'Cost of Attendance' Expected to Decline Post COVID-19

JohnWallStreet

Pro sports priced out the middle class fan long before the Coronavirus outbreak, but with the global economy headed towards a recession industry insiders say the 'cost of attendance' is destined to decline when the games resume. Chris Hartweg (publisher, Team Marketing Report) said the conversations he’s had with executives across various leagues indicate that teams “will be aggressive with [pricing] to make it compelling for people to come back to the stadium or arena.” They may have no choice. We still don’t know how long the U.S. economy will be halted or how long it will take to rebound (i.e. if the middle class fan will even have money to spend) and a condensed sports calendar (in addition to a condensed sports spending calendar) means that there will be increased competition for the fan’s time and dollar.

Howie Long-Short: Historically speaking, the cost of attending pro sporting events does not decline YoY. Hartweg said, “if you look at the Fan Cost Index - dating back to the early 1990s (100+ pro sports league seasons) - there have only been five instances [of YoY slides].”

NBA:

2001 -1%

2009 -.3%

2010 -1.4%

MLB:

2010 -.4%

NHL:

2005 -2.7%

Considering no league has ever dropped pricing more than -2.7% YoY, fans shouldn’t expect the 'cost of attendance' to become a bargain, but the longer quarantine lasts the more teams may have to slash pricing to draw fans back to the ballpark. As Hartweg noted, “folks [will be] going on 4 weeks, 8 weeks, 12 weeks of unpaid or partially paid leave. How can they justify spending [big] on entertainment when they’re worried about paying other bills?”

The sheer volume of games expected to take place when social distancing orders are revoked is all but guaranteed to result in “some cannibalization” of fans amongst the leagues. As Patrick Ryan (co-founder, Eventellect) said, “MLB Opening Day is traditionally a special occasion, but the demand for tickets could immediately plummet if it is competing head-to-head with NBA and NHL Playoff games.” Remember, the start of the baseball season usually occurs +/- one month prior to the start of the NBA and NHL post-seasons.

Ryan believes the demand for tickets during the first week of the MLB season will be strong (regardless of when it’s played) and that the NBA and NHL Playoffs will be sell-outs (or near sell-outs) as usual, but then he’s expecting in-stadium attendance across the sports world to be volatile. “Teams that aren’t putting out a high quality product and don’t offer unique promotions and offers could see demand fall right off a cliff.” MLB and MLS teams will be in a particularly tough spot once the initial excitement of the games being played dies down. There's simply too many games and not enough fans with budgets to attend them all (at least not at 2019 prices).

MLB and MLS clubs will need to get creative with ticketing promotions if they’re going to pack their stadiums this summer. Ryan suggested “bundling [tickets with] a bunch of F&B credits or offering 50% off concessions during weekday games” to appeal to budget conscious fans with options. It’s worth noting that both leagues currently have rules limiting the number of tickets teams can discount or give away. They’ll likely need to do away with (or suspend) those guidelines to draw capacity crowds.

How the sports slate is staggered will impact the cost of attendance, but so too will the condensed sports spending calendar - particularly as we roll into the fall (see: NFL, CFB) and winter seasons (see: NBA, NHL). Ryan explained that current macro economic conditions have led “NFL teams to push back due dates on their season ticket renewals and NCAA teams have done the same with theirs. Winter sports teams (see: NBA, NHL) are also now in the midst of a renewal cycle (for the 2020-2021 season). Fans may be dealing with several renewals at the same time and [its reasonable to believe] some will have to be cut.”

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Comments (1)
Professoratplay
Professoratplay

Interesting. On this postponed Opening Day (should be a holiday) I wonder how much baseball will have to cut ticket prices. Even if big cuts year to year haven't happened, this is unprecedented. Particularly highly-leveraged teams might need to generate more revenue (though as you point out, stadium revenues are a much smaller proportion than they used to be). I'm designing a simulation for my MBA students based on MLB, to play absent the actual season, so I always appreciate your insights!


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