May 23 2007

Grab a Seat

It takes a network to bolster an online ticket market.


Photo: James Schnepf
Electronic market technology and smart deals helped Ted Homatas (left) and Rick Harmon launch TicketReserve.

As kids growing up in North Carolina, Brad and Adam Short cheered as the Chicago Bears won Super Bowl XX in January 1986. Then they made a vow: If the Bears ever make it to the big game again, they would go, no matter what it cost.


But when the Bears advanced to Super Bowl XLI, the brothers did not shell out several grand apiece to a secondary market broker. Two years earlier, in the summer of 2005, Brad Short put his faith and $18 on the Bears’ future.

After surfing the Web, Brad stumbled upon TicketReserve.com, a Web business that provides access to face-value tickets to major sporting events. Part futures market, part reservation system and part bid-to-buy, bid-to-sell, TicketReserve is a sports fan’s marketplace.

“With TicketReserve, faith in your team has currency,” says Ted Homatas, chief technology officer of TicketReserve in Deerfield, Ill.

At the time, Brad had little hope that the Bears would make it through the playoffs. Still, he figured the $18 price for a future ticket — or what TicketReserve calls a FanForward — was a bet he was willing to lose. With the FanForward, Brad could purchase a face-value ticket of $600 if the Bears earned a Super Bowl slot.

“I told my brother, ‘We’ll just buy these every year, and if they make it, we can go to the Super Bowl,’” Brad Short says.
It took two seasons, but the gamble paid off in January. The Short brothers paid $1,236 — the price of two face-value tickets and two FanForwards — to attend the big game. “We would’ve had to remortgage our houses to get to the game because on the secondary market, ticket prices started at $3,000 apiece,” Brad Short says.

Nothing but the Fans

The Short brothers are just the audience that Rick Harmon, CEO and founder of TicketReserve, was aiming at when he started the business six years ago. Harmon, a venture capitalist and self-described populist from Texas, earned his stripes first in the oil industry, and then in entertainment and media.

Intrigued by the dot-com marketplaces of the late 1990s, Harmon decided to pursue a market around event tickets. “When I looked at the stark contrast of the fans versus the secondary brokers, I said, ‘There has to be a better way.’ ”

Photo: Brian Gomsak
Brad Short got to see his team play in the big game, thanks to his faith in the Bears and TicketReserve.

Harmon and his team purchased electronic marketplace technology, assembled a board that includes former professional quarterback and New York congressman Jack Kemp, and began cutting deals with teams in the National Basketball Association, National Football League, National Hockey League, National Collegiate Athletic Association and the college football Bowl Championship Series. Those contracts guarantee a certain number of face-value tickets for TicketReserve customers for major sporting events.

But the company’s revenues only partially depend on the money collected through FanForwards, which can range from $20 to about $200 apiece. As the FanForwards sell out, buyers can sell them on TicketReserve’s marketplace. The company then collects 10 percent of the selling price, while charging buyers a 7 percent commission and splitting the revenue with the team or league.

These machinations would not be possible without TicketReserve’s underlying computer platform, which supports quick-forming marketplaces, tradable ticket reservations, sometimes volatile bid-buy and bid-sell activity, and fluctuating team valuations. No wonder nearly one-third of the company’s 32 employees are software engineers dedicated to creating and maintaining the system that makes TicketReserve tick (see sidebar, below).

Always About the Business

But for all his championing of the loyal fan, Harmon is no starry-eyed romanticist. The online event ticket market that he entered is an active one, according to Forrester Research in Cambridge, Mass. In 2005, online event ticket sales reached $3.4 billion, according to the company, and were expected to grow to $5.4 billion in 2007.

And TicketReserve is not the only game in town. Other online ticket venues include TicketsNow.com, RazorGator.com, TicketLiquidator.com and StubHub, purchased earlier this year by eBay. “There are so many suppliers now, and online just lends itself to selling and buying tickets and will continue to do so,” says Sucharita Mulpuru, a senior analyst at Forrester.

But TicketReserve’s approach is quite different from these secondary ticket market suppliers. For one thing, the tickets it enables fans to purchase come directly from the leagues and teams, whereas StubHub enables individuals and brokers to resell their tickets, charging sellers 15 percent and buyers 10 percent. And while StubHub does have partnerships with teams, such as the Chicago Bears and the New Jersey Nets, which refer fans to the site, TicketReserve’s model “is exclusively about partnership [with the teams, leagues or event organizers],” says Andy Leach, TicketReserve’s executive vice president. In other words: no partnership, no tickets.

TicketReserve plans to grow these partnerships by offering teams and leagues direct access to the site’s registered users for marketing and communication purposes. Teams also receive trend data mined from the company’s database. “There’s a lot of wisdom in there,” says TicketReserve’s Homatas. “We can see which teams people think are going to go to the game, lifetime trading information, who wanted to go but didn’t and which fans are more passionate about their teams.”

Future Plans

Harmon hopes to add social networking capabilities and worldwide sporting events to the site, such as World Cup Cricket or World Cup Soccer, as well as ticket options to nonsports events, such as Broadway shows in smaller cities, and “American Idol” performances.

He also plans to add what he calls “dream markets” to the site. The idea is that people can define their own have-to-be-there event — Madonna singing with Tony Bennett, for instance, or a Chicago Cubs–Boston Red Sox World Series matchup — and then buy a FanForward for it. If the event does not happen in the next one to three years, the money would be returned. But if it does happen, the people with FanForwards can buy their tickets at face value.