Ticketing Strategies in the Sports Sector

Abstract

Ticketing (pricing) still represents an important source of revenue for sports property owners.

We argue that this is an area that many businesses in general, and sports clubs in particular, have demonstrated a lack of understanding about the basic principles. Instead of developing “smart” ticketing strategies, they have traditionally employed relatively rigid and inflexible approaches. This can lead to the accusation that fans are being ripped off or that they are missing out on optimising their revenue, in the absence of using big data and technology.

However, this is changing. In this chapter we consider the concept of demand-based pricing. Sport is part of the services sector and is shaped by characteristics such as perishability.

We argue that the more far-sighted clubs and organisations embrace a more creative and flexible approach to setting their prices for games and events.

Advances in technology and big data mean that tools such as variable ticket pricing and dynamic pricing, allow administrators and marketers to drill into the data. This creates opportunities to provide more relevant and personalised pricing strategies.

We consider the role of secondary ticketing operators in the process and whether this is good or bad for fans.

Appendix

Discussion Questions

• 1. Examine the extent to which you would agree with the view that the role played by disgruntled fans and social media has effectively restricted the club from maximising revenue from its ticketing strategy.

• 2. Assess the rationale behind the proposed changes to pricing strategy as articulated by the board. How well or how badly did they handle the change? What could they have done differently?

• 3. How true is it to say that this is a simple case of foreign owners not understanding the nature of football and its fans in the UK context?

Discussion Questions

• 1. Examine the extent to which you would agree with the assertion that fans are losing out in the context of the strategy employed by the NBA teams and the overall administrative body of the NBA.

• 2. Does it make sense to have such varying degrees of fluctuation in the pricing of tickets for NBA games?

• 3. Assess the rationale for the NBA making the decision to renew its partnership with Ticketmaster.

• 4. In relation to other major sports, how would you rate the strategy employed by the NBA?

7.1 The Leaving of Liverpool: Fans Walk Out

7.1 Introduction

In 2010 Liverpool football club - the English Premier League team, was acquired by the Fenway Sports Group. This is an American sports investment company. It has a portfolio of sports properties which includes the Boston Red Sox - the Major League Baseball team as its marquee brand. Business experts view the Fenway Sports Group as one of most sophisticated and strategic players in the sports space globally.

Despite initial suspicion on the part of Liverpool fans about the possible motivations of the Fenway Group for buying the club, the owners were seen to be supportive of the manager: providing him with cash to purchase players. By contrast to other leading EPL teams however, many commentators argued that the owners adopted a more “business-like” approach to releasing funds.

The new owners faced a real initial challenge: its Anfield stadium only had a capacity of around 46,000. This was considerably below its main competitors such as Manchester United - the latter having a capacity of 75,000. They committed to increasing capacity in order to make it more competitive and generate extra revenue streams as an issue of immediate priority.

The new main stand opened in 2016. This raised the ground capacity by 9,000 to an overall figure of 54,000.

7.1 Revised Pricing Strategy for 2016/17 Season

In early 2016 the club reviewed its ticketing strategy for the upcoming 2016/17 season. It proposed to increase some of the seats in the newly designed main stand from £59 to £77. This sparked outrage amongst a number of fans’ supporter associations. This was seen as a step too far and once again a clear signal that football clubs were no longer interested in the average working class supporter. Instead they were viewed as being avaricious and unrelenting in their quest for more and more revenues.

Was this an indication also of a tipping point in terms of how fans view the concept of value for money? Many fans felt that this was typical of what tends to happen when foreign owners take over a club and focus on the key issue (for them), profit at all costs.

Influential supporters groups such as The Spirit of Shankly (a highly popular and successful previous manager) demanded meetings with the CEO at the time; Ian Ayre.

They threatened to organise a mass walk-out of the stadium at the next scheduled home game against Sunderland: appropriately enough on the stroke of the seventy-seventh minute.

7.1 The Response to the Criticisms

Ayre met with the various groups and argued that fans should focus on the bigger picture. Liverpool had to be competitive in the market if they were to challenge clubs such as Manchester United, Chelsea and Manchester City. The onus was on the senior management to generate as much revenue as possible in order to make this objective happen. However, he acknowledged that there had to be a balance in the context of setting prices that were affordable for the fan-base. He felt that the club had taken this on board when reviewing pricing levels for the coming season.

In particular, he argued that the proposed increase to £77 only affected 200 seats in the main stand. In real terms this only impacted on less than a half of one per cent of total capacity.

Likewise, proposed increases in season tickets only affected a limited number (the lowest costing £685). In the context of season ticket categories, he argued that in fact sixty-five per cent had remained the same or had decreased in price. In the context of overall ticket prices the proposed change would mean that forty-five per cent would experience a decrease for the coming season.

He also made the point that the club operated a scheme whereby 500 tickets for league games were made available to “local fans” at the knock-down price of £9. He evidenced this as an example of how the club emphasises its commitment to the fans and to the community in the city of Liverpool.

7.1 The Pricing Controversy in Context

The timing of this controversy was unfortunate. Around that time the new Sky media rights deal had been announced with much fanfare and trumpeting. This contract would deliver around $5.2 billion to the EPL over the next three seasons. This figure did not include further revenue from the sale of international media rights. This took the total to over £8 billion. This marked a significant increase on the previous deal-driven mainly by the increased competition from BT, who acquired some of the available live games packages. The EPL was literally awash with money. Combined by the perceived outrageous salaries that were earned by players, this led to more condemnation of the proposed increases by the fans and supporters groups of Liverpool football club.

Another negative event also fanned the flames of criticism. A couple of weeks prior to the announcement about the new prices, EPL clubs blocked a proposal to freeze away tickets at £30. This was seen as yet more evidence of the greed of the clubs. With money pouring in from media rights and increased sponsorship, various supporters groups and politicians felt that this presented an opportunity to make a meaningful gesture to fans: given the levels of economic austerity being experienced in the UK since 2009.

This experience was not confined to English Premier League clubs. In Germany, fans of Borussia Dortmund also expressed their displeasure with the Commercial department by throwing tennis balls onto the pitches in one of the Bundesliga games.

Various surveys, most notably one carried out annually by the BBC Television Corporation called “The Price of Football” showed evidence that the average season ticket price of a football ticket to the EPL had increased by twice as much as the cost of living rates in the UK. Even the cheapest season ticket had increased by 8.7 per cent since 2012 (£508.55p).

7.1 Change of Heart

In the face of the mounting criticisms from fans and within the social media in general, the Liverpool Board of Directors decided to keep the prices at £59.

The change in approach was captured in a quote from comments made by Billy Hogan: the Managing Director and Commercial Director, to a fans forum in December 2017 when he articulated the need to formulate a long-term pricing strategy.

He presented the club’s position on ticket revenues to the 10 forum members present. He said:

“Ticket pricing impacts overall club revenue and our goal on the commercial side is to drive as much revenue as possible in order to provide the resources for Jürgen Klopp and Michael Edwards to reinvest in the football side. This is all geared towards winning, which is what everyone wants”.

“The reality at Liverpool is that demand for tickets exceeds supply. That creates its own question of how we should price tickets but we have never gone down that route. We have tried to strike a balance, looking at what people can afford to pay at the lower end and what people can afford to pay at the higher end”.

“But we also want to compete and, in the case of this forum, I think that means looking at ways that we can collaboratively drive revenue while also addressing some of the issues that we are all aware of”. (► https://www.liverpoolfc.com/news/announcements/284865-liverpool-to-formulate-long-term-ticket-pricing-strategy)

At the same forum, Phil Dutton, Liverpool’s head of ticketing and hospitality, suggested that one way forward would be for the club to become more creative in the way that it structures pricing. “Nothing should be off the table today in terms of ideas and we will see what we can agree on,” he said. “If people can pay to get into the game, they should. But by the same token, if people are struggling, we should look at what we can do. If that means giving consideration to stretching the pricing structure we should do that.”

Tony Barrett, Liverpool’s head of club and supporter liaison noted that:

“This was another positive forum in which several issues were discussed in a challenging but constructive atmosphere,” said “While there may not have been a consensus on all matters, there was a clear commitment from all involved to continue working together in the best interests of the club and its supporters”.

That bodes well for the future and, although there were no immediate solutions to the challenges faced, the frankness and thoughtfulness of the discussion ensure the ticket pricing structure fans forum got off to a good start. It is now crucial that this particular forum reconvenes in January prior to the club setting its budget for the 2018–19 season.

(Sources: Compiled by the author from various sources on the Internet).

7.1 The Price Is Right: The Case of Boston Celtics and the NBA

7.1 Introduction

Boston Celtics was founded in 1946 and play in the Eastern Conference Atlantic Division of the National Basketball Association. The overall divisions comprise thirty teams. Boston Celtics was one of the eight founding members of the NBA and over the past 70 years or so it has been the most successful team in the NBA, winning seventeen championships.

Like most sports teams it has had peaks and troughs: struggling in the 1990s and recovering to win the championships in 2008.

7.1 The Stadium

The team play in the TD (Toronto and Dominion Bank) Gardens stadium in the centre of Boston. This is the largest entertainment arena in the state of New England and was opened in 1995. It has an overall capacity of 19,580 and for basketball it has an official capacity of 18,580.

The arena stages over 200 events annually. The Boston Celtics also share the stadium with fellow Bostonian National Hockey League team; the Boston Bruins. It has three private restaurants in the stadium: Banners Harbor View, Legends and Premium Bistro.

The Celtics makes use of ninety executive suites, 1100 Club Seats. It makes use of 360 degree-led technology and operates specific areas such as the Loft, AT&T Sportsdeck and the Heineken Green Room.

7.1 Key Performance Indicators in the NBA Championships

Historically, the most successful club in the NBA, it has made the play-offs consistently in the past 4 years without actually winning the overall prize.

In terms of comparing the valuation of the franchises in the NBA, ◘ Table 7.2 gives us an indication of the overall financial worth of Boston Celtics.

Table 7.2 Valuation of NBA brands (2016)

In terms of revenue, ◘ Table 7.3 provides an indication of what the club generated over recent seasons.

Table 7.3 Revenue

7.1 Ticket Price Indicators

The NBA reveal some interesting trends when we consider comparative average prices for a ticket to watch the fan’s favourite teams play. ◘ Table 7.4 indicates the average price charged by seven of the top teams in the NBA.

Table 7.4 Average price of tickets

The cheapest average ticket to watch NBA basketball during the 2016/17 season could be purchased at the home of the New Orleans Pelicans. This turned out to be $48.

The aforementioned figures do not fully convey the cost of watching NBA teams. For instance, there is a long waiting list for season tickets at the Boston Celtics. A “good seat” would cost around $10,000 in 2017/18. By contrast a seat at the top of the arena (referred to by fans as the “nosebleed seats”), would set you back to the tune of $2,000.

Loge seats (small areas in the arena that can hold a small number of people) can cost around $7,000.

Fans who cannot attend all of the games can recoup some money by putting the seat up for sale for individual games. They typically make use of Ticketmaster, the official partner of the NBA when it comes to selling tickets.

In terms of attendance at Boston Celtic games, the average in the season 2017/18 was 18,600, with an overall attendance of 744,960. This effectively meant that each game had full attendances. This compares with an overall NBA average game attendance of 17,830.

7.1 The NBA and Ticketmaster Partnership

In 2012 the NBA entered into a partnership with Ticketmaster, one of the main third-party operators in the secondary ticket market. The NBA identified an opportunity where it could compete with other key operators such as StubHub. This was not necessarily innovative: the National Hockey League had a similar arrangement in place with Ticketmaster since 2008. The latter company stated that it had twenty per cent of the secondary ticket market for hockey tickets.

The NBA saw this partnership as a mechanism whereby it could provide a “one-stop-shop” for basketball fans in terms of securing tickets for games, as well as selling on tickets that they could not use. The partnership between the NBA and Ticketmaster created ► NBATickets.com. This represented the only official resale marketplace of the NBA.

We should note that NBA does not necessarily control the team rights in terms of setting prices. While the thirty teams all participate on the ► NBATickets.com website, twenty-four have individual ticketing deals with Ticketmaster.

In the early years of the deal, Philadelphia 76ers sold all of their tickets through StubHub.

As stated earlier, the individual teams set their own ticketing strategy.

An advocacy group called Fans Freedom Project raised some concerns which centred on the issue as to whether fans would be allowed to set their own price when using ► NBATickets.com or if the individual teams would enforce price floors below which tickets could not be sold. The NBA argued that there should be no price floors, but left it to the discretion of the individual teams.

In early 2018, Ticketmaster announced that it was renewing the partnership for the NBA and the WNBA. It was going to focus more fully on enhancing the digital ticketing experience for fans, allowing them to focus on the actual game.

7.1 An Insight into the Approach to Ticketing by Boston Celtics

A 2015 Harvard Business Review interview with Richard Gotham, the President of Boston Celtics generated the following responses to a couple of questions on the general issue of ticketing.

HBR::

You’ve been with the Boston Celtics for 12 years now. How has the business of running a professional basketball team evolved in that time?

Gotham::

“In the years that I’ve been involved, things have become exponentially more sophisticated. These aren’t mom and pop operations anymore. Asset valuations in our league have really grown over the years. For example, Steve Ballmer just bought the L.A. Clippers for $2 billion. We now have entire conferences dedicated to the analytics of our business and our basketball operations. We’ve hit a point of acceleration in video and wearable technologies that provide us with information that we’ve never had in the past about how to optimize player performance. We have a global audience that has an unending thirst for mobile content, and a sophisticated CRM database that allows us to be a state-of-the-art marketing operation. We talk about things like yield management, demand curves, and perishable inventory - factors that dictate our pricing strategies. We’re working with unprecedented levels of data. At the same time, so much of what we do is all about the intangible, emotional attributes that really drive fan passion and engagement - that’s what fuels our business, and always has.”

HBR::

You’ve been with the Celtics in good years and bad. How do you keep the business itself running steadily, when team performance can change so much year-to-year?

Gotham::

“You need to have a business that’s flexible enough to respond quickly. That way, when the going is good, you can maximize your upside yield on assets like ticket sales and merchandise, and when the team isn’t performing quite as well, you have a hedge in place to protect your downside risk.

The big revenue drivers in our business are TV media rights - both national and local - and ticket sales. The bulk of the variability in our annual revenue is in ticket sales, which is most sensitive to team performance. So, it’s a matter of trying to keep our finger on the pulse of demand in order to maximize our return. We monitor pricing and demand in real time using algorithms to help inform our decisions. In some cases, demand says that you can raise the price. In others, it says lower the price to drive a higher volume. We have an analytics team that’s built some models using regression analysis to help us with dynamic pricing. It allows us to determine the right price, for the right game, for the right customer - and even factor in a sudden last-minute snowstorm on top of that to see how it affects demand. We were really the first team in the NBA to say that it’s OK to price your tickets differently for different games.”

HBR::

I talked to a few families who said that they’d love to attend a Celtics game, but between the tickets, parking, food and drinks, it’s prohibitively expensive. What would you say to those families?

Gotham::

“Tickets to sporting events can be expensive. Our pricing, as I mentioned earlier, is demand-driven and what the market will bear, and generally the market will bear a lot. But having said that, we recognize that being accessible and affordable is important for growing our fan-base, so we have a lot of entry points. You can buy a Celtics family pack, which gives you four tickets, concessions and a souvenir for $70–$90, which is pretty affordable for a professional sports game. We keep about 25% of our inventory in the form of individual tickets that are $30 or cheaper. The idea is that we cordon off a certain amount of our seats so that we’re not pricing people out. That math fluctuates from year to year based on changing demand dynamics. For as long as I’ve been here, we’ve always maintained 300 seats for every game at a $10 price point, but we found that the scalpers were scooping up those seats and selling them at higher price points, so we had to combat that a bit. It’s about educating the market that those alternatives are available. In a year when the team isn’t considered to be a championship contender, we’re doing more marketing of those ticket offers and promotions using database-driven marketing.” (► https://hbr.org/2015/03/how-an-nba-team-thinks-about-data-talent-and-pricing)

7.1 Concluding Comments

The sport of basketball is right up there with the other bastions of sport in the USA: American football and baseball. As we can see from the statistics it represents a lucrative investment for most of the franchise owners of clubs that play in the national divisions of the NBA championships.

Boston Celtics, as befitting of one of the doyens of the sport, almost routinely sell-out their games. Together with the other teams and the administrators of the NBA, they implement a ticketing strategy that arguably is demand-led. By this I mean that the tactics used are reflective of the nature of the demand for tickets from the perspective of the fans.

This is encapsulated in the following quote from Steve Schanwald, a Vice-President of the Chicago Bulls.

“Ticket pricing is becoming more fluid and often changes daily, based on supply and demand, along with other factors,” said Steve Schanwald, the Bulls’ executive vice president of business operations, who responded to questions via email.

It’s becoming similar to other industries such as airfares and hotel rooms. Consumers typically aren’t aware of the exact pricing until they make a specific inquiry. We’ve found that fans are becoming much more familiar and comfortable with this trend. And they often benefit because there’s much greater ticket availability and many more pricing options”. (► https://www.sportsbusinessdaily.com/Journal/Issues/2013/04/15/In-Depth/NBA-Ticketing.aspx)

Selling tickets for games in the sport of basketball is complicated by the fact that any given team might have as many as forty different price points available for seats in different sections of the stadium. This does not provide much room for manoeuvre - particularly when dynamic pricing strategies are being used.

The days of setting pre-determined prices are a thing of the past. NBA teams are becoming more adroit at selling tickets for games and appear to be making use of smarter tactics in order to maximise revenue.

(Sources: Compiled by the author from various sources on the Internet).

(► https://hbr.org/2015/03/how-an-nba-team-thinks-about-data-talent-and-pricing).

(► https://www.sportsbusinessdaily.com/Journal/Issues/2013/04/15/In-Depth/NBA-Ticketing.aspx).