May 22, 2003

Breaking Balls

Not-So-Fuzzy Cubbies

by Derek Zumsteg

In my first Breaking Balls column, I wrote about how to run a team to avoid revenue sharing (and in the process, make your team a net drain on the system, rather than pay in). It didn't take long for a team to find a way to do this that I hadn't thought of.

The Chicago Cubs, who already do the undervaluing-your-media-rights thing for their superstation, have opened up a whole new avenue I hadn't even considered.

The Cubs sell tickets at cost to "Wrigley Field Premium," a ticket broker down the street. Premium sells these tickets for an outrageous mark-up. Greg Couch, of the Chicago Sun-Times, has written some great columns on this I'd recommend if you're interested. He reported that while a Cubs-Yankees game was sold out ("Obstructed view only") from the Cubs, Wrigley Field Premium was selling them for insane markups--$1,500 for a primo $45 seat.

The Cubs and WFP are the same company: A Cubs VP is the President of WFP. The Cubs are contracted to do the books for WFP. And WFP gets to return tickets they don't sell.

People they're cheating:

• Major league baseball, which gets 30% of the team's revenue

• Fans, who don't even get a chance at the good seats before the Cubs siphon them

• Justice, who is blind and would have liked a pair of tickets behind home plate where she could at least listen to the Cubs play the Yankees

The Cubs have responded to criticism by offering a string of dubious arguments:

• Ticket brokers reduce supply for street buyers

• Therefore, introducing a new broker improves competition

• So ticket prices from brokers will go down

• Because ticket prices go down, people will buy more tickets from them

• More tickets bought from brokers mean, uh, it's easier to get tickets directly at face value from the Cubs.

Baseball's an industry that has made billions of dollars by lying to states, counties, cities, citizens, and robots posing as citizens. I don't expect that a team's going to tell me the truth really. What I want is the courtesy lie. At least make up something plausible.

The Cubs' arguments aren't even really arguments, they're just hollow assertions, placeholders, stalls. I can imagine trying these arguments out on a skeptical parent. "See, I stole all the Halloween candy from all the neighbors because now all the kids can come to me, creating a more efficient marketplace."

Let's poke an easy hole in this: The Cubs sell most of their tickets to their associated broker. What happens, even in the bizarre sequence they give us?

• It's impossible to get tickets from the Cubs, easily or otherwise.

• Everyone's forced to buy from their broker.

• So ticket prices actually go up from the broker.

• And there's no competition between brokers, so prices go up even higher than ever.

The Sun-Times' Couch makes a point that I totally agree with: If a team wants to go to demand-based pricing, just do it. The Mariners did this for a limited section once, and there was a huge public outcry, so they've retreated to skimming scalping between season ticket holders and Joe Fan, and trying to destroy the secondary scalping market. But at least even there, the Mariners report and share that cash. What's to stop them now from starting Section 110 Tickets, a separate company run by the people who happen to be the M's owners, and selling every ticket in Section 110 to the broker every game?

The Cubs had a choice. They could have gone to more demand-based pricing, and possibly by providing more realistic ticket values, driven down the ticket brokers' business. If the Cubs are selling hot bleacher seats for a cost/demand-balanced $100/game, for instance, the brokers wouldn't be able to buy them for $100 and resell them for $110...they'd have to survive on marginal inefficacies. They'd have made more money, and had to face some public criticism, but it could have worked.

Instead, the Cubs went out of their way to create a system that utterly screws the fan so that few good tickets are available at face value. They then don't have to share the revenue they're making on the side, thus screwing the revenue sharing in the CBA they just voted for and creating a weird system so complicated they hope that the average fan would give up.

What's more, it's illegal. The Illinois Ticket Scalping Act bars exactly this sort of nonsense; if you put on the event, you can't sell the tickets for over face value. The Cubs are arguing the technicality, that because WFP is a separate company, they can't be held responsible. A lawsuit has now been certified as a class action. To quote the Sun Times again: "Judge Sophia Hall ruled that the following legal questions potentially involve more than just Peter Cavoto and Gerald Carr, who filed the suit: Whether the Cubs had scalped tickets, whether Premium was a qualified broker, whether the Cubs were involved in Premium's business practices and whether people who had bought tickets at Premium suffered financial damage."

The Cubs, in their arrogance, may become huge losers. They're going to lose this suit, and if enough people who bought tickets through their sham company join in, WFP and possibly the Tribune Company will be on the hook for huge costs, and then if Selig has a spine (wait, I'm getting an update on MLB's actions...no, he does not, it appears it was placed in a blind trust along with his majority ownership of the Brewers), he'll nail the Cubs for the ticket revenue they ran off with, plus it's within his powers to levy heavy fines (and what other team wouldn't support him this time?).

As a bonus, we're going to get to see the Cubs hugely embarrassed as the scope of their fraud comes out in court, and everyone gets to hear about their cheating ways. The damage of this blunder is going to be huge, and may cost the Cubs much of the political leverage they hoped to use for things like Wrigley Field improvements, more night games, and the hundred other tiny bits of legislative items they'd like to see happen.