Sports Illustrated this month announced the launch of a new vertical, SI Tix. The press release touts a “fan first, innovative and multi-feature ticketing platform with a revolutionary $10 flat fee” (for those who use Venmo to pay). On the surface, the introduction of a secondary ticketing marketplace that charges a nominal transaction fee regardless of how many seats are purchased sounds like the industry disruption that event-goers, who have become accustomed to paying a surcharge between 15% and 34% on every ticket sold, have awaited.
But on closer inspection, SI Tix will not necessarily save the consumer money on their ticketing purchases. While the get-in price (fees included) for a pair of tickets to the NBA’s three conference semifinal Game 7s were lower on the new platform than on competitors StubHub and SeatGeek (as of June 18 at noon), we found that was not necessarily the case on some of the more desirable seats for those same games.
Our Take: It is more than reasonable to wonder how a ticketing transaction could be more expensive on SI Tix when they are charging just $10 above and beyond the listing price and their competitors are collecting a 15% to 34% fee on every ticket. SI Tix CEO David Lane explained it has to do with how much competitors discount pricing on the front end. “One of the tactics you’ll see the ticket retail sites [employ] is they will lower [the listing] price point down and then charge a [more significant] transaction fee at the end of checkout.”
From a timing perspective, ticketing is a logical vertical for Authentic Brands Group (ABG), the owner of Sports Illustrated, to pursue. “We’re going to have this one time, short-period, massive flood of live events over the next 16 months,” TicketManager CEO Tony Knopp reasoned. Of course, the company did not know the pandemic and subsequent reemergence of live events was on the horizon when it began looking at the business as a natural fit with SI readership nearly two years ago.
To make it in the ticketing business, companies need to pick a side. “You are either supply driven or you are demand driven,” Knopp said. “You either need to bring rich new supply, which nobody else has to market so that the customer will eventually come find you. Or you need to have eyeballs that others don’t.”
SI Tix acknowledges it does not have new supply. Like most secondary marketplaces, much of their inventory is coming from large broker consolidators (think: Ticket Network and Ticket Evolution) that enable smaller brokerage businesses to list their tickets across a host of sites and pay less to do it. Lane says the company is also getting tickets from qualified rights holders and resellers. That explains how a nascent platform is able to provide access to millions of tickets to more than 100,000 concerts, theater and sporting events across the globe.
In time, SI Tix believes there will be opportunities to work with teams and/or content providers (as many large marketplaces and broker consolidators do) to gain exclusive inventory (i.e. tickets that only show up on their site). But Knopp doesn’t see that as a viable approach for ABG, believing that such deals are usually not significant enough for the public to notice them until done at scale—and each one is competitive and expensive. And even if SI Tix were to find exclusive inventory, “There is so much arbitrage in the market that it would end up being bought up by the [arbitrageurs] and resold on their distribution channels, anyway [limiting the value].”
Considering SI Tix has the same inventory as dozens of other marketplaces out there, it makes sense the company is focused on the demand side of the business. And the $10 flat fee is an attractive selling point (even if it doesn’t necessarily mean the cheapest transaction). But a trio of industry insiders expressed strong doubts about the company’s ability to take market share in a very competitive and mature market. “[Everybody] says they have something that differentiates them. Really what differentiates [the market leaders] from everyone else is how sophisticated and well they drive PPC and search,” Knopp said.
A flat $10 transaction fee would be terrifying for the establishment if the company employing the model could drive traffic without having to spend a fortune on PPC. As Knopp explained, the amount of “money these major players are spending in search is what makes them so powerful. It is a multi-billion dollar spend between them, it’s the vast majority of their investment.” While Lane said SI Tix “will certainly have a [search] presence,” the company does not intend to compete with the industry’s giants on a dollar-for-dollar basis.
SI Tix is not going to unseat the likes of Vivid Seats, SeatGeek and StubHub/Viagogo unless it spends on par with them. But the belief is with Sports Illustrated’s 30 million fans and the “60 million [users it has access to] from Venmo, there is enough of an audience there where if we are successful at very reasonable conversion rates, industry standard conversion rates, we can be a very successful company,” he said.
It would be problematic for the ticketing establishment if a company like Facebook, Google or Amazon entered the space. Those companies either own search and PPC (areas where the ticketing giants currently have an advantage) and/or have a large built-in audience that would enable them to operate in a far more capital-efficient manner. “For someone to come in and compete [with the market leaders], they would have to come to the table with the demand side already built into their business structure. Their conversions would have to come via looks, views and visual presence from another medium,” Corey Gibbs, Ph.D. (CEO, Elite Entertainment Experiences) said.