Factors that Affect the Customer Demand for Sport Tickets

Sports have always played a big part in the lives of Americans and have provided a way for people everywhere to come together and escape their everyday lives while cheering on the teams that they love. Ever since professional baseball started in the late 1800s, consumers have paid the price of admission to get a ticket to see their favorite team play. In today’s environment, consumers are willing to pay an absurd amount of money to spend 3 hours watching their team compete.

For example, Game 1 of the 2017 World Series average ticket price was $1,863 (Garcia). Another example was the 2018 NBA finals, where the most expensive ticket was $76,956 (Kay). To a neutral third party, the exorbitant price of tickets is not worth it. To a dedicated and passionate sports fan whose favorite team made it into Game 1 of the World Series or into the 2018 NBA finals, these tickets are worth the price. Why are consumers spending a ridiculous amount of money to watch the game when they could spend no money and still view the same event on television? This enigma is puzzling to me in many ways.

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From a sport’s fan perspective, I understand paying what feels like a substantial amount to see my team, but as an economics student, it seems illogical that consumers would spend ridiculous amounts of time and money to go to a game when you can view the game on television for little or no cost, and in the comfort of their own home or a bar.

The concepts I am going to be touching on in this paper is cost-benefit analysis, law of demand, scarcity forces tradeoffs, and incentives matter.

Sports fans are facing a constant dilemma; they must decide on whether they wish to pay to attend a game or watch it on television. For this, consumers participate in a cost-benefit analysis to determine if the explicit and implicit costs of attending are worth the benefits they receive. A cost-benefit analysis is used to show whether the benefits of making a decision exceed the costs that are associated with that decision. When going to a live sporting event, there are many costs to keep in mind. Some of the explicit costs are the ticket, food and beverages, parking, and any souvenirs one might want. The implicit costs for going to a game can be travel time, preparation, and the opportunity cost associated with the cost of going and viewing the game. Fans will use these costs and compare them to the benefits of attending. For many sports, the experience fans receive from the event is the main benefit and can be viewed as “priceless”.

The experience of tailgating, atmosphere of the crowd, and the social status of attending are some of the major benefits that come from the live sporting event experience. Although some people would rather tailgate in the parking lot the whole time rather than go into the stadium, it still counts as part of the gameday experience. Going to a game live and being in the crowd as it erupts is a huge benefit. The atmosphere of the crowd at a live sporting event is unlike anything else. Other times, people just go to games for the social aspect so other people can see them. Lakers games are notorious for being more of a social event than a basketball game. Celebrities and wealthier fans spend their money on front row seats even though they watch half of the game.

While the costs of watching the game live can add up, the costs of watching at home or a bar are really only food and drinks and the opportunity cost. You can still receive an experience that outweighs the costs when choosing to watch the game at a bar. Some benefits received are the convenience of being able to get in and out of a bar without the whole ordeal behind going to a game, such as struggling to find parking and fighting large crowds. Another benefit of the bar is you are almost guaranteed a great view. Yes, sitting courtside at a basketball game is an experience unlike anything else, but sitting in the nosebleeds is not worth the price when the TV has a better view. Another huge benefit of watching at the bar is being able to watch multiple games on multiple screens at once. This is very true for March Madness when 6 games can be playing at once. A fan can sit there all day and watch sports and not spend hardly any money. One other key benefit of watching the game at home or a bar is not having to walk through huge crowds of opposing fans after your team loses. Based on this analysis, consumers must make their own decision and determine personally whether the benefits received outweigh the costs. Consumers then can determine their willingness to pay for an event.

The next factor I will be looking at is the Law of Demand. According to the Law of Demand, consumers demand more of a good the lower its price, holding constant tastes, the prices of other goods, and other factors that influence the amount they consume. In layman’s terms, as the price of a product or service rises, the demand will fall and vice versa. Ticket prices are immediately the first cost you think of for a sporting event. Ticket prices affect demand the most, but there are other factors involved. According Forbes, in 2018 the average cost for a family of 4 to attend an MLB game, purchase food and drinks, souvenirs, and parking was $230.34, while the average actual ticket is $76. So, a ticket is only around 30% of the total cost. These increases in cost are what is leading to the MLB having their lowest average attendance in 15 years, which is down 8.6% overall (Brown). Other factors affect demand for sporting events other than the prices associated with the event. Some of the factors associated are consumer level of income, age, weather, competition of the event, or even gender. According to Demographic partitions, men between the ages of 35-54 are the biggest purchasers of tickets for sporting events. The average level of income for fans in the U.S. is between $40,000-$75,000. As income increases, demand for these luxury items increases. When fans are attending outdoor sporting events, weather is a key factor for demand. In the 2018 MLB season, there have already been 11 weather related postponements. Nine teams have played in temperatures averaging 40 or below. This does not increase the demand for fans to attend. In addition, consumers are more likely to pay higher prices to attend games if the game features an elevated level of competition or a well-known player. Lebron James is arguably the greatest basketball player in the world and news that he was joining the Lakers immediately increased demand for L.A. Lakers tickets. According to the Mercury News, within 20 minutes of his announcement, the lowest Lakers season ticket went from $3,499 to $6,500 per seat. So yes, ticket prices affect demand, but other factors are also important deciders of demand.

Scarcity forces tradeoffs is another topic that comes in to play when deciding whether to attend a sporting event. Scarcity is defined as the condition of limited resources, where society does not have sufficient resources to produce enough to fulfill subjective wants. Scarcity is very prevalent in ticket prices for NFL games. A reason for this is the NFL only plays 16 games, which means a fan can only view their team at home 8 times a season. This limited supply of games allows for NFL teams to charge higher prices. In 2017, the average NFL ticket had increased 6% compared to the year prior (Ramachandran). This scarcity of games has also affected the broadcasting of the games. A few years ago, the only NFL games a fan could watch were limited to whichever game were chosen to be shown on CBS, NBC, or Fox. The games shown were dependent on the consumers geographic location and the teams playing. Now fans can watch games on CBS, NBC, Fox, ESPN, NFL network, twitter and Facebook, NFL RedZone, or NFL Sunday ticket. NFL Sunday ticket allows fans to watch all out-of-market games. In 2018, NFL Sunday ticket prices increased from $281.94 to $293.94 (Grathoff). Consumers see what scarcity is doing to the prices of tickets and the prices of NFL Sunday ticket. This scarcity forces consumers to make a trade off with their funds. Fans must make a choice on whether they would spend $293 to view every game at home or spend relatively the same price to see a game live. Another tradeoff fans must make is with their time. It is up to the consumer to determine if they value paying for a ticket and going to a game over more money and more free time.

Because an increasing number of fans are watching games on TV, teams of all sports are adding more and more incentives and amenities to try and draw fans to come to the game. Teams are realizing that the fan experience, not the game, is what is going to increase attendance and separate themselves from TV. Teams are focusing on incentivized fan competition, such as the Dr. Pepper challenge where contestants compete against each other by throwing a football at a Dr. Pepper target. The winner will usually receive either a monetary prize or some scholarship. In 2017, Penn State created incentives for their fans to try and increase attendance. Some of the incentives were if fans showed up within 45 minutes after the gates opened, fans received a 20% on concession items (Penn State). Besides incentives, teams are trying to increase the amenities in the stadium. The Atlanta Falcons recently built the Mercedes-Benz Stadium, which is supposed to be one of the most fan friendly stadiums around. Some of the features are the fan first pricing, technology & video displays, increased Wi-Fi, larger seats, and more restrooms for both women and men (Atlanta). Since the Falcons opened the new stadium, average attendance has increased. These new incentives and amenities alone are worth the price of admission for some fans. These incentives make the difference between watching the game on TV and going to the game that much larger.

In the end, there are several factors that motivate a sports fan to purchase tickets and attend the event rather than to stay home and watch on TV. The main points I looked at for examining a consumer’s decision was a cost-benefit analysis, the Law of Demand, scarcity forces tradeoffs, and incentives matter. Using these factors, and my prior knowledge as a lifelong sports fan, I was able to explain the fans desire for paying and attending sporting events rather than just viewing them on TV. Fans are willing to sacrifice whatever is necessary to see their team win.