A very interesting lawsuit, from a sport finance perspective, was filed last week in Utah. A group of VIP Jazz ticket holders, called “the 100 Club” are suing the team for $19 million because of a change in the team’s policy about the transfer of season tickets. The 100 Club has between 50 and 60 members who own the rights to tickets in the first five rows in the arena. It was formed in the late 1980s to raise capital for the team when it needed money. At that time, the members paid a one time membership fee based on location and received the rights to their seats, along with the right to sell or bequeath the seat after paying the team a $1,000 fee. In effect, the 100 Club agreement converted a selected number of seats in the arena into assets under the control of the seat owner, not the team. It’s basically a PSL. 100 Club members are also able to buy other season tickets at a 20% discount. Presumably, these 100 Club seats appreciated significantly in value, but I have not seen any information about how valuable – the market for these seats may be quite thin.
Until recently, 100 Club seats were the only seats in the arena with this sort of property rights structure. In January, the team started something called the “Transfer Marketplace” program that allowed other season ticket holders to sell the rights to their seats, as long as the team got 30% of the sale price. The emergence of this substitute for Club 100 seats led to a decline in the value of Club 100 seats by 90%, according to the suit. That amounts to $16 million in losses to Club 100 members, and led to the lawsuit.
The economics of this case are quite interesting. The existence of these Club 100 seats represents a significant external financial benefit that the team would clearly like to capture. I can’t imagine what was going on in the late 1980s that led the Jazz to form the 100 Club in the first place. If they needed more revenues, why not just raise ticket prices? Or take out a loan? The creation of the new secondary market for season tickets, the “Transfer Marketplace” program, implies significant excess demand for season tickets to Jazz games, which implies that the team is not correctly pricing season tickets. In addition, the team appears to have alienated their loyal VIP ticket holders in the process.
Details about the lawsuit can be found in this article from the Salt Lake Tribune.