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Jerey Stinson said on November 17th, 2008 at 12:21 pm

Do you think that the corporations that are building new stadiums that are set to open in the next 3-18 months will take this into account? Or are we going to be stuck with overpriced seats for awhile because owners don’t always understand basic economics?

Jeremy

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Russell Scibetti said on November 17th, 2008 at 1:52 pm

The smart ones should, but I doubt it. They are going to make the classic mistake of letting sunk costs influence their decision making. Basically, no matter what they decide to price their tickets at, the $1B spent on the stadium is sunk – no getting it back!

Oversimplified Example:
Say a team spends $10M on stadium work. Then they budget 1,000 tickets at a $10,000 price point with the goal of making that $10M cost back. Maybe only 400 people can buy those tickets at $10,000 ($4M revenue), but they could sell all 1,000 tickets at $6,000 ($6M revenue). Economics says you drop the price and make the $6M – the problem is that many teams will think about needing to make back the $10M entirely. That $10M is already gone (sunk cost) and they cannot let it influence their revenue moving forward!

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David Wakeman said on February 1st, 2011 at 3:52 pm

I think a good example of teams not reading the tea leaves very well and still pricing their tickets without any concept of their fans situations was present in NY/NJ with the New Meadowlands Stadium.

I know that the Jets commissioned any number of studies to try and find a way to capture as much revenue that they felt was being suctioned off to the secondary market as possible without fully understanding the secondary market and the factors that drive the prices there.

This led to the embarrassing articles where fans complain about being gouged; the in game experience suffering due to empty seats; and the generic feeling of the games because so many of the more rabid fans can’t afford to attend the games.

While there are certain economic theories that say that the more a ticket to a certain event costs, the more the demand increases, I believe that in a sour economic climate that the necessity of balancing your family’s finances wins out over whether or not you are going to go to a game.