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Playing by New Rules
Photo by heyjoewhereyougoinwiththatguninyourhand.
Fed up with Ticketmaster’s ticket monopoly and service charges? So are AC/DC fans and many other concertgoers and sports lovers. But while the ticket giant maintains its prominence in the primary market, a secondary ticket arena is quickly developing online. Contrary to Ticketmaster’s facilitation of ticket sales between artists and the public, secondary market players expedite the re-sale of tickets that have already been purchased.
This derivative market is no amateur operation: expected profits in the space are so high that eBay recently bought StubHub.com for $310 million and Ticketmaster acquired TicketsNow for $265 million. By simply providing an online forum that connects potential buyers and sellers with one another, these sites have flourished and are expected to continue growing. Unlike the scalpers standing outside of stadiums, though, some of the sellers on these sites are people who might have accidentally bought too many tickets because their friends bailed, or they are ticket holders who can no longer attend their event. Unfortunately for purchasers, the sites require them to pay up for missing the original sale by charging service fees around 10% of the ticket price (sellers pay 15%).
Enter LiveStub. Co-founded by Torontonian Michael Hershfield and his Chicago business partner Levi Bergovoy, LiveStub is a secondary ticket start-up with a fresh vision for the online model. Most distinctively, LiveStub does not charge any commissions. Run out of a Soho Street office in Toronto, the firm has always strived to differentiate itself from its competitors. “I always thought,” says Hershfield in a phone interview, “there was something missing in the secondary market space.” Born and raised in Vancouver, Hershfield got frustrated whenever he tried to buy event tickets back home because “there was no way to connect with the seller other than Craigslist.” His frustration also stemmed from sellers insisting on contact via e-mail because he had trouble getting a hold of them just hours before events started.
Photo by chromewaves from the Torontoist Flickr Pool.
Although technology and other secondary ticket sites have developed since his time in Vancouver, Hershfield never forgot what he felt was missing from the market. Despite his law school degree and his Bay Street legal experience, he finally decided to give an entrepreneurship a shot in January of this year. Understanding he couldn’t do it alone, Hershfield found a partner in Bergovoy, whom he met through a cousin in New York.
To this day, both men live in different cities and communicate incessantly via e-mail, Skype, BlackBerry pinning, and text messages. Each co-founder assumes a different role within the firm: Hershfield’s legal background enables him to focus on the company’s legal and administrative affairs, while Bergovoy, a seasoned entrepreneur, focuses on strategy. To test the waters (of their relationship and the idea itself), the two men launched a sample site in January. To their surprise, the response was strongly positive. Taking the user feedback from this trial run into account, Hershfield, Bergovoy, and their out-sourced Romanian web developers eventually launched the final version of their site.
Unlike its competitors, LiveStub does not involve itself in the delivery of tickets. Once a buyer and seller find each other and they agree on a transaction, LiveStub sends a text message that contains a code to both parties that they must enter into the site. This allows the company to track the exchange and to hold the buyer and seller accountable. The site also includes a Google Maps application that allows buyers to enter their location and determine how far they are from sellers.
Because LiveStub doesn’t charge commission, the company has had to look beyond conventional revenue sources. In the words of Hershfield: “We believe the ticket shouldn’t be the be-all and end-all revenue generator.” So far, the co-presidents have identified three potential income streams. The first of these are power brokers. Although ordinary people do sell their tickets on the site, Hershfield doesn’t deny that LiveStub will target North America’s 4,500 ticket brokers who buy and sell en masse. Some of these brokers will likely become power sellers on LiveStub, and the company will charge these big names posting fees. LiveStub also intends to expand its advertising space as its popularity increases. Finally, Hershfield stresses the revenue potential stemming from relationships with music companies and buyers. He hopes that one day the site will be able to offer a buyer much more than just a ticket. As he sees it, “Why don’t you build a relationship with the buyer and sell a DVD of the concert when it comes out?”
From week one, LiveStub hit the ground running. This is in large part because of its seed capital from Morten Lund, one of the first investors in Skype. With Lund’s name came blog chatter, and from blog chatter came newspaper coverage. As the ball continues to roll forward, LiveStub appears well-positioned to claim a substantial portion of the secondary ticket market, and it is getting mention from big names like Sports Illustrated. Sadly, a tanking economy may limit the demand for pricey entertainment tickets at this precise moment, when LiveStub needs to establish its revenue streams.
On the bright side, falling incomes may not mean there’s no need for a secondary market—ticket prices may simply decrease to meet consumer demand. Luckily for LiveStub, this won’t hurt its commission-adverse model. Further, the site’s intricate differences from its competitors and the company’s position as a first mover in the space will also help it to weather a near-term storm. Because of this, the Toronto start-up might just become a North American powerhouse; at the very least, it’s certainly poised with potential.