Wednesday, October 22, 2008

Price Discrimination at the Super Bowl

NFL Super Bowl ticket prices for the first time are $1000. Specifically, the NFL will sell 17,000 suite and club seats for $1,000 each, 53,000 tickets at $800 each, and the remaining 1,000 tickets at $500 each. This is a change from last year when Super Bowl tickets were priced at $900 and $700 each. So instead of two price points, the NFL is providing three price points for Super Bowl tickets.

The NFL seems to be moving in the right direction, even if it is at the speed of molasses in January. Assuming all Super Bowl tickets are sold by the NFL, a quick calculation reveals that under this three point pricing scheme, the NFL is poised to make $59.9 million on the Super Bowl - just in ticket sales. Now I do not know how many 2008 Super Bowl tickets sold (at face value) for $900 or $700, but let's assume that half of the 71101 Super Bowl tickets sold by the NFL for the 2008 Super Bowl were $900 and the other half were originally sold for $700. The NFL would have made almost $56.9 million in Super Bowl ticket sales for the 2008. Thus the three price points policy can increase overall Super Bowl ticket revenue for the NFL by roughly $3 million.

While this is good news from the NFL's perspective, the bad news greatly outweighs the good. Like I mention in a previous post on ticket scalping, live ticket event pricing is one of the worst priced services in the marketplace. In fact the NFL agrees, "[i]t appears our face value is underpriced based on demand and what people are willing to pay," said NFL spokesman Brian McCarthy. I think "appears" is an understatement. From 2004 to 2007, Super Bowl tickets resold on ticket exchanges - such as StubHub - for at least a 400% mark-up (my calculation). At the upper-end of the Super Bowl ticket revenue potential, the NFL is leaving almost $180 million in ticket sales revenues to on-line ticket brokers.

Granted, not all tickets could be sold for 400% (or more) than their current face value, but many could. My point is that the current change in Super Bowl pricing is a good start to generate greater Super Bowl ticket revenues, it is a small gain relative to setting Super Bowl ticket prices closer to what spectators are willing to pay as revealed by on-line ticket price auctions.

Finally, maybe the NFL could allocate tickets in a more efficient manner. Currently the NFL allocates 17.5% to both teams playing in the Super Bowl (35% total), 5% to the team hosting the stadium. The other 29 NFL teams receive 1.2% each for a total of 34.8% of all Super Bowl tickets, and the NFL distributes the remaining 25.2%. Instead of selling tickets to the NFL teams, why not sell them to the fans directly. In this day and age, setting up an auction is not that difficult. Additionally, those that are willing to pay the most will be those that attend, as opposed to people getting tickets via luck, nepotism, or favoritism. I find the NFL's ticket allocation policy in conflict with some of the goals the NFL has for its players and fans, specifically, fairness.

Here is a list of Super Bowl Ticket Prices since Super Bowl I.

1 comment:

Shirley said...
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