From pork bellies to pigskin: An online futures market for sports tickets

W. P. Carey professors Stephen Happel and Marianne Jennings are free-market defenders. For almost two decades they have evangelized the fundamentals of supply and demand, specifically in the secondary market for event tickets. Now a new company has done what Happel and Jennings proposed in a paper for The Cato Journal in 2002. YooNew offers a website that turns tickets into commodities that can be traded on a futures market.

With the Super Bowl in early February and the NCAA men's basketball Final Four in early April, 'tis the season to find a better way to score tickets to major sporting events. These two events are among the most hyped in U.S. sports, and they rival one another for exorbitant ticket prices. Well, perhaps "exorbitant" is the wrong word. According to W. P. Carey professors Stephen Happel and Marianne Jennings, the right word for a ticket priced at many times its face value is "appropriate."

Happel and Jennings are free-market defenders, and have for almost two decades evangelized the fundamentals of supply and demand, specifically in the secondary market for event tickets. Now a new company has done what Happel and Jennings proposed in a paper for The Cato Journal in 2002. YooNew offers a website that turns tickets into commodities that can be traded on a futures market.

YooNew your team would be there

Simply put, the three-year-old site lets fans buy options on tickets for an event that requires qualification (World Series, NBA Finals, Final Four, Super Bowl) months ahead of time. For example, a Vikings fan might have bought an option for Super Bowl tickets early in the season. Since the team's chances, even early on, were slim, the option would have been priced low. If Minnesota had made it to the Big Game, though, that fan would have received the seats at a bargain price.

Patriots fans, on the other hand, would have paid much more for their options, because the team was highly regarded in the preseason, and that price would have risen as their dominance became obvious. The savings on the best teams, therefore, would not be as great. YooNew makes its money on the options bought for teams that don't make it — like those Vikings — thereby funding the purchase of the tickets it has to supply to holders of the successful teams' options.

Fans can play, as can brokers, and those with normal financial trading experience are encouraged as well, regardless of their affiliation as fans. One of the site's co-founders, Gerry Wilson, consulted with Happel several times. A paragraph in the site's About Us section bears Happel's fingerprints: "We are passionate about leveling the playing field and creating a fair marketplace where everyone has equal access to tickets."

With the Super Bowl teams decided, the action is heating for the Final Four. The YooNew website features New York Stock Exchange-like crawls of prices for teams, complete with abbreviations, decimals, progress arrows and percent of change: CBB.FF08.LOU.A 628.35 16.77%. Options are transferable and tickets can be bought and sold continuously, leading to wild volatility: as the N.Y. Giants' fortunes waxed and waned versus the Green Bay Packers in the NFC title game, the qualifier for the Super Bowl, Giants options fluctuated more than $2,000.

YooNew provides Happel with more ammunition for his battle against the view that regular people cannot afford to attend high-profile events because of the prices. Options for the Giants, who started the season 0-2, could be had for less than $100 at one point during the season. Super Bowl tickets on StubHub ranged between $2,700 and $7,200 in the final week of January. "(YooNew) is an opportunity for somebody who doesn't have much money to go to the Super Bowl — buy an option and see if your team gets in," Happel says. "You don't have to spend $900."

As of March 2007, YooNew had fulfilled 100 percent of its obligations to holders of winning options, though in its early days it nearly collapsed. The 2005 Final Four featured an unusually high demand, and when it came time for YooNew to hold up its end of the deals, Wilson had to cash out his 401k and used $35,000. A $2 million infusion from an investor steadied the firm, which claims to be making money now.

Freedom to buy and sell

YooNew is a gratifying development for Happel and Jennings, who have seen most of the country come around to their way of thinking: laws that limit ticket-resale prices do not benefit consumers. Professional teams and leagues have stopped fighting the practice of season ticket holders selling their unwanted tickets, and have embraced it, in many cases by starting their own trading portals. It has been one of the clearest instances of the maxim "If you can't beat 'em, join 'em."

Jennings herself joined Happel's point of view after several discussions about freeing up secondary ticket markets. Happel eventually took her to the scalping area surrounding the Phoenix arena hosting the 1995 NBA All-Star Game. Jennings watched prices come down as game time neared and she was convinced. "I saw it in action," she says of the populist practice. The pair has helped usher the secondary market for tickets from the speakeasies to legitimacy.

They have spread the free-market word in journals and newspapers, before legislatures, in front of juries and judges and on panels, and they have advised and testified and composed for free. To date, Jennings supposes they have changed the minds of at least six state legislatures that mulled keeping price controls on ticket resale.

"It's a very upbeat moment when you're testifying and suddenly a light goes on," Jennings says. "You can tell by their questions, they understand." The conversion of New Jersey led to the enlightenment of New York, with all its Broadway implications in addition to its sports teams. Through it all, the duo has preached the power of supply and demand to allow Joe Normal to compete for tickets with Jim Corporate as well as to reduce the shadowy side of the secondary markets.

They could take $250 per hour for testifying in lawsuits, but at most, they take travel expenses. "We are here as a public resource," says Happel, who teaches economics. "We consult purely because we're defending free markets. Our reputation throughout the industry is that we are people who can be trusted. Our story is we just want to make markets more competitive."

Jennings says she and Happel have refused to accept money to uphold their integrity but also the integrity of an ongoing research project — secondary ticket markets. They have always given their time and observations and advice to business people — StubHub, RazorGator, TicketAmerica, and the latest innovator, YooNew — as long as they are not out to swindle.

"Research is only research unless it helps somebody," says Jennings. "We both needed each other. It was a marvelous partnership. It's like being in a lab." These days they are preparing for a new skirmish. Ticketmaster, the dominant force in the primary sale of tickets, is making a move to similarly control the secondary business by buying TicketsNow, a competitor of StubHub. Happel and Jennings won't sit idly by.

As January ended and the Super Bowl neared, the pair was thinking about the extremes of the current secondary market. The Giants are from a state that recently repealed price-control laws, and whose fans may have hit pay dirt if they bought an option on YooNew early in the season.

The Patriots, by contrast, are a team which punishes season-ticket holders if they sell their tickets for more than a certain price. And, the Patriots' home state (Massachusetts) is one the few to still have price-control laws. The final irony: The teams are playing in Phoenix, one of the first cities to adopt free-market thinking in the secondary sales of tickets.

Quoting from one of their online articles: "We look at hosting the Super Bowl as an opportunity to have the Patriots here for remedial training, in economics, if they could just see how open ticket markets work in their allocation of resources as well as in provision for demand. We're hopeful that after a stint in Phoenix's open ticket markets, the Patriots return home, Renaissance men, schooled in the benefits and potential profits they could garner from a market they keep trying to contain. That's a game they can never win."

Bottom Line:

• YooNew, a website that provides a forum for trading event tickets like futures options, is based on a journal article by W. P. Carey professors Stephen Happel and Marianne Jennings.
• Happel and Jennings have never taken more than travel expenses for advising, consulting, testifying and making speeches in the advance of freeing markets, specifically as it relates to the secondary market for tickets.
• Most states currently have no price controls on the resale of tickets, and professional sports teams and leagues have joined a practice they once fought vigorously. Many now have their own portals for resale of season tickets.