2012 London Olympics Essay
2012 London Olympics
1)What broad tradeoffs does Williamson face as he thinks about his ticket prices? Some of the main factors that need to be taken into consideration when pricing the tickets and the associated tradeoffs that come with each are: •Maximizing Revenues: Per estimate, ticket revenues ($650MM) account for 21.5% of LOCOG’s forecasted budget ($3B). Any drop in revenue generation either due to pricing or total number of tickets sold (Revenue = Price/ticket x Quantity) will add undue stress on the remaining three buckets namely broadcast revenues and international sponsorships, domestic sponsorships, and licensing fees. It is even questionable whether the other streams of revenues have the capability to make up the deficit due to drop in ticket prices revenue. The Games were meant to stimulate the vital economic and social regeneration of the area surrounding East London. Part of this transformation would come during the games with visitors attending and enabling the local economy. All this would be possible by drawing people at affordable but also at revenue maximizing prices. This indirect revenue streams were difficult to quantify but also incorrect to neglect due to the additional revenue potential the games had to offer to London and U.K as a whole. •Maximizing Game Attendance: Just maximizing ticket revenues alone was insufficient to the success of the London Olympics due to this being pegged “Everybody’s Games”.
If bottom lines were realized with lack luster attendance at some of the non-popular sporting events then it would be deemed a failure. Having house full attendance at popular sporting events such as swimming and gymnastics was easy but insufficient crowd turn-out at wrestling or table tennis would show poorly on the hosts as well as demoralize participating sportsmen and women. Determining which had more weight between revenue and attendance in the success of the games was extremely important. (i.e. ticket revenue targets exceed by $50MM but with 70% attendance or ticket revenue lags targets by $50MM but with 90% attendance). Could shortage in ticket revenues be acceptable if “Everybody’s games” had everybody participating in the events? Weren’t there other options to substitute ticket revenue generation? Could differential pricing not irk participants in less-popular sporting events with potential boycott of the games? •Filling seats with the right people: Having tickets being bought by people who have no interest in attending the games would show the LOCOG in very poor light when the games with half-empty arenas were
broadcast on TV. It was absolutely necessary that the tickets got distributed to the right individuals: Individuals’ who would not only buy but also attend even if it meant attending some of the low profile sporting events. Also it was essential that tickets distributed to VIPs, and media did not go to waste. For every seat left vacant there may be plenty more willing to attend. This issue was hard to control as the LOCOG couldn’t force any individual to attend the games. Bringing in volunteer “seat fillers”, with little knowledge of the sport, to showcase full house venues would work to the detriment of the games as was reported on the Beijing Olympics. Also it would be worthwhile to involve East London’s citizens in the games by having them attend and be a part of the success. But considering the social strata of the residents in this area it would be hard to convince them to buy tickets at regular prices without incentivizing it for them. EU rules prevented any such special pricing and in a way would potentially deter involvement of the local community.
Ticket accessibility: This meant availability not just to the elite and the general majority interested in attending some of the popular events such as the opening and closing ceremonies, swimming, gymnastics, etc but also to the common masses. How could an equitable distribution of tickets be guaranteed by the LOCOG and the same perceived by the public? The establishment of trust was vital to the game’s success so that the general masses did not feel left out to favor high income paying individuals. The other issue was black marketeering. How could the LOCOG in spite of a fair distribution of tickets to the masses ensure that a secondary market for tickets did not prop up? Could something be done to prevent this happening in the first place by having buyer’s names printed on the ticket and making it non-transferable? Would this be forcing who in a family would have to attend even if it meant a no-show at the venues?
2)On what dimensions does he need to optimize? Why? Which are less important? Dimensions needing optimization are:
•Ticket Revenues – Importance Low to Medium
•Event Attendance – Importance High
•Getting sport friendly and enthusiastic audiences into sporting venues – Importance Medium to High •Making this a truly international event by
ensuring and encouraging visitors from across the globe easy access to the games – Importance Medium •Including transportation planning and pricing into ticket prices – Importance Low to Medium •Security – High
•Fair pricing tiers for all 26 sporting events – Importance Medium to High In my opinion Ticket Revenues would be relatively less important as it represented just 20% of the total revenues. As long as prices were in line with other international sporting events and also took the general economy and spending power of the individuals in to account tickets would sell. Also, minimizing the user costs associated with attending the games by including public transportation tickets would sweeten the deal further to not worry about additional costs such as travel, tolls, parking, etc.
3)How might Williamson’s pricing strategies vary by sport? To get traction on this problem, focus on three sports – swimming, indoor track cycling, and table tennis. How should ticket prices and price ranges differ across these sports?
The games represented sports people from varied countries. Each had endeavored to be at the top of their sport and to show a bias in pricing by charging more for highly popular games such as swimming and athletics and less for games such as table tennis and fencing would send the wrong signal not only to the players but also to the audience. Setting such a perception would be detrimental to player’s morale and the goodwill of the sport. Also some of the other considerations that need to be taken into account when fixing ticket prices and price ranges across different sports are: •The duration of the games
•The number of events per game
•The location and seating capacity of the venues
•Distance and transportation options between venues
•Non-sporting events occurring in between events to keep visitors glued to the venues •The popularity of the sport based on the host nations past performance and success •The host city’s tastes, culture and atmosphere
•The proximity of the games to international visitors and their nations past performance and success •Online ticket buying
•Tier based pricing at sporting events
•Global economic crisis and ability of people to spend
Focusing on three sports – swimming, indoor track cycling, and table tennis: Table 3.1: U.K Olympic Track Record
SportGold Medal EventsTickets AvailablePast Medal Success of UKSuccess % (3 medals per event)Popularity based on past performance
Indoor Track Cycling1028,0002020/(10*3)
Based on the stats in table 3.1, though swimming has the maximum number of events and the maximum number of tickets available, U.K.’s past win record is only 10% as against 66% in indoor cycling with far fewer seats available for spectators. No information in the case related to table tennis win record. With this in mind, just solely based off of U.K. citizen’s interest, indoor track cycling will be the most popular event to attend and with just 28,000 tickets available will be selling quick. Depending upon the surrounding EU nations and their past performance in any of the above games, swimming might also draw reasonable interest but this is augmented by the larger number of tickets available.
I have considered the Sydney 2000 Olympics to me a good indication for pricing the London Olympic Games. Based on similar economies, cultures, and lifestyles, it would be reasonable to assume Sydney’s pricing as a bench mark. Observing Table 3.2 below, the tiers available in each of the sports below vary indicating the quality of the visual experience at each pricing tier. Having just a single tier in indoor cycling indicates that everybody inside are going to have no significant advantage in terms of seating positioning and hence the one price for all. Considering this and U.K’s past performance in this sport, a premium price must be charged for this. But this should be taking into consideration the general economy keeping in mind that the global economy was just recovering from a recession.
The huge popularity of swimming with the rest of the world would entail charging the same if not higher prices than the Sydney Olympics. Considering the sport has 34 gold medal events and a larger venue this should help draw in revenues to make up for some of the less popular sports such as table tennis. This would also enable offering attractive pricing on table tennis and draw crowds in who otherwise would not have been interested. This is seen in the pricing for table tennis at the Sydney Olympics, which is 250% and 64% cheaper than comparable tier 1 preliminary events in swimming and indoor cycling respectively. At 85,000 seats available, it will also be harder to sell the event out unless the pricing is really attractive. Table 3.2: Historic Ticket Pricing based on Sydney 2000 Olympics SportEvent StagePricing TierSydney 2000
Tier 3$ 88
Tier 3$ 286
Indoor Track CyclingPreliminariesTier 1$ 41
Prelim/FinalsTier 1$ 66
Table TennisPreliminariesTier 1
Tier 2$ 25
QF & SFTier 1
Tier 2$ 35
Tier 2$ 47
Bundling too would not be a good option when one event (table tennis) is slightly inferior (less popular) than the other (swimming). There will be a
tendency to show up for the popular event and be a no-show at the less popular events acerbating the issue of audience attendance.
4)Does it matter that the London Olympics are a one-time event? Why or why not?
The Olympics is a not-for-profit organization committed to the fostering of goodwill and solidarity by bringing nations together. Though the IOC is the main body, the daily operations and planning of the London Olympics is being carried out by LOCOG. Any indifferent decisions taken without taking into consideration stakeholder’s interests can have long lasting repercussions on the country’s image. Next time an event of such grandiose is in the works, citizens will be cautious of the organizing committee’s intentions. Not to mention the fact that London had already hosted the Olympics twice in the past set a precedence of expectations and lessons learned. Pricing irrationally or not taking the masses into confidence could create a media nightmare.
5)What would you recommend to Williamson and the LOCOG?
My recommendation to Williamson and the LOCOG are as follows: •Use the Sydney Olympics 2000 as a baseline for pricing, visitor turn-out, and lessons learned •Segment the visiting population based on country visiting from, past performance of nations in certain popular games, celebrity players, etc. to get an estimate of the traffic expected at each of the events. •Look into events on a case by case basis based on the pricing tiers possible and determine pricing based on proximity to players, maintenance and upkeep of events, etc. •If possible clubbing some of the lesser popular venues or having them close to each other could keep renewed interest of visitors in these events •Have a dedicated website or an optional tab to re-sell tickets such that the reselling has to go through the LOCOG whereby the original owner has to log-in to transfer the ticket to another customer but at the same price. Sellers could be tracked and could only sell for the purchase price thereby not making undue profits. •Have the option for visitors to buy official souvenirs’ without having to buy tickets as memorabilia.