HOW MUCH?
Service Industry or Disservice to the Game?
HOW MUCH?
By Stylo Sauvage February 5 2008
An "Economist" takes a look at ticketing, issues surrounding the availability or otherwise of tickets and some of our least favourite characters in sport...ticket touts. Touting owes its existence to the economic forces that come into play given a certain set of circumstances.
HOW MUCH?
An "Economist" takes a look at ticketing, issues surrounding the availability or otherwise of tickets and some of our least favourite characters in sport...ticket touts. Touting owes its existence to the economic forces that come into play given a certain set of circumstances.
The original seller of tickets sets the price to clear the market – or, in the technical jargon, get “bums on seats.” Selling all the tickets for £1 will do this, but earn little revenue. So, ticket prices are set rather higher to maximise revenue.
But, setting the highest possible ticket-price for a particular event may not be compatible for maximising revenue over a season, or even income from the game. The fan with a £200 ticket may be less likely to attend other matches that season, less likely to buy merchandise and more likely to bring a hip-flask and a packed lunch.
High prices can also harm brand-appeal, with negative publicity causing the most obvious damage. More subtle effects can include changes to the demographics of the crowd. Hospitality is the normal whipping-boy, but so too is a rise in the average age of the crowd as these tend to less vociferous. This is just the effect at Old Trafford bemoaned by Sir Alex Ferguson
Different prices in different parts of the ground widen affordability and diversify the demographic. Those who can afford higher prices effectively pay more of the costs incurred in running the event. As a technical-aside, the principle of charging more for those most able to bear the costs is known amongst economists as Ramsey pricing.
Because customers are detracted by overly-complex price-structures, the ability to use Ramsey pricing to its fullest extent for events like football and rugby is limited. There will always be tickets sold for less than some fans are prepared to pay.
Low-cost airlines make much better use of Ramsey pricing. Although the prices are numerous, the charging mechanism is simple: the less flexible your times and the later you book, the more you pay. Time-rich but cash-poor customers are put in touch with cheap tickets. Those that are cash-rich and time-poor avoid lengthy searches and wasteful queues.
The airline model does not work for sporting events. If one flight is too pricey there are others to the same destination. Matches are one-offs. The result is that the time-rich can queue for match tickets and sell these to the cash-rich. The price of the re-sold ticket reflect the general level of surplus demand and the buyer’s willingness-to-pay (otherwise the transaction would not have occurred).
Touting is not risk-free. With tickets bought in advance, will England’s final fixture in the 2008 Six Nations against Ireland be a Grand Slam decider, a dead-rubber or the Wooden Spoon decider? Dabbling in the futures market for tickets may bring large rewards but losses are possible.
Perhaps, rugby could learn from America. There, online ticket-exchanges have expanded the market for secondary ticket sales (touting) by making it much easier for sellers and buyers to find each other. Fans prefer these exchanges to purchases outside the ground – many hold money in escrow, giving it to sellers only after the event to make sure the tickets are legitimate.
Sports teams are now trying to get a piece of the action, by signing revenue-sharing deals with the online exchanges. The teams refer ticket-less fans to the exchanges. In return, the exchanges share their profits.
In August MLB.com, a subsidiary of Major League Baseball, signed a five-year deal with StubHub, America's largest exchange. Next season 30 MLB clubs will refer ticket-less fans to StubHub for an undisclosed share of the resale revenue.
More interestingly, Ticketmaster, a company that once brought legal challenges to the online-resale market, is now on board. It had argued that buyers should not be able to resell tickets because they don't actually own the tickets in the first place: tickets are merely licences to enter a venue, and licences are not freely transferable. That argument failed, and now Ticketmaster has its own resale subsidiary, TicketExchange. More than 50 professional sports teams have now negotiated a cut of TicketExchange's resale revenue.
British football is embracing this market. In 2007, Europe's biggest online ticket reseller, Viagogo, based in London, signed deals with several English football clubs and the Scottish Premier League.
But, setting the highest possible ticket-price for a particular event may not be compatible for maximising revenue over a season, or even income from the game. The fan with a £200 ticket may be less likely to attend other matches that season, less likely to buy merchandise and more likely to bring a hip-flask and a packed lunch.
High prices can also harm brand-appeal, with negative publicity causing the most obvious damage. More subtle effects can include changes to the demographics of the crowd. Hospitality is the normal whipping-boy, but so too is a rise in the average age of the crowd as these tend to less vociferous. This is just the effect at Old Trafford bemoaned by Sir Alex Ferguson
Different prices in different parts of the ground widen affordability and diversify the demographic. Those who can afford higher prices effectively pay more of the costs incurred in running the event. As a technical-aside, the principle of charging more for those most able to bear the costs is known amongst economists as Ramsey pricing.
Because customers are detracted by overly-complex price-structures, the ability to use Ramsey pricing to its fullest extent for events like football and rugby is limited. There will always be tickets sold for less than some fans are prepared to pay.
Low-cost airlines make much better use of Ramsey pricing. Although the prices are numerous, the charging mechanism is simple: the less flexible your times and the later you book, the more you pay. Time-rich but cash-poor customers are put in touch with cheap tickets. Those that are cash-rich and time-poor avoid lengthy searches and wasteful queues.
The airline model does not work for sporting events. If one flight is too pricey there are others to the same destination. Matches are one-offs. The result is that the time-rich can queue for match tickets and sell these to the cash-rich. The price of the re-sold ticket reflect the general level of surplus demand and the buyer’s willingness-to-pay (otherwise the transaction would not have occurred).
Touting is not risk-free. With tickets bought in advance, will England’s final fixture in the 2008 Six Nations against Ireland be a Grand Slam decider, a dead-rubber or the Wooden Spoon decider? Dabbling in the futures market for tickets may bring large rewards but losses are possible.
Perhaps, rugby could learn from America. There, online ticket-exchanges have expanded the market for secondary ticket sales (touting) by making it much easier for sellers and buyers to find each other. Fans prefer these exchanges to purchases outside the ground – many hold money in escrow, giving it to sellers only after the event to make sure the tickets are legitimate.
Sports teams are now trying to get a piece of the action, by signing revenue-sharing deals with the online exchanges. The teams refer ticket-less fans to the exchanges. In return, the exchanges share their profits.
In August MLB.com, a subsidiary of Major League Baseball, signed a five-year deal with StubHub, America's largest exchange. Next season 30 MLB clubs will refer ticket-less fans to StubHub for an undisclosed share of the resale revenue.
More interestingly, Ticketmaster, a company that once brought legal challenges to the online-resale market, is now on board. It had argued that buyers should not be able to resell tickets because they don't actually own the tickets in the first place: tickets are merely licences to enter a venue, and licences are not freely transferable. That argument failed, and now Ticketmaster has its own resale subsidiary, TicketExchange. More than 50 professional sports teams have now negotiated a cut of TicketExchange's resale revenue.
British football is embracing this market. In 2007, Europe's biggest online ticket reseller, Viagogo, based in London, signed deals with several English football clubs and the Scottish Premier League.
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