COMMENTARY | Time will tell if the New York Yankees are more powerful than the invisible hand that drives markets, but history will not be on the team's side when it comes to its decision to, as news outlets have reported, set a minimum price for game tickets resold online.
Last month, the Yankees, along with the Los Angeles Angels and the Chicago Cubs, opted out of Major League Baseball's contract with ticket outlet StubHub -- the company Hal Steinbrenner recently blamed for the sea of empty blues seats at Yankee Stadium during the team's playoff run last season.
Throughout the past few seasons, Yankees officials routinely expressed their annoyance at StubHub's refusal to set a baseline price (a "floor") for tickets resold on its site. As a result, many seats with a $100 or more face value were routinely posted for sale on the site at closeout prices, oftentimes for less than the cost of a beer at Yankee Stadium, especially if it was a rainy day, make-up game, or against a cellar-dwelling club.
Through rainy days and marquee match-ups, however, StubHub relied on the free market to dictate prices -- generally a good idea. According to data from ticket reseller SeatGeek, over the first two months of the 2012 season, when the Yankees were playing at a slightly above .500 pace, more than half of available tickets to Yankees games were available for prices below face value. Some seats were available for almost $100 below face value.
Steinbrenner, however, is in negotiations to sign an accord with Ticketmaster that would set a minimum price on tickets, a move that, according to their theory, would drive people to buy tickets directly from the Yankees box office or from season ticket holders who opt to sell through the team's website. (StubHub's new five-year deal with MLB includes a "floor" price too, but it's $6 -- obviously too cheap for the Yankees.)
The Yankees' economic model, in my opinion, is bound to fail. StubHub will still allow ticket-holders and ticket-buyers to use its service, and it plans to offer a pickup and drop-off service for buyers and sellers. To drive people to Ticketmaster or the team's own site, the only thing the Yankees can do, I believe, is to foster fear that tickets not bought through the team are counterfeit.
In past years, individuals could rely on StubHub to guarantee that tickets were authentic because, through its deal with MLB, StubHub was able to use barcode technology to reassign tickets. However, we operate in an Internet economy and many people will still use StubHub, sites like Craigslist, or their friendly neighborhood scalper to buy tickets.
As StubHub president Chris Tsakalakis told Fox Business News, consumers will always want to get the best possible price. "The reality is that StubHub is a marketplace. … The market determines the price," he said.
The Yankees haven't announced their deal with Ticketmaster yet, although the team has hinted that an announcement is coming soon. In recent weeks, team officials have said the club's new deal will be more "fan-friendly" and require "less fees." However, in the end, as StubHub's Tsakalakis pointed out, it will come down to price. Any price "floor" is too high as far as markets are concerned, and I suspect that the Yankees will regret their decision to opt out of the StubHub deal.
Inevitably, the Yankees will be forced to do what a majority of other ballclubs are doing to attract fans -- dynamic pricing, the purest economic form of pricing. Such a system adjusts prices of individual game tickets (either up or down) based on demand, which is generally driven by the day/night of the week, the opposing team, the opposing pitcher, or the weather.
In an Internet economy, it only seems natural.
Howard Z. Unger is a freelance journalist in Brooklyn, New York. For the past 15 years, he has written about sports, media, and popular culture. His work has appeared in The Village Voice, New York Post, and New York Times.