Location Experiences


10. Shubert Organization — ticketing, venues, theater production


Consumers are afraid to go out in public, a fear which will grow as this pandemic plays out here in the United States in ways we are not yet ready to acknowledge: accelerating infections and rapidly rising deaths. If you think it’s ugly now, wait until hospitals are building tents to house COVID-19 wards in your town and we start the mandatory recall to work of anyone ever licensed as a doctor or nurse. Once we get past the crisis and begin to restart life as usual, we have to be thoughtful and orderly. The consumer isn’t going to rush out and buy tickets to five festivals, eleven sporting events, three plays and nine concerts.


We do not have a vaccine to prevent Coronavirus from spreading or a cure


Until we do, the very real threat of ongoing waves of infection and death will require social distancing. Think about this: at this point school is not only out for summer, how can it possibly resume in fall? It only took 90 days or so for the virus to circle the globe from a small start in Wuhan, China. We can’t reopen the world until the virus is stomped out, and people are inoculated against the prospect of it resurfacing.


If schools are going to stay closed, no responsible government is going to allow mass gatherings. This means the NBA season is over for the year or at best will play it out without fans in a truncated form. Baseball is not going to start and the NFL is doubtful to play before fans in attendance. I’m guessing hockey is unlikely to survive in its present form and wrestling is dead. At best selected games from each of these sports will be played for television only, but there isn’t enough air time to broadcast every single sporting event which would normally have been played.


https://www.theringer.com/mlb/2020/3/27/21196612/mlbpa-canceled-season-agreement-free-agency-mookie-betts-service-time


Since sports are the next closest thing to religion in this country, if they can’t play to a crowd, I have to believe the concerts and theater performances stay dark for the rest of the year. The current strategy of rescheduling tours for which tickets are already sold will have two predictable results: first they will all be rescheduled into the spring of 2021 or later, and second a delay this long will cause increasing pressure on regulators or credit card companies to force refunds of tickets which were sold.


Remember after 9/11 when television went completely sober for weeks. When it was time to allow a little comedy back, Saturday Night Live went first. They were measured. The first guest host was Paul Simon. The show opened with a then heroic Mayor Rudolph Giuliani and a stage full of New York’s stunningly brave first responders. I defy you to watch this and remain dry-eyed:


https://www.nbc.com/saturday-night-live/video/911-tribute-with-mayor-giuliani/n11612


There’s a lesson there in civility, class and order. 9/11 was a tragedy this nation mourned together, but it hit New Yorkers at home. Coronavirus is indiscriminate. It’s coming to your town, if it isn’t already there. This year’s heroes are the medical personnel risking their lives to help others, along with everyone else from delivery drivers to grocery store checkers who interact with the public continuously thereby increasing exponentially their likelihood of being exposed to the virus.


On to the issues of ticketing:


For the business of arts, culture and sports to get back it should start slowly and thoughtfully. The planning needs to begin now. We need to rebuild desire in the fans to attend an event, and trust that their attendance will be safe. Everyone in the ticketing ecosystem has to row in the same direction. There’s never been such a rapid suspension of public gatherings worldwide, so none of us knows what it will look like on the other side. But, of this I am certain if we don’t work together we most certainly won’t work again.


Give me a kiss to build a dream on

And my imagination will thrive upon that kiss.

Sweetheart, I ask no more than this:

A kiss to build a dream on.


A Kiss To Build A Dream On — Louis Armstrong


As I’ve written more and more frequently, something my mother once told me is proving true: wisdom comes with age. I’m creeping ever closer to an age that starts with a “6” and does not end there. So, I’ve been able to learn a thing or two over time.


In this situation I know that order remains until the first major player panics. Then, and rapidly, it’s every man for himself. It’s something we’ve already seen in the public at large who, when first informed about this pandemic wiped out the nation’s supplies of toilet paper, flour, rice and pasta. The current ticket world is breathlessly holding onto two fence posts: the rescheduled events will be held rather than refunded and there won’t be a cascade of defaults which wipes out everyone.


What do I mean by defaults? I mean the money ultimately paid by a fan was distributed among many hands and is not exactly easy to get back. Stay with me here, this part is hard, but it’s important. I promise it gets more fun to read in the next section.


Here’s how the money works in concerts:


1. An artist working with a promoter decides to go on tour, whether locally, nationally or around the world. Often the promoter is owned by Live Nation or AEG. Sometimes the artist works with local promoters in each market. The artist may be contracted to play the shows for a guaranteed price based upon what the promoter believes they can sell enough tickets to cover. Sometimes they get the greater of the contracted guaranteed amount or a percentage of ticket sales. Sometimes, if they’re Jimmy Buffet, they even get a split of the liquor sales.


2. The promoter typically helps arrange and pay for tour logistics, including hiring the staging, trucks to move the stage and sound systems and the roadies to rig them in every city. Money is spent up front before the tour designing and building the stage, creating the lighting plan and the visuals which run on the screens and the “special” effects like pyrotechnics, flying stage elements, secondary stages near the back of the arena and, if they’re Pink Floyd, a flying pig. Rehearsals are held to make sure the show runs the way it was envisioned. During this period there may be 50 or more people working full time running sound, tuning guitars, connecting lights and amps and providing back office services like accounting, payroll, arranging travel, lodging and catering.


3. Meanwhile, the “primary” ticketing companies associated with the venues the artist will play sell tickets over several days of presales (artist password, credit card, Facebook or Spotify password, venue or radio station password) during which, hopefully, many of the tickets are sold. Finally, the remaining tickets are released to the general public sale. With luck the show sold out. With a lot of luck, demand was so high that dynamic pricing kicked in, and the ticket prices were moved up continuously over the course of the days tickets were sold. In almost every case, the primary market charges a fee on every ticket sold. Typically primary markets don’t pay the artist until the show is played. All the money raised from selling the tickets is held.


4. Speculators (ticket brokers, scalpers, touts) use their knowledge of the venues to buy tickets which they believe might be worth more than face value. They use their own money, money they’ve raised in groups and money they have available on lines of credit to pay for these tickets. They hold the risk that demand might not be there for these shows and the tickets will either sell for less than what was paid, or sometimes not sell at all. (See: Gordon Lightfoot)


5. These speculators, using point of sale software, broadcast their inventory in real time to “secondary” or resale ticket markets such as StubHub, Ticketmaster Resale, Vivid Seats, SeatGeek, TickPick, TicketNetwork and others. When a fan buys a ticket from a secondary market, they are charged immediately for their tickets. The secondary market typically pays the speculator whose ticket they sold upon delivery of the ticket to the buyer, although in certain cases big speculators get paid upon sale. The secondary market places a fee on top of the price the speculator was asking for the ticket. So, the ticket might be priced at $100. The market might add a 25% fee, making the price for the fan $125. They may charge the seller a commission of 15% which means they pay the seller of the ticket $85 and keep the remainder of the $125 for themselves — a gross profit of $45 on a $125 sale.


6. At this point the promoter has advanced the costs of the tour, the artist has sold tickets through the primary market to fans and speculators. Speculators have resold tickets through secondary markets to fans.


7. Enter Coronavirus. The tours are either postponed indefinitely or to a date which may change again in the future. The primary market is holding all the money they collected including the fees which are theirs once the show takes place. The secondary market is holding all the money they’ve collected from fees, having paid out the money they owed the seller as soon as the fan received the ticket. The speculator is holding the money received from the sale of the ticket.


8. Let’s work backwards: a Pearl Jam fan buys a ticket for $800 from StubHub and pays for it on a Visa card. That ticket had been listed for sale by a speculator for $600. StubHub marked it up 33.3% which is how it sold for $800. At this point StubHub has $800 minus credit card processing fees. The speculator has a deal with StubHub to only charge a 10% seller’s fee. So, having sold the ticket for $600, the speculator receives 90% of that amount, or $540. StubHub keeps the other $60 plus the $200 they received from the 33% fee they added on when selling the ticket to the fan. The speculator paid $350 when buying the ticket from the primary market, which was $275 for the artist and $75 in fees charged by the primary market.


9. Summary:

a. The fan paid $800 on a Visa card for the ticket.

b. StubHub got the fan’s $800 and paid out $540 to the seller leaving them with $260.

c. The speculator received $540 from StubHub for the Pearl Jam ticket he paid $350

to buy — a $190 profit.

d. The primary market received $350 from the speculator and when the event

occurs will pay out the $275 face value to the promoter leaving the market the $75

fee charged.


10. Because of Coronavirus, the artist cancels the tour completely. The fan who paid $800 wants it back from StubHub or Visa. StubHub only has $260, having paid out the remaining $540 to the speculator. The speculator spent $350 paying the primary market for the ticket and has to seek a refund from them. Likely any of the $190 profit the speculator collected was long ago spent on buying additional tickets to resell or paying operating expenses.


11. If, instead of a concert, this event was a team sport ticket from a season plan, there isn’t really a primary market that will refund the purchase. Instead, the team will insist the money be rolled over into next year’s season ticket plan. Or, if you insist on a refund they’ll take away your ability to buy your seats for the next season.


Why did I make you read all of that deep detail about money?


The ticket business, more than most, relies on trust all throughout the supply and distribution chain. The fan buying a ticket in January for a summer stadium show trusts the band won’t break up in March, that the promoter won’t steal the money as happened with the Fyre festival and that the show promised is the show they’ll see. The band trusts the promoter will have secured the stadium for that date, and arranged the stage and crew so they can actually plug in their instruments and play.


But, also, the speculators who bought tickets and resold them on the secondary markets are a significant part of the trust equation. Because, once a fan buys a ticket from the secondary market, they trust that either the ticket will be delivered or the secondary market will make good its promise to make them whole. And here’s where it’s all breaking down.


Let’s talk about StubHub


StubHub revolutionized the ticket world. It used to be that tickets were resold on the streets outside of a venue, or over the telephone. Fans who bought resale tickets had no recourse if their tickets didn’t work at the gate. They were at risk until they got inside. And, if rejected, the ticket seller was gone. I had a brush with that just this year in New York:


https://medium.com/@ericsfuller/when-a-broker-gets-brokered-a-new-decade-in-tickets-begins-and-i-meet-an-old-school-ice-man-88e2757a35ef


StubHub was instrumental in building consumer confidence that tickets bought on the secondary market were valid, and that a real company with customer service personnel who could be called stood behind those tickets in the event there was any unexpected problem at the event.


Eric Baker and Jeff Fluhr founded StubHub in San Francisco twenty years ago. Baker, who I’ve written about many times, was president of StubHub. He left in 2004 after a falling out with Fluhr. In 2006 Baker founded Viagogo, a StubHub clone in London to resell tickets in Europe. In 2007 StubHub was sold to eBay, reportedly for $310 million. What happened next was fascinating, and what’s in play now might hold the future world of tickets hostage to its resolution.


Look

If you had

One Shot

Or one opportunity

To seize everything you ever wanted

In one moment

Would you capture it

Or just let it slip?

……….

While Eric Baker steadily built Viagogo in Europe and around the globe, StubHub with the backing of eBay became a colossus. By the end of 2018 StubHub was the primary driver of eBay’s earning growth, bringing in $4.751 billion in gross sales and $1.068 billion in net transaction revenues (earnings after deducting the costs of the tickets sold).


That had to be hard to watch. Baker did not leave StubHub happy. Watching from across the ocean while the company he helped form grew dominant while backed by a Fortune 500 company had to hurt. I can only imagine it might have been something like Trevor Engelson experienced when his former wife Meghan married Prince Harry of England. You just never quite expect things will turn out that well. Although in both cases as we continue watching events are occurring to shatter the image of perfection which was initially presumed.


For eBay, the demand letter sent by Elliott Management Corporation to restructure itself set into motion a chain of events which led to the sale of StubHub for slightly more than $4 billion. At that time, the apparent leading contender to buy StubHub was Vivid Seats, a Chicago based resale ticket market with great technology focus and strong venture capital backing from GTCR and Vista Equity.


I wrote two pieces about this possibility, one speculating that the value of StubHub as an investment would be zero, based upon my belief that Live Nation and other primary markets could make tickets non-transferable and thereby destroy the value of companies which have to sell lots of tickets to be sustainable.


https://medium.com/@ericsfuller/stubhub-is-for-sale-e2ba93f7c64


I also wrote a piece about what would be the likely result if Vivid Seats were able to buy StubHub and what permitting one company to hold such a large percentage of the US resale ticket market might look like:


https://medium.com/@ericsfuller/duopoly-what-if-vivid-seats-bought-stubhub-51bb9b0edcb8


I believed I’d really thought through the options of what might happen. But, I’d overlooked something really important. Viagogo was out there with a big lead in the rest of the world, and its only true competitor at scale outside North America was StubHub. StubHub was the leading resale market in the United States where Viagogo had virtually no presence. And, StubHub was now for sale.


You better lose yourself in the music, the moment

You own it — you better never let it go

You only get one shot, do not miss your chance to blow

This opportunity comes once in a lifetime.


Lose Yourself — Eminem


Viagogo has great VC partners, which reportedly included: Index Ventures, Bernard Arnault, Brent Hoberman, Jacob Rothschild, Andre Agassi and Steffi Graf. Here was the opportunity of a lifetime. The biggest ticket resale market outside of North America could purchase the biggest ticket resale market inside North America and have absolute dominance worldwide in redistributing tickets. They would have gross sales approaching $8 billion a year and enough sway over sports to become a partner in primary distribution of team tickets globally. Plus, the guy who was invited to leave StubHub would return as the vanquishing hero. For a Stanford graduate like Eric Baker, the Steve Jobs parallel must have been irresistible. Come home to the company where it all started and show that it was you all along who knew better.


You let your blue walls stand in the way of these facts, honey

Get your carpet baggers off my back

Girl give me time to cover my tracks

You said, “Here’s your mirror and your ball and jacks”

But they’re not what I came for

And I’m sure you see that too


I came for you, for you, I came for you

But you did not need my urgency

I came for you, for you, I came for you

But your life was one long emergency

And your cloud line urges me

And my electric surges free


Crawl into my ambulance, your pulse is getting weak

Reveal yourself all now to me girl

While you’ve got the strength to speak.

Cause they’re waiting for you at Bellevue

With their oxygen masks

But I could give it all to you now if only you could ask


For You — Bruce Springsteen


Baker and the Viagogo team had the chance of a lifetime and they did not sleep on it. They closed the purchase of StubHub on February 13, 2020 — a reunion of sorts just in time for Valentine’s day.


https://variety.com/2019/digital/news/stubhub-sold-4-billion-e-bay-viagogo-1203415381/

https://www.nytimes.com/2019/11/25/business/stubhub-viagogo-ebay-sale.html


It had been a bravura performance by the Viagogo team. They bought a company bigger than theirs and closed against sophisticated counter bidders in an aggressive and accretive industry. Viagogo is now one of the largest sellers of tickets in the world and likely the company with the most comprehensive reach globally. It was like buying a place on the water in winter — the spring was about to arrive and the sun was about to shine. Leveraging everything to grow so fast while coming home was quite a risk. Fortune favors the bold. No one writes the history of the guy who wears both a belt and suspenders. But Baker — he was a baller.


Honey got no money

I’m all sixes and sevens and nines

Say now baby, I’m the rank outsider

You can be my partner in crime


Baby, I can’t stay

You got to roll me and call me the tumblin’

Roll me and call me the tumblin’ dice


Tumblin’ Dice — The Rolling Stones


Here’s the thing though, sometimes when you take the biggest swing of your life, it doesn’t play out the way you expect, no matter how well you thought through the possibilities. Life’s funny in that way. It’s the bullet you never saw coming that does the damage. In this case, the “bullet” was Coronavirus, that nasty business which was developing in China and the Far East.


Nobody Expects the Spanish Inquisition


On January 10, 2020 the New York Times reported about the first known death from a new virus which was not believed to be spread between humans.

By March 6, 2020 the South by Southwest festival cancelled due to fears about Coronavirus


https://abcnews.go.com/Business/facebook-netflix-twitter-back-south-southwest-coronavirus-fears/story?id=69409100


On March 10, 2020 Goldenvoice announces it is rescheduling their Coachella and StageCoach festivals in October.


https://medium.com/@ericsfuller/canary-in-the-coal-mine-is-coachella-our-first-look-at-how-fans-now-balance-fear-against-fun-b4068bbbba20


By March 11th, 2020 the Director-General of the World Health Organization declared COVID-19 to be a pandemic with 118,000 cases reported in 114 countries.


https://www.who.int/dg/speeches/detail/who-director-general-s-opening-remarks-at-the-media-briefing-on-covid-19---11-march-2020


The next day, March 12, 2020, Live Nation and AEG recalled all tours, told their employees to work remotely and cancelled or postponed all events until a date to be determined, but likely not before May or June. That was the day when eBay recognized selling StubHub and getting paid $4 billion in late February 2020 would go down as one of the greatest coups of all time.


The speed with which StubHub was about to unravel would open the possibility that in the near future eBay might be able to buy it back for the same $310 million they’d originally paid in 2007. I can’t lose the idea that, in the midst of all this darkness, Masayoshi Son finally had a laugh about someone else who made a colossally bad bet. The abrupt ending of every live entertainment worldwide for the indeterminate future had turned StubHub into WeDon’tWork.


I never been so mad before

When I found out she ain’t mine no more

If I get her in my sight

Boom, boom, out go the lights


Boom, Boom, Out Go The Lights — Little Walter


StubHub was pressing hard to get money. Ticket sales volume had crashed at the same time as they’d been receiving chargebacks from customers and requests for refunds on cancelled shows. Each cancelled show was a loss to StubHub of their fees which now represented as much as 45% of the total sale. There wasn’t much new revenue coming in to replace what was being lost. And, StubHub was at risk because they guaranteed the ticket they’d sold to their customers, but there was no way the broker community was going to be able to cover the bill which was about to come due. Brokers don’t bank the money they receive from selling tickets. They reinvest it into more tickets or spend it to pay their overhead.


But, StubHub seems to be under more financial distress, notwithstanding the comments made on CNBC March 20th by its president Sukhinder Singh Cassidy


https://www.cnbc.com/video/2020/03/20/stubhub-president-talks-about-impact-of-coronavirus-on-online-ticket-industry.html


On March 27, 2020, StubHub quietly changed their “Fan Protect Guarantee” first to give customers the choice of a refund or a coupon for 120% of the purchase price valid for one year. That quickly changed to the only choice was the coupon — no refunds would be given.


https://www.sbnation.com/2020/3/28/21198101/stubhub-refunds-canceled-event-ticket-nhl-nba-concerts


Then, after a barrage of press pointing out that at least 14 states required the option of a refund, StubHub took a new position, they’d refund your money if your billing address or event was located in a state which required a refund. However, early feedback is their customer service team does not make that obvious. You have to insist or even threaten in order to get refunded.


https://www.pollstar.com/article/refund-hubbub-stubhub-modifies-refund-policy-144151


How to tell when someone’s about to fail:


There are two ways to know when someone’s desperate for money:


1. They stop paying their bills

2. They make relentless calls to collect money they are owed.


StubHub’s coupon program is the clearest possible signal they can’t pay their bills. The only assets of significance StubHub owns is a computer program that manages sales of tickets and the goodwill they’ve built up with the fans who trust them. Refusing to return the customers’ money for tickets to events which are clearly not going to happen is like charging your credit card to its limit then refusing to pay the bill. It won’t end well.


But, here’s what is not well known. StubHub is now making calls to their ticket suppliers demanding that they be repaid immediately for shows which are cancelled. Remember, prior to this crisis, StubHub paid the brokers for tickets once they were delivered. The brokers, correctly pointed out that StubHub is now refusing to pay them for tickets which have been sold until the event takes place. This is a breach of the terms of service in place when StubHub sold the ticket and received it from the broker. And, in many cases, because tickets are a “money in, money out” business, the amount StubHub has already collected from its customers for the tickets brokers supplied to events in the future is much more than what StubHub is trying to collect from brokers for now cancelled events.


The fact that StubHub doesn’t care, and is demanding to both be repaid immediately for cancelled events, and to keep holding the money received for the future events — all the while refusing to pay brokers or refund their customers (instead offering a coupon) — means they are on death watch.


I can see by your eyes you must be lying

When you think I don’t have a clue

Baby you’re crazy

If you think that you can fool me

Because I’ve seen that movie too


I’ve Seen That Movie Too — Elton John


In my decade of working in and advising companies related to ticketing I’ve seen three resale markets fail: ScoreBig, Rukkus and RazorGator. Combined these markets were a fraction of StubHub’s size. I was involved in efforts to acquire ScoreBig and RazorGator so I saw their financial information. The facts were almost exactly the same with both companies. Money came in from consumers for tickets and some of it got spent running the business. When the amount that got spent began to interfere with the business’ ability to pay for the tickets they owed their customers, they sputtered to a halt as brokers pulled their inventory. Anyone who continues to sell tickets on StubHub now is at risk of the same result. They’re going to get stuck in limbo. With ScoreBig and RazorGator, brokers mostly decided the small loss of not getting paid outweighed the damage to the entire industry which would result from cancelling tickets already in the hands of fans for events in the future.


StubHub is so big, when it fails brokers will have to recall their tickets and the reputational damage to the entire industry will be intense. Now is the time for the industry to coalesce and plan. There aren’t going to be any events for months. It’s time to decide the future of live event ticketing before it’s decided for us. Benjamin Franklin had it right:


We must, indeed all hang together or, most assuredly, we shall all hang separately.


I’ve had the good fortune to interact with many of you either directly, at conferences, during group chats or through stories such as this one. I want you all to know that I believe in you, and I believe in this business. As my part of trying to help rebuild, I’ll be answering reasonable questions. That’s my way of contributing to solving this crisis. Just email, my address is below.


I’ll do my best to either answer you directly, or if I see certain questions repeat frequently I’ll post another article which goes over them all. I will not identify publicly the source of any question.



Let me know what you think.


I’m a consultant advising leading companies in the live event space. If you are an investor, artist, promoter, team, producer, venue operator, primary or secondary market of ticketed events or have comments on this article, please don’t hesitate to contact me:


Eric@FullerFacts.com


#FullerFacts


Copyrighted 2020 by Eric Fuller

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