SeatGeek-Redball Merger a Bet on Ticket Market Convergence

Last week, it was announced that SeatGeek had entered into a definitive business combination agreement with RedBall Acquisition Corp. (NYSE: RBAC), a special purpose acquisition company. The deal values the combined enterprise at $1.35 billion.

The SPAC led by RedBird Capital Partners managing partner and CEO Gerry Cardinale and baseball executive Billy Beane, of Moneyball fame, is the second to come to terms with a ticketing firm in the last six months. Back in April, Horizon Acquisition Corp. (NYSE: HZAC) entered into a definitive merger agreement with Vivid Seats. General Sports Worldwide managing director Lou DePaoli, who has 27 years of senior leadership experience across multiple sports teams, leagues and markets, explained the interest in and around the ticketing business is driven by the ongoing convergence of the primary and secondary markets. “SeatGeek, Vivid—with Todd [Boehly] and his group at Horizon doing the same thing—StubHub and viagogo, you’re seeing a lot of [investments] in this space because [these companies] are all going to try to create that single marketplace where [a ticket buyer] can do everything and anything, easily.”

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JWS’ Take: While the seamless single marketplace DePaoli speaks of is the endgame, the move toward it began more than two decades ago, when online secondary marketplaces first began popping up. DePaoli said the gradual shift has largely taken place behind the scenes, with consumers mostly unaware it was happening.

The teams and leagues who issue tickets are responsible for the convergence of the two markets. Initially, they sought to eliminate the arbitrage opportunity that existed on the secondary market. But as sports organizations got smarter about dynamic pricing and gained access to better pricing tools, margins on the secondary market slimmed. “The spread between what the team is offering on the primary and what is being sold on the secondary is much, much narrower than it used to be,” DePaoli said.


Now the push to mesh the primary and secondary markets “is really all about data,” DePaoli said. Teams and leagues want the insights gathered during secondary market transactions so they can better understand who their customers are, build models to better engage those customers and to derive more revenue from them. For perspective, DePaoli estimated that in the past, for a big game, a club may have only had data on 50-60% of the tickets sold, and much less on those fans actually in attendance due to tickets being resold and/or shared.

The differentiation between the primary and secondary markets is less and less important to the end-user. “In the minds of the consumer it is already one marketplace. The consumer is more concerned with getting the seats they want at the price they want to pay than which provider they are purchasing them from,” DePaoli said. The question is which ticketing company is best positioned to capitalize on the shift.

Ticketmaster dominates the primary market and has the largest universe of clients and purchasers, while StubHub, SeatGeek and Vivid Seats are the major players in the secondary market business. DePaoli believes SeatGeek is in a “really good spot” in the shifting landscape. In fact, he believes the company is best-positioned, “based on their market share and technology” to take advantage. Vivid, which he put in the next-best position, has recently got the backing of DraftKings. The company is among the PIPE investors affiliated with the HZAC-Vivid merger.

SeatGeek is also being more aggressive than its competitors at trying to merge primary and secondary markets. By doing so, it may have built a better mousetrap. Research has shown fans who use the platform to purchase primary market tickets are much more likely to use it again for other unrelated events. So, in theory, the more primary business the company can attract (see: existing deals with the Dallas Cowboys, Brooklyn Nets, MLS and the EPL), the more secondary business they should be able to develop.


While it won’t be any cheaper for SeatGeek to acquire primary business than it will be for competing marketplaces to spend on the paid search and marketing that drives their businesses, it is seemingly a better use of marketing funds. Over time, the primary business can be profitable, and in the short-term, while the company is still spending more than they make, primary can feed the secondary business. Merging with RedBall should help to expand their network of team/league relationships, and the public markets will provide the capital needed to invest in more primary relationships.

The demographics of the SeatGeek user base indicate the company is well-positioned to operate in a single-platform environment. SeatGeek customers are younger, more comfortable using mobile technology and do not differentiate between primary and secondary markets as much as those using competing platforms. Their customer base is primarily concerned about the cost of the ticket, its authenticity and the ease of the user experience.

SeatGeek, a tech-first company, is also well-positioned should the ticketing industry transition to blockchain technology, as Monumental Sports & Entertainment CEO Ted Leonsis suggested it would. “Being at our core a technology company gives us a huge advantage as we bring ticketing into the internet age and then leverage emerging technologies to reinvent the space, which we’re already doing,” SeatGeek CEO Jack Groetzinger said. “We’re focused on extending our technology advantage in four key areas: blockchain ticketing, machine-learning pricing, biometric identity and at-event experiences.”

Despite the company’s seemingly strong prospects, RBAC did not pop on initial reports of the deal. That is not necessarily indicative of the market’s thoughts on the business’ fundamentals. It’s more likely a function of the way many hedge fund traders are trading SPACs in general right now (think: separating stock from warrant, shorting stock and long on warrant). Warrants were up about 60% on 1,000 times the prior day’s volume on the news (when trading was halted on Oct. 8). Prices held flat once the business combination was announced last week indicating the market was satisfied by the terms.

As a publicly traded company, RedBall declined to comment on the deal.

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