The Impact of Wins, Stadiums, & Economies on Ticket Prices by Owen Watson March 8, 2016 For many irrational reasons, I have consciously decided to put myself through the experience of being an Oakland A’s season-ticket holder for the past three years. Every year since I joined this small, delusional, and fanatical club, the price of season tickets has gone up by a sizable amount. I say “sizable” as an intentionally unscientific term, as I realize there’s a lot that goes into it, but the increases have been more than noticeable for my section of the stadium, which is not one of the highest-priced nor one of the very-lowest. The A’s were really good between 2012 and 2014, so I understood that the increase was probably just the price of success, and left it at that. We all know what happened to the A’s in 2015, however: they lost 94 games. It was a woeful, terrible year. You can’t come up with a superlative to represent what trading Josh Donaldson and then losing 94 games is like. It felt — and feels — exactly what it sounds like reading that sentence. It was with some confusion, then, that I looked at the prices of tickets this January and saw that the prices had stayed steady or increased, especially for those teams or dates that are denoted as top tier. As most teams now do, the A’s have adopted a dynamic pricing model for their ticket sales, which assigns higher pricing to favorable matchups, promotions, days of the week, etc. It’s a complicated and flexible model, and there’s the chance that holding off on buying tickets now might actually save money if certain circumstances arise. The possibility of the opposite is true, however, which is the point (for the A’s) of adopting the model. The fact remains, however: the A’s were one of the worst teams in baseball during 2015, yet one wouldn’t know it from the ticket-price differences between 2015 and 2016. My own personal situation with the A’s is secondary to what we’re going to be looking at today, however, as it was simply the spark that caused me to ask a myself a few questions: what is the relationship between winning, losing, and ticket prices? How much do new stadiums increase ticket prices? What role does the larger economy play? And, on a deeper level — whether it’s actually the case or not — should teams have a moral obligation to own up to their team’s recent failures by adjusting ticket prices? With all those questions and a few more in mind, I set out to try to answer them. The data for this sort of undertaking is inherently scattershot. There isn’t a great repository of, say, the lowest-priced ticket for every team over the past 10 years. At least not one I could find. The best resource I found was a site called Team Marketing, which assembles a yearly “Fan Cost Index” for each team and the league as a whole. In addition to factoring in the cost of beer, food, etc. into this index, they also log the cost of an average ticket — that is, the cost of a non-premium ticket based on season-ticket prices. The average is weighted to weed out the discrepancies of more or fewer seats in areas that don’t cost the same, so it’s actually a pretty representative figure of a strictly average ticket. The only knock against it is that the teams get to decide what is “general” seating and what is “premium,” but that’s splitting hairs a little bit, and this information is great in that it is one of the few available datasets not based on the secondary market for tickets. The data goes back to 2007, so I’ve pulled everything and assembled them in some tidy graphs for us to look at. For reference, here’s the source: 2015 Team Marketing MLB Report. It’s worth a look. First, let’s examine the general pricing trend of tickets for each team and the league as a whole. All of these graphs are interactive, so feel free to scroll over them and select teams to find out specific information. The league-average ticket price for all teams increased by slightly more than $6 between 2007 to 2015, with some really remarkable changes occurring mostly on the top-end of the spectrum. What these figures don’t necessarily capture is something Matthew Kory addressed last week — the increasing barrier-to-entry cost for those wanting to see baseball (i.e. the cost of the lowest-priced seat available in any given stadium). However, we can probably safely expect that teams with higher average tickets prices also to have higher barriers to entry. As Matt pointed out, it’s hard to get an actual seat at Fenway for under 40 bucks. Now let’s get into some cause and effect for ticket prices. The first thing that jumps out in our chart above is that massive spike for the Yankees all by itself up in the $70 range. You might be able to guess what happened in 2009 to cause that spike: the new Yankee Stadium opened. So let’s take a look at all of the new stadiums that have opened in our time frame and their impact on ticket prices. I’ve charted them below, with the percent increase in average ticket price over the previous year, as well as whether the stadium was publicly-funded. (Though the question of public-funding can be complex, I’ve used the most widely-accepted figures for it, including future tax subsidies.) Changes in Ticket Prices Due to New Stadiums Stadium Year Opened Opening Year Change in Ticket Price Public Funding Nationals Park 2008 +18.4% $693 Million Yankee Stadium 2009 +76.3% $1.2 Billion Citi Field 2009 +8.6% $614 Million Target Field 2010 +45.0% $350 Million Marlins Park 2012 +55.4% $500 Million+ Yankee Stadium certainly increases the stakes among this group, with its staggering 76.3% increase in ticket prices over the year before the stadium opened. Based on our data, the average increase in “general” (non-premium) ticket price due to a new stadium opening was $11.75, or 42.8% over the previous year. If we take Yankee Stadium out of the group — it could be considered an outlier, after all — our average increase in ticket price drops to $6.79, or a 28.3% increase due to a new stadium opening. Those are still substantial increases on ticket holders, especially if we even think about factoring in public funding for stadiums — an issue whose complexity places it outside the scope of this piece. Quickly, however, we can say this: though these public-funding figures often include future tax breaks — an issue that makes exact numbers difficult to project — many also include direct taxes on residents, like the sales tax in Hennepin County that was implemented without a voter referendum to finance the Twins’ new stadium. Though factoring in those taxes on ticket-price increases would be difficult to do, it’s at least something we should keep in mind when discussing the subject. Now that we know new stadiums are a driving force behind increases in ticket prices — as we might expect them to be — let’s look at a few other potential factors, like win totals. I’ve pulled win/loss information for our time frame, and plotted the relationship between ticket price change and the previous season’s win total. Again, this chart is interactive, and I’ve also highlighted the teams that built new stadiums in blue. Take a look: Variability is an understatement here; if you mouse over the trend line (which we have to consider a loose term here), you’ll see an r-squared of just .01 and a p-value of .06. We should expect this, as tickets fluctuate in price for many reasons beyond how many wins a team had the season before: normal inflation, new stadiums, demand, you name it. But we do clearly see something related to ticket prices the year after a team wins 90 games — tickets seldom decreased in price (outside of the Yankees in 2010 after their incredible 2009 price increase was walked back less than a month into the season). So how about this — let’s just look at playoff teams. What’s the average ticket price change for teams the year after they make the playoffs? I’ve gone through the data and pulled only those teams that got to the postseason (Wild Card games included), averaging their ticket price change: Average Ticket Price Increase, Playoff Teams, 2008-2015 Scenario Price Change, Following Season Average Yearly Increase (All Teams) +3.6% Lost in Wild Card Game +6.7% Lost in First Round +7.4% Lost in Second Round +5.4% Lost World Series +4.8% Won World Series -1.6% SOURCE: Team Marketing Report As we might expect, playoff teams increase their ticket prices more than the league-wide average. This also shows that simply making the postseason is a big factor in price changes, as the largest increases came in the year following getting knocked out in the Wild Card or the League Division Series. This could also be influenced by the fact that teams who exit in the Wild Card or first round are often one-off teams that don’t often make the playoffs, whereas many of the teams that have made deep runs in the past seven years are in the playoffs on a more consistent basis. That survival bias is certainly a hypothesis for why we see the average ticket-price increase actually fall as a team gets deeper into the playoffs. Our negative value for World Series winners is also being skewed by the 2010 Yankees winning, as they brought ticket prices down by an average of 29% after the spike in 2009 for the new stadium. If we remove them from the sample of World Series winners between 2008-2015, average ticket prices for WS winners actually rose by +2.4%. There’s one other big factor on ticket prices outside of supply and demand at which we can look: national economic conditions. As we all know, 2008 and 2009 were years of global financial turmoil, so it’s unsurprising that only 16 out of the 30 major-league teams increased their ticket prices for the 2009 season. Most of the teams that increased their prices did so by marginal amounts, and nine teams actually decreased their prices — often by double-digit percentages. Compare that to 2008 — when 27 teams increased their prices — and we can start to get an idea that the economy could quite understandably be a big driver of ticket cost changes. Take a look at average ticket price increase vs. U.S. median income growth for our timeframe: Individually, there are a lot of complexities to how ticket prices fluctuate season to season. Collectively, from this information, the case could be made that the economy is the biggest factor. This study doesn’t get into the complexities of the dynamic-pricing model, which would certainly add a wrinkle to our findings. It also doesn’t get into in-season supply-and-demand issues, which are a huge driver of ticket prices from game to game. And, finally, these figures aren’t adjusted for inflation. I’m not a professional economist, and as with most things baseball-related, controlling for every variable is difficult to do. But there’s signal here related to individual circumstances, especially for stadium-building and playoff appearances. Teams will sell tickets at whatever price they think people will pay for them, which is a bedrock tenant of our economic system. That’s their right to do so. But that also obscures a truth about baseball. The truth is that baseball is not just business; it is, in fact, a pursuit whose end product is experientially divorced from its financial machinations. Sure, we pay attention to contract figures and free-agency decisions, but there has always been baseball (the business), and baseball. The two are completely different. There are few subjects in the world in which the emotional interests of the public and the financial interests of those running a business oppose one another more often than sports. It has always been like this, and it will continue to be like this; up until now, the business interests have almost always won out. History tells us that expecting otherwise is naive. And yet it seems important to continue examining this tension between the owners’ obvious financial interests and their role as stewards of a public institution. If we view baseball through this perspective, it’s not crazy to think that ticket prices ought to be decreased after losing seasons, just as they are increased after successful ones. In our sample, there were just 51 out of 240 individual seasons that saw a ticket price drop, and that was during an era that endured the worst economic climate since the Great Depression. We’ve already seen how much of the cost of building new stadiums falls not only on taxpayers — who are often unwillingly forced to give money to billionaires — but also to ticket buyers, who are on the hook for higher prices regardless of a team’s results on the field. Owners take advantage of the “public trust” aspect of owning a baseball team by putting the cost of new stadiums and team success on taxpayers and ticket holders, yet assume little responsibility (in the form of lower ticket prices) when teams fail to win. We don’t expect them to do otherwise, but that’s due merely to the precedent which has been set. Perhaps it’s time to establish a new one.