I have seen the future of scalping, er, selling. And its name is OptionIt.
This season, the Washington Capitals have partnered with OptionIt. Technically, the company, which was founded by ex-traders on the Chicago commodities market, sells options on tickets to Caps games the way a trader on an exchange floor might sell pork or petroleum futures.
So, for example, for the March 8 game against Dallas at Verizon Center, you can buy options from OptionIt for two $45 tickets for a total of $10, or four $90 seats for $35. Options on the March 24 home game vs. Pittsburgh now go for $43 to $270. Options holders have up to seven days before the game to decide whether to exercise their option—hence the company’s trademarked slogan, “Reserve Now, Decide Later.” If customers opt to buy the tickets, they pay face value. If they opt to not purchase the tickets, they lose their outlay.
But the coolest and riskiest attribute of the OptionIt offering comes with the sale of options to Caps playoff games. Options on Game 7 of the Eastern Conference Finals run from $42 to $123. Game 1 of the Stanley Cup Finals options is now going for $67 to $188. Game 7 options are sold out.
Unlike the regular season games—which, barring a natural disaster or a plane crash, will go off as scheduled—there’s nothing close to a guarantee that those late, late-round games will even be held.
The Caps could sweep a series or, heaven forbid, choke in an earlier round of the postseason tournament. They could lose home-ice advantage as the regular season wanes, thereby doing away with any Game 7’s at home. And there’s history: In the nearly four decades the franchise has been in existence, there has never been a home Game 5, Game 6, or Game 7 in the finals.
And, again, if a home game doesn’t happen, for whatever reason, the options purchaser loses every penny.
OptionIt Vice President Michael Proman, one of the Chicago-based company’s two full-time employees, asserts that the sale of options prices street scalpers and institutional ticket brokers out.
“Yes, we do have some scalpers [buying options],” Proman told me by phone from the NBA All-Star Game, where he said OptionIt’s sales were swimming. “But the way we price our options actually deters scalpers. They want 50 to 100 percent profit on their inventory, but our pricing”—the cost of the options plus face-value tickets—“is 25 to 30 percent below what the scalper market is.”
Another novel OptionIt feature: Customers are given the right to resell their options. Currently, several folks who bought options on Game 7 of the Stanley Cup, for example, have put them up for sale. As of Sunday night, the prices for these options on the secondary market ranged from $188 for two mezzanine nosebleeders, to $5,000 for four preferred lower-level seats in sections 114 to 119.
The secondary prices for options lends credence to Proman’s argument that professional scalpers are priced out: Only somebody dying to see a Stanley Cup Game 7—like, really dying—would pay $5,000 just for the potential to buy four tickets that will likely never be worth that much.
Options companies have tried their hand in sports before OptionIt, but without much success. Yoonew, one of the pioneers in the field, shut down right before this year’s Super Bowl. Another, FirstDibz, canceled orders to last year’s Super Bowl after telling customers that it had been victimized by scammers and therefore couldn’t deliver all the tickets it had sold options for.
But OptionIt, unlike its predecessors, deals directly with the teams it’s selling ticket options for, while yoonew and FirstDibz dealt only with ticket brokers.
That means that Caps owner Ted Leonsis made tickets in all price ranges unavailable for sale in the general ticket pool and instead earmarked them for OptionIt customers. Leonsis and OptionIt split the profits from the options sales.
Proman’s company’s role in all these transactions is above-board, smart, and maybe even visionary. A study by researchers from the University of North Carolina and Indiana University, based on the hypothetical selling of options to NCAA basketball tournament, advised that sports leagues should look into options selling, also called forward sales or advance selling.
“The idea of option ticket pricing resonated with both league officials and university athletic officials we interviewed during the course of our study,” the researchers concluded amid a blitz of academic-ese. “In our empirical study, the majority of respondents thought that option pricing was a good idea—one that was fair and easy to understand. Both analytically and experimentally, we demonstrated that option pricing can yield higher profits compared to existing pricing mechanisms.”
And sports, Proman says, is just the beginning.
“We’re looking into getting into concerts,” he says. “So if you want to make sure you get to see Britney Spears, for example, you can buy an option on those tickets before they go on sale in your town.” (FirstDibz has already entered that market. The company’s Web site is now offering futures on a Led Zeppelin comeback tour. For $214.50, you can reserve the right to pay face value for a pair of Led Zeppelin in Atlanta tickets. Of course, there hasn’t been any Led Zeppelin tour announced yet, let alone an Atlanta date.)
But it’s risky for Leonsis. To get in bed with OptionIt, after all, Leonsis takes tickets off the regular market: The Pittsburgh contest on March 24 would be sold out if those were available to the non-options-holding fan. But those seats will now bring in above-face-value profits to Leonsis.
As Redskins fans know better than anybody, pro sports team owners have made deals with ticket scalpers in the past. Dan Snyder, after years of threatening to ban Skins season ticketholders if they were caught reselling their tickets, was exposed in a Washington Post series for selling directly to established brokers.
Then again, Snyder long ago established himself as a guy with a black belt in gouging. Leonsis is seen as his opposite, and next to Alexander Ovechkin, Leonsis’ goodwill sells more tickets to the Caps than anything else about the organization. When the Capitals announced last week fairly large ticket-price increases for next season, the Web-obsessive Leonsis was compared to Snyder on message boards. That’s gotta hurt.
Capitals spokesman Nate Ewell says the comparisons are unfair. The Caps, he says, hooked up with OptionIt only after researching the market and deciding the ticket-futures realm wasn’t going to go away. The OptionIt alliance, and the alliance with StubHub clone TicketExchange, gives the Caps more control of the Wild West–ish secondary ticket market, reducing the chance fans will get ripped off.
“The idea of the options market has been around,” Ewell says, “and authenticity is a big issue with us. Dealing with [established partners such as OptionIt] is a much more reassuring way than buying a ticket off the street or buying it off Craigslist. There’s an assurance there that the tickets are legitimate.”
Ewell says it’s too early to say if the Caps will renew the partnership with OptionIt for next season. Superstitious folks would say it’s a lock: The Capitals are one of two NHL teams that OptionIt partnered with this year. The other is the San Jose Sharks, who, like the Caps, are now leading their conference.
“This was fortuitous for us,” says Proman. “My luck’s never that good.”
The good-luck charm didn’t extend beyond the ice, however: OptionIt also had a deal with the NFL’s Buffalo Bills. Bills fans who bought an option on postseason tickets lost every penny.
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