The economics of this isn’t pretty for consumers so be warned. The ticket seller Stubhub has given itself a cash cushion from buyers who had events cancelled due to the COVID-19 pandemic. Originally (pre-pandemic) consumers who bought tickets on the platform were guaranteed a refund if the event was cancelled but less than the two weeks after the NBA and the NHL seasons were put on pause, Stubhub quietly amended its policy (on March 25th) to give consumers who purchased from them a voucher worth 120% instead of a refund. They are now the subject of a class action lawsuit, read more about that here. However, here’s why this their voucher idea is good for Stubhub and bad for consumers.
- The vouchers expire by December 2021, so if you had waited more than two years to see that band finally come to your city and they’re not coming back for a while, well you’ll have to choose an inferior substitute
- If everybody that had tickets to MLB, NBA, NHL, or concert over the course of multiple months now has vouchers they have to spend by a certain time it’s going to increase demand for tickets. An increase of demand is going to increase prices that sellers can charge (they are free to charge what they want). So I may have paid $100 for tickets to a hockey game in section 211, Row J before the pandemic, if I want those same tickets for the same game a year later I may find that the price is now $130 or more because there are a lot of people who have vouchers that they need to use.
- Stubhub charges a lot in service fees, for buyers they charge 10% the purchase price of the ticket and for sellers they charge 15% per ticket. So for a ticket that’s priced at $100 the seller will get $85 and the buyer pays $110. What is to stop Stubhub from raising their fees once sports resume? They were “ethical” enough to quietly change their refund policy, what if they raise the fees on customers to 15% to recoup the value of the vouchers? That means the ticket now costs $115 and coupled with increased demand that may further diminish the actual value of the ticket.
- Similar to gift cards, people often receive them and forget to use them, so there will undoubtedly be some people who simply forget to use their vouchers and it becomes a gift for Stubhub.