April 6, 2010
Un-Juicing Ticket Prices
Thanks to the Great Recession (official run now over, but still in extended performances), what seemed like a never-ending boom in baseball ticket prices has slowed to a crawl the last couple of years: If you don't live in New York or Boston, there's even a chance you're paying less for tickets now than you were two years ago.
Still, the sports ticket bubble remains undeflated — as an op-ed in yesterday's New York Times notes, over the last two decades, the average Cubs ticket price has risen 265%, more than four times the inflation rate. And the authors, Duke law professor Richard Schmalbeck and Rutgers business professor Jay Soled, identify one reason why:
There are many reasons for the price explosion, but a critical factor has been the ability of businesses to write off tickets as entertainment expenses — essentially a huge, and wholly unnecessary, government subsidy.
These deductions have led to higher ticket prices in two ways. On the demand side, they have fueled competition for scarce seats, with business taxpayers bidding in part with dollars they save through the deductions.
On the supply side, the large number of businesses bidding for expensive seats has driven the expansion of luxury skyboxes and a reduction in overall seats in new ballparks.
This hasn't exactly been a secret — it's an issue I've raised before, and Joanna Cagan and I noted it way back in the first edition of our book. The deductibility of sports tickets has bounced around a bit — it's currently at 50% of the face value of tickets — but it remains a huge incentive for corporations to pay more than they otherwise would for tickets, driving up prices overall — and helping spur teams to demand new stadiums with more luxury seating that they can sell to the artifically inflated corporate market.
Schmalbeck and Soled argue that while it would be ideal to eliminate the business-entertainment deduction for sports tickets entirely, probably a more feasible reform would be to cap the deduction at $50 per seat. That wouldn't end the juicing of ticket prices — teams being able to fill up their seats with partly deductible fannies would still help price me out of the stadium — but it would at least blunt it somewhat. Where's Dennis Kucinich when we need him?