Don't look, ticket prices keep rising.

Photographer: David Ryder/Getty Images

Other Super Bowl Losers: Scalpers

Stephen L. Carter is a Bloomberg View columnist. He is a professor of law at Yale University and was a clerk to U.S. Supreme Court Justice Thurgood Marshall. His novels include “The Emperor of Ocean Park” and “Back Channel,” and his nonfiction includes “Civility” and “Integrity.”
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As an interesting coda to the most thrilling Super Bowl in recent years, I’d like to point to an unintentionally hilarious article at ESPN.com about the travails of ticket brokers who were unable to fulfill customer orders for the event. Evidently it has become common for brokers to engage in short selling, charging their clients heavy markups for tickets the brokers don’t own but hope to pick up later for less than the contract price. This year, prices never fell, and the brokers couldn’t fulfill the orders.

Now, you might respond that this is always the risk in short selling: The market moves against you, you can’t cover your position, you take a bath. That’s exactly right. The puzzle is why we should somehow have sympathy for the brokers who bet the wrong way. According to the story, Arizona Attorney General Mark Brnovich “suggests that it’s possible for the league to help alleviate market manipulation in the future by holding back tickets and releasing them closer to the game, just like some high-profile entertainers have been known to do.”

To which one wants to reply: Huh? What market manipulation? The brokers didn’t manipulate the market; they just guessed wrong. They were punished for it, offering their clients refunds of twice or more what was paid for the undelivered tickets. Probably most took hits to their reputations as well. This all is as it should be. It’s unclear who exactly has to be protected from what.

Moreover, the proposed solution -- holding back some tickets for release closer to the event -- doesn’t make any sense. Consider the issue from the point of view of the National Football League. The only reason the brokers exist is that the NFL has intentionally created a secondary market by selling Super Bowl tickets below the market-clearing level. Put otherwise, if a fan is willing to pay, say, $2,000 for a ticket with a face value of $1,000, the league could simply price the ticket at $2,000 and cut out the middleman. Why doesn’t this happen?

There are many reasons a for-profit business might choose to price its goods below market-clearing levels. One stands out in this case: the positive value of buzz. Think about Beanie Babies. The stuffed animals were intentionally priced below the market-clearing level because the manufacturer wanted the secondary market to exist. The trading in Beanie Babies, along with the limited quantity of each model, helped maintain excitement about the product itself.

Now consider professional football. Every year at Super Bowl time, the networks run stories about how much tickets are going for. This helps the NFL in its effort to present the game as an exciting event everyone should care about. The league makes most of its money from advertising, not ticket sales. Ad dollars rise with viewership. The league has plainly made the calculation -- I suspect a correct one -- that the buzz about how much people are willing to pay for tickets in the secondary market is far more valuable than the returns that would come from charging more in the first place.

For the NFL to hold back a large block of tickets for later release would be inconsistent with this plan. It’s true that the ticket brokers who lost out are participants in the secondary market that the league itself has created. But that doesn’t mean they should be rewarded for betting the wrong way. The market wasn’t manipulated. The market worked, and worked well. The public anticipated a great Super Bowl, and tickets were quickly bid up to the market-clearing level. The short sellers got caught holding orders they couldn’t fill. That happens to short sellers all the time. If short sellers never lost money, everybody would do it. And if this particular tale of short selling didn’t happen to involve football, nobody would care.

The ESPN.com article strongly implies that the people who bought from the brokers and never got tickets were victims. If so, they were victims of the brokers, not of the league. Regular readers will know that I hold no brief for the NFL. Quite the contrary. But this is the rare professional football controversy about which we can confidently conclude that the NFL is genuinely blameless.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Stephen L Carter at scarter01@bloomberg.net

To contact the editor on this story:
Stacey Shick at sshick@bloomberg.net