Study: This is why colleges stink at pricing their tickets
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One of the central truths that I keep coming back to with this newsletter is the idea that college sports is a business. It isn't a charity. It isn't a gathering of warrior poets. It is a business.
But unlike professional sports, or your local woodworking shop, or a slew of other businesses, college sports is also a bunch of other things besides a business. Your local athletic department is absolutely trying to maximize revenues, sure, but they're also trying to build political coalitions between donors, lawmakers, faculty, and community members. They're trying to grow institutional enrollment and prestige. And it also sometimes has to pretend that it isn't a business, but a noble extension of higher education instead.
Professional sports doesn't have to pretend to be something it isn't, except when it's time to ask the local government for a stadium funding handout. Sure, it can help bolster civic pride, but at the end of the day, your favorite NFL or NBA team exists to make money. Your favorite college sports program also exists to make money…but also do a bunch of other stuff.
Those competing priorities and stakeholders can make actually running a college athletic department really challenging. One recent paper, titled 'A Qualitative Exploration of Ticket-Pricing Decisions in Intercollegiate Athletics'. Published in JIAA, highlights why making the right decisions can be much more complicated in the college sports space.
How do you decide how much to charge for tickets?
If you're a pro sports team, figuring how to price your tickets is relatively straightforward. Generally, you want to charge whatever will produce the most revenue.
But according to this study, it isn't always so clear at the college level. The paper's authors surveyed numerous administrators at the P5 and G5 level, asking about their institutional goals for their pricing strategy. While college programs do want to maximize their ticket revenue, many reported other goals. Some schools may feel empowered to give away a ton of tickets in order to maximize attendance, which could provide boosts in recruiting, student experience, and gameday revenues (parking, concessions, etc.), even at the risk of alienating donors and season ticket holders. Some programs may keep prices low on purpose, as a way of engaging other community groups.
Other schools, particularly ones at the G5 level, may not even have the tools to figure out how to maximize revenue, even if they decided that was the route they wanted to take. Larger P5 institutions may have access to more data to help them make more informed decisions. Via the study:
"At one end, one G5 department leans towards more qualitative (if not anecdotal) data; conversely, one P5 school computes net promoter scores and is building an elaborate database to track lifetime customer value. These vastly different approaches to research may exemplify a widening divide between G5 and P5 institutions"
Another anecdote from G5 program also indicated that perhaps not every lower-level school was using the most modern tools to price events:
One G5 school implemented a static five-year pricing policy after changing conference affiliation. In order to facilitate that move, the department formulated a policy in which football season tickets would increase one dollar per ticket, per game, per year for a period of five years (i.e., assuming a six-game home schedule each season, year one was $200, year two $206, year three $212, etc.). However, as Antonio pointed out, this policy has “no accounting for state of the program, market demand—it’s all driven by budget needs.” This reflects a cost-based strategy for ticket pricing that should be considered antiquated in spectator sport, especially as research indicates demand-based pricing is more efficient (Drayer, Rascher, & McEvoy, 2012).
Not using every tool in your toolbox is potentially concerning, especially since most G5 programs aren't earning truckloads of money in media rights, and still face political pressures to become more financially self-sufficient. Athletic departments can use variable-pricing (i.e, charge more for the home game against the big P5 school), peer-benchmarking, historical data and other tools to best figure out what to charge.
But even more concerning than that? Not knowing what you're trying to achieve in the first place.
This bit from the study really stood out to me.
"Among the findings from this study, perhaps the most problematic for college athletic departments is the indication of no formalized objective driving pricing decisions.On one hand, it is plausible to have multiple objectives, especially considering large seating inventories within stadia. However, these objectives should be mutually agreed upon and lead to strategically sound pricing policy designed to achieve that goal. Unfortunately, at present, the administrators representing common athletic departments in this study do not appear to be pulling in the same direction. Aside from one P5 program in this sample, athletic departments seem to lack a systematic, scientific, or analytical approach to pricing decisions."
Bolding was mine.
One thing I've really learned since launching this newsletter is that higher education is not great about talking to each other. Faculty may not really understand what happens in the athletic department, the athletic department might not trust or understand what happens in academic departments, and nobody has a great relationship with central administration. As a result, it's difficult to get everybody moving in the same direction to achieve campus-wide goals.
That can even be true within an athletic department. If the institutional goal is to maximize revenues to help limit institutional subsidies, great, that might inform one ticketing strategy. If the institutional goal is to pack the stadium in hopes of improving recruiting or young alumni donation outcomes, that's a different strategy.
Without moving in the same direction, you have departments that risk either leaving money on the table, or overcharging fans and hurting relationships with important constituents. And if administrators can't agree on the same goals when it comes to ticket prices, what are they missing when it comes to academics? Sport sponsorships? Other critically important decisions?
In a world where TV money may be harder and harder to come by for smaller programs, and where students may vote against fee increases and faculty may push back on additional subsidies, all programs need to look for ways to increase revenues and decrease costs in ways that don't ask more of the athletes. Figuring out the best way to price tickets without driving away fans ought to be an important priority, just like finding new sponsorship opportunities and cultivating donors is important.
And you can't figure that out if you can't agree on your department goals. That's probably a good place for everybody to start.
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