The 2015 Super Bowl 49 matched the Seattle Seahawks and New England Patriots. Ray and Traci planned on spending Super Bowl week with Ray's parents in Rancho Mirage, California and they thought about the possibility about attending the game 250 miles away in Phoenix, Arizona.
Super Bowl tickets are extremely difficult and expensive to obtain - the NFL distributes the tickets just prior to the game - about 1/3 to the NFL, 20% to each participating team, 10% to the home city and the rest to the other NFL teams. Other than the companies with exclusive NFL contracts, travel companies and ticket brokers have to resort to pretty shady tactics in order to obtain their inventory - guys in trench coats hanging out near the pickup windows for super bowl tickets, cold calling coaches and NFL employees, etc... The very limited time between release of tickets and the actual game means travel agents and ticket brokers including extremely reputable companies have to sell tickets in advance without actually having them in hand.
Ludus Travel, a company with a 12 year track record selling "bucket" list travel packages to such marquee events as Super Bowls, the Masters Golf Tournament, Olympic Games and the World Cup, brought a new wrinkle into the market - selling future options on tickets to select games such as the Super Bowl and College Football Championship Game. As noted in the New York Times (2013) - "The way it works is that fans buy options for a specific team. When a team is knocked from contention for the Super Bowl, the options associated with that team expire and the option holders lose whatever they paid. The fans who hold options for the two teams that advance to the Super Bowl can buy a ticket at or below face value, which is far less than what they would pay on a secondary market like StubHub. The tickets can be resold at a profit, too. The options are priced based on the likelihood of a team’s advancing to the Super Bowl. Options for weak teams like the Jaguars went on sale at $20, while options for strong teams like the Broncos were $100. As with many markets, prices for the options rise and fall as fans bid for them, a proxy for their expectations of the team’s success. Options for the Broncos are now selling for more than $430, while those for the Jaguars remain at $20."
While Seahawks, as defending Super Bowl champions, had a high initial price for Super Bowl ticket options, their 3-3 start to the season brought the price down. Ray decided to purchase 2 options at $190 each so they could attend the Super Bowl should the Seahawks qualify. He didn't even tell Traci that he bought the options initially because it would seem so foolish given the lackluster performance of a team that just traded away their star wide receiver, Percy Harvin. In any case, the Seahawks turned their season around, qualified as the #1 NFC seed, and had a come from behind victory against the Green Bay Packers that was nothing short of miraculous in the NFC championship game.
Ray was notified by Ludus that the option was exercised and his credit card was charged the $1600 face value for 2 upper deck Super Bowl tickets. Ray and Traci eagerly waited to travel on Tuesday of Super Bowl week to Rancho Mirage, California for a week of golf and football. The first sign of trouble was the astronomical increase in ticket prices. From Forbes Magazine:
"The ticket market tends to behave in predictable ways, which means that waiting is usually the best way to get a deal. This year, however, the Super Bowl ticket market is completely off the charts, and anything but predictable. One big reason for that is the speculative selling that occurred in week one, when brokers were selling tickets for $1,900 that they didn’t own. Instead these sellers were betting they could get a ticket for less than $1,900, and pocket the difference. Last year, the cheapest ticket on gameday was around $1,500. The brokers who sold those $1,900 tickets this year were figuring the market would end up in about the same place. The week of work would earn them a nifty 20% return. Over the last five years, a spec seller who did this 10 times would earn $4,000 for their troubles. This year, those same 10 sales are sitting at a $60,000 loss. That’s enough to send some ‘specs’ out of the ticket business forever. It also raises the possibility that a spec or two that lost their shirts just skip town, like the old west, adding even more desperate buyers to the last-minute local market."
Ray's $990 investment in a Super Bowl ticket became a little too good to be true as the price of the cheapest seats rose to over $10,000 on the open market. Darren Rovelle wrote for ESPN about the emerging "perfect storm" in ticket sales: "So on Sunday, brokers who still hadn't purchased their tickets, started buying tickets at more than $5,000 apiece, losing as much as $3,000 a seat just to save the integrity of their businesses, according to those on the buying and selling side, who spoke anonymously. A company paid $200,000 for a block of 40 tickets on the Patriots' side by the 30-yard line last Thursday. The company was offered $600,000 to sell those tickets Thursday, according to a source with knowledge of the offer. The alleged collusion between brokers also squeezed the websites that make up the ticket marketplace. Sites like StubHub guarantee that tickets sold will be delivered, so the company started buying tickets to protect itself from people who sold tickets but didn't appear to have the ability to actually deliver them, sources told ESPN."
Ray and Traci got their bad news from Brian Peters, CEO of Ludus Tours, on Thursday afternoon two days before their planned drive to Phoenix. "I have bad news to report from Scottsdale. I do not believe that my suppliers are delivering tickets to me. Certainly, I do not have them in hand as expected today. I am sincerely sorry for this situation. For what it is worth, I will not have a functioning business once the dust settles from this event. I assure you that I am not profiting from this circumstance, and that I will do everything in my power to resolve it for you."
The crushing news really put a damper on an otherwise fun week in Southern California. The whole concept of selling, promising, giving Super Bowl tickets that were not in hand resulted in a market collapse. Ludus, who promised tickets both to option holders as well as regular tour customers couldn't come up with them as their original suppliers abandoned them. Even if they had millions of dollars to lose, there were not enough tickets for sale! News reports surfaced of other fans being similarly denied tickets despite traveling to Arizona. Fans from both Seattle and New England shared in the misery, often having spent thousands of dollars on premium air tickets and paying 5-10 times normal hotel rates in Phoenix for Super Bowl weekend.
This whole Super Bowl disaster was similar to the credit default option perfect storm during the 2007 housing collapse with companies like AIG owing billions of dollars on bad insurance bets and not having the cash to pay them. Ultimately, the US government stepped in to make good on the bets to prevent a possible economic collapse. Unfortunately, there was no bailout on the way to the fans like Ray and Traci who were denied the tickets they purchased. ESPN reporter Darren Rovelle tweeted, "Some good will come of this Super Bowl debacle. The practice of short selling tickets might be made illegal."
What caused this "Black Swan" event resulting in astronomical Super Bowl prices - you could not find a pair of tickets for less than $19,000 on Stubhub or the NFL Ticket Exchange (the only two sites who guaranteed delivery) on the day prior to the game? Many theories abound including the large number of snowbirds (Seattle and Boston residents who live in the Phoenix area during the winter). Other more sinister theories also have been proposed - from Money Magazine, "In its Thursday release about skyrocketing prices, StubHub accused a handful of unnamed large ticket sellers in control of most of the Super Bowl ticket inventory of colluding with each other and manipulating the marketplace. “A consolidation of supply has allowed sellers to manipulate the marketplace and made it near impossible for any last minute fans to attend the game,” StubHub global head of communications Glenn Lehrman said in the release."
Ludus Tours appears to have operated successfully for over a decade but it is unlikely anyone would do business with them in the future since all travel agencies, especially high end ones, operate only because of their reputation. It is unfortunate for their employees that the 2015 perfect storm in Super Bowl tickets will likely be the final event in their history. Certainly, their customers suffered as well with dashed hopes of following their team and wasted travel costs. Hopefully, measures will be taken to ensure this fiasco is never repeated.
Update 2/14/2015 - Ray received the money paid to Ludus for the Super Bowl debacle +20%. Ludus has changed its name to Bucket List Events (http://www.mybucketlistevents.com). And of course, the Seahawks lost the Superbowl with a turnover on the Patriot's 1 yard line with 30 seconds in the game on a very "interesting" play call.
