How the Minnesota Timberwolves killed the free market

Although they’re the least supported major sports team in the Twin Cities, the Minnesota Timberwolves are quietly revolutionizing how you’ll buy tickets to sporting events, and, in the process, increasing the price you’ll pay.

The team, and its partner, the Minnesota Lynx, are the first franchises to successfully manipulate the “secondary” ticket market, eliminating competition from scalpers and services such as StubHub and Ticket King.

It was a clever and innovative method the team used. FlashSeats, a smartphone app that eliminated paper tickets in favor of a bar code on the phone, does not allow fans to print out the tickets, and that’s the genius of the strategy. By controlling how the tickets are transferred and used, the team keeps them out of the hands of scalpers and third-party dealers.

The team also gets a 15% price bump in the form of fees from fans who buy other fans’ tickets via FlashSeats.

Scalpers who once worked the skyways near Target Center are mostly gone now. They can get a few tickets from people who bought single game tickets, but the season tickets are mostly beyond their reach now.

With the team in control of the market, here’s what happens if a fan tries to sell a ticket for less than an arbitrary “value” set by the team.

flashseats_fail

You can thank the Cleveland Cavaliers for that “floor” in the resale price. One of the early adopters of FlashSeats (the owner’s company created the app), the Cavaliers didn’t set a floor for the resale of tickets. And the app was flooded with people who wanted to unload tickets for some games to help pay for their season tickets. Bad for them, good for fans looking for cheap seats.

“The reality of the situation is that hundreds of ticket brokers and speculators bought season tickets with the thought of making a fortune in the secondary market, and they are all now choking on tickets,” season-ticket-holder Jeffrey Thomas told Crain’s Cleveland Business last season, the first season of LeBron James’ return to town. “The typical transaction on Flash Seats is for far less than 50 cents on the dollar.”

That’s the marketplace setting the value of a sports ticket. But the free market is not friendly to bad teams.

So the Timberwolves, who angered the NBA a few years ago by lowering the cost of tickets to as little as $5, are attempting to eliminate the competition from the secondary market, the one thing that puts pressure on ticket prices in the primary market.

In an interview with the Pioneer Press’ Andy Greder earlier this week, Timberwolves President Chris Wright said the restriction on fans who want to resell their tickets was to “make sure that our tickets are not completely undervalued by the market.”

That’s an ironic statement, coming as it does from a franchise owned by Glen Taylor, a former Republican leader of the Minnesota House of Representatives who has generally embraced the economics of a free market.

But his strategy is working as evidenced by this screenshot today of what happens when a fan searches for a Minnesota Timberwolves ticket on StubHub.

stubhub

StubHub, basically, is out of the business of selling Minnesota Timberwolves tickets.

Things are only slightly better at Ticket King, where only 8 sections in the upper deck have seats available for the upcoming game against Chicago. None of the available tickets is being offered for less than what the Timberwolves themselves are charging for the game.

It’s possible that one day none of this will matter.

Cleveland provides a perfect example. Because the team had a product in demand, the secondary market ticket prices were much higher than the primary market. In effect, the team left money on the table.

“You always say that, “Yeah, we could have raised prices and taken that revenue instead of letting the secondary market have it,’ but what we’re trying to do is have a reasonable-priced ticket,” Cavaliers owner Dan Gilbert told Crain’s. “We didn’t really raise tickets across the board at all this year.”

And that could someday happen here, too.

The Timberwolves might again be so good that it’ll be a hard-to-get ticket and, as a result, the marketplace will set a value that’s much higher than the face value of a seat obtained in the primary market.

That’s the kind of free marketplace at work that could make a team owner smile.

[Update 1:09 p.m.]– The New York Attorney General is investigating the NFL’s attempt to control the secondary ticket market, specifically because of the “floors”, Bloomberg reports:

NYAG’s concern with price floors is twofold. First, buyers of tickets on Ticket Exchange or other sites with price floors are frequently not informed that the tickets they are buying are subject to a floor. It is therefore easy for buyers to be fooled into believing what they are paying is the market price for a ticket, when in fact the buyer is paying a price artificially inflated by a price floor. The more aggressively sports leagues and individual teams push ticket buyers and sellers to use their “official” secondary markets, the more serious this problem becomes.

More fundamentally, even when buyers are informed of price floors, the floors deprive the public of a chief benefit of the market-driven approach taken by the 2007 law: lower prices. In particular, price floors may make it impossible to obtain tickets on the team-promoted Ticket Exchange platform for below face value when demand decreases. As described above, when contemplating the legalization of ticket resale, the sponsors of the 2007 legislature repeatedly expressed the hope that legalizing profit resale might lower prices for consumers. A clear source of such savings is lower prices when demand falls. For example, near the end of an unsuccessful baseball season, the tickets to watch a team not destined for the playoffs may go down sharply, allowing fans who otherwise might not be able to afford to see a match to buy tickets for far less money.

From the archive: Here’s to the ticket scalpers (NewsCut)

  • MikeB

    Example #678345 that owners like free market principles only when it benefits them. This is probably the wave for all pro sports teams going forward. The team has already sold the ticket, now they want to control a ticket owner’s use of that ticket, including the right to sell it to someone else. Not a good long term strategy

    • John

      how is this not free market? There’s no government interference in the market here. It’s the owners of the team attempting to maximize their marketshare of the tickets. That’s a perfectly logical thing for them to do.

      • BJ

        sold the ticket, now they want to control a ticket owner’s use of that ticket

        • John

          They sure do – for exactly the reasons I said – maximizing their return on investment.

          I still don’t understand how that’s not free market capitalism at its finest. No interference from government – the market bearing the price it will bear. Who ultimately ends up with the money has little to do with whether it’s free market or not.

          • Jeff

            Seems more like a monopoly to me. It does not sell for what the market will bear. There’s a floor on the ticket price set by the team. Also the team gets 15% of the transaction for the ticket you already own.

          • John

            It’s definitely a monopoly, but then again, the Timberwolves had a monopoly before – there are no other professional basketball alternatives in the area.

          • That’s a monopoly on the sport, it’s not a monopoly on tickets.

            We’re talking about people who bought something and not being allowed to treat it as an asset even though they bought.

            What’s interesting is Minnesota considered a cap on scalped tickets two years ago but declined because to do so steps into the participants right to buy and sell their assets. Legislators never thought for a second that an equal problem is that a floor would also restrict the right to buy and sell and assets.

          • Tim

            Right, it’s a natural monopoly (at least in terms of NBA teams; it’s a different story when looking at all possible entertainment options). The free market ceases to exist when natural monopolies occur, because a free market requires competition.

          • Imagine only being allowed to sell your car through the dealership that controls sales of new cars for the brand? And then being told that this is the minimum you can sell it for, a minimum which is too high and thus creates no market for the product you want to sell?

          • Tim

            I imagine the company and its dealerships would eventually go out of business or change their policy, as nobody would want to buy a car that they couldn’t resell if they wanted or needed to do so. They’d buy other cars instead. I see your point, but these aren’t comparable kinds of markets.

          • How so?

          • Tim

            They’re not comparable because with cars, you would generally have other options unless you happened to live somewhere with only one car dealership nearby. If Ford did this, for example, you could buy a Chevy, Toyota, Kia, etc instead. But there’s only one NBA team around here, as is the same situation in every city except for NYC. Now, people would have alternatives if they were willing to substitute something else, i.e. a hockey game or college basketball game, but if they’re set on going to an NBA game, they’re usually only going to have one option.

          • Sure, but you’re still denied the ability as the owner of someone who already bought a car to sell it at a marketable price.

            The idea that because the monopoly exists therefore the monopoly on ticket selling is acceptable ignores a few things, I think. One is that the anti-trust exemptions granted to professional sports teams does not give them immunity in engaging in anti-trust practices in all facets of their business, particularly when the anti-trust action creates victims.

          • Tim

            I don’t think it’s acceptable, but I do think it’s inevitable without outside intervention (which is happening, as you noted, with the NFL).

          • Alex

            I think everyone is failing to see what the timberwolves are really trying to do which is everything you all are saying, but because of the trajectory of the team we have pretty soon our team will be in the playoffs for years and when they do glen and ownership will have complete control over ticket prices and will gain so much money and eventually all ticket prices will go up making games to expensive for fans unless wealthy or upper middle to middle class. Just think how expensive the floor price of a season ticket holder will be when in the playoffs for years and if we win a championship prices will go up even more

          • John

            I expect car manufacturers would love to put language in the sale contract that does exactly this. Then they could make money off your car twice, but won’t because it would put them out of business in short order, as people ran away to other brands of vehicle (I would). The free market probably protects us in this case.

            There is no other option if you want to watch pro basketball in MN, so the Wolves are trying to maximize their income by controlling the market to their advantage.

            Would it be different if they didn’t put a floor on the sale price of the ticket? Instead, they just require you to sell through their app, and they get the fees rather than Stub Hub (does stub hub charge fees?). They’d have a monopoly on the secondary market (which they already do in the primary market), but they wouldn’t be controlling prices at that point, correct?

            Hopefully I’m not coming off as a troll here. I am not intentionally trolling, but some of my posts look a bit more troll like than they should.

          • // so the Wolves are trying to maximize their income by controlling the market to their advantage.

            You know there’s a word for that, right?

            They’re not merely controlling the market; they’re eliminating existing markets through anti-competitive business practices.

            It’s worth noting that there are several lawsuits in Colorado underway, which has a law limiting restrictions that teams can place on reselling. And with good reason, of course. It’s really bad for the consumer.

            My guess is that Minnesota is a less-friendly consumer protection state than either NY or Colorado.

            Pity.

          • John

            The word starts with ‘M,” right?

            My guess is that you’re right as far as consumer-protection is concerned.

            I also don’t argue that it’s a rotten thing to do to the customer base. It definitely is.

            The first thing I thought when I saw this was that they were following the airlines model (which someone else then mentioned above somewhere). I suspect that’s what they’ll fall back on if/when somebody pushes back on the plan.

            My question still stands though – if they simply remove the price floor, do all the fan concerns with it go away? The Wolves are preventing other parties from getting in on the action, which would be anti-competitive, but would anyone who doesn’t work for stub hub even care? Where the fees go probably doesn’t matter to the ticket buyer.

          • Who would care about the situation? Anyone who wants to go to a sporting event. The impact isn’t falling on StubHub or TicketKing as companies (well, maybe it is, but, really, who cares? It’s falling on people who once had an option to buy an affordable ticket.

            At, I should point out, an arena that is being renovated for the wealthy owner at taxpayer expense.

          • John

            this is why the removal of the price floor was key to my question – if there’s no price floor, you the fan can presumably still get an affordable ticket to the game – the only thing that functionally changes is where you have to buy it from.

            edit: I have no knowledge of the service fees stub hub or ticketking may or may not charge to broker the transaction. I have made the assumption that the 15% that the Wolves are charging is in line with what they’re charging.

            Don’t get me started on the use of public funds to pay for the headquarters and/or storefronts of wildly profitable private business. That’s a whole different set of frustrations for me.

          • DavidG

            I would argue no, because there is still a monopoly on the service charges.

          • DavidG

            I suspect more important here is the fact that the First Sale doctrine is fairly settled case law at this time.

            In fact, that may be a second approach for ticket buyers to chalkenge this.

          • Tim

            It’s pretty settled when it comes to physical objects, yes, but — and I’m not saying I agree with this — I can see an argument being made that this is a digital product rather than a physical one, and digital products are an area where First Sale is still being hashed out.

          • Jerry

            That is pretty much what media companies are trying to do. One of the primary reasons they are pushing digital downloads of movies, music, and games is to destroy secondary markets.

          • DavidG

            Bot to get too far off topic, but related is auto repair/service: with manufacturers putting copywrite and DMCA restrictions on the software that runs our cars today.

          • They’re isolating their product pricing from market influence. I honestly don’t understand how you consider that a free market.

            I don’t believe the definition of a free market need include consideration of the role of government. I think it only need consider whether the marketplace influences the pricing of a product.

          • John

            Okay – then we need to ask – does the marketplace influence the pricing of the product? It may not right now, but given time, I think it still will.

            i would argue that if the market was operating freely before (which I’m not entirely convinced of, because the Wolves are already a monopoly), then either tickets were underpriced, because people were apparently willing/able to resell them for a profit (scalpers/season ticket holders selling some games) or prices should drop now, because the value of the tickets to a season holder have dropped (since you can’t recoup some of your total cost by selling unwanted tickets, in theory you may not buy season tickets in the first place).

            If it’s the former, then why don’t the Wolves simply run up ticket prices until they reach the maximum return that they’re going to get (they seem to be trying to do that by increasing season ticket prices)? They can then effectively ignore the secondary market because it will disappear from a profitability standpoint. I suppose season ticket holders will still sell unwanted games.

            If it’s the latter, then time will tell if ticket prices (or sales) drop under the new system to a point where they have to change it and/or roll out something else in its place.

            But, you’re right that they’re isolating their product from direct market influence,and I definitely hadn’t considered that aspect of it.

          • BeansNRice

            Price floors are a feature of a conmand and contol economy fool. Rigged economies favor the 1%…free markets show no preference.

      • Wright pretty well says how it’s not the free market. He’s isolated his product pricing from the marketplace. He says it. Out loud.

  • DavidG

    I have to imagine some lawyer somewhere is looking into an anti-trust or similar action.

    Also, if season ticket packages are being sold to ticket brokers and people reselling them, whether to scalp, or just cover costs, isnt a team likely to see a drop in season ticket sales? That might not matter for teams with loyal fan bases and wait lists, but surely it would for teams that have a much more cyclical product.

  • skylar

    wow just big business getting bigger i love scalpers and i love cheap tickets for my favorite basketball team but now it looks like i wont be able to support them live anytime soon

  • John

    It looks to me like this is exactly free market in action. There is no government interference, and the Wolves owners are attempting to maximize the return on their investment (the team). It’s a business – anyone who thinks they’re in it for anything beyond making money (perhaps the ego trip of owning a sports team) is deluding themselves.

    The only thing that will stop this sort of free market capitalism from happening is when one of two things occurs:

    1) Government intervention (i.e. no longer a completely free market)

    2) People stop buying the product

    Given the political pull sports teams have, I wouldn’t hold my breath on number 1. Given people completely surprise me constantly by how much they willingly shell out for sports, I don’t expect number 2 either.

    • Leroy

      I think it depends entirely on your definition of free market. It’s not a free market when it involves monopolies, and in this case the team in monopolizing the secondary ticket sales.

      http://dictionary.reference.com/browse/free-market

      I am curious to see if there will be a significant drop in season ticket sales as a result of this.

      • I think if you’re a ticket seller with a legal right to the marketplace in MN since 2007, but you can’t get access to the marketplace, you don’t really have a free market.

    • Knute

      I agree with John. I’ve never read the legalese on a ticket (since I VERY seldom buy them). Do they really sell you the ticket? Or do they sell you an opportunity to enter their facility to look at their product? If so, why shouldn’t they control that if they want?

      There are airline tickets that are non-transferable, aren’t there? Is that any different? Possibly. There are lease agreements that facilities can’t be sub-leased. Isn’t that similar? Maybe these examples are too apples v. oranges. If they are close enough examples, where is the outrage over those?

      • There is no ticket so you don’t know what you’re buying until you’re in the door. After your ticket is scanned, THEN you get a printed out version, the back of which has the legalese.

        You can’t read it, though because this is what it looks like. I’ve placed it on the keyboard for scale.

        Your airline ticket analogy is a good one. But consider too that one of the ways airlines protected their pricing from market forces is by refusing to allow travel sites access to to the fares so that people couldn’t compare prices. That kept them on the (mostly) legacy sites.

        Airlines are REALLY good at screwing customers. No industry in America treats its customers worse.

        • I blew this up on the copy machine today to read the language. It does refer to a “license” rather than a “ticket.” But there’s nothing in there reserving any right to dictate resale policies.

      • //Or do they sell you an opportunity to enter their facility to look at their product? If so, why shouldn’t they control that if they want?

        Because they’ve ALREADY sold the ticket at the price they want. That’s not the issue. The issue is they’re preventing people from selling what they’ve purchased at a price that is also what they want to sell it for.

  • Jeff

    You won’t be seeing me there anymore (not that I was there much). I’ll only sit in the lower bowl but not at those prices. Also the Flash Seats UI is terrible compared to StubHub. I can’t just mouse on a section and see the price ranges or select sections I’m interested in. This is evil, I hope the Twins don’t do anything similar.

  • Thomas

    How do the Twolves handle shared season tickets, 5-10 guys sharing a couple season tickets?

    • One person is the contact for the account exec. His FlashSeats (or HER FlashSeats) account gets all the tickets, then he/she transfers the shared tickets to the others’ FlashSeats accounts.

      • Thomas

        They did think of everything. I assume the group can shuffle games across individual accounts without charge.

        Yes I said “guys” in original comment, he/she is important distinction, I’d never invest in even shared season tickets but my wife loves the game.

        • It’s super easy to transfer tickets (a lot easier than when the TWolves gave the job to Ticketmaster) from one person to another if no money is involved. Of course the person you’re transferring tickets to has to have the app installed.

          • DavidG

            So there could be a small number of opportunities(family, friends, etc) to transfer tickets tha way and deal wirh the cash.transaction the old fashioned way.

  • Rob

    Gee, imagine a Repub who only likes the free market when it works in his favor. And the T-wolves “might be so good again” at about the same time that pigs start to fly.

    • Tim

      Well, this situation is not and can’t be a free market to begin with, which is the issue.

      • Rob

        ‘Tis only because of the owners’ machinations that ticket selling/reselling is no longer a free market.

  • lindblomeagles

    I’d like Glen Taylor to put more emphasis on building a winning team than trying to find creative loopholes to screw us, the customers.

  • Scott

    Been a season ticket owner for 15 years but I’m a businessman and the lack of paper tickets has turned this from passing on a perk to a chore. My sales force doesn’t want to hassle with the teams “Apps” and the team doesn’t care if I walk. So Goodbye Timberwolves. Too bad.

    • shleigh

      Ditto. I’m not the owner, but our company has bought tickets for years (shared a season ticket package). After pointing out the intrusive permissions the app requires to my boss, I recommended that we don’t bother next year. It’s only a minor perk for employees and customers, and borders on being insulting when the team is so bad.
      Really hope the Twins don’t do this too. Too many games and too many weather variations. Beautiful weather, decent Twins team, exciting opponent = higher demand, higher prices. Cold/rainy or scorching hot/humid, weekday game, crappy Twins, boring opponent = low demand, low prices.

  • shleigh

    As somebody who was given free tickets (and good seats too), the FlashApp was annoying. Mostly the intrusive permissions required when you download it (of which you have no choice if you want to go to the game). Why, exactly, if season ticket holder A told you they are giving the tickets to me, Friend B, and you have my email address, do you need access to my ‘Device & app history – read sensitive log data’ and to read my contacts, and access, modify or DELETE the contents (photos/media/files) of my SD card, etc? You could do a whole other blog post on that. Makes you wonder how much data mining and selling they’re doing in the background…. I deleted it after we got into the game.