Super Bowl tickets disappeared in an imperfect storm

Selling fans “options’’ to buy future Super Bowl tickets at face value seemed like a good way to help them avoid the shadiness often plaguing the loosely regulated resale market.

Forbes, CNBC and other business media hailed a Chicago company’s website, called TeamTix, as a pioneer in selling options to the Super Bowl and other sporting events. For as little as $20, fans could hedge bets throughout the NFL season that certain teams would qualify for the big game.

For those who picked correctly, pre-purchased TeamTix options, or “reservations” as the company calls them, would guarantee Super Bowl tickets at face value — a bargain, considering street prices eventually topped $10,000 this year.

But when dozens of Seahawks and Patriots option-holders tried claiming their Super Bowl tickets, they encountered the same problems as those buying from resale brokers. They were told a supplier had failed to deliver their tickets.

“It was so stressful and heartbreaking,’’ said Justin Hendrix, 34, of Magnolia, who’d paid about $5,000 for nine winning options and planned to sell some Super Bowl tickets while using others to take family to the game. “I flew down to Phoenix and my cousin and his kids were expecting to go. To tell his 11-year-old, who’s been a Seahawks fan his whole life, that he couldn’t go … to see him run off crying to his room, that was hard to take.’’

Hendrix received the e-mail saying his seats weren’t coming while flying to Phoenix on Thursday before the game. He returned home the next morning, and his option money was refunded.

The Seattle Times has been examining the impact of brokers reneging on Super Bowl sales to hundreds, possibly thousands, of fans this year. The fans are forced to buy on the resale market because the NFL makes about only 1,000 tickets available via lottery.

System breaks down

As part of the system, ticket brokers often “short sell” tickets they don’t yet own, waiting to fill those orders after street prices fall the week before the game — and profiting on the difference.

But this year’s prices topped $10,000 and never really fell. Some brokers reneged on deals, and others lost thousands of dollars per ticket filling orders.

Those left seatless by unfilled broker orders transcended income levels.

Issaquah High School assistant football coach Brian Hartline left Arizona empty-handed, denied the $1,750 ticket he’d saved all season. Meanwhile, ranch owners Steve and Heidi Van Boven of Grandview spent $50,000 for four last-minute seats when their initial $12,000 order fell through.

The $5 billion ticket-resale industry makes it difficult to determine exactly who is selling on a plethora of websites. The Washington Attorney General’s office has received 115 Super Bowl ticket “short selling” complaints, and authorities in other states are exploring what happened.

TeamTix, owned by Forward Market Media (FMM) of Chicago, touts itself as “the only way fans can secure face-value tickets.’’ It doesn’t sell ticket options directly but enables third parties to do so by licensing its software platform to one seller for each event.

The value of TeamTix options fluctuates for every team throughout the season as their chances of making the Super Bowl increases or decreases. Fans can profit by reselling their options to others via the website.

A handful of companies began early forms of ticket optioning a decade ago. TeamTix evolved from one of those companies in 2012, and its software has since helped sell options to about 100,000 people for tickets to dozens of top sporting events, concerts, Broadway shows and other things.

For some events, licensees selling TeamTix options have direct access to the ticket supply — such as the Big Ten Conference and organizers for the Orange Bowl, Sugar Bowl and Rose Bowl.

But the NFL controls all Super Bowl tickets and partners only with Ticketmaster in reselling them. That means for the Super Bowl, TeamTix options are sold by a company relying – just as the public does – on a broker to ultimately supply tickets.

For the past two Super Bowls, the TeamTix options were sold by Austin, Texas, businessman Brian Peters, owner of Ludus Tours, a high-end sports-travel agency.

Peters was to receive 200 Super Bowl tickets from his supplier to give to Seahawks and Patriots option-holders. A Ludus Tours e-mail to them proclaimed “all of our seats are coming from the NFL.’’

But three days before the Super Bowl, Peters e-mailed: “I have bad news to report from Scottsdale. I do not believe that my suppliers are delivering tickets to me. … For what it is worth, I will not have a functioning business once the dust settles from this event.’’

FMM CEO Rick Harmon said he has terminated business relations with Peters.

Previous problems for Peters

Reports indicate Peters and two colleagues were arrested June 28 in Rio de Janeiro, Brazil, for allegedly reselling tickets illegally to the FIFA World Cup. Brazilian police reportedly raided his hotel room and seized 200 tickets worth $175 being sold on the Internet for $1,172.

All charges against Peters were dropped, but Peters – his passport seized – said he did not arrive back in the U.S. until Nov. 19, having spent considerable funds gaining his freedom.

Peters said he had ordered Super Bowl tickets in December and made partial payments on them before arriving in Phoenix. Despite his arrest, he said he’d operated Ludus Tours from Brazil and had sufficient funds to make final payment on his Super Bowl tickets once received.

He said he has copies of purchase orders, wire transfers and proof that his supplier told him he hadn’t received his usual ticket supply. But Peters declined to provide that proof.

“If I’m sued, then it will all come out,’’ he said.

Peters said he tried buying tickets elsewhere, but prices were too high.

Instead, he refunded everyone “at least” 120 percent. The standard recommended by the National Association of Ticket Brokers is 200 percent, to cover expenses such as airfare and hotels.

Some customers complained that Peters made them sign waivers agreeing to 120 percent and promising not to take legal action. But Peters said even those refusing to sign received refunds.

Peters has rebranded Ludus Tours as Bucket List Experiences and plans to sell the company’s assets.

“I’m done with ticket resale,’’ he said. “I’ve had just about all I’m willing to take.’’

Phoenix-area resident Luke Kassi, 33, who paid $1,749 for two Seahawks options the week before the NFC Championship Game, was refunded despite refusing to sign the waiver. Kassi calls the 120 percent refund offer “a joke” considering Peters collected money for options on all 32 NFL teams all season without ultimately awarding the promised tickets to anyone.

Refunding just the winning options, he said, is “easy when you’ve got all this other money you’ve collected.’’

Though FMM doesn’t make direct revenue off option sales, it collects a percentage of service fees for all transactions on the TeamTix site. That includes when fans resell options to others throughout the year.

Hendrix and Kassi said because Forward Market Media profits from such fees, it should have backed its TeamTix brand by buying tickets to replace those that Ludus Tours never produced. National resale site StubHub spent millions filling broken Super Bowl orders, as did Seattle broker Epic Seats on a much smaller scale.

‘Short-sale tsunami’

But FMM CEO Harmon said though he’s sorry problems occurred, his business model is structured to avoid such liability.

Harmon likened the Super Bowl ticket crisis to a “short-sale tsunami” in which unscrupulous practices washed away much of the resale industry. He said TeamTix is meant to provide an alternative to buying from online brokers, or on the street, and that nothing like this had happened before.

Just three days after the Super Bowl, Harmon and TeamTix announced the sale of options for next year’s College Football Playoff. The licensee of that market is the College Football Playoff organization, which directly controls ticket inventory.

Harmon has previously faced criticism over people buying options created by his business.

FMM used to be known as The Ticket Reserve, which ran a FirstDIBZ website that shut down after a 2009 class-action lawsuit involving Super Bowl tickets. Hackers had infiltrated the website and sold fraudulent “dibz”, or options, for Super Bowl tickets.

The hackers went to prison and Harmon’s company settled the lawsuit for $530,000.

Harmon ceased operations for 18 months before re-opening as FMM, saying his biggest mistake had been assuming an ownership stake in all tickets being optioned on the FirstDIBZ site.

He’s happy to simply license the TeamTix platform, leaving ticket ownership and distribution headaches to others. Given what just transpired, he’s glad he’s no longer out there acquiring seats.

Today’s resellers, he adds, “have thousands and thousands and thousands of opportunists for events across the board, not just the Super Bowl.

“It’s a wild, wild West.’’