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Ticket price disputes in sports – discussing cases of dynamic pricing and fixed ticket price increases while searching for a sustainable fan base

Recently, there have been various debates about the level of ticket prices in sports. Liverpool FC has been caught in crossfire with fans that were protesting the price of £77 to attend a game at the lately renovated Main Stand at the club’s iconic Anfield Road in which fans are known worldwide for their passionate support of the club. The price is nearly a 1/3 increase compared to the previous price of £59. In Danish football, the Danish champions from FC Midtjylland played mighty Manchester United last night in the first leg of the UEFA Europa League Round of 32. Many Manchester United fans were not happy with the ticket prices in the ‘visiting fan zone’ at MCH Arena in Herning. Approximately £71 had to be paid to gain entrance for United’s fans to support the club against the underdogs from Herning, which has caused Manchester United fans to criticize the ticket price via social media platforms. Rhetorics like ‘SCAMdinavia’ and that ‘FC Midtjylland is ripping off fans’ describe the negative feelings among Manchester United fans.

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Photos: Different examples of Twitter accounts critisizing FC Midtjylland’s ticket prices against Manchester United.

So, as you can see, the price of tickets is a sensitive topic in a football economy in which some football fans (often the most passionate fans) feel that they are being exploited in football clubs’ processes of meeting inflating transfer fees and astronomic wage pools while the capital injections from lucrative broadcasting deals and commercial partnerships have been increasing over the past decades. The discussion tends to remind me of a double-edged sword because there is more to this consideration than the feelings of fans. I certainly acknowledge the meaning of fans as the most important catalyst in the sports economy but there must also be a mutual understanding of the situation of a specific club among internal and external stakeholders, e.g. club management and fans. Manchester United fans are visiting a club in a small European football league where the market conditions do not provide FC Midtjylland with the same capabilities for revenue generation as the clubs in the Premier League. Even in the Premier League, Manchester United is in a league of its own given the club’s enormous global appeal. Manchester United enjoys different degrees of freedom to act on the transfer market and to cash in on its performances.

Therefore, it is no surprise that FC Midtjylland has applied aspects of dynamic pricing to enhance the financial outcome of its participation in UEFA Europa League. Aalborg BK (AaB) and FC Copenhagen are two other examples of clubs in Denmark that have integrated dynamic pricing in relation to international club tournaments. The concept of dynamic pricing can be defined as a system in which prices respond to supply and demand pressures in a real time (or nearly real time) manner” (Drea & Nahlik, 2015, p. 1; originally as stated by Sahay 2007). From a financial standpoint, Danish clubs operate in a market where the main reasons for economic success are related to good sporting performances leading to a positive transfer balance and solid revenue generation directly and indirectly linked to participation in UEFA competitions. This performance level boosts the club’s business model on a short-term as well as on a long-term basis.

In a theoretical framework, the understanding of dynamic pricing can be illustrated as:

Price = Transaction Cost + Variable Cost + Markup (Drea & Nahlik, 2015, p. 1)

This equation focuses on profit maximization and the Markup represents what the market (e.g. fans) will tolerate while the lowest acceptable price for the club accounts for the sum of a transaction cost plus the variable cost (for a unit for sale). In this light and given my explanation of the economic circumstances in a ‘development league’ like the Danish Super League, it makes sense that FC Midtjylland tries to find new and valid paths to maximize revenue generation. The dynamism and fierce competition among clubs in the football economy gives dynamic pricing a good ‘breeding ground’ as the dynamic pricing strategies seen in the business of sports reflect the core of strategy in the sense that it entails the search for a club’s competitive advantages through differentiation. Therefore, I believe that dynamic pricing has come to stay and that we will see a development where this concept speeds up in the years to come.

From my viewpoint, the Liverpool FC case is slightly different, as the ticket prices in the Premier League on a general level tend to be relatively high compared to other European football leagues. At the same time, the English clubs have been positively influenced by boosted revenue streams via massive broadcasting deals while enjoying (in Liverpool FC’s example) passionate fan affiliation. These passionate fan elements to sports start at an early age and never stops; fans are simply paying to engage. The relevant moral question of a football club is: how much can you allow charging specific fans game after game? Critically, this development has raised the question of whether or not the Premier League clubs should use the enhanced television contracts (keep in mind that this improvement adds positively to the entire football business model) to give back to the fans in contrast to a continued exploitation of fans’ disposable income due to inflated ticket prices? The German Bundesliga has set the agenda that fans are at the core of the league’s business development and strategic direction. Personally, I like the German method in terms of pursuing a convergence between economic and commercial development, the legacy of the game and its cultural role in society and among fans. To fully understand this approach, football clubs are such an integral part of the cultural DNA and society. Therefore their cultural and social roles of uniting people and their function as local and regional identity locomotives emphasize that football clubs cannot distance themselves ‘too much’ from its most significant stakeholder group, i.e. fans. With that in mind, my advice to Liverpool FC is to engage in close dialogue with its fans to find a reasonable solution regarding the current problem area.

Stoke City is an English benchlearning example depicting how to respect the situation of its fans. Stoke City has strived to build encouraging ‘affirmative action’ by providing its fans with free replica shirts, cheap ticket prices for children and backings to fans to help them pay to attend away games. Stoke City has done a lot, also via the symbolic management of its players, to build loyalty among stakeholders of the club whereas the ticket price increase for next season offered by the Liverpool FC owners Fenway Sports Group symbolizes global ambitions and BIG BUSINESS and thus a gap to the club’s loyal fanbase. Focusing on ticket price inflation, Stoke City’s season-ticket prices have been kept at the same level since the club was promoted to the Premier League in 2008. £18.11 per match while providing free bus travel to Premier League away games are examples that mirror a parallel to what is seen in the German Bundesliga and mark a huge difference to what has been on the drawing board in Liverpool FC. Consider in that regard what it means for a team to experience good fan support for away games. It adds value. Ownership (I wrote an article about Liverpool FC’s old ownership earlier, see here) makes a difference and so does that of Stoke City. In Peter Coates’ first spell as Stoke City owner, his popularity was debatable whereas his second spell from 2005 framed his ‘Stoke boy’ approach and thus lasting affinity for the club and underlined a new era (an emphasis on looking forward and ending the previous clashes) with a dialogue-based tie to fans.

A varied perspective on the football economy and ticket prices reveals that a football club’s fanbase wants more than inexpensive football. Cheap tickets are not necessarily the epitome of football fan demands; postmodern fans want to have a VOICE and to feel that the club listens to them. Fan advisory boards and Stoke City’s example of an elected fan council, in which one representative from every area of the Britannia Stadium and every fan group is allowed to participate, are ways to secure a voice to fans. This has reproduced a way for club management in Stoke City to regain trust among fans in a situation characterized by clashes that years ago appeared tough to solve – an illustration that fan’s opinions NOW carry lots of weight. In a football culture and a location in which fans value ‘working class heroes’, it is important that club management is down to earth, encourage players to work hard and seek to give fans value for money. Stoke City does not have the same opportunities as the bigger clubs, e.g. Arsenal, Manchester United and Liverpool FC to approach fans as consumers that are easy to substitute by other consumers. When replacing Hicks and Gillett in Liverpool FC, Fenway Sports Group looked to understand the club’s roots among working class fans with limited disposable income for what reason it would be recommendable that Fenway Sports Group intensified the dialogue with the ticket working group that represents various fragments of Liverpool FC’s fanbase.

The wisdom derived from the previous ownership group of Liverpool FC should be that retaining fans’ trust and satisfaction is better than having to rebuild these elements after a serious fan collision. Stoke City’s example presents a fine process of accommodating fans and especially the younger generations of future fans, which has led to a young and vibrant and thus more sustainable fanbase.

Sources: 

Drea, J. T., & Nahlik, A. (2015). Dynamic Pricing in Major League Baseball Tickets: Issues and Challenges.

Sahay, A. (2007) How to reap higher profits with dynamic pricing. MIT Sloan Management Review. (Summer) [Online] Available from: http://sloanreview.mit.edu/ article/how-to-reap-higher-profits-with-dynamic-pricing/ [Accessed 15 May 2015]

 

 

 

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