2 ticket brokers buy tents at Derby
April 21, 2007 by Andrew Wolfson and Jason Riley Churchill punishes scalpers and defends tour packages
Churchill Downs is doing business this year with two brokers selling more than 1,000 Kentucky Derby tickets online at huge markups, while at the same time punishing customers caught scalping.
One of the brokers Churchill is working with is TicketCity, which the track dropped last year as a partner in Derby package tour deals after learning it was scalping.
Churchill Downs has sold corporate hospitality tents to TicketCity, which this week was offering 764 tickets online for the Derby and Kentucky Oaks, as well as to Innova Sports Tours, which had 306 tickets for sale.
Those tickets ranged from $195 for five "VIP" parking spots to $35,035 for a third-floor clubhouse box for both race days -- 12 times face value.
Ticket scalping is illegal in Kentucky but permitted in 39 states, and thousands of brokers legally scalp tickets to sporting events, concerts and shows, including the Derby and Oaks.
Some former ticketholders say it is hypocritical for the track to invite ticket-scalping companies to the race while stripping patrons of the right to buy future tickets if they are caught selling as few as one or two tickets over face value.
"It's not fair," said Jerry Kelsey of Louisville, who after 15 years lost his seats when his tickets ended up with a scalper. "I have a bitter taste in my mouth about Churchill Downs, that's for sure."
Steve Sexton, Churchill Downs president, said it sold tents, which it calls chalets, in its "Marquis Village" to TicketCity and Innova, as well as other sports tourism companies, on the condition that they package those tickets with hotel accommodations.
He said the companies might be selling tickets in Marquis Village and elsewhere around the track that they obtained from other sources.
Sexton said some people might think it is hypocritical for the track to do business with companies that sell tickets above face value, but he said the tourism package deals are "very important to the Derby" because half of the fans come from out of town.
Churchill Downs has 57 chalets, which it sells to corporations for $40,000. They accommodate up to 75 people, who have a seat and access to food and beverages. Most invite clients who attend for free.
Randy Cohen, the owner of TicketCity, of Austin, Texas, said any tickets it is selling in Marquis Village are from other sources: "We are following to a 'T' our deal with Churchill Downs."
Innova of Raleigh, N.C., did not respond to a request for comment.
This week, TicketCity was offering 23 standalone tickets to Marquis Village and Innova had 45. TicketCity, one of the nation's largest brokers, says on its Web site that all its tickets are sold above face value because it specializes in finding "hard to obtain tickets."
Innova's Derby offerings this week included 24 tickets in the second-floor grandstand clubhouse priced at $888 apiece -- more than four times their face price.
'The Gumer code'
Following through on the threat it made last year, Churchill Downs has banned sales to at least some customers whose tickets ended up in the hands of Louisville jeweler Bruce Gumer.
He was caught by Louisville Metro Police in April 2006 with 419 Derby and Oaks tickets and eventually pleaded guilty to scalping 84.
Gumer, who paid $10,000 in fines and forfeitures, declined to comment this week.
Kelsey said that when he called the track to ask why he hadn't received his annual invoice, "They said, 'Your name is on the Gumer code.' "
Kelsey said he gave away his tickets last year and has no idea how they ended up with Gumer.
Julie Koenig Loignon, a Churchill spokeswoman, confirmed that the track is declining to sell tickets this year to some of Gumer's suppliers, although she said it considered them case by case.
The scalping rules
Churchill Downs through the years has offered various reasons for its anti-scalping policy, but Loignon said this week that one is to keep out-of-town ticket buyers from being gouged.
"Somebody who pays four or five times the face value to a broker may be unhappy when they get here and don't like their seat," she said. "It is hard to make them happy when we weren't the ones who charged them that outrageous price."
Loignon said the track has no financial motives for opposing scalping.
"Our position is that if we invite you to buy Derby tickets, we want you to use them," she said.
But former employees say that Churchill Downs executives don't like to see others profit on their product and would prefer that companies get tickets by paying the track to sponsor races rather than turning to the black market.
Sexton said yesterday that the track wants to control who gets tickets to make sure that regular trackgoers -- like a "Kentucky Derby horse owner with a table on Millionaire's Row" -- don't have their day spoiled by people who bought scalped tickets at a nearby table.
Economist Craig Depkin of the University of Texas at Arlington, who has written extensively about scalping, said that explanation makes no sense.
"They say they want to keep the riffraff away from the pretty people," Depkin said, "but the riffraff are priced out."
Sexton, however, said that patrons who are invited by the track are more accountable because they could lose their tickets for next year if they misbehave.
In contrast with Churchill Downs, the Ryder Cup, the international golf tournament to be played in Louisville next year, sells hospitality tents only to corporations that will use them, not to sports-packaging companies or ticket brokers, director Tara Guenthner said.
"We want to have total control of our product," she said.
A right to resell tickets?
Jason Berger, the immediate past president of the National Association of Ticket Brokers, which has 200 members, said Churchill Downs' anti-scalping policy doesn't stop tickets from being resold, it just drives up prices.
"People who are worried about the risk of losing their tickets are just going to make them sell them for a higher price," said Berger, a ticket broker from Greenwich, Conn.
Sean Pate, director of public relations for StubHub, a Web site that matches buyers with sellers, said owners of tickets should have the right to sell them "to whomever they wish, at whatever price," just like "owners of a house, a car or a baseball card."
Pate said that StubHub, a San Francisco company recently acquired by eBay Inc., had 850 Derby tickets for sale this week vs. about 1,200 at the same time last year, and the average price had increased to $764 from $653.
He said the differences may be explained by publicity over the Gumer incident, as well as ticket-licensing fees that Churchill Downs began requiring this year for 790 additional Derby and Oaks tickets.
The licenses cost $850 to $60,000 and give buyers the right to buy tickets for a set number of years.
Some resellers, like DerbyBox.com, which operates out of Jeffersonville, Ind., say they perform a public service by introducing "the sport to as many potential new fans as possible to help grow our sport."
'They make the rules'
Courier-Journal advertising executive Bruce Thomas, who said he sold two tickets last year to Gumer at face value, said he didn't get an invitation to buy tickets for the first time in 20 years. He said he has no hard feelings.
"They make the rules, and you have the choice whether to abide by them or not," he said.
John Shanchuk, owner of John E's Restaurant & Lounge, who is listed in court records as providing Gumer with 30 tickets, said he wasn't allowed to buy any this year, but he declined to elaborate.
Joseph E. Borsch, an insurance agency owner, said the track allowed him to buy tickets again after he explained that he gave his tickets last year to a client because he was too sick to use them, and the client sold them to Gumer.
Michigan resident Jayne Wagner, who lost her tickets for selling some on eBay last year, said she is "sick" over the track not letting her buy again.
"If someone gave us $5,000, we would buy tickets from one of those broker companies just to go," she said. "We just love the Derby so much. I'm drinking out of a Derby cup right now."
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