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Cavaliers Look to Lead E-Ticketing Trend

Monday, January 29, 2007

The Cleveland Cavaliers envision an arena full of cheering fans with no tickets in their pockets. Ticket brokers say it can't be done, but the team believes electronic ticketing will sweep the sports and entertainment industries much as it did the airline industry.

"The paper ticket market is fundamentally inefficient and arcane," said Cavaliers chief marketing officer Chad Estis. "I don't think there's a role for that in the future."

While some major league baseball teams have introduced electronic ticketing, the Cavaliers have taken it a step further, providing a completely paperless transaction. Nearly a third of their season-ticket holders use Flash Seats, owner Dan Gilbert's online ticketing company.

The firm is looking to sell other professional teams on the concept, allowing them to cash in on the lucrative secondary ticket market. Teams long have been frustrated because they sell seats for the price listed on the ticket, only to have scalpers outside the stadium get double and triple that figure.

"I hope to be in every league starting next fall," said Flash Seats chief executive officer Sam Gerace, who would not say which teams have expressed interest.

A decade ago, the airlines industry found it could save money by going paperless and eliminate passengers' fears of losing or forgetting tickets. Southwest Airlines says 73 percent of its bookings now are done through the Internet.

Flash Seats isn't all that different. Season-ticket holders who elect to go paperless register at http://www.flashseats.com and get into games by swiping a credit card or driver's license at the arena.

They can transfer their seats by e-mail and may sell their tickets via Flash Seats, naming their price. Flash Seats charges the buyer a 20 percent fee.

Among the benefits: Buyers don't have to worry about a ticket being counterfeit, Gerace said.

The secondary ticket market has grown into a $10 billion-a-year industry, according to Sucharita Mulpuru, a senior analyst for Forrester Research Inc. About $3 billion of those sales are online.

"The online piece of it has been growing quickly. There are new sites. There's more comfort with it," said Mulpuru, whose clients include eBay and Amazon. "Before it was a very fragmented local process. The Internet has helped to eradicate those geographic barriers."

The NFL is looking into electronic ticketing league wide, exploring whether it would be viable for teams that host just 10 home games, including preseason, each year, versus 41 for basketball, said Brian McCarthy, an NFL spokesman. He would not comment on whether the league has had discussions with Flash Seats.

Fifteen major league clubs use technology similar to Flash Seats. Fans buy seats online, then go to a kiosk outside the stadium, swipe a credit card and get a receipt that gets them in the gate, said Jim Gallagher, spokesman for MLB.com.

The San Francisco Giants are one of several teams that provide a Web site for fans to sell and transfer tickets much like Flash Seats, but the transaction isn't entirely paperless, team spokesman Russ Stanley said.

Flash Seats faces competition from sites such as http://www.stubhub.com and http://www.razorgator.com that in recent years have given individuals the ability to become ticket brokers.

StubHub Inc., a San Francisco-based startup that was purchased this month by eBay Inc. for $310 million in cash, generated more than $100 million in revenue last year. It charges users a 15 percent fee to sell tickets on the site, while the buyers are charged a 10 percent commission.

Many teams work with StubHub and refer fans to the site, including the Chicago Bears and New Jersey Nets. But the New England Patriots sued the company in November, alleging the site encourages fans to break state law that bans selling tickets for more than $2 above face value. The New York Yankees revoked season tickets of fans who sold their seats on StubHub.

StubHub's sales of Cavaliers tickets - a hot item because of superstar LeBron James and the team's solid performance this season - have gone up even with the emergence of Flash Seats, said Colin Evans, StubHub's vice president of sales and business development.

Evans thinks it will be difficult for the Cavaliers, or any team, to go paperless for every seat in the arena. He said fans who sell on StubHub have more potential buyers because the site offers numerous sporting events and concerts.

"Sellers go where buyers are," he said. "As long as there's that buyer demand, you're going to get sellers."

The Cavaliers say they're generating buyers by advertising heavily during Cavaliers radio and TV broadcasts. Bringing more teams to Flash Seats also would increase the number of visitors to the site.

Mark Klang, president of Amazing Tickets, a ticket brokerage based in suburban Cleveland, believes it will be difficult to separate fans from their paper tickets, especially white-collar types who give them away to clients.

"Anybody that is paying a premium for tickets likes to have something in their hands," he said.

Tickets still are important for practical reasons, said Josh Logan, director of ticket operations for the Houston Rockets, noting that fans in club seats need them to get access to a special bar and concessions area.

"I don't see any time soon phasing it out completely," Logan said.

The Rockets haven't considered Flash Seats, but are looking into sending ticket bar codes to fans' mobile phones or PDAs (personal digital assistants) that would be scanned at the arena, Logan said.

Flash Seats plans to get more season-ticket holders involved next season, then eventually sell single-game tickets electronically. The Cavaliers and Flash Seats would not comment on whether they've seen profits yet.

The Cavaliers rewarded season-ticket holders who made the plunge into electronic ticketing this season by offering them 10 percent off playoff tickets.

"I love it," said Lee Baskey, who won't go back to paper tickets next season. "It's a neat concept. When I first heard about it I had 8,000 questions."

Baskey, who uses his tickets for both his family and customers in his insurance business, said his main concern was how easy it would be to transfer tickets. He said there's been no glitches.

"It will grow on people once they educate people on what it's about," he said. "I don't know if they'll ever be able to go 100 percent. We're creatures of habit. People want something tangible."

Although the Cavaliers give Flash Seats users a stub with their seat number on it, some fans have complained that they miss keeping their glossy tickets as souvenirs. Flash Seats plans to give out flashier commemorative seat locators by February.

Gerace thinks it's only a matter of time before all major sports, concert and theater events are paperless.

"We're about to make history," he said. "We're going to make something disappear."


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