NFL’s fledgling resale ticket empire under scrutiny

Inside sports business

New York attorney general Eric Schneiderman is the last guy the National Football League needed crashing its Super Bowl party.

Other than some concussion litigators wandering in, it’s tough to imagine another party crasher wiping smiles off NFL faces faster than the sports world’s version of Eliot Ness on another cleanup crusade.

Schneiderman just demolished Daily Fantasy Sports in his state and is now targeting NFL resale ticketing practices. Specifically, how the NFL Ticket Exchange website sets price floors prohibiting ticket sales below face value.

A broader resale industry report released last Thursday by Schneiderman mentioned NFL teams forcing fans to use the price-floored exchange — which the league partners on with Ticketmaster — when reselling seats. Bloomberg reports an antitrust investigation is under way, which Schneiderman’s office won’t confirm.

Make no mistake: This is bad news for a league that’s aggressively cornered the secondary ticket market.

Not just because of price floors. But everything else Schneiderman might find behind the league’s fledgling resale ticket empire.

Just as Daily Fantasy Sports thrived before guys like Schneiderman intervened, the NFL and teams have enjoyed free reign effectively “scalping” their own tickets.

They’ve muscled in on resale exchanges, brokers and fans to control as much secondary market inventory as possible, later flipping tickets for profit several times face value.

Some fans have no problem with that.

They figure since everybody else profits off reselling tickets, so should the NFL, as it’s their game.

And that’s fair, to a point.

But where the NFL raises concern is when it appears to be controlling the market rather than merely participating in it.

Ticket resale was legalized with the idea online exchanges and brokers would adhere to supply-and-demand principles.

Lawmakers figured an Internet-driven industry offered quick comparison-shopping to help consumers determine market prices. Brokers would profit off popular tickets, with consumers getting below face value prices for low-demand events.

A price floor destroys that. Even with the Cleveland Browns in town, you can’t dump unwanted seats on NFL Ticket Exchange for less than full price.

You’d think fans could just hop over to StubHub or Vivid Seats and sell for whatever. But Schneiderman says the NFL discourages that.

NFL spokesman Brian McCarthy denied via The Associated Press that anyone is forced to the league-partnered exchange.

But Schneiderman says some teams threaten ticket holders with losing their seats if selling via other exchanges, or delay releasing PDF versions of tickets sold on those sites.

His report says the NFL pushes fans to its exchange by proclaiming it is the only “safe” place to buy. It adds that price floors inflate ticket costs and failing to disclose them causes fans to wrongly assume they’re buying tickets for true market value.

And part of Schneiderman’s job is protecting consumers from their own ignorance.

After all, many assume last year’s Super Bowl fiasco, where tickets soared beyond $10,000, came from fan demand for the Seahawks-Patriots matchup.

But resale industry insiders say that market was artificial.

Two or three NFL-partnered companies — most notably, PrimeSport — had disproportionate ticket supplies and withheld inventory from the market. Some teams also delayed releasing tickets to players, staff and alumni who typically sell to brokers.

Once prices soared due to reduced market supply, those companies hoarding tickets sold them for massive profits.

Fans weren’t the ones paying $10,000; just brokers desperately trying to fill advance ticket orders of $2,000 or $3,000 that more accurately depicted true demand. Prices spiked because of a disrupted supply chain and tickets concentrated among a powerful few.

One beneficiary was NFL Ticket Exchange, which collects 25- to 30-percent fees off sale prices. When market prices soared, so did those fees — later shared with the NFL and its teams.

During the ticket crisis, the league also never missed an opportunity to tout NFL Ticket Exchange as the only safe place to buy.

While nobody says the NFL masterminded the entire debacle — greedy brokers played a role — it demonstrates dangers of too much ticket supply concentration.

PrimesSport gets tickets via lucrative “sponsorship” arrangements with teams, including the Seahawks. Perks like radio ad time are included, but it’s really just teams packaging tickets for several times face value while pretending they aren’t “scalping’’ seats.

Miami Dolphins owner Stephen Ross has a small PrimeSport ownership stake. Florida brokers say Ross yanked their tickets to give to PrimeSport.

The Seahawks also revoked thousands of broker tickets last year, giving some to fans at face value. But most were resold, or packaged in sponsorships, at marked-up prices.

Brokers continuously warn that teams revoking seats reduces and concentrates supply, causing prices to rise. Sure enough, according to TiqIQ tracking of resale exchanges, the average Seahawks home ticket last season jumped 10 percent from $397.12 to $438.09 despite lesser opponents and the team’s decline.

And higher market prices mean sales fee increases for — you guessed it — NFL Ticket Exchange, the league and teams. There’s clearly growth potential over multiple NFL financial fronts if fewer hands control more seats.

That’s why the league needs Schneiderman to leave its party fast.

For now, he’s supposedly investigating a price floor. But the bigger threat will be if Schneiderman starts questioning whether the NFL’s flourishing ticket side business has anything resembling a price ceiling.