Study at ODU: Brokers stubbing out scalpers

Consider the old-fashioned ticket scalper, a sales pro with an image problem.

He plies his trade in parking lots, deals in cash only and generally conducts himself with a street-smart slickness. He can inspire the uneasy feeling that, whatever the price you're paying for a ball game, he's somehow getting the better end of the deal.

Buyer, beware.

Now consider the scalper's more-evolved cousin, the ticket broker. Old Dominion University sports management professor Stephen Shapiro has. He and research partner Joris Drayer of the University of Memphis have conducted the first academic study of brokers. They presented the paper, "Understanding Ticket Brokers" at an industry conference in Las Vegas several weeks ago.

Shapiro and Drayer set out to learn just who these new breed of brokers - incorporated, online, credible enough to have an industry conference - are, and how they operate.

"There had been some studies of the secondary ticket market, looking at supply, prices, consumer's thoughts and perceptions," Shapiro said. "No one had really focused on the brokers."

Their conclusion: While the industry continues to suffer from negative stereotypes associated with street scalping, ticket brokers are increasingly legitimate, self-regulating business people who provide a convenient and trustworthy service.

Shapiro and Drayer contacted more than 1,000 brokers and received usable survey results from 261, asking only questions related to sports ticket sales. They found that contrary to what some might think, brokers don't acquire their tickets through back channels to manipulate the market and engage in price go uging. Most are college-educated and conduct the majority of their business online.

"There was kind of a negative stereotype that some of these brokers get their tickets in an unfair fashion," Shapiro said. "Of course, they're aggressive and knowledgeable - it's their business - but they're buying them through the same outlets as everyone else."

Those outlets are "primary distributors" - like the teams themselves or a sales company like Ticketmaster. Brokers buy tickets to re-sell, trying to anticipate which events will generate high enough demand and a fair enough profit.

Sounds simple enough. Technology has made the business increasingly competitive, however, knocking down barriers and opening the marketplace. Internet platforms such as StubHub and TicketNetwork that bring buyers and sellers together have made it fairly easy for smaller brokers to set up shop. Some larger companies have their own websites.

About 65 percent of the brokers surveyed said that ticket resale is their primary source of income. There are "tons" of them out there, Shapiro said. The conference he attended attracted 640 brokers, and that's just a small percentage of the industry.

That competition has been a boon for consumers, who can shop around online, purchase with the click of a mouse and receive a money-back guarantee.

For many, it beats dealing with a guy in a stadium parking lot. Not surprisingly, brokers are supplanting traditional street scalpers. Anti-scalping laws have helped facilitate the process, pushing the business online, where laws often don't apply.

"I can buy a ticket for an event in California, for example, and sell it without ever setting foot in California," Shapiro said.

The study concludes that anti-scalping laws need to be re drafted or eliminated. The industry has become self-regulating, with demand - not the desire to hit a particular profit margin - the primary determinant of price.

Though it wasn't part of their study, Shapiro and Drayer learned at the conference that 40 percent of tickets in the secondary market are sold at or below face value. Brokers make their money on larger events.

How much do they make? The study didn't get into profit margins. Brokers are notoriously protective of such information and publicity-shy in general, having dealt with negative portrayals from consumers and the media, the study said.

Still, as the industry grows, brokers are overcoming their shyness and flexing their muscles. With a trend toward paperless tickets threatening the secondary market - they are harder for brokers to re sell - the industry hired lobbyists in New York to help pass a law requiring primary sellers to offer traditional paper tickets as well.

"It was a win for the brokers," Shapiro said.

A win in a tough economy. Feeling the effects of the economic downturn like nearly everyone else, brokers discussed new marketing strategies at the Vegas conference, Shapiro said. Among the ideas floated for unloading "dead" or hard-to-move tickets: give them away to repeat customers as a way of building brand loyalty.

Call it a scalper's rewards program. Not something you'll get from the guy on the street.

Ed Miller, (757) 446-2372, ed.miller@pilotonline.com