Stub Hub - Client or Competitor?

One of the most common questions Michelle and I are asked when we are socializing is: Does Stub Hub “hurt” our business. It is a difficult question to answer since Stub Hub has become our number ONE client! In the last 365 days they have purchased almost ¾ of a million dollars from us. They are for the most part very easy to deal with. We pay no credit card fee, get paid effortlessly and accurately, and it takes very little effort on our part to deal with them.

Conversely , we have, on occasion, shipped tickets to people we know to be on our database. We don’t look super closely, but we have to assume that many any other people, especially non regular buyers who buy 1-2 times a year or less may have purchased tickets from Stub Hub. Not knowing the exact count, we are still under the assumption that it is a positive to Musical Chairs to have Stub Hub as our client/competitor.

Two things a consumer focus’ on is obviously price and service. With regards to price, Stub Hub is cheaper in some instances but more expensive in most instances. Stub Hub does many things brilliantly and one is there primary marketing slogan: FAN TO FAN. When they began using FAN TO FAN they got approximately 85 percent of their tickets from ticket brokers and they now get approximately 40-60% from brokers . Of course, I am a huge fan in many regards. However, I don’t think that is what you the consumer had in mind when buying “fan to fan.”

The question this raises is when is Stub Hub more expensive and when are they cheaper? First, we will let the information out of the bag and let you know that when a broker exports their tickets to Stub Hub (the Stub Hub term is Large Seller) Stub Hub marks the ticket up 15% (although at brokers option they can lower that rate as long as they are willing to pay the difference to Stub Hub out of their proceeds). Thus, if I list a ticket for $100 it lists as $115 on Stub Hub. Famously, Stub Hub adds their 10% “Service Charge” thus making the price $126.15 per ticket. Since our mark up above “wholesale” is normally 10% for tickets we inventory, Musical Chairs would charge $110 for that ticket. Since we charge approximately 15-25% above wholesale from other brokers, we would sell that ticket for $120 (20% mark up on a $100 ticket). Moreover, if it were emailable we would email for free saving the consumer another $5 (stubhub tacks on $4.95 for emailing tickets).

Slightly off topic, but relevant to sellers and the “service charge” is another marketing (deceptive) tactic. If a seller lists a ticket for $100, SH states they keep 15%. Thus, SH keeps $15 and the seller keeps $85. Calling said spade a spade, if Stub Hub adds a 10% service charge, is Stub Hub actually charging $100 or $110 per ticket. The way I see it they are keeping 23%, not 15%.

Since 40-60% come from fans (many of these are actually home brokers-brokers who work from home and don’t keep regular office hours etc), the question is will these be cheaper than the brokered tickets. Stub Hub works differently with “fans” (Non Large Sellers). They take a 15% charge from the amount a person asks. Thus, if a “fan” asks $100 they give me back $85. The cost to the consumer is $110. Undoubtedly, some of these fan tickets will be cheaper. Truth be told, on occasion, on some big events we actually arbitrage tickets off of Stub Hub. Since Musical Chairs is run like a commodities brokerage (which in essence, it is), a few of us can look through a list of tickets very fast and pick out an excellent deal. Nevertheless, since most people tend to believe their own assets are worth above market value (read: Predictably Irrational-The hidden forces which shape our decisions) the number of excellent deals and especially arbitrage opportunities are rare and time consuming to find. If you have the time get a quote from us and compare it to the prices on Stub Hub (please don’t forget to add the 10% “service charge”). It is RARE you will get a better deal.

Let’s say you get a better deal. Here is where it becomes real PROBLEMATIC using Stub Hub (unless it is an instant download ticket). They have, per their TERMS AND CONDITIONS, 48 hours to confirm your order. Until they confirm the order (get a confirmation from their seller), they have NO OBLIGATION to you. Thus, if it is some real “fan” who realized he may have underpriced his seat or had given the seat to his Mother’s sister’s Uncle, you are out of luck (especially if the market on the event is increasing). Additionally, you have lost Forty-Eight hours of time in getting your tickets and if it is a rare irreplaceable ticket gained some resounding disappointment (just so it is clear, once Stub Hub confirms the order they are very good in getting a comparable seat if the actual seller does not send out the ticket as promised). The aforementioned has happened to me a couple of times scoping out “excellent deals.” Using Musical Chairs you will NEVER have this problem as seats are confirmed immediately (unless it is a future order where it is backed up with our full faith and credit of twenty years).

Part II Will come next