Wednesday, December 09, 2009

Enhanching the Stream

Last Saturday, the day when news stories people don't want talked about are talked about, Paul Sullivan ran a piece in the Tribune on ticket price increases for the Cubs in 2010:

Club box outfield seats will increase by nearly 19 percent for so-called "platinum" games, a new ticket price tier that was introduced in 2009, and will nearly double from 14 games to 26 next year.

The most expensive seat will be a platinum club infield box, which was raised by $12, or a 12 percent increase from $100 to $112. The cheapest tickets will be $9 for an upper deck outfield reserved seat for one of the six "bronze" games on weekdays in April, May and September.

The Cubs maintain that half of the ticket inventory will remain about the same, while the average price increase will be $2 for "gold" games and $5 for "platinum" games. A 1 percent rise in the city amusement tax, from 11 to 12 percent, also figured into the price hike.

In essence, the Cubs hiked the prices on their most expensive seats and said they believe many of them will be re-sold by season ticket holders. Meanwhile, they held the line on most "cheap" seats that generally go to individuals when tickets go on sale to the public in February.

The best Cubs-Business blogger out there, Wax Paper Beer Cup, has some fun with a Crane Kenney comment:

"We understand our season ticket holders in particular use the secondary market as a way of underwriting their ticket purchases," Kenney said. "It's a fact of life. We’re over that. That’s fine. So we did the $5 (average) increase on those premium games as a way of trying to push the burden of our ticket price increase on those games, leaving the ticket prices flat for most of our games, for most of our seats.”

So Kenney decides to run the 'move the blame to the ticket brokers play', it's a play that's almost as tiresome as a Bears screen pass. Kenney doesn't have to run this play and truthfully the Cubs should thank the secondary market for being an easy scapegoat every year the Cubs raise ticket prices. I guess it's easier to blame ticket brokers than it is to tell the fans: 'the team has a shitload of debt and you will pay for it. That may not go over so well.

You never want to slap down anger directed at Kenney (aside - just why is he at the Winter Meetings? What the hell kind of value is he capable of adding to actual baseball discussions?), our friend CCD kind of misses Kenney's (shockingly) correct point.

The reason the Cubs are raising ticket prices is not because of the brokers. It's because the brokers demonstrate that Cubs tickets have a higher market value than their face value.

As we all know, the Ricketts now are responsible for debt service on $425 million in loans. If they have a way to increase total revenue, they should do it. If the equilibrium price for tickets is higher than the face value of the tickets, then, by gum, raise prices.

What no one seems to have noticed here is that this has been the case for quite a while. Remember Premium Ticket Services? The Cubs have been trying to get extra money for years out of their tickets.

So, why didn't they just raise prices like this directly the last few years? Simple.

The team was for sale. What do you do when a sports team is for sale? Maximize attendance and show a buyer the inherent potential for new revenue. What do you NOT do? Do anything that creates even one more empty seat.

What this means is that prices have been lower the past several years in an effort to facilitate a sale.

This isn't really a price increase. It's a price recovery.

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