October 4, 2006
The Ledger Domain
With MLB placing more emphasis on season ticket sales, fans with considerable disposable income, corporations, or sponsors are swooping up tickets that in the past might have been available to the general public at the ticket window. More and more, clubs are configuring new ticket package offerings that are tailored to get fans into long-term commitments. As an example, with a 50% deposit down on a 2007 Detroit Tigers full-season ticket package, you can get the chance to purchase 2006 League Championship and World Series home games. The increased methods of incentivizing individuals into investing in long-term commitments has increased dramatically in the past few seasons. Since those that make those investments many times have the right of first refusal for postseason tickets, clubs are only offering up a small fraction of the total seats available to the general public.
How few? Here are some examples.
With new Busch Stadium being opened up just as the 2006 season started, the Cardinals sold most seats in advance through season ticket packages or other long-term commitments. With those commitments come the perks of getting the first shot at playoff tickets, so as a result, the Cardinals are offering up only around 3,000 tickets per game to those that are not part of a ticket package that includes postseason ticket options. With New Busch totaling 46,861 in seating capacity, the total available tickets to the "general public" represents 6% of the total seats.
This isn't an isolated case created by a team in a new stadium. Although the total is considerably higher, the Dodgers released 10,000 seats for the Division Series, which represents 18% of the 56,000 total seating capacity of Dodger Stadium. The A's decided to tarp off the upper deck of McAfee Coliseum this year, and will not be changing that for the postseason. As a result, total seating capacity for all postseason games in Oakland will remain at 34,077. Instead of opening up the upper deck, the A's have released 1000 "Standing Room Only" seats priced at $15 for the Division Series.
What we're seeing is a transitional shift in how MLB is doing business. The trend is to generate long-term ticket sales as opposed to single-game purchases, with a variety of ticket packages designed to get casual fans off the fence and into their stadiums more often than a infrequent jaunt.
Roger Noll, a Professor of Economics at Stanford University and someone who has researched the economics of Major League Baseball, sees the trend based on MLB's sale strategy along with a change in the income distribution in the US.
"Most teams give priority to season ticket holders, and the fraction of seats accounted for by season tickets has been growing," said Noll. "I think baseball always has been willing to sell as many season tickets as it can, so the policy has not changed.
"Instead, as population grows and the incomes of the wealthiest people grow--recall that virtually all of GDP growth in the past few years has gone to the top quarter of the income distribution--the willingness to pay for tickets by the wealthiest has grown. This explains the growth in season ticket sales and the increases in prices."
Ticket prices for the postseason are set by MLB, but can be adjusted. An industry source claims this was the case in 1993, when the Braves were having trouble selling out the first round of the playoffs. MLB suggests the price for postseason tickets, but for the most part, this "suggestion" is put into practice and is rarely deviated from. Postseason ticket revenues are all shared between the clubs that make the postseason.
As an example of the differences between the regular and postseason prices, tickets at Yankee Stadium that may have cost $18 during the regular season for Main and Tier-Box seats will be $66 for the Division Series before the services charges. The same ticket went for $60 last season. In the case of the Dodgers, a Baseline Field Box that may go for $70 during the regular season will go for $156 for the Division Series, $206 for the NLDS, and $256 for the World Series, which is the highest price for a ticket at Dodger Stadium should they make it all the way to the World Series. By comparison, the most expensive ticket for a World Series game at Comerica Park for the Tigers would be $250.
What has come out of this is a booming secondary ticket industry. With demand high for tickets and some fans willing to part with them for a profit--and knowing as much when they make the commitment to long term ticket purchases, tickets sold on StubHub or eBay can create skyrocketing prices.
The secondary ticket sales industry is estimated by the Sports Business Journal to be worth "anywhere between $10 billion and $25 billion in aggregate size. At the club level, the secondary market is worth as much as several million dollars per year." MLB has actively participated in the industry and continues to do so. For example, Tickets.com, which is owned by MLB Advanced Media (MLBAM), controls secondary sales for six of the 30 MLB clubs based on a revenue-sharing model. MLBAM also shares in commissions with Ticketmaster, which has a deal with MLB. MLB also has an agreement with Paciolan, who works with four other MLB clubs. In total, 27 of the 30 clubs are now conducting secondary sales, which means clubs are not only making a profit on the initial sale, but the resale, as well. As an example, the Mets charge sellers a 10 percent fee on the ticket price, and buyers 11 percent.
MLBAM continues to look at controlling these secondary revenues and the levels at which individuals can resell tickets to MLB games. Clubs are also becoming directly involved. The Angels and Yankees are the most recent clubs that are looking to prevent what they see as abuse in the secondary ticket sales industry. For example, the Angels will put into place a policy next season in which season ticket holders will not be able to resell tickets to more than 20 games, and that the price per ticket is not to exceed three times the face value.
The Yankees are trying to get fans to stop reselling on StubHub, who is also a major radio sponsor for the club. The club has stated that they will revoke season tickets from those that resell on not only StubHub, but eBay as well. The reason? The Yankees are considering launching their own company to sell secondary tickets. A New York assistant attorney general believes that the Yankees have the legal right to prevent the secondary sales while in the midst of creating their own online site designed for secondary sales; Pinstripe Marketplace is listed as 'coming soon' on Yankees.com. Those that purchase season tickets with the Yankees sign a contract stating it is in violation of the Yankees policy to resell tickets. If the Yankees find a season ticket holder in violation of the policy, the Yankees can revoke postseason, as well as season ticket licenses for the 2007 season, and beyond.
But, is the control of ticket sales by clubs truly limiting tickets to the general public? Not so says Rodney Fort, a professor of sports economics at Washington State University.
"The fact that leagues pre-empt this behavior by 'the general public' with official resale agreements is just a distributional result; the league, official resellers, and the favored post-season ticket holders make the money rather than 'the general public' but the latter would have resold them as well," said Fort. "It's just different people getting the money from resale. The major point is that resale has happened, will happen, and is now simply officially in operation through licensed resellers."
When MLB created MLBAM in 2000, one of the first efforts the media arm of MLB did was to pull all the divergent club websites under one umbrella. Looking at the pricing structures for postseason tickets, the strategy of enlisting more long-term commitments in the form of advanced ticket sale packages, and the regulating of the secondary ticket resale market for games, MLB is positioning itself to reap the benefits of the supply and demand for postseason tickets, and beyond.
As for the average fan who may simply want to get into a postseason game and walks up to the ticket window between now and the end of the postseason, they may well have to settle for being asked "May we see your ticket snub, please?"