Grab a Seat
As kids growing up in North Carolina, Brad and Adam Short cheered as the Chicago Bears won Super Bowl XX in January 1986. Then they made a vow: If the Bears ever make it to the big game again, they would go, no matter what it cost.
But when the Bears advanced to Super Bowl XLI, the brothers did not shell out several grand apiece to a secondary market broker. Two years earlier, in the summer of 2005, Brad Short put his faith and $18 on the Bears’ future.
After surfing the Web, Brad stumbled upon TicketReserve.com, a Web business that provides access to face-value tickets to major sporting events. Part futures market, part reservation system and part bid-to-buy, bid-to-sell, TicketReserve is a sports fan’s marketplace.
“With TicketReserve, faith in your team has currency,” says Ted Homatas, chief technology officer of TicketReserve in Deerfield, Ill.
At the time, Brad had little hope that the Bears would make it through the playoffs. Still, he figured the $18 price for a future ticket — or what TicketReserve calls a FanForward — was a bet he was willing to lose. With the FanForward, Brad could purchase a face-value ticket of $600 if the Bears earned a Super Bowl slot.
“I told my brother, ‘We’ll just buy these every year, and if they make it, we can go to the Super Bowl,’” Brad Short says.
It took two seasons, but the gamble paid off in January. The Short brothers paid $1,236 — the price of two face-value tickets and two FanForwards — to attend the big game. “We would’ve had to remortgage our houses to get to the game because on the secondary market, ticket prices started at $3,000 apiece,” Brad Short says.
Nothing but the Fans
The Short brothers are just the audience that Rick Harmon, CEO and founder of TicketReserve, was aiming at when he started the business six years ago. Harmon, a venture capitalist and self-described populist from Texas, earned his stripes first in the oil industry, and then in entertainment and media.
Intrigued by the dot-com marketplaces of the late 1990s, Harmon decided to pursue a market around event tickets. “When I looked at the stark contrast of the fans versus the secondary brokers, I said, ‘There has to be a better way.’ ”
Harmon and his team purchased electronic marketplace technology, assembled a board that includes former professional quarterback and New York congressman Jack Kemp, and began cutting deals with teams in the National Basketball Association, National Football League, National Hockey League, National Collegiate Athletic Association and the college football Bowl Championship Series. Those contracts guarantee a certain number of face-value tickets for TicketReserve customers for major sporting events.
But the company’s revenues only partially depend on the money collected through FanForwards, which can range from $20 to about $200 apiece. As the FanForwards sell out, buyers can sell them on TicketReserve’s marketplace. The company then collects 10 percent of the selling price, while charging buyers a 7 percent commission and splitting the revenue with the team or league.
These machinations would not be possible without TicketReserve’s underlying computer platform, which supports quick-forming marketplaces, tradable ticket reservations, sometimes volatile bid-buy and bid-sell activity, and fluctuating team valuations. No wonder nearly one-third of the company’s 32 employees are software engineers dedicated to creating and maintaining the system that makes TicketReserve tick (see sidebar, below).
The first Super Bowl was played in January 1967 between the Green Bay Packers of the National Football League and the Kansas City Chiefs of the American Football League. The Packers won 35-10. The leagues merged three years later, and the Super Bowl became the NFL’s championship game.
Always About the Business
But for all his championing of the loyal fan, Harmon is no starry-eyed romanticist. The online event ticket market that he entered is an active one, according to Forrester Research in Cambridge, Mass. In 2005, online event ticket sales reached $3.4 billion, according to the company, and were expected to grow to $5.4 billion in 2007.
And TicketReserve is not the only game in town. Other online ticket venues include TicketsNow.com, RazorGator.com, TicketLiquidator.com and StubHub, purchased earlier this year by eBay. “There are so many suppliers now, and online just lends itself to selling and buying tickets and will continue to do so,” says Sucharita Mulpuru, a senior analyst at Forrester.
But TicketReserve’s approach is quite different from these secondary ticket market suppliers. For one thing, the tickets it enables fans to purchase come directly from the leagues and teams, whereas StubHub enables individuals and brokers to resell their tickets, charging sellers 15 percent and buyers 10 percent. And while StubHub does have partnerships with teams, such as the Chicago Bears and the New Jersey Nets, which refer fans to the site, TicketReserve’s model “is exclusively about partnership [with the teams, leagues or event organizers],” says Andy Leach, TicketReserve’s executive vice president. In other words: no partnership, no tickets.
TicketReserve plans to grow these partnerships by offering teams and leagues direct access to the site’s registered users for marketing and communication purposes. Teams also receive trend data mined from the company’s database. “There’s a lot of wisdom in there,” says TicketReserve’s Homatas. “We can see which teams people think are going to go to the game, lifetime trading information, who wanted to go but didn’t and which fans are more passionate about their teams.”
Harmon hopes to add social networking capabilities and worldwide sporting events to the site, such as World Cup Cricket or World Cup Soccer, as well as ticket options to nonsports events, such as Broadway shows in smaller cities, and “American Idol” performances.
He also plans to add what he calls “dream markets” to the site. The idea is that people can define their own have-to-be-there event — Madonna singing with Tony Bennett, for instance, or a Chicago Cubs–Boston Red Sox World Series matchup — and then buy a FanForward for it. If the event does not happen in the next one to three years, the money would be returned. But if it does happen, the people with FanForwards can buy their tickets at face value.
TicketReserve may look as if it is all about big games and team partnerships, but a hidden factor that is ultimately responsible for getting fans to their dream sporting events is the underlying technology platform. And it is not just any computer system that can keep up with marketplaces that sometimes need to be built in hours, with unpredictable traffic surges and the tight security that is required when dealing with any financial transactions.
That explains why one of the first things chief technology officer Ted Homatas did when he joined TicketReserve was build a platform from scratch that could meet those demands better than the packaged software the company started with.
The resulting system is built mainly on open-source technology, with Oracle’s 10G database at the core. The system runs on a cluster of IBM blade Web servers running a stack of Red Hat Linux 3.1, the Apache Software Foundation’s Apache Tomcat and a number of other open-source frameworks, Homatas says.
Because security is a big concern, that cluster sits behind a group of F5 Network’s Big-IP load balancers that perform hardware Secure Sockets Layer (SSL) encryption, which enables any nonanonymous browsing on the Web site to be encrypted. A separate group of servers that are not connected on the backend do order matching and processing. Homatas also chose to use Oracle Data Guard for data protection, since there is no tolerance for losing even one transaction.
The ability to quickly load balance and add capacity was key because of the burst of traffic that results from sports upsets — which spurs people to buy or sell their ticket rights, or FanForwards — or on the days when FanForwards first go on sale for big events. With the clusters, additional servers can be added within two hours. Homatas says, “In the world of sports, you never know when something crazy will happen.”
Speed is also essential in building new marketplaces, which sometimes needs to happen in hours; for example in 2004, when golfer Michelle Wie unexpectedly looked as if she might make the cut for a Professional Golf Association tour.
The system also has to be able to run 24 x 7. “That’s why we operate in appliance mode, where we roll the builds from one machine to another with no downtime,” Homatas says.
Although TicketReserve operates differently from any other online ticket marketplace, it is also crucial for the Web site to clearly explain how it works as simply as possible, such as market timing and the fact that users are purchasing not a ticket but the right to buy a ticket, Homatas says. That spurred a 60-day overhaul of the Web site, moving it into the Web 2.0 world of Ajax and context-sensitive capabilities. “A lot of information is buried now so that it looks simple, but the information becomes apparent when you need to know about it,” he says.
In the future, the information technology group will work to increase traffic to the site. For instance, it plans to add a refer-a-friend program with a sliding scale for credit, as well as Google Gadgets that users can add to their Web sites or Web logs to display their teams’ market performance in near real time. It also plans to integrate the site with users’ Flickr photo albums to display pictures from the events that they attend through TicketReserve.
According to Team Marketing Report’s Fan Cost Index annual report for Major League Baseball, overall ticket prices, which increased by more than 10 percent collectively in 2005 and 2006, increased by only 2.5 percent this year.
According to TMR, while 19 teams raised ticket prices, only nine teams did so by more than 5 percent. The Los Angeles Dodgers raised prices nearly 27 percent, the Oakland Athletics increased prices 8 percent and the Detroit Tigers pushed a 5 percent increase out to fans. The World Series-winning St. Louis Cardinals did not increase ticket costs.