THE BIZ: THE PSL "PROBLEM"

by Peter Keating

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You can have this. For years.

You know what's really grinding fans' gears these days? Personal seat licenses, or PSLs. A PSL is the right to buy a season ticket, as opposed to a ticket itself; a team that sells PSLs will charge you one fee for a long-term license to your seat, then another fee to actually plant your butt in that seat. Recently, the New York Giants announced that when the new stadium they are building with the Jets opens in 2010, they will charge season-ticket buyers from $1,000 to $20,000 for PSLs on top of ticket prices of $85 to $700 per game. On cue, fans, columnists and radio hosts erupted in protest. Anthony Chiappone, a Democratic state assemblyman from Hudson, N.J., has even proposed banning PSLs throughout New Jersey.

But are PSL's really that evil?

There are a few good reasons PSL's exist. Many teams, particularly in the NFL, sell tickets for much less than they could command if they let supply meet demand. We know this because when tickets get re-sold or scalped, they often sell at considerably higher prices. (When was the last time you paid face value for a scalped football ticket?) PSLs are basically just the clubs' attempt to capture some portion of that secondary market.

Suppose you're paying $100 per game for an NFL team's season tickets. You will probably attend some games and re-sell other tickets to help defray your costs. If you're forced to pay $8,000 for that team's PSL and then you keep the license for 20 years, essentially you will be paying $400 per year, or $50 a game, of your scalping proceeds back to the team. Indeed, if teams really wanted to maximize their revenues, they would auction off PSLs, but as far as The Biz can tell, only a bankruptcy court has ever tried that.

ANOTHER MAJOR REASON TO EMBRACE THE PSL? FRANCHISES THAT RELY ON THEIR FANS FOR MONEY HAVE LESS NEED TO MILK THE GENERAL PUBLIC FOR NEW STADIUMS.

Instead of creating whole new markets for seat licenses (and the resulting revenue sources), teams could just jack up ticket prices for individual games. But keeping down the face value of tickets has a number of upsides. It makes it easier to funnel tickets to local pols, since many states limit or report gifts above a certain threshold. In Pennsylvania, for instance, lobbyists have to disclose gifts that exceed $250 a year. That makes it convenient to give tickets with a face value of $100 or $200 to state and municipal officials, even if they could sell for $500 or $1,000 on the open market. Holding the line on face value also helps teams in value-based rankings, such as The Mag's own Ultimate Standings, which uses average ticket prices to calculate how much bang fans get for their buck.

As a fan, there are good reasons to want your favorite team to snag fuller value for its tickets via PSLs instead of allowing scalpers to keep all the money from re-sales. For one thing, clubs can use extra revenues to invest in better players and facilities; scalpers can't. The Giants, for example, plan to raise $371 million through their PSLs—dollars that will help add club seats and luxury boxes at the new stadium, which will in turn generate revenues that will help the team keep pace with the Cowboys and Redskins. Another, major reason to embrace the PSL? Franchises that rely on their fans for money have less need to milk the general public for new stadiums. The San Francisco Giants built AT&T Park and the St. Louis Cardinals constructed Busch Stadium without taxpayer grants in part by relying on PSLs. Meanwhile, the Yankees and Mets, with no PSLs, are relying on $1.6 billion in bonds, some of which are tax exempt, to build their new ballparks.

So you can complain about the higher prices you get with PSLs, or about how your club doesn't spend enough on free agents, or about how sports teams get all kinds of ridiculous tax breaks. Just don't complain about all three.