A couple of days ago, Doc Blume wrote an interesting post about the obvious lack of demand for Cubs tickets this year. There are still tickets available for every game on the schedule, including Opening Day and the Red Sox series. There are large numbers of tickets available for most of the other games on the schedule. That is all true, but Doc concludes two things from this: 1) The Cubs ticket revenues are going to suffer and 2) The ticket brokers are going to get killed this year.
As I've thought more about it, I would have to disagree on both of those conclusions.
First, the Cubs dynamic pricing in the bleachers could potentially grab the Ricketts an absolute huge pile of money, and they don't have to sell out the bleachers to accomplish it either. To illustrate the point, I created a scenario using a theoretical dynamic pricing model. I can not stress this enough. I DO NOT HAVE ANY INFORMATION FROM THE CUBS ABOUT HOW THEIR DYNAMIC PRICING CHANGES ACCORDING TO SALES. I am only theorizing using examples that I feel are close enough to accurate to illustrate the point.
I'm assuming the Cubs have 4,000 bleachers seats for sale for each home game. The renovation in 2006 added ~1,800 seats and I don't think they doubled the capacity, so I'm guesstimating and keeping it fairly conservative. I'm also assuming that the Cubs jump the price of their bleacher tickets by 10% every time they sell enough at a certain level to jump to the next highest tier. Again, I don't think that is outrageous, as the Red Sox bleacher seats are currently selling for $140 per seat and that is exactly what it would be if the Cubs jumped the price 8 times at a 10% increase each time since they went on sale.
So if the Cubs stuck with a flat ticket rate, the potential revenue would break down like this
| Marquee | Platinum | Gold | Silver | Bronze | |
| # of Games | 13 | 16 | 26 | 16 | 10 |
| Flat pricing | 72 | 64 | 55 | 45 | 24 |
| Attendance | 4000 | 4000 | 4000 | 4000 | 4000 |
| $ 3,744,000 | $ 4,096,000 | $ 5,720,000 | $ 2,880,000 | $ 960,000 |
That would come to a total of $17,400,000 for the year.
Now let's assume that after every 500 tickets are sold, they bump the price up 10% (rounded to the nearest whole dollar). So 500 tickets would sell at the original $72 mark, but then ticket #501-1000 would sell at $79, #1001-1500 would sell at $87, and so on. That would complicate things a bit, but it would work out to something like this:
| Marquee | Platinum | Gold | Silver | Bronze | ||||||
| Tier | Price | Revenue | Price | Revenue | Price | Revenue | Price | Revenue | Price | Revenue |
| 500 | $ 72 | $ 36,000 | $ 64 | $ 32,000 | $ 55 | $ 27,500 | 45 | $ 22,500 | 24 | $ 12,000 |
| 500 | $ 79 | $ 39,600 | $ 70 | $ 35,200 | $ 61 | $ 30,250 | $ 50 | $ 24,750 | $ 26 | $ 13,200 |
| 500 | $ 87 | $ 43,560 | $ 77 | $ 38,720 | $ 67 | $ 33,275 | $ 54 | $ 27,225 | $ 29 | $ 14,520 |
| 500 | $ 96 | $ 47,916 | $ 85 | $ 42,592 | $ 73 | $ 36,603 | $ 60 | $ 29,948 | $ 32 | $ 15,972 |
| 500 | $ 105 | $ 52,708 | $ 94 | $ 46,851 | $ 81 | $ 40,263 | $ 66 | $ 32,942 | $ 35 | $ 17,569 |
| 500 | $ 116 | $ 57,978 | $ 103 | $ 51,536 | $ 89 | $ 44,289 | $ 72 | $ 36,236 | $ 39 | $ 19,326 |
| 500 | $ 128 | $ 63,776 | $ 113 | $ 56,690 | $ 97 | $ 48,718 | $ 80 | $ 39,860 | $ 43 | $ 21,259 |
| 500 | $ 140 | $ 70,154 | $ 125 | $ 62,359 | $ 107 | $ 53,590 | $ 88 | $ 43,846 | $ 47 | $ 23,385 |
| $ 411,692 | $ 365,948 | $ 314,487 | $ 257,307 | $ 137,231 | ||||||
| $ 5,351,995.63 | $ 5,855,174.71 | $ 8,176,659.99 | $ 4,116,919.72 | $ 1,372,306.57 |
That comes to a total potential revenue of $24,873,057, or more than $7 million more than they would with a flat pricing model.
Demand is lagging, but it is most lagging in the lower level Silver and Bronze games, but those were the low revenue games anyway. The Cubs are now able to charge $140 face value for a seat 400 feet away from home plate. They are making up for the lost revenue from the crappy games by charging premium prices for the games they know will sell no matter what.
Think about it, for every ticket they currently sell at $140 for the Red Sox (and eventually the White Sox, Cardinals, etc.), that extra $68 on top of what they would have charged last year makes up for almost 3 full unsold tickets at the Bronze level.
I'm actually a little shocked the top of the scale is only $140, but it is only the first year trying this. If they bump the price after every 400 seats (setting the top of the scale at $170 per ticket), they can get over $27 milion in potential revenue.
So between selling ~26,000 seats per game to season ticket holders (guaranteeing a floor of about 2.1 million for total attendance) and then making a money grab for the most popular games in the bleachers, the Ricketts can deal with a decrease in actual attendance a heck of a lot better than they could with a flat pricing model. My guess is that their revenue will stay relatively flat from last year even if they fall short of 3 million fans. Even if people aren't tripping over themselves to get at tickets, I'm guessing the Marquee and Platinum levels will sell out or come awfully close.
But can't people get tickets from scalpers for cheaper than face? Maybe, but the tickets on the secondary market won't be as plentiful this year. I think part of the reason we are saying such lagging pre-sales is that the scalpers aren't sucking up the tickets like they normally do. Why would they? Why get stuck with all that merchandise again? If you sell t-shirts and got stuck with 1,000 t-shirts last year, why would you buy the same amount of t-shirts to sell in a year where you KNOW the demand won't improve?
Ticket brokers and scalpers aren't stupid. In fact they understood the market for Cubs tickets a hell of a lot sooner than the Cubs themselves did. I'm sure they have a stash that they have purchased from season ticket holders looking to dump off their tickets now for whatever they can get for fear that later in the season they won't be worth the paper they are printed on. But I'd bet my life they have kept the capital invested in Cubs tickets to a minimum.
So the scalpers will make some money by still underselling the Cubs prices at the ticket windows, but the Cubs don't care because they got full price for the tickets when the season ticket holders bought them. Meanwhile they are making up revenue by selling the actual games with high demand for absolutely ridiculous prices. The people footing the bill for all of this remains the season ticket holders and the people who can't help themselves from paying exhorbitant prices to leer at scantily clad young women while the Cubs get annihilated by premium opponents.
Like I've said before, that wait list and the mythology of the bleachers gives the Cubs tremendous license to pull this shit while fielding an inferior team. That is how they can preach patience and let the Superfriends enact a longer range building plan than most teams would be able to.
Comments
Sorry about the premature post, Mish. I published before it was done and had to unpublish it.
Aisle424Quote Reply
Aisle424 wrote:
I’m sure not the first time you’ve said this. (dying laughing)
MishQuote Reply
Bazinga.
Aisle424Quote Reply
Do you really think they can use this plan to keep revenue steady for the 3-5 years the Superfriends need to fix the team? I guess incremental improvement (70 wins this year, maybe, then 75 next, then 79 the next etc) would be encouraging and could help with attendance and sales, but that still seems like a tall order to fill.
Rice CubeQuote Reply
@ Rice Cube:
I think it will keep the bleeding to a minimum. Like I’ve said repeatedly. The Cubs sell over 2.1 million tickets every year before they sell a single 9-pack, 6-pack, or single game ticket. The Royals and Pirates would kill for that kind of guarantee every year.
Remember, the payroll is also going down so they don’t need all that revenue to maintain the same cash flow.
Aisle424Quote Reply
I forgot to mention that if they were really on board with such a plan, the Ricketts probably have some kind of reserve fund or similar to tide themselves over while the MLB team continues to suck but the minor league pipeline that they (and we) hope to build manifests itself. At least I think that’s what a smart businessperson would do.
Rice CubeQuote Reply
I don’t think they have a reserve. If they have excess money laying around somewhere, they should be paying down the debt with it.
Aisle424Quote Reply
@ Aisle424:
That’s probably the smartest thing to do, if the interest is as bad as I think it is from what you and others have reported. At the same time, I’d be surprised if they didn’t have some kind of emergency fund in place…the Ricketts are financial gurus and one of the main lessons in financial planning is to always have an emergency fund.
I think a more accurate thing to say is that they have a cushion of both time and revenue (with or without a disaster fund) that they could use to get their shit together, which I believe you have already stated in this post.
Rice CubeQuote Reply
@ Rice Cube:
If it came to it, they could sell the building across from Wrigley or the McDonald’s lot if they needed cash fast. You don’t need to have actual cash as long as you have assets you can liquidate quickly. Plus, I’d bet Papa Joe Ricketts is their emergency reserve if they need it.
Aisle424Quote Reply
Great post, 424.
mb21Quote Reply
Berselius wrote:
Aisle424 wrote:
I completely thought this was a joke. I thought Bernsein meant that no one knew that Marshall was going to be traded (the trade being the incident). RC didn’t know what happened with Marshall. And then Aisley made fun of RC by making up some bullshit story that couldn’t be true since RC didn’t just google it.
Then I checked my phone and was bombarded with messages about Marshall punching someone. sigh..
WaLiQuote Reply
(dying laughing)
(dying laughing)
I couldn’t make that shit up.
Aisle424Quote Reply
Apparently Roy Halladay topped out at 89 mph yesterday. Things haven’t been going well for him so far.
mb21Quote Reply
mb21 wrote:
He’s put a lot of mileage on that arm. I wonder if he’s starting to lose his arm strength. He’s what, 35?
MuckerQuote Reply
RC’s alma mater —> sucks at basketball
Bracket still technically not busted though (dying laughing)
Rice CubeQuote Reply
@ Mucker:
He’ll be 35 in May. His hobbies include long walks on the beach and candlelit dinners.
joshQuote Reply
http://storify.com/JimBreitinger/baden-axe-bat-is-changing-baseball-and-softball
mb21Quote Reply
@ mb21:
I’d thought the bat always needs to be symmetrical but the MLB rules actually allow this. That’s pretty cool.
Rice CubeQuote Reply
BN seems to think there’s a real possibility the Cubs’ A-team could switch from Peoria to South Bend.
Rice CubeQuote Reply
Rice Cube wrote:
That would be sweet. I might actually drive to check out a few games if that happened.
Aisle424Quote Reply
@ Rice Cube:
Wouldn’t be surprising. Those teams switch locations fairly often. IIRC, the Cubs were in Peoria throughout the late 90s and then moved their Low A team to Lansing (Steve Stone would always talk about how the Lansing Lugnuts was his favorite team name) and then about 5 years ago they moved back to Peoria. A few years ago the AA team was the West Tennessee Diamond Jaxx (probably my favorite team name) and now they’re the Tennessee Smokies. Not sure which organization took over for the DJaxx team.
mb21Quote Reply
When I lived in Oregon the Cubs were in Eugene (Eugene Cubs). As far as I know those are the only Cubs minor league teams to have changed names/locations over the last decade. I’m guessing that’s much less than the average team.
mb21Quote Reply
Eugene Emeralds.
mb21Quote Reply
@ mb21:
That’s a really good idea. It’s almost obvious when you stop to think about it.
joshQuote Reply
Search phrase of the day: obstructed view とは
mb21Quote Reply
@ josh:
The only problem I can see is bat shelf life, since you’re not going to be able to wear the bat down evenly around the barrel. The bats I’ve owned always recommend rotating the bat so you don’t get a dead spot from hitting the same place every time.
joshQuote Reply
@ mb21:
Your blog is moving back to Japan to save face?
Rice CubeQuote Reply
@ josh:
I wonder if there is a way to compromise, so that it’s not totally asymmetrical but still has the basic axe handle shape. That way you can rotate between two spots instead of concentrating all the contact points on one spot due to the restrictions of an asymmetrical handle.
Rice CubeQuote Reply
You can still join the OVBlog bracket on espn: http://games.espn.go.com/tournament-challenge-bracket/en/group?groupID=91223&entryID=1774207
mb21Quote Reply
Does anyone know if the March Madness streams are still free or if we have to start paying?
Rice CubeQuote Reply
@ Rice Cube:
We’re nearly a year old so we’re launching in Japan next month.
mb21Quote Reply
@ Rice Cube:
I don’t know, but I’ll tell you the final scores for $1 per game.
mb21Quote Reply
@ mb21:
Good ruck with your discledited brog.
Rice CubeQuote Reply
@ Rice Cube:
It’s $$ this year RC
BerseliusQuote Reply
Berselius wrote:
$3.99
Aisle424Quote Reply
Rice Cube wrote:
Aisle424Quote Reply
I don’t know when this super google internet thingy is going to be completed in Kansas City, but I am looking forward to testing it out. As far as I’m concerned, download times on the internet can’t be fast enough.
mb21Quote Reply
Royals ————> still stupid
They just signed the most exciting player in baseball to a 4-year extension worth $10 million. Can you imagine how exciting Escobar would be if he was any good?
mb21Quote Reply
Face palm
http://obstructedview.net/chicago-cubs/daily-facepalm-3-15-12-calling-in-sick-with-march-madness.html
BerseliusQuote Reply
There goes Aisley again, posting meaningful business-related information and turning the comments section into a board meeting. Tickets aren’t sold on a spreadsheet!
AndCountingQuote Reply