I disagree with you, at least in part. I think their average 4% fee is not nearly as bad as Ticketmaster, once you understand where the money goes.

It breaks down like this: Visa/MC charge the retailer about a 2.5% discount rate, so of the money that you pay Active.com, 2.5% goes right to Visa/MC. The rest covers Active.com's overhead and profit requirements. So you pay Active.com $416, and $400 goes to IMNA, $10 goes to Visa/MC, and only $6 goes to Active.com.

I believe that the reason Active.com accepts neither Discover nor AmEx is that they both charge ridiculous discount fees(also called transaction fees): 4% in Discover's case, I think AmEx's fee is around the same, but it was once 6%, which is why at one point in the 90's many retailers stopped accepting it.

If you think about it in that context, you soon realize that the people who should be lynched(other than Ticketmaster, who should be dragged behind a truck for a while) are the credit/debit card people, without whom you would pay 2.5% less for everything you buy.

This is how the credit card companies make so much money. The interest you pay on your credit card is icing on the cake for them. It's nice of you to pay it, but that's not their main revenue source.

Finally, then I'll turn rant mode off, if you have a Discover Card, they give you 0.5-1% cash back on all your purchases. If you don't carry a balance, where does that come from? Discount fees. Apparently, they are making so much money on their discount fees that they can give some of it to their dupes(us).

You may have read about this, but Visa/MC was the subject of a suit brought by retailers earlier this year claiming that they collected/charged $800,000,000 too much in discount fees over a 3-5 year period(I don't recall which). That money came straight out of our pockets. That suit was settled in favor of the retailers.

So the way I see it, Active.com is providing a necessary service to both the RD's and the racers, and charging less than the other two parties involved in the transaction.

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"Active.com is providing a necessary service to both the RD's and the racers:

good analysis, and i agree, but...

...there's a flip side to this. RDs used to pay a lot of money for the generation and mailing of their paper entry forms, and for the data entry and other costs associated with doing their own registration by hand and by snail mail.

now they not only don't have to do this, they can wipe the cost of doing pre-race registration entirely off their books, and blame active for this expense. i'd like it better of RDs did what every other business does: just absorb the cost into the entry fee.

as slowtwitch readers know, i'm a big fan of empowering race directors. part of that, though, is for them to become grown ups and run their businesses like other grown ups do. it's one thing to say, "you can enter via paper and pay X, or enter via active and play X+ the transaction fee." but most just don't even have paper entries. so just have the cost be X and that includes the transaction fees.

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Dan Empfield
aka Slowman

Everybody wants the convenience of MAC machines, credit cards, and on-line purchases and/or registration but nobody wants to pay for that convenience. I have no problem paying these extra fees. It allows me not to carry cash, to get cash any time I need it, and to shop and register for races in living room. All those conveniences cost someone money and it's only right that it's passed on to the consumer using those conveniences.

Not to be too picky here, but...

In a former life I worked for one of the transaction companies, and this isn't how credit card companies make their money. Visa/MC are unrelated to the credit card issuing banks (MBNA, Citibank, etc.). Visa/MC collect most, if not all, of the transaction fee (the 2.5% surcharge that retailers pay). The card issuing banks make most, if not all, of their money from interest fees and service charges. 18% APR is how these guys are making the boat payments.

Also, I disagree that things would be 2.5% cheaper if there wasn't a credit transaction fee. Why do I pay the same amount in stores that don't take credit? Retailers are willing to suck up a 2.5% cut in their margin to increase traffic and make things convenient for their customers.

dts - I'm with you - because of the high cost of most triathlons - I'm always looking for discounts (tri clubs sometimes have slight discounts) and ways to cut the registration costs down a little (such as early registration). Active. com is sure convenient - but on a high priced race, the convenience of using Active. com is significant! I understand that Visa, etc. charge for their service and someone has to pay for it.

When possible, I have switched to filling out the registration form by hand and using slow mail (to save a few bucks) - I sure hope race directors don't eliminate that or some option.

What about an option of filling out the registration form on the computer, nothing is confirmed (via e-mail) until the race director receives a check/money through slow mail? Those who a willing to pay for the option of credit card payment - go for it.

Tom, Dan is spot on on this one. This convenience, as Dan has pointed out, is a new, modern way of reducing overhead. It saves money, that's why retailers use it. Don't be fooled, they hate paper money now more that you do.

This has ALWAYS been a big sore spot with me when it comes to the use of technology and not passing the savings on to the consumer. I'm now a computer systems analyst, but started as a printer. Many printing costs have been reduced by technology, but not passed on to the consumer. Technology grows by leaps and bounds while retailers are forced to play catch-up because those at the helm don't fully understand the technology and don't listen to those who do. Even software companies haven't grasped the concept. Here's an example: when you buy software, it generally comes shrink-wrapped in a bunch of expensive printed cardboard, a 10-cent CD with the data and a expensive printed user manual, all for the user friendly price of, say, $600+ for Photoshop. Now, remove the cost of printing the expensive cardboard coverings and converting the user manual to a PDF file, place it on the original 10-cent CD or another 10-cent CD if there's not enough room and let the end user print all or part of the manual at will using their own supplies. All you get is a shrink wrapped CD or two and pass the savings on to the consumer. Photoshop could now cost far less than $600 and Adobe could still profit. Have they done that yet? No, but some smaller companies have.

Another case in point, the Recording Industry Artists of America (RIAA) has spent MILLIONS going after people sharing music files for free rather that spending these MILLIONS on research and development of new technology. They should have bought Napster and put Shawn Fanning on the payroll to convert the system into a viable, money making system. These people have the audacity to blame people for being smarter than they are. What a total joke. No wonder these people are losing money hand over fist. They're blockheads stuck in the Stone Age. Case in point - Apple Computer put together the first online pay-for-music system that was available for just 3% of the computer market (Macintosh) and in it's first month sold 3 million songs at .99-cents each.

Now, I can see Dan's point.

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Sean

[snip]

btw, this is apropos of nothing, but, did you know that active was, to the best of my knowledge, primarily owned by ticketmaster?

one can see why. it's a good business model. the thing is, i don't think this model has been used to its greatest effectiveness. two examples, and these are two ideas i had that i passed on to active within the past several months (i have no idea whether they'll do anything with them).

1. online dating. there are a spitload of people who're signed up to match.com or kiss.com and these various online dating services. literally millions of people. i believe that some entity connected to active is actually the engine for match.com, so the technology's there. imagine an online dating service exclusively for people who are into endurance sports? lost of revenue dollars there.

2. political contributions. howard dean is raising gillions, just off the internet. each politician is like a "race." he's got, say, 100, or 500, or 5000, or 25,000, people out there wanting to pay him money. active has the engine already set up for that. now, just imagine all the city council races, judgeships, county assessor, school board, everything. and each person running is able to generate the same sort of contribution turnout as an event promoter. thousands, tens of thousands, of political aspirants, all with an online site that they can tell their constituents to go to in order to contribute money. this could be potentially as big as the footrace registration market. maybe bigger.

you'd start with either the republican or the democratic national committee. they'd do your legwork for you. you'd say, "we'll provide our technology exclusively for the democratic party for two political seasons, then we open it up to everyone. but for us to be exclusive to you, we need your mailing list of every democratic candidate in every race in every city, county and state in the U.S., so that we can pitch them on this idea."

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Dan Empfield
aka Slowman

Good clarification. Thanks. It's been a few years since I was in retail, so some detail fades, but I should not have referred to Visa/MC as credit card companies directly, but rather as credit card transaction processing companies.

Now, responding to various other responses...

Dan:

Those ideas are just scary(smart). I'm glad you don't work for ticketmaster, or I'd be paying fees to be married to my wife. ;)

Let's see:

$200 monthly marriage fee
$100 monthly happiness fee(assumed)
$50 fee processing fee
....

Dan again:

The complexities of the whole process make it hard to watch what both hands are doing, but there is definitely something fishy going on. The RD's should have all costs included in the fee, but they don't. However, the debate over just how badly, rather than if, IMNA is gouging customers will go on forever. Meanwhile, the races continue selling out.

mudphud:

As to whether companies do charge more on account of credit card transactions, they do. They increase the price for everybody, and if you pay cash, the margin is slightly higher on that sale. The fees of credit card transactions are built into the cost of doing business, and are therefore spread across all products.

You may recall some years ago when gas stations charged a higher price for credit cards than for cash. Now they have signs that say "Cash or credit: Same price". They realized that they can charge everybody the same high price, and save the trouble of charging cash customers less.

The evidence that I can offer is my own experience. I saw prices go up at a couple of companies for several reasons, but among them were transaction processing costs and credit card chargeback costs, when the credit card processing companies would not honor sales alleged to be fraudulent. The only time I saw prices come down was when competitors were lowering prices.

I think one thing we can all probably agree on is that all of these groups are operating on the assumption that the average user of their services has no idea how the machine works, and will therefore pay whatever is asked. I wouldn't have considered Dan's point had he not made it: That the RD is already charging me to sign up, which makes active.com's fees redundant.

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I absolutely agree on both points. Its always amazing to see the evening news clips about how people don't know the difference between credit/debit/charge cards. And, one year ago when I was signing up for IMWI, I flinched when I saw the $15 processing fee on top of a $375 race fee. Had the race fee been $390 I wouldn't have been fazed (well, not any more than I was at seeing $375...)

Hey Dan,

Here's an idea...make PDF registration forms of known races, post them in a section on your site...wallah...more web traffic, happy people paying less. In fact, if you do this, I would volunteer and make you the PDfs.

-Trisha
TCSD member

My local RD does this. You can either use Active.com or print and send in the pdf application. But their races never seem to sell out, even though the overall quality of their races is good, and they are the biggest RD in Massachusetts.

The problem comes into play with the IM races, and races like Escape, where by the time your envelope hits the bottom of the mailbox, the race has sold out through active.com.

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I'm here in RI and probably use the same RD. It is nice to be able to print the form or register online, and they always have registration forms at the races for every event for the next couple months so you can sign up right on the spot for those races too. I think that people just have to realize that the race directors want to put on a good race, and the credit card companies want to make some money, and Active wants to make it easier for you and make some money as well. Nobody is going to provide a service without making some profit. If the RD absorbed the cost, they would have to make it up somewhere. Volunteers, t-shirts, aid stations, something. Fortunately for us up here, if you plan your season, you don't have to sign up for every local race online, and you only have to use Active for the big races.

Just had a coupla random thoughts.. In response to Dan's comment about online dating- there are actually a series of sites already out there for singles into endurance sports- they've got urls setup like www.runningsingles.com and www.cyclingsingles.com - they advertise in the back of the larger consumer running and cycling magazines. Also, RE: the transaction costs, the processor we use for our site (I help run an online gaming site and we have memberships) charges us a little less than 2% even for Mastercard/VISA and about 3% for American Express- I would imagine that if Active.com is associated with ticketmaster their deal would actually be a little better than that.

Maybe we'll see you in Narragansett next weekend for FirmMan. It should be a nice race. Considering that it's the only 1/2 Iron distance race within 100 miles of Boston, and its proximity to NY, I'm surprised that it hasn't sold out. Based on the FIRM races I have done, it will be, at minimum, of equal quality to Tupper Lake, which sold out months in advance and had almost twice the field capacity of FirmMan(1100 vs 700).

Incidently, for those not familiar with FIRM, they give a lot of their proceeds to local charitable organizations such as the Lions Club, The Boys and Girls Club, etc. So if you see the local Lions Club doing traffic control for your race, the proceeds from that race are more than likely going to them. I don't know if this is a common model, but that, plus the atmosphere at the races, makes it seem like the folks at FIRM are not simply in it for the money.

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agreed that there is a cost associated with credit card transactions, but electronic registration and payment brings not only convenience to us, but reduced cost of doing business.

When there was only paper registration, did we include a pro-rated salary for the person processing the registration and depositing the check?

What is next, paying at aid stations for water? Or how about a chip rental fee? Or then a fee to the timing services company.

Your point is valid. I conceded this a couple of posts ago, when Dan pointed out that the service Active.com provides is built into the registration cost already, and that by providing registration services Active.com is saving the RD money, so it should lower our costs.

But since the entire race experience is turning into an exercise in price gouging, why not go for it? They can have a box where you estimate the number of Gatorades you'll want on the course, and charge you say, $3.00 per bottle at registration, or $5.00 per bottle during the race. And you'll have to stop to have your chip swiped so they can process your aid station needs request(but that time will count against you). Are they charging for the post-race IV's yet? Or maybe the Mount Everest style rescue fee, to cover expenses in case they have to pull you out of the water. I know, I'm being ridiculous now, but this is the direction it's going. I'm rambling, and it's time to call it a night.

This is my first season at triathlon, and I'm already way in the hole. I estimate that IMUSA next year will cost me, conservatively, $2,000. And that is just the event cost, not including all the money I'll spend on training, gear, and membership fees.

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