Introduction to Mini-FAQ's: Many issues come
up repeatedly in
rec.sport.baseball. The discussion on these issues can be
productive
but often becomes repetitive. The purpose of a Mini-FAQ is to
give the
main points of previous discussions to avoid repetition. Further
discussion on these points, or on points not covered in the
Mini-FAQ's,
is encouraged. Please send feedback to the author at grabiner@math.lsa.umich.edu
Contents:
Q1: How are ticket prices determined?
Q2: How much have ticket prices gone up?
Q3: If they haven't gone up much, why do sportswriters talk as if
they have?
Q4: What is the relation of ticket prices to salaries?
Q5: Why do concessions at baseball games cost so much?
Q6: Why are baseball ticket prices lower than prices in other
sports?
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Q1: How are ticket prices determined?
Baseball owners, like most business owners, are interested in
maximizing
profits or minimizing losses. Thus they set ticket prices with
that
goal in mind, not the specific goal of breaking even or covering
expenses.
Normally, this means maximizing total revenue, since having an
additional fan attend a game does not have much effect on the
cost of
holding the game. Higher ticket prices mean lower attendance but
more
revenue per fan, and the team tries to set the price at the point
where
these effects balance out.
If the team's payroll or TV money changes, this does not affect
the
number of fans who will buy tickets at a given ticket price, so
it
should not affect the ticket price, only the team's profit.
Owners may
talk about the need to raise ticket prices to cover increased
salaries,
but they do not actually raise them to cover the salaries, nor
lower
them when salaries go down.
If the team opens a better stadium, on the other hand, this
improves the
quality of the team's product, and thus is likely to result in
fans who
are willing to pay more. If the team becomes so popular that it
sells
out its existing stadium frequently, it will raise ticket prices
because
it cannot collect the revenue it would get by meeting demand at a
low
price. (And if such a team didn't raise ticket prices, fans would
still
pay the higher prices, as ticket agencies and scalpers would buy
the
tickets and then re-sell them at the demanded rate.)
You can see the same effects with other forms of entertainment
such as
movies. The same first-run theater may sell tickets to _Titanic_
and to
a movie which cost 1/10 as much to make for the same price.
However, it
will sell tickets to an afternoon showing for less than the
evening
showing of the same movie on the same day, because the demand for
evening tickets is much greater.
Q2: How much have ticket prices gone up?
Only at the rate of inflation. In real value, the cost of an
average
ticket has been essentially constant since 1950. According to
_Baseball
and Billions_, by Andrew Zimbalist, the average ticket price of
$1.60 in
1950 was $8.74 in 1990 dollars, while the average in 1990 was
$7.95.
This is consistent with the assumption that ticket prices have
been set
to maximize profits.
Since prices tend to change in whole-dollar units, and since they
are
affected by local conditions such as the city's economy and the
quality
of the team, they may not increase at the rate of inflation for a
single
team in a single year. But a team which raises grandstand seats
from
$10 to $12 following a good season isn't likely to raise them
again for
several more years.
In the last few years, ticket prices have gone up faster than
inflation
when new parks opened, while staying close to inflation in cities
which
have kept the same parks.
Q3: If they haven't gone up much, why do sportswriters
talk as if they have?
The quote you will often hear is something like, "Thirty
years ago, you
could buy a bleacher seat for $1.50. Now it costs a family of
four $120
to attend a game."
The ratio looks impressive, but there are several differences in
the
comparison. The comparison is based on the a fan's perception of
the
price rather than the actual price, as the fan probably bought
single
bleacher tickets as a kid, then moved up to box seats, and now
buys box
seats and everything else for his family of four.
In addition, the $120 is the "Fan Cost Index", for a
family to buy a
full set of souvenirs and food, four average tickets, and
parking. It
may be possible for a family to spend that much on a once-a-year
trip,
but it is more than regular fans would spend. A fair comparison
would
be between the ticket prices alone, and even then, you may be
comparing
a bleacher seat thirty years ago to an average seat today. If you
compare an average seat at $3 then to $12 now, you are left with
the
rate of inflation.
Complaints about high prices are common in many areas, even when
the
prices are keeping pace with inflation in the long run. Every
time the
Postal Service raises postage rates or New York City raises
subway
fares, there are editorials opposing the move.
Q4: What is the relation of ticket prices to salaries?
High salaries do not cause high ticket prices, since salaries do
not
affect the ticket price which maximizes revenue. That's why the
beginning of the free-agent era, which was the period in which
salaries
increased by the greatest factor, was also a period in which
ticket
prices declined in real dollars.
However, high ticket prices are an important part of the reason
for high
salaries. If one million more fans will watch a contending team
than a
fourth-place team, and they pay an average of $12 for their
tickets,
then it is worth $12 million in extra ticket revenue for the team
to
become a contender. The team should thus be willing to pay $12
million
build a contender by signing players. Since many teams could gain
about
the same amount from the improvement, the players will earn about
that
much money as free agents. (Actually, they will earn more,
because
tickets are not the only source of revenue; a good team will also
earn
more from TV and the playoffs.)
Q5: Why do concessions at baseball games cost so much?
It is a captive audience, and concessions thus cost whatever the
market
will bear. This is the same reason that popcorn at movies and
meals at
airports are extremely expensive.
You can avoid this part of the cost of attending a baseball game
by not
using the concessions. Most ballparks allow fans to bring their
own
food, with restrictions on such things as metal containers. It is
also
possible to eat at home or at a local restaurant just before the
game
rather than paying the high prices at the game.
Q6: Why are baseball ticket prices lower than prices
in other sports?
This is also a result of supply and demand; prices will be high
when
demand is high and supply is low.
Basketball and hockey arenas are smaller than baseball stadiums.
If
basketball teams charged the same prices that baseball teams
charge,
they would have 50,000 fans wanting to attend every game, and
that many
fans won't fit in an arena. Instead, they charge $70 for good
seats and
still fill most or all of them.
Football tickets are limited in supply because of the very short
season;
with eight games rather than 41 in basketball or 81 in baseball,
there
are far fewer tickets available even with large stadiums. Also,
since
football games are so infrequent, there are many fans who make
major
trips to attend the games, and the ticket price is only a small
part of
the cost of these trips. The result is that many teams can sell
out
their stadiums with high-priced season tickets.