January 2, 2014
Rereading Nate Silver: 14. Salaries and Ticket Prices
Ticket Prices Vs. Player Salaries
Abstract: Nate tries to test the BP “party line” that higher salaries don’t lead to higher ticket prices, and ends up taking a mini tour through publicly available economic data before ultimately addressing the question itself. Among the topics discussed/conclusions concluded: Ticket prices spiked, relative to inflation, beginning in 1997; they did not, however, spike by nearly so much relative to disposable income; suggesting that ticket prices are tied more closely to the upper end of the consumer market; and that baseball’s key demographic is, essentially, rich people; making cities with higher per capita income relative to the country particularly fertile for ballclubs; such as, generally, coastal cities, which were already showing signs of breaking away from the larger U.S. economy in the new winner-take-all economy; and, as such, and extrapolating beyond the author’s intent only somewhat, expect Seattle to win all the World Series after 2003.
Key Quote: “But baseball executives, with their high turnover rates, may be disproportionately concerned with driving up profits in the near term. This may help to explain why ticket prices have increased dramatically as compared to inflation, but much less dramatically as compared to wealth. Catering to higher-end customers in a period of rapid economic growth may be a Faustian bargain, as it increases near-term cash flows but erodes support among working class segments of the fan base who may be important to a team's success in the longer term. This is especially true given that baseball allegiances are often strongly determined by familial affiliations, and working-class Americans tend to have larger families. I believe the low early-season attendance figures in some traditionally strong baseball communities may partly be a result of this phenomenon. See also: professional boxing.”
Updated Wealth Table: As noted, in the original piece there’s a little micro-hypothesis that teams in wealthier areas could afford to raise prices higher (relative to inflation) and that coastal cities were getting relatively wealthier. That last part still true? Here’s my attempt to recreate one of his tables, but with a 2012 column added and all major-league cities (and, for the heck of it, San Jose) included. Notable: My figures for 1995 and 2000 are different than his, though proportionately they are very similar, which satisfies me. The numbers reflect each region's per capita income, as a percentage of U.S. per capita income.
My geography skillz might fail me here, but by my count there are 14 cities here that are not within 200 miles of the Atlantic or Pacific Ocean. Of the 14, all but two (Pittsburgh and Houston) saw their per capita income drop, relative to the nation as a whole, since 2000. Meanwhile, there are 11 that are within 200 miles of the oceans: Seven got wealthier, two are in Florida (and thus fit in no category created by man), one dropped from Bubble levels yet remains the wealthiest major metropolitan area by a large margin, and Seattle dropped slightly. I don’t know if this has much to do with baseball, but I’m not certain it has nothing to do with baseball.
On the Nate Silver must-read scale: 2