Comments on: Basic Economics in Sports Today http://www.thebusinessofsports.com/2008/11/17/basic-economics-in-sports-today/ News and opinions on the business side of sports Thu, 09 Feb 2012 17:59:09 +0000 hourly 1 http://wordpress.org/?v=3.3 By: David Wakeman http://www.thebusinessofsports.com/2008/11/17/basic-economics-in-sports-today/comment-page-1/#comment-83644 David Wakeman Tue, 01 Feb 2011 20:52:47 +0000 http://www.thebusinessofsports.com/?p=341#comment-83644 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. 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.

]]> By: Russell Scibetti http://www.thebusinessofsports.com/2008/11/17/basic-economics-in-sports-today/comment-page-1/#comment-192 Russell Scibetti Mon, 17 Nov 2008 18:52:44 +0000 http://www.thebusinessofsports.com/?p=341#comment-192 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! 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!

]]> By: Jerey Stinson http://www.thebusinessofsports.com/2008/11/17/basic-economics-in-sports-today/comment-page-1/#comment-191 Jerey Stinson Mon, 17 Nov 2008 17:21:45 +0000 http://www.thebusinessofsports.com/?p=341#comment-191 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 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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