{"id":3770,"date":"2017-02-25T15:52:11","date_gmt":"2017-02-25T20:52:11","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-digit\/submission\/stubhub-the-best-platform-for-fans-to-find-fun\/"},"modified":"2017-02-26T16:39:36","modified_gmt":"2017-02-26T21:39:36","slug":"stubhub-the-best-platform-for-fans-to-find-fun","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-digit\/submission\/stubhub-the-best-platform-for-fans-to-find-fun\/","title":{"rendered":"StubHub: The Best Platform for Fans to Find Fun"},"content":{"rendered":"

eBay\u2019s StubHub is now the largest ticket marketplace in the world, processing $4.3 billion in gross transactions and $937 million in net transaction revenues in 2016[1]<\/span>. \u00a0After being acquired in 2007, StubHub has been the main driver of growth for eBay. StubHub\u2019s net transaction revenues grew 29% in 2016 as compared to essentially zero growth in net revenues for eBay\u2019s core marketplace business in the same year[2]. Despite fierce competition, the platform has enjoyed strong growth and is estimated to have over 50% market share of the fragmented ticket reselling market[3]<\/span>.<\/span><\/p>\n

The Business Model<\/b><\/p>\n

StubHub acts as a two sided marketplace connecting buyers and sellers of live event tickets. Typically, the tickets sold on StubHub are for events that are already sold out, making it primarily a platform for reselling. The size of the buyer\/seller network generates the bulk of the value on the platform. The value proposition for consumers is very strong; StubHub allows them convenient access to tickets that would otherwise be unavailable, and StubHub also removes much of the risk from the reselling transaction. StubHub helps vet seller and ticket quality, reducing the chances that consumers will buy a fraudulent ticket. If a ticket does end up being fraudulent or the ticket does not end up getting to the buyer for some reason, StubHub will either find the buyer a new ticket or refund the buyer in full (sometimes with additional compensation for the inconvenience). StubHub also creates value by handling the payment process, which typically can be an area where reselling transactions break down. Further, StubHub creates value for live event venues by allowing them to sell off large blocks of unsold tickets. <\/span><\/p>\n

The company captures value by charging a transaction fee. Typically, the company charges a 10% fee to buyers and a 15% fee to sellers, but increasingly, the company has been employing a dynamic fee model that is contingent on buyer demand. The company has impressively been increasing its blended commission rate over the past few years, growing it from 19% in 2014 to almost 22% in 2016[4]<\/span>. The blended commission rate is lower than 25% because of seller incentives given out to stimulate supply for high demand events[5]. <\/span><\/p>\n

Why StubHub is Winning<\/b><\/p>\n

StubHub has benefited from being a first mover in the ticket reselling platform space, which has allowed it to amass the largest number of users. Its user base has been its main competitive advantage to date, because the cross side network effects for the platform are very strong and multihoming levels are low. While multihoming is relatively easy for buyers, it\u2019s difficult for sellers, because they are obligated to fulfill the order if a buyer chooses to transact. Therefore, it\u2019s virtually impossible to list the same ticket on StubHub and a competing platform at the same time. Currently, StubHub competitors charge similar fees, so it makes most sense for sellers to list their tickets on the platform that offers the highest likelihood of sale – i.e. the platform with the most buyers. With a strong network effects and low levels of seller multihoming, product quality does not matter as much, so competitors can only compete on the basis of users. With a large lead over competitors in terms of number of users, it\u2019s hard to see how others can catch up. StubHub benefits from being a part of a large corporation with substantial cash on the balance sheet, so it will be difficult for competitors to acquire users by outspending StubHub. These dynamics point to a \u201cwinner take all\u201d platform market, and at this point StubHub seems best position to be the winner. <\/span><\/p>\n

Potential Risks <\/b><\/p>\n

Competitors have refrained from undercutting StubHub\u2019s fees to date, but if a well-funded competitor attempts does so in an aggressively, there may be an opportunity for that competitor to win. Alternatively, if a new competitor enters the market with different operating model that enables a materially lower cost structure, they may be able to offer lower commissions without needing as much capital to grow their user base and compete directly with StubHub. <\/span><\/p>\n

Another risk is litigation and regulation. Certain venues have refused to allow StubHub to resell tickets associated with them, and others have chosen to punish ticket sellers by stripping them of rights to buy tickets in the future. Substantial litigation has arisen from these issues. To date it has not been a large hindrance to the company’s growth, but it certainly is something to keep an eye on. <\/span><\/p>\n

Sources:<\/p>\n

    \n
  1. eBay 2016 Annual Report. <\/span><\/li>\n
  2. eBay 2016 Annual Report.<\/span><\/li>\n
  3. https:\/\/www.wsj.com\/articles\/stubhub-gets-out-of-all-in-pricing-1441065436<\/li>\n
  4. eBay 2016 Annual Report.<\/span><\/li>\n
  5. eBay 2016 Annual Report.<\/li>\n<\/ol>\n","protected":false},"excerpt":{"rendered":"

    With strong network effects and low levels of multihoming, StubHub has dominated the market because of its massive user base relative to competitors. <\/p>\n","protected":false},"author":564,"featured_media":3771,"comment_status":"open","ping_status":"closed","template":"","categories":[447,472],"class_list":["post-3770","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry","category-ebay","category-stubhub"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-digit\/assignment\/growing-businesses-in-the-age-of-platforms\/","yoast_head":"\nStubHub: The Best Platform for Fans to Find Fun - Digital Innovation and Transformation<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-digit\/submission\/stubhub-the-best-platform-for-fans-to-find-fun\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"StubHub: The Best Platform for Fans to Find Fun - 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