In January 2014, StubHub attempted something radical. Addressing the frustration of its customers, the online ticket reseller began including its bevy of fees in the first price a customer sees, rather than tacking them on just before purchase. Now when you click “buy,” a pair of tickets listed at $100 will cost $100, not $125. According to StubHub, customers said they wanted—and say they love—the transparency. But the change hasn’t improved sales.
Because StubHub, which generated $500 million in revenue last year, baked its fees into the list price, its tickets looked more expensive than those of rivals. Sales for the company fell more than 10 percent in the months that followed the pricing change, according to Wedbush Securities, as competitor Ticketmaster gained market share. StubHub further trimmed its profit margins by cutting its take from each sale. By November, Chris Tsakalakis, who championed the new pricing, was out as president. (He declined to comment.) Still, the ticket reseller has stuck with the policy, which spokesman Glenn Lehrman says is among the most popular moves the 15-year-old company has ever made.
StubHub’s problems come amid a massive restructuring at parent company EBay, which on Jan. 21 announced plans to eliminate 2,600 jobs (about 7 percent of the total) this year across its holdings. EBay will soon spin off online payment system PayPal, and it’s assessing how the rest of its properties fit into its future.
The online auction house bought StubHub in 2007 and has let it more or less run itself. But EBay’s also kept it on a live-within-your-means budget, which has only tightened since the announced restructuring. New features, such as a mobile app released last summer listing concerts, must be funded by cuts elsewhere in the business, says a person familiar with EBay’s operations who isn’t authorized to discuss them. About 100 people were fired last year, and the remaining 900 StubHub employees fear more cuts are coming, say two people close to the company.
While StubHub is a small piece of EBay, the two businesses face similar challenges. StubHub turned the practice of scalping into a legitimate business; it moved $3 billion worth of concert and sporting-event tickets last year. “They’ve had a huge impact,” says ticket industry consultant Doug Lyons. Like EBay, StubHub’s simple-to-use marketplace has changed little from its original concept. As its markets matured and competitors emerged, growth slowed.
StubHub remains the industry leader, with about 50 percent of the ticket-resale market. Still, the pricing change and belt tightening have been good for competitors, says Gil Luria, an analyst with Wedbush. Ticketmaster, whose main business is primary ticket sales, is moving onto StubHub’s turf as it focuses on its resold ticket service. For some events, tickets sold on its site by brokers are available alongside regular ones, with a cut from the sale going to Ticketmaster. Ticketmaster, which declined to comment, has seen resale tickets increase about 30 percent from a year earlier and triple for concerts. It’s second to StubHub with an 11 percent share of resales, according to Billboard. “We’re seeing a convergence between the primary ticket and secondary markets,” says Andrew Dreskin, chief executive officer of Ticketfly, which sells concert tickets for clubs. That will make it tougher for players who operate solely in the secondary market, he says.
Private investors have approached EBay about buying StubHub, say two people involved in the talks who aren’t authorized to discuss them. StubHub needs an injection of cash so it can acquire other ticketing businesses, compete more directly with Ticketmaster in primary ticket sales, or expand into a wider range of event packages such as swanky dinners and vacations, the sources say.
EBay had contemplated selling StubHub but doesn’t want to now, says a person familiar with the company’s plans who isn’t authorized to discuss them. “StubHub is part of EBay, and we have no plans to change that,” says EBay spokeswoman Amanda Miller. StubHub spokesman Lehrman says the company understood the fee changes would mean a hit to sales but those will rebound over time. He says the change marks the company’s first step toward expanding into sales ranging from tours of the Empire State Building to yoga classes. “Right now we’re focused on tickets, but our goal is to go beyond that,” he says. And the new packages will bring advertisers to the site, he says. Still, the company doesn’t have all the time in the world to take its next step, says Dave Brooks, the founder of industry publication Amplify Media. “StubHub’s core product is strong and powerful,” he says, but Ticketmaster “is really figuring out ways to close the gap.”
The bottom line: EBay is limiting StubHub’s ability to expand into new kinds of ticket sales but doesn’t want to get rid of it.