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?
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Other than that, bravo! Bravo! But then I'm in favor of the estate tax with a million $$$ deduction, which I guess makes me a commie.
Nice dream , huh?
-Racketeer Mendy Menendez explains his business model to PI Philip Marlowe in “The Long Goodbyeâ€
I don’t spend that much time thinking about how baseball teams make their money because I know that it’s just going to make me angry--my team plays in “corporate banditry field,†I’m not quite prepared to hold that against them, even if I should.
But companies writing off their seats—it’s kind of beautiful. Because the very taxpayer who is subsidizing the corporate ticket is the same guy who now can’t afford to take his family to the game, due to the inflated ticket prices, which inflation is caused by a write off that is essentially paid for by the taxpayer… and then, in between the innings, the corporate types can all chat about how to rise prices and lower wages. Marvelous.
I'm not familiar with the American tax system (I am an accountant, but Canadian), but I assume the expense also has to be for business purposes. At the very least the company would have to be bringing client's, or potential client's to the games on a regular basis. Anyways, if anyone has a little more insight on the American tax system, I would appreciate the feedback (ok, I am actually getting excited to discuss taxes).
Basically, the prices are going up because people appear to be willing to accept the prices. Stop going. Ultimately the people determine the prices of tickets.
Retail prices may not have dropped in NY or Boston, but I am definitely seeing more reasonable prices for Sox tickets on Stub Hub that I have the past few years. I just purchased four infield grandstand tickets for a game in late April for face value, something I have never been able to do in the past.
Having enjoyed corporate seating on a number of occasions myself, I can tell you two things. First, season tickets are often one of the first expenditures to get cut when times get tough, deadening the impact of corporate-driven ticket prices during a recession. Second, business buyers may negotiate lower ticket prices, either because they are long-term supporters of the club, sponsors of the team in some way (advertiser or supplier) or simply buy enough seats to get a discount. So unless you have actual revenue data, tickets for business purposes may be selling for less than you'd think from the posted prices.
The corporate tax benefit just allows them to hand-wave the expense if anybody ever questions it. "Oh, it's a tax write-off." You'd be amazed how few people bother thinking it through at the level of detail The Situation does above.