NCAA deals into reselling

The allure of March Madness guarantees the NCAA will receive at least $3.8 billion from its CBS deal over the next five years. But the organization isn’t about to leave any spare change on the men’s basketball tournament court.

While maintaining a firm stance against unregulated scalping, the NCAA has struck deals with online ticket resellers in a bid to share in the wealth being created as Final Four tickets change hands in the secondary market.

Fans now can connect with resellers on an NCAA-approved website and book upscale NCAA travel packages that include Final Four tickets, hotel rooms and admission to exclusive parties. The more adventurous can even participate in a Wall Street-style market that deals in options for hard-to-get tickets.

The NCAA, which closed its last fiscal year with $327 million in net assets, has not disclosed the value of these deals. But its increasingly sophisticated ticketing machinery has sparked concern among some observers that the leading nonprofit governing body of college sports has, in effect, turned pro.

“When you go to these [online ticketing] websites, you see the professional sports listed right next to college sports,” said Ellen Staurowsky, a professor who teaches sports management classes at Ithaca College in New York. “The NCAA says it adheres strongly to its amateur ideal, but it seems to be operating precisely, exactly the same way that the major professional sports enterprises are.”

NCAA officials say the push into the ticket resale market makes financial sense for student athletes and fans.

“It’s the nature of the association, in that we are, in essence, a pass-through to our membership,” said Greg Shaheen, the NCAA’s senior vice president for basketball and business strategies. About 94% of the NCAA’s overall revenue flows through to member institutions and their 380,000 student athletes, Shaheen added.

The NCAA also hopes to give fans who otherwise would risk being taken by shady operators “the confidence of knowing that the tickets are legitimate and any revenue derived from the programs will directly benefit NCAA member institutions,” Shaheen said.

One sign that the NCAA is serious about controlling unauthorized ticket resales is its decision to cut the annual allotment to the National Assn. of Basketball Coaches. The group has told members it received 100 fewer Final Four ticket strips than it did a few years ago because of NCAA sanctions against coaches whose tickets ended up in scalpers’ hands. (Each strip consists of a ticket to both semifinals and the championship game.)

The average fan’s only shot at buying a ticket directly from the NCAA at face value came last summer, when 4,600 strips were distributed by lottery.

By charging a handling fee for every lottery applicant -- including the vast majority who go away empty-handed -- and earning interest on deposits, the NCAA covers its handling costs; it also retains any surplus funds.

The NCAA no longer says how many fans enter the lottery, but in 1994 more than 267,000 sought tickets. Each entry requires a down payment and $5 service fee.

The NCAA typically holds the money for at least two months before mailing out tickets and refunds. If the number of applications grew modestly since 1994 to, say, 300,000, the NCAA would collect $1.5 million in service fees. The NCAA also would generate $42 million in down payments that -- if parked for 45 days in an institutional money market fund or a certificate of deposit with a 3% return -- could generate about $155,000.

The NCAA began accepting applications Sunday for next year’s Final Four. The service fee has been bumped to $6, the cheapest ticket strip will cost $150 and the venue, Detroit’s Ford Field, can hold more than 65,000 fans.

NCAA Final Four tickets remain something of a bargain in a sporting world, where a 2008 Super Bowl ticket’s face value topped out at $900. The face value of 44,500 Final Four ticket strips for next month’s games in San Antonio ranges from $140 for a “distant-view” seat to $220 courtside.

At the end of last week, Final Four strips were being resold online for $2,500 or more. Others were offered in travel packages for as much as $4,495 per person.

The NCAA signed a deal months before the 2007 Final Four making Los Angeles-based RazorGator its official online ticket reseller, and a related entity, PrimeSport, its official travel agency.

Though the NCAA doesn’t sell tickets through RazorGator’s online resale market, it encourages fans with extra tickets to use RazorGator rather than an unlicensed website or real-world scalper. RazorGator guarantees that tickets bought through its website are authentic and promises to substitute equal or better tickets if a deal falls through.

The NCAA declined to discuss financial terms of the deals, but competitors say RazorGator probably paid upfront marketing fees to the NCAA and shares a percentage of fees levied on resold tickets or travel package customers.

RazorGator’s fees can add up to 22% to the price of a ticket transaction. So if the Final Four ticket strip advertised on the company’s website last week sells for the requested $2,650, RazorGator would generate fees of up to $583 -- the NCAA presumably receiving some of that money.

PrimeSport doesn’t break out the NCAA’s fees for travel packages, such as the two-person deal that included game tickets, four nights at the Wyndham St. Anthony and entry to exclusive parties for $6,970. (Fans who buy a package can also upgrade to VIP courtside seats for an additional $2,650 each.)

The NCAA hopes to work similar magic through a separate deal with FirstDIBZ.com, which offers fans the opportunity to buy and sell options for game tickets and even $500-a-night rooms at sold-out San Antonio hotels.

A bullish Bruins fan, for example, can bid for the right to purchase a Final Four ticket strip. As of Monday, FirstDIBZ.com showed UCLA ticket options offered for $348 to $1,500 -- though no one was offering more than $225 to buy one.

The danger of holding a UCLA option for a game ticket is that it becomes worthless if UCLA fails to advance to the Final Four. FirstDIBZ and the NCAA share in fees that are equal to 17% of a transaction’s value.

To some observers, the options market seems closely tied to the odds as calculated by a Las Vegas sports book.

“No question it’s the odds, and there would be a big problem if it weren’t the case,” said Alan B. Krueger, an economics and public affairs professor at Princeton who has studied ticket-futures markets. “The odds explain virtually all of the variability in [options] pricing.”

The NCAA’s Shaheen maintains that the price of options contracts is driven solely by supply and demand. Still, the NCAA has slapped strict limits on athletes, employees and even college chancellors and presidents. Individuals with an NCAA affiliation are allowed to purchase options -- but may not sell or exchange them at a higher price.

In an e-mail, an NCAA spokesman described that prohibition as being “consistent with NCAA sports wagering legislation.”

Krueger credits the NCAA with embracing a new ticketing idea that could give some fans access to seats they might not otherwise be able to afford.

But he doesn’t think NCAA athletes should be playing this particular game: “I don’t see how the NCAA could permit it because a game is something an athlete can have an impact on, which could be seen as insider trading.”

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greg.johnson@latimes.com