To gouge or to capture? That is the questionBy
As American businesses have grown accustomed to life under a bad economy, consumers have seen long-established pricing practices thrown by the wayside. The airline industry has been the one taking the lead here, and the most notable example came last week when Spirit Airlines announced they would be charging for carry-on luggage.
Spirit’s CEO subsequently explained their pricing rationale. Their base fares would be reduced by $45, and those who wanted to bring a piece of luggage on board would have to pay the unbundled $45 to do so. Potential customers were unhappy but only because this is a new — and sensible — way to price a commodity. By paying for component parts, we are paying for what we need and want to use. If only telecommunications and cable providers would follow such a path.
In baseball, economics are moving in new ways as well, and the Yankees have been among the prime motivating factors. The team has long been a hot ticket in New York, and road attendance has risen as well. Last year, the Yanks averaged over 34,000 fans per game on the road, tops in the AL and second overall to the Cubs. Teams such as Tampa and Kansas City that don’t draw well regularly see record crowds when the Yanks come to town.
As such, teams have wisely jacked up prices when the Yanks come to town. Tickets and concessions are priced for premium games, and it works because the market forces of supply and demand can dictate the prices. If a potential fan is willing to pay more on the secondary market for a chance to see a premium team play, the home team should be trying to capture that added revenue.
What happens though when teams start bundling tickets? That’s the question Craig Calcaterra raises today. He highlights two Consumerist posts — one on the Mets and one on the Dodgers — that expose a new practice. Instead of selling individual tickets to games involving the Yankees, these teams are requiring their fans to purchase Yankee tickets as part of a season- or package-ticket plan. For Yankees/Mets games, fans have to buy tickets in groups of five or more. For Dodgers/Yankees games, Los Angelinos have to purchase at least a seven-game mini plan. (The Orioles, I believe, instituted this practice last year when Yankee fans started overwhelming the Baltimore crowd.)
Loyal fans, of course, aren’t happen. Said the Mets fan who reported his tale to Consumerist to his ticket agent, “I’m going to be blunt with you. That is a horrible practice. The fact that I have to buy four extra tickets to get a guaranteed good seat ticket right now is horse shit. To be honest you have just turned me off from buying a ticket for the rest of the season.”
From an economics perspective, though, teams should have done this years ago. The demand for these premium games is great enough for the team to try to get fans interested in other non-sold out games as well. The teams want to capture more fans, and if they alienate a few fans along the way, well, then others will just take those seats instead. What makes people uncomfortable with it is that it’s a new practice. Had the ticket office been run as a sensible business from the start, teams would have been bundling years ago.
Calcaterra wants teams to “what the market would bear for the hot seats and sell them individually,” but he freely admits its an emotional reaction to what he views as sensible economics by clubs looking to milk money out of fan attraction. We might not like the blatant money grab, but that’s the way the capture market works.