Apr
21

To gouge or to capture? That is the question

By

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.

Categories : News
  • Andy in Sunny Daytona

    The Orlando Magic had been doing this for years. Now that they are good again, they don’t do it as much.

  • Mike HC

    Yea, it is really the obvious thing to do.

  • A.D.

    Atlanta did this with Yankees & Sox tickets last year. Basically just forced fans coming to visit for a game (such as myself) to buy their tickets on StubHub instead of from the team.

  • CapitalT

    They do this for football.

    A friend wanted Cowboys at Indianapolis a few years ago and had to also buy the Buffalo at Indianapolis game. This actually works out for local fans because he then sold the Buffalo tickets at a loss on stub hub. Some local fan got a deal on the Buffalo game.

    • Rick in Boston

      Chargers did the same thing with Raiders tickets. I want to say that the rule I saw was that it had to be a non-divisional opponent.

    • http://yanksgoyard.com Andy_C_23

      The real question is why are you friends with a Cowboys fan?

  • Jose

    In the words of Ted Turner:
    “Gentlemen, we have the only legal monopoly in the country,
    and we’re f**** it up.”

    Some fans may not like the idea, but other fans will show up in their stead. In the end, ticket sales can become more lucrative, even with some of those fans turning away. These moves are great chances for owners to make more money.

  • YankFan

    I live in NY & about 6 years ago after striking out on getting Mets/Yanks tickets at the stadium my wife called up Shea. They told her they will not sell the Yankee game as an individual ticket, that we would have to purchase a 5 game pack.

    As an additional note, 7 years ago we went to Boston for a vacation built around the Yanks being in town. My wife called for tickets & all was fine. When it came time to give our address & it turned out it was in NY, she was told that they can not sell us tickets to a Yankee game. We had to go onto ebay & buy the tickets for 10x face value.

    • http://www.facebook.com/adorador Ray Fuego

      That is horse crap right there I went a few years ago and got tickets fine.

      • YankFan

        Went there? Went to the box office? Went to a scalper?

        If Fenway, maybe it was the telephone operator who didn’t want to sell to a NYer but that is what she said.

        If Shea, who knows.

        That’s why I gave the time frame for when these events happened to me.

  • A.D.

    What makes people uncomfortable with it is that it’s a new practice.

    Well mainly I don’t think they like the practice, since generally they don’t like bundling.

    • Jimmy

      Wouldn’t it be more accurate to say that what makes people uncomfortable with it is that they don’t want to be forced to shell out a lot of money on games they don’t want to see?

      • A.D.

        Or generally to be forced to pay for good/services that they don’t necessarily want, to get those they do want.

      • http://www.facebook.com/adorador Ray Fuego

        its cause prices these days, as a college student I have money for one game not 5 or seven

  • ClayBuchholzLovesLaptops

    Another idea for those teams to have a higher attendance without pissing of their fans: A better product on the field.

    • Rick in Boston

      But that doesn’t always work, either – look at the Rays. In 2008 they were 12th in attendance and last year they were 11th. Without breaking down the game-by-game, I wonder if the only difference is that they got an extra game at home against Boston and/or the Yankees.

      • ClayBuchholzLovesLaptops

        From 1999 to 2007 their average attendance was never higher then 19,294 (1999) and as low as 13,070 (2003). Their highest win total in that time span: 70 (2004).

        In 2008 and 2009 they winning season and average attendances of 22,000+. I guess, winning helped bringing those up.

      • currambayankees

        I think part of that has to do with the fac that the Yankees have a ton of fans in Tampa and I seriously doubt The Rays are ever going to truely conquer that market.

  • http://deleted Richard Deegan

    Some fifty years ago I was a kid working in a supermarket where, if you wanted the Maxwell House one-pound can of coffee at sixty-nine cents, you had to spend $ 7.50 on other products. This basic concept is nothing new, and is used in many, many fields. With my first cable 35 years ago, I couldn’t get just the 3-4 channels I wanted (or in places like Columbia County just the NYC channels), I had to take a bunch more.
    Just what is new?

    • http://www.secondavenuesagas.com Benjamin Kabak

      It’s new that industries that hadn’t traditionally followed that model are now doing it. Airlines and sports teams had a very binary ticketing system up until recently. Now fans are going to have to deal with the changes.

      • MattG

        I bet anything the reason for the sudden shift is automation. Until now, there probably weren’t any technologies available for ticketing to easily manage bundling. They are probably using some nifty new apps that allow them to restrict certain commodities by rules, and enforce it across a platform shared by all ticket agents. Without a gatekeeper, an organization wouldn’t be successful.

    • Ed

      The supermarket thing doesn’t bother people because they have to food shop anyway. The total spending you have to meet to get the discount are pretty easy to reach. The extent of the influence that has is it makes you spend your money at supermarket A instead of supermarket B, or you stock up a little more on an item to ensure you reach the total. If the deal just doesn’t make sense for you, you can still get the items you want at normal prices. The downside of it is pretty minor for the customer.

      As for cable, that’s traditionally been a practical issue. With analog cable, selective channel delivery required climbing up the utility pole and installing a physical filtering device on the wire running to your house to block the frequency of the channel in question. You can’t fit many of those filters in the utility box, and each one slightly weakens the signal strength.

      As things have gone more digital over the decades that’s changed, but that’s why it started out that way.

      As for what’s new here: There’s no inherent reason that bundling the tickets provides an advantage. Five individually sold tickets are of equal value to the team as five tickets sold together. The customers affected by this are most likely only going to be buying tickets to a few games at most during the season, so you’re forcing them to spend significantly more money than they intended.

      • A.D.

        Five individually sold tickets are of equal value to the team as five tickets sold together.

        But it makes sure the tickets do in fact get sold, vs just being left at the ticket office unsold. Which is particularly important for the NFL with blackout rules.

        • currambayankees

          But then again it may make so none of them get sold to begin with. Would you rather the fans buy one premimium ticket at a slightly elivated price or non at all? That’s probably going to happen if try to have force fans to buy 6 additional tickets to games they have no interested in watching. Plus again these teams need to remember the economy and reason they themselves are being frugal.

  • A.D.

    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.

    Didn’t MLB make it that a team could only have a few “premium” games/series a year, or now is it as team see fit?

    • http://www.teamnerdrage.com dr mrs the yankee

      For teams that don’t have fifty different game types like the Mets the premium games are generally:

      1) Opening day
      2) Yankees/Red Sox
      3) NL Central teams usually pencil in the Cubs
      4) NL East teams pencil in the Mets and now the Phillies

      This year for the Yankees it’s OTD, Sox, Opening Day, Phillies. Phillies taking the place of the ALCS teams.

  • vin

    Forcing the fans to buy a 5 or 7 game mini plan is pretty ballsy. I think the reaction would be a bit different if a 2 game plan were required.

    It is smart economics, but poor marketing. The better approach would be to charge fans the higher ticket price for the Yankee game, and offer a reduced price on another game(s) against a less attractive team (call it the SuperSaver plan or something). Do that for a couple of years, then force the fans to buy both tickets together and cite the success of the SuperSaver plan as the reason why.

    If avoiding backlash is the goal (and its probably not), then it’s got to be a gradual build. Kind of like the airlines:
    Stop serving meals
    Start charging for check-in luggage
    Start charging to reserve/choose your seat
    Start charging for carry-on bags.

    • Chris

      It is smart economics, but poor marketing. The better approach would be to charge fans the higher ticket price for the Yankee game, and offer a reduced price on another game(s) against a less attractive team (call it the SuperSaver plan or something).

      I agree with this. One of the goals should be to increase the size of their fan base. If you require a Yankees fan living in Baltimore to come to some non-Yankee games that the Orioles play, there is a chance you could siphon them off to be a more regular Orioles fan. Even if they never truly become an Orioles fan, they may enjoy the game and start coming to more (sort of like Bill Simmons with the Clippers).

    • http://www.teamnerdrage.com dr mrs the yankee

      The Braves last year didn’t put tickets for the Yankees games on sale until a few weeks before the games. They had a lottery for them, and if you signed up for it they called you several times trying to push mini-plans on you.

      I had an interest in travelling to Atlanta to see the team, as I had done in Houston the year before (I paid double their normal face value but I got them through the lottery) but I wasn’t going to buy a 7 game plan just to guarantee seats so I nixed that trip idea.

      Their ticket office was also very rude when calling people up, which didn’t help.

  • currambayankees

    I think that there would be plenty of people that wouldn’t bother. I am a Yankees fan not a Baltimore fan, why the heck would I buy tickets to see Baltimore and another team play or for that matter take a loss on games I don’t want to see? First off when the Yankees are in town and you are crappy team you should be happy to see any fans in the stands. In this economy unless you have money most people are going to be just as frugal as the teams have been with the free agents. I am also sure those cities should be happy to have the additional income brought in my visiting fans.

  • Chris

    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.

    That’s not necessarily a good trade off. Obviously some teams have deemed it reasonable, but unless you’re selling out all of these premium games, there really is a loss to a team if someone does not buy a ticket to one of these premium games. For the Dodgers and Mets (particularly with regards to Yankee games) this is an easy trade off, but for a team like Kansas City that won’t sell out the Yankee game it may not be worth it.

    (btw… I think you mean gouge and not gauge in the title)

  • NYCOUG

    When the Angels owner bought the team he lowered beer prices and attendence went up. Coincidence? I’ll just stick with Stubhub thank you!

  • Ed

    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.

    Eh, old news. Continental’s being doing it for a while now. I’d imagine others have as well.

    The reason for it is a loophole in tax laws. Airline fares are taxed, but fees for optional services are not. They’re arguing that checked bags are optional, as you can travel with just carry-on baggage.

    Anyway… as for baseball tickets. I think teams should just charge more for tickets against the big drawing teams. The vast majority of fans only go to a game or two per season, so if you make them buy 5 tickets, all you’re doing is pricing out the average fan.

    • Jimmy

      Spot on.

    • cr1

      I flew Continental out of Newark within the last week and they did not charge for carry-ons. (Unfortunately. I’ll be glad when they do, hoping to spend less time standing around in airplane aisles while people wrangle everything but pigs and chickens out of the bins. My time and comfort is worth more than the added cost.)

      • Ed

        Wow I misread that. You’re right, I just interpreted it as checked bags, as the whole tax thing makes a lot more sense that way. I understand the argument for checked bags being non-essential, but some sort of bag pretty much is a requirement.

  • MattG

    50 years ago, or whenever, people probably screamed bloody murder when they could no longer by the seats right behind home plate without a 77-game plan. This is no different.

    They used to package the seat as the premium attraction, now they package the opponent.

  • Across the pond

    This is very common with Soccer clubs over in Europe here.

    If our experience is anything to go by it doesn’t guarantee seats are filled, just that they have been paid for.

  • nathan

    Ben Kabak..

    I donno when you are completing your law degree, but I would say you are ready…

  • CS Yankee

    The worst thing I’ve seen was about 10 years ago when the Av’s were playing great hockey and the Nuggets were horrible. They are owned by the same entity (another WalMart kid) and if you wanted Av’s season tix you had to get Nugget tix. This didn’t fly and was soon stopped.

    I understand that even with deep discounts, people just don’t want to see a team like the Astros or Nats and they need to package these tix to get them there as deep discount tix won’t fly. If you don’t like the product, and its a week night game your not going to get the people thru the gates.

    Just buy the package and donate the Royals Tuesday night game to chartible cause and take the writeoff OR pay stubhub the same and not get the good feeling (or the writeoff) in helping others enjoy a game.

    • Jimmy

      But the problem is that a real fan with a finite disposable income can’t afford to buy 5 tickets. Try to take one or two kids with you and that’s 10-15 tickets. The same fan may be ready to spend a little more for the premium game, but not 5x more.

      I’m not questioning the economics or even the ethics of this, just the wisdom.

      • CS Yankee

        Understand, but this seems to be the trend. “Real fan” seems to carry an ugly tone. I grew up lower middle class where a meal at McDonalds was a big treat. Now, I fly out to see a Yankee game once a year with the family and it quite the costly splurge…but it is our “big thing”.

        Maybe an option would be to get a group of neighbors/friends and do a package every year and rotate the big names every year.

    • http://www.teamnerdrage.com dr mrs the yankee

      The Astros do pretty well attendance wise and the way they handled the Yankees was just to bump up the ticket prices for the series.

      The thing the Astros and some other teams do to bump up ticket sales is give you extra seats for free if you buy season tickets. The problem is that the Astros don’t put all of the seats together, making them pretty useless for most season ticket holders. And it’s not exactly easy to give away those tickets a lot of the time, nevermind selling them so those seats just go unfilled.

  • steve s

    The interesting question to me is there any other team but the Yankees that are packaged this way on the road and do the Yanks see any direct financial benefit from being packaged this way?

    • steve s

      I just read some more of the posts so there are examples of teams other than the Yanks being marketed this way but my other question regarding if there are any direct financial benefits flowing to the visiting teams marketed under these circumstances would still be interesting to know.

  • Klemy

    The Cleveland Indians are doing packages like this for Yankee games this year too.

  • Hughesus Christo

    Can’t at least some of this be traced back to MLB teams getting paid twice for tickets re-sold over Stubhub? That’s a real travesty.

    • http://www.teamnerdrage.com dr mrs the yankee

      They don’t get anything near the full price you’re paying on StubHub for a ticket, so I doubt that’s it. Plus most of those tickets have zero resale value.

      • Hughesus Christo

        I didn’t intimate that they get full price back twice. They get the initial sale plus a cut of the re-sale. The partnership between MLB and Stubhub encourages teams to up their season ticket sales by dealing with dedicated re-sellers. In the past you would lose your season tickets for doing that, now it makes you their most attractive customer.

        • http://www.teamnerdrage.com dr mrs the yankee

          The reason teams wanted to take away people’s tickets for reselling extras on SH and other areas is because they wanted to have their own market places. That failed and so they made a deal with SH where they get a cut.

          Most teams are probably not getting anything really substantial from the cut (assuming it’s not pooled and doled out) so again I doubt this played any part. It’s about trying to up attendance numbers.

          • Hughesus Christo

            That’s correct to an extent, but their motivation for opposing ST resales before Stubhub/Craigslist/Whatever isn’t that important to the point. Instead of discouraging this and being forced to price their seats in response to the market, they have re-sellers subsidize the risks they take in raising prices. It inflates direct sale prices, and then offers a cut from the re-sale market. The emergence of internet resale, contrary to popular belief, probably isn’t doing much positive for the common fan.

            This entire system allows what we see in the post. If people didn’t see StubHub as a way to bail them out of these kinds of deal, teams would never get enough purchases to force something like “Buy 5 to get one Yankee game.”

  • http://www.teamnerdrage.com dr mrs the yankee

    You can buy Yankees single game tickets at Camden.

    The Mets specifically have a lot of aggravating to the customer ticket practices, but because of that and the performance of their team their season ticket holder retention has gone down the tubes.

  • Kevin Ocala, Fl

    Well written, but the day may come when people rememeber. Which makes the pressure on the GM all the greater, he’s ‘got’ to win, and win more, every year.