How Teams Can Use Ticket Prices to Serve the Audience

MLB could benefit from kid-friendly events at parent-friendly times. (via Paul L Dineen)

MLB could benefit from kid-friendly events at parent-friendly times. (via Paul L Dineen)

If new commissioner Rob Manfred reads The Hardball Times, he’s already seen our 10-part wish list of what we’d like him to address within the game. In this article, I’d like to consider something too basic to make the list: ticket pricing. Baseball has an existential need to keep growing its fan base, particularly young fans, and there are few economic levers for doing so as effective as lowering the cost of a ticket.

Of course, tickets are also a major source of revenue, and teams obviously shouldn’t starve themselves into insolvency. But I’ve already argued that I believe that new commissioner Manfred urgently needs to win new young fans for baseball, and I believe that baseball’s customer experience in that regard often leaves much to be desired.

One way to bring in new young fans is by targeting families with discount tickets. Teams do this, but their efforts are all over the map. Typically, they’re on weekend games, probably because those aren’t school nights. In 2015, the Braves, Nationals, and many other teams will have a “Kids Run The Bases” promotion on many Sunday games. The Astros have a number of “Kroger Family Sundays” marked on the schedule, allowing children under the age of 2 to get in for free. (Though that’s really more of a daycare plan than a family plan. It doesn’t do anything for families with children who will actually remember the game.) On Saturdays and Sundays, the Nationals have “Harris Teeter Family Fun Packs,” which bundle a ticket with a hot dog, potato chips and soft drink. The Cubs offer a six-game “Family Day Pack,” with tickets for six Sunday games. Some teams also have promotions associated with a specific game on the calendar: Wednesday, April 15 is the Cardinals’ “Catholic Family Night,” and June 6 is the Braves’ “Father-Daughter Night.”

I asked several sports economists how teams could best use their current ticket prices to grow their future appeal. Over the last decade, many teams have implemented dynamic pricing, algorithmically driven ticket prices that fluctuate from minute to minute and may depend on everything from the desirability of the game to, potentially, what may be inferred about the buyer herself.

What do I mean by desirablity? A 2013 article in Sport Marketing Quarterly analyzed publicly available ticket data for the Giants, Cardinals, White Sox, and Astros. The authors found that “factors include the day of the week, month of the baseball season, team success (win percentage), opponent, promotions, and starting pitcher.” Just as with airline tickets, the price of the ticket may fluctuate wildly depending on when you buy it: a June game against the Marlins might not cost much if you bought it in April, but it might cost a lot a few days beforehand, after Jose Fernandez is announced as the starter.

The principle behind dynamic pricing is simple: price discrimination. That means that different fans have a different maximum amount that they’re willing to pay, so the purpose of dynamic pricing models is to pick a ticket price that is as close as possible to the maximum price a fan is willing to pay. Of course, it’s hardly a new concept: as my editor Joe Distelheim says, “Go to a market in any continent and you’ll find cheaper prices on the produce as the sun sets.”

Team pricing data are closely held corporate secrets, but broad contours are known. “About two-thirds of the clubs use dynamic pricing models, and one-third of the clubs use traditional variable pricing schemes,” Vanderbilt economist John Vrooman writes in an email. Eventually, he predicts, every team will use them.

So I have three overarching questions in mind with regard to baseball-wide pricing strategy:

  • What are teams currently trying to maximize?
  • What should they be trying to maximize?
  • What should they change about the way they’re currently pricing tickets to achieve this different goal?

Rodney Fort, a co-director of the Michigan Center for Sport Management, answers the first question by arguing that teams should seek to maximize their own future sale value. “The final arbiter is, if I sold this team tomorrow, how much could I get for it?” Fort said in an interview. “If everything is done in the best way, I will get the biggest sale price I could hope to get.” This type of approach should balance short-term revenue with long-term growth, fan service with profit margins, because (assuming perfect information, the kind of assumption you always have to make in classical economics) any corner-cutting would lead a buyer to make a lower bid.

Of course, he points out, not all owners will behave this way. Some of them really, really want to win a World Series and are willing to bear the amount of money that will cost them. Some are real estate developers who are willing to use the team to maximize the value of other assets in their portfolio: Making downtown ballpark tickets affordable may raise property values for nearby apartment complexes.

But still, maximizing future sale value may still suggest that teams should discount their tickets. There are several reasons why.

First, revenue attributable to tickets goes far beyond the ticket price, because once a fan gets into the ballpark, there are a whole lot of things to spend money on. “They try to price tickets to bring people in to maximize a bundle,” says Brian Mills, an economist at the University of Florida, in an interview. “Tickets, parking, concessions, etc.”

And there’s another reason to keep the price of the ticket itself artificially low: “rational addiction.” In other words, Mills explains, “if you can get people into the stadium, they’ll decide they like it and next time they’ll be willing to pay more.”

Mills points to two other reasons for teams to want to keep attendance as high as possible: in-stadium advertising, and the psychological effect that popularity has. From the fan’s perspective, of course, everyone enjoys being in a ballpark when it’s full more than when it’s empty. He pointed to a 1998 article in the Journal of Economics and Finance that suggests teams price tickets in order to increase attendance because of the home field advantage. “In short, a lower ticket price attracts more fans, which, in turn, increases the home field advantage,” the authors write. “The increase in the probability that the home team will win makes the event more attractive, further increasing attendance.”

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Second, teams with publicly financed ballparks may have promised local governments that they would make tickets affordable. “There’s a relationship between how low you set your prices and the subsidy that you’re negotiating with local hosts,” says Fort. “If you show that you’re serving your local hosts by keeping prices down, then local politicians may more than offset that revenue loss.”

Third, and most importantly, in order to grow the future audience, Major League Baseball needs to be able to reach fans long before they start paying for tickets themselves. After all, says Fort, “Young people don’t buy tickets.” Most of us saw our very first baseball game with a family member who bought the ticket for us. So one way for teams to bring more young people into the stands is to sell more family packages, deals that make tickets cheaper for fans who have young children.

There’s a tradeoff there, obviously: There are a fixed number of seats in the ballpark, and if you have a packed house, then any tickets you discount and earmark for families are going to push out fans who would have been willing to pay more for it. That may be fine, and may still satisfy Fort’s assumption that teams want to maximize their future sale value, but it will depend entirely on how teams calculate the lifetime value of each of their fans.

That line of reasoning — to maximize the team’s sale value, provide discount tickets today to the superfans of tomorrow — is how to square the circle, but when stated in those terms, it’s a fairly obvious point, and because teams already offer a multitude of family plans, it’s quite clear that teams already agree. Baseball games are fairly affordable for a family — absurdly affordable compared to the other major professional leagues, and depending on the quality of the seat, they may be slightly more expensive than a movie or a college game.

But it still costs a fair amount of money to get the family into a car, pay for parking, and buy tickets and food for every member of the family. This is why in many sports, family plans often include discounted parking and food. If Major League Baseball is serious about gaining more young fans, it could help ball clubs develop a standard format for family tickets, both multi-game packs and single-game tickets. This would allow the teams to coordinate a national marketing effort to families.

Obviously, teams are concerned with selling to their local markets, and every market is different, and every park has a different number of seats to sell. But bringing more families with young children into the ballpark is — or should be — a national strategic goal. The league should work with teams to find some way to combine national strategy with local pricing. They could still have single-game promotions — starting a “mother-daughter night” would be a great start — but helping to ensure a family option for any game would help clear the clutter and confusion.

One way for baseball to bring in more young fans is to tell young families how much money they’ll save if they come to the ballpark. Once they’re at the park, they just might fall in love with the game. That’s exactly what baseball needs.

References & Resources


Alex is a writer for The Hardball Times, and is an enterprise account executive for The Washington Post.
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Carl
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Carl

If serious about it, Manfred will outlaw Dynamic pricing. The practice, just like the airlines, removes/eliminates consumer surplus, which by definition is the difference between the price the consulmer pays for the item and the price point they would do without it. By eliminating it via dynamic pricing, 2/3 of the teams have wrung all consumer surplus from attending the game.

Attending a game results in less “surplus” to the point attending a game is just slightly more enjoyable than flying.

Duane
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Duane

I think MLB teams should provide dirt-cheap (or free) tickets to Boys and Girls clubs for games they know will have empty seats. If the seats were going to be empty anyway then they will make money on concessions and hopefully work on building a younger fan base that will be there for the team for years to come.

Brian Mills
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Brian Mills

They do, actually. Both in baseball and in other sports, this is pretty common practice for a number of reasons that include the ones you mention. In some cases, they do it to keep their “sellouts”, which in turn can mean more advertising revenue (selling inventory in the stadium).

Brian Johnson
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Brian Johnson

Baseball has an existential need to keep growing its fan base, particularly young fans

I don’t think this is true. There are more than enough baseball fans to sustain the sport. Cheap tickets for kids is a great idea — I have no objection to that. But the idea that baseball should make concessions to attract more fans is a dangerous and pernicious myth. Far more important for baseball to maintain its integrity, even if the fanbase is reduced by a factor of 1000.

Chuck2a
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Chuck2a

“…maintain its integrity,…” What does that even mean in the context of promoting the game to young fans and recruiting a new generation of fans?

Matthew
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Matthew

Baseball has the oldest average viewer of every mainstream sport in the United States and is second in all sports to only golf. Baseball may not need more fans now, but they will soon when those older viewers/fans stop buying tickets and merchandise.

Calvin Liu
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Calvin Liu

If bringing in children in order to grow future customers is truly beneficial – and I think it is – then promotions to do so should be a part of a baseball team’s marketing department. To try and create ticket policy to both market and maximize revenue is frankly impossible as they are fundamentally opposing goals in the short and even medium term. However, teams do set aside large sums in order to market – diverting or isolating some of this for “far future” demand development is perfectly legitimate. It puts the onus for identifying the success percentage and lifetime… Read more »

Infielder
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Infielder

Another thing some teams do is having “kids clubs.” For a reasonable amount, you get some team swag (stickers, pencils, and the like) and ticket vouchers to x number of games. The vouchers can be used by kids with the purchase of an adult ticket. Seems to be a good way to grow the fan base, while encouraging adults to still buy tickets but still offering value to families. In fact, my local Triple-A team did this growing up and we went to probably dozens of games a summer growing up because my parents had already paid for our tickets… Read more »

Tomston
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Tomston

The thing is, teams don’t need to do any of this… Baseball wil be perfectly fine with less revenue and fewer fans. Neither of those events are even happening. Fan bases are growing in demographics that brainwashed sports writers don’t look at, the most important demographic: young adults, those with the time and money and social groups to go to games and who will be fans for 40-60 more years. Baseball is completely fine, this article was a waste.

Brian Johnson
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Brian Johnson

If any business in the world lost 90% of its revenue, it would go out of business.

I dare you to back that up. I just web-searched for “lost 90% of revenue” and found many companies this has happened to, which are still doing JUST FINE (Tesco, Williams-Sonoma, etc). I was sympathetic to your main point, but now you’re just making up nonsense off the top of your head.

I repeat: there is no need for a billion-dollar juggernaut to produce good baseball. MLB would provide just as much value to consumers with 1% of its current revenue.

bucdaddy
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bucdaddy

Does the old adage “If you’re selling all your tickets, you’re not charging enough” still apply?

And I’ve advocated for years the use of rush tickets (I don’t have to explain what those are, do I?) based on the theory that an unsold seat loses more money than the base price, because of the lost opportunity for concessions, parking etc.

bucdaddy
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bucdaddy

Does the old adage “If you’re selling all your tickets you’re not charging enough” still apply?

And for years I’ve advocated the use of rush tickets (I don’t need to explain those, do I?) on the theory that an unsold ticket loses more money than the face price because of the lost opportunity to see food/beer/gear/parking etc.

Marc Schneider
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Marc Schneider

I don’t understand the idea that Brian Johnson seem to advance that baseball should exist only for the benefit of the connoisseurs and, therefore, should not be run as a business. If you want to grow your business-and professional sports is a business-you have to attempt to maximize your revenue. I’m also not sure what Brian means when he says it’s more important for baseball to maintain its integrity even if the fan base is reduced by a factor of 1000. Really? First, I don’t know what integrity has to do with lowering the price of tickets. He seems to… Read more »

Brian Johnson
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Brian Johnson

Indeed you’re right, cheap tickets don’t threaten the integrity of baseball – quite the opposite. Within the context of maintaining the integrity of the game, certainly the league should make money; that’s the American way. The trap to look out for is the false idea that because baseball is a business, its owners are bound to do anything at all, no matter how egregious, if it brings one more dollar to the table. This isn’t a hypothetical concern – look at our dear commisioner’s so-called “pitch clock”. Baseball is not played with a clock; this is the very definition of… Read more »

Brian Johnson
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Brian Johnson

Thanks for pointing that out, I wasn’t awar that the rule isn’t technically new — but enforcing it would be. Does anybody have reports of how well this has worked in practice? I can’t imagine that a giant NBA-style “shot clock” could be anything but an annoyance.