The Considerable Financial Upside of Success

dodger stadium chavez ravineSurprise: good teams sell more tickets than bad ones.

While the collective customer base can’t always sense going into a season whether its local team will be “good” or “bad,” there is a clear relationship between early season ticket sales and success in the previous season, and between late season ticket sales and in-season success. Splashy offseason additions can help at the margins, but, historically, the only real way to increase ticket sales in the long-run is by fielding a consistently competitive team at the big league level.

A recent example of this obvious relationship? How about this extreme:

Wow. Just wow.

The Dodgers were among the best-looking teams on paper last year, and lived into that expectation in the second half by blowing away the field from about June on. They made it to the NLCS, and the near-term future looks extremely bright, thanks in no small part to a luxurious spending binge over the past year and a half.

But being in a position to have sold 50,000 season tickets? Capacity at Dodger Stadium is 56,000, so the Dodgers could have essentially assured themselves a near sellout for every single home game in 2014 before throwing a single pitch. Imagine the implications there for price/demand. The implications for future spending, because of the guaranteed revenue. To the victor go the spoils, indeed.

It’s important to note that the Dodgers’ decision to limit season ticket holders is probably not entirely altruistic, though doing so will definitely allow a lot more people to take in Dodgers games (without resorting to the secondary market, that is) than if the vast majority of tickets were gobbled up by season ticket holders. To wit: the Dodgers could use dynamic pricing on the remaining single game tickets to maximize their take.

Allow this to serve as further evidence that a team in a large market can make a whole lot more money when it’s good than when it’s bad. And this is just one example of one revenue stream.

Cubs owners know this, and I remain supremely confident that they aren’t interested in being crummy forever. Being bad on the field is bad for business. Building a long-term, sustainably competitive organization? Bad for business in the short-term, good for business in the long-term.

(Aside: I do wonder how many season tickets the Cubs could sell if they opened it up to everyone, without any limits on the total number of season ticket holders they’re willing to have. With a long wait list, in theory, the Cubs could sell a whole lot more season tickets than they do now. In any case, the point stands: winning generates more demand than any other “method” of increasing interest in your team.)

Brett Taylor is the editor and lead writer at Bleacher Nation, and can also be found as Bleacher Nation on Twitter and on Facebook.

73 responses to “The Considerable Financial Upside of Success”

  1. Jason P

    I think the Cubs currently sell about 20-22 thousand season tickets, right? With a waiting list close to (last I heard) 100,000 names, it would seem to me they wouldn’t have too much of a problem selling 20 thousand more to guarantee themselves a sellout.

    1. Kyle

      Don’t assume that everyone on the waiting list actually buys the tickets. They’ve been churning through it pretty fast without sales the last couple of offseasons.

      1. Ivy Eater

        I want to say I have gone up roughly 10-15k spots in the last few years. Could be even more than that.. Though I am still at 84,800.

      2. Jason P

        That’s true, but with 100,000 names on the list, only about 1/5th would actually have to buy. I’m not sure 1/5th are actually willing to buy, but it definitely seems plausible.

        1. Kyle

          Do you really think there’s 20k buyers per game out there just sitting on the sidelines and the Cubs aren’t selling to them?

          1. Jason P

            I just googled it, and it turns out there’s a bit more concrete info than I thought.

            The Cubs sold 25,000 season tickets last year. Their renewal rate after 2012 was about 80% and 85% after 2013. So there were roughly 5,000 season tickets available after 2012 and 3,500 after 2013.

            http://www.chicagobusiness.com/article/20131127/BLOGS04/131129800/cubs-season-ticket-renewals-ahead-of-last-years-pace

            There are also 7-8 thousand season ticket account holders, so that means each season ticket holder purchases an average of about 3 tickets.

            Ivy eater above said he’s moved up 15,000 spots in the last 2 years. 8,500/3=about 2800/15,000= about 20% of people on the waiting list actually buying tickets.

            If each person on the waiting list who bought, bought an average of 3 tickets, it would only take them 17,000/3= 5,600 buyers x 5 = 28,000 season ticket waiting list spots to sell out.

            Just an estimation, of course.

            1. Kyle

              It’s perfectly possible that there’s a good reason why they didn’t do this, but I’m waiting to hear it.

              1. hansman

                You don’t want to lock in the entire ballpark to that group for multiple reasons:

                1. It becomes even more difficult for STH churn to occur. If you sell out and then decide later that you want to open seats to the general public, you have to stop allowing new STH to come in which brings ne groups of businesses/individuals in the door.
                2. With 100% STH you become beholden to the secondary market and that drives away more of the casual fans since there is no competition, prices will escalate.
                3. I bet you would find that with a full slate of STH you would find less in-house attendance. You have a number of fans who want the season tickets, can afford them but aren’t going to want to go to every game or go through selling the extras.

                There is a lot more meat to these points but I think it’s safe to say that out of a list of 100K, the Cubs could find another 6,000 to buy tickets to get them to a sellout every game. However, the luckiest team in baseball the past 4 years opted out of doing that…

                1. Kyle

                  “1. It becomes even more difficult for STH churn to occur. If you sell out and then decide later that you want to open seats to the general public, you have to stop allowing new STH to come in which brings ne groups of businesses/individuals in the door.”

                  So in order to prevent bringing in groups/individuals in the future, we prevent them now?

                  Not going to deny that “locking in the downside to avoid it” would fit the MO of a team that is losing for years in order to avoid risking losing for years, but I somehow doubt that they are really doing that.

                  “However, the luckiest team in baseball the past 4 years opted out of doing that…”

                  Because they knew they could sell the single-game tickets.

                  1. Jason P

                    The Dodgers averaged 10k empty seats last year. They’re still pulling in boatloads of money because their stadium is so big (and the TV deal), but they could still pull in more fans if they sold more season tickets.

                    1. Kyle

                      They didn’t have this much demand last year. I assume they don’t plan to have 10k empty seats a game this year.

      3. hansman

        Somewhere around 27,000 in the last 2 years and 37,000 in the last three.

        That’s with kicking a couple thousand scalper tickets off the list too.

        I bet they could get themselves to a guarranteed sellout through season tickets.

        1. Kyle

          So the Cubs were ~700k below capacity in tickets sold at Wrigley Field last year. The average Cubs season ticket cost $44.55.

          Yeah, I totally believe the Cubs left $32m in revenue just sitting there that they could have had if they wanted to.

          1. hansman

            Kinda like it’s totally believeable that the Dodgers didn’t sell out their stadium with season tickets?

            1. Kyle

              The Dodgers are choosing not to sell season tickets in favor of single-game ticket sales. That’s believable.

              The Cubs are allegedly choosing not to sell season tickets in favor of empty, unsold seats. That’s a bit harder to swallow.

              1. bbmoney

                This is true. For this year. But once they sell those season tickets they can’t really just take them away and the only way to open them back up for dynamic pricing / single game sales in the future is when people voluntarily drop out.

                So, yeah you’re right. For this year. But they’re probably concerned about more than just this year.

                1. Kyle

                  And for last year. And for the year before that.

                  It’s adding up awfully fast.

  2. Jim

    Your aside brings up a great point. There’s still a massive wait list for season tickets. If they scrapped it, I do bet they could get a serious uptick in season ticket holders.. in the shortterm.

  3. bushybrows74

    I think teams across sports tend to inflate the number of season ticket holders on the wait list. Trying to sell exclusivity.

  4. EQ76

    I’ve got a buddy that has season tickets. He was able to upgrade to better seats this year and said that there were many choices available due to some cancelling their tickets. He didn’t take this as good news for attendance this next season.

  5. CubFanBob

    When I went for STH relocation, around the middle of schedule, there were no better selections in the three sections I always look to upgrade in. So being earlier in the relocation process the seat selections were no better than last year for me when I was scheduled even later in the relocation process. This doesnt mean other STH didnt purchase those better seats before I got there but I was expecting to be able to upgrade to better seats without much of an issue.

    There did appear to be more 100′s and inner bowl 200′s, much more expensive seats, available but it didnt appear to be such a huge increase in number from my past STH relocation events.

  6. Edwin

    I wish the Cubs could have done something like the Dodgers did.

  7. brainiac

    i agree with this post – the owners surely also want the *glory* of winning, and at this point to change their general reputation in chicago and nationally.

    the argument was never that the owners want to make the team bad forever because they can. it’s that they’re going to take advantage of a history of losing seasons to find excuses to profiteer for a few years to recoup their investment. in other words they’re going to tank 6-7 years by design and “brand” it as a strategy for winning.

    i’m sure things will clear up after a generation of little jimmys has already finished high school and college and could care less about his hometown team. but when a team wins, new fans will come.

    1. mjhurdle

      That is a not a very logical viewpoint.

      For the sake of argument, lets accept the that the Cubs are looking to recoup their investment (regardless of what it does to the team short or long term) and that winning is more profitable than losing.
      If this is the case, why would the team attempt to “tank” in the first 6-7 years, when winning in the first 6-7 years (not even winning playoffs/World Series, but just being competitive) would result in more profits and a quicker recouping of the investment?
      So why are they tanking? Maybe they are being patiently greedy, knowing that if the team is really good in 6-7 years, their profits skyrocket. But as people love to mention, a complete rebuild is not a requirement of getting good again. Why aren’t they using the “parallel fronts” to be competitive now, and still be really good in 6-7 years? That would make the most sense if they were simply trying to get the most profit to recoup the investment.

      Given what we know, it seems that the most logical choice is that the Front Office believes that the best way to having a good team (and more profit) is this complete rebuild.
      They could be wrong, and we can (and will) debate whether their choice is right or not. However, I think it is safe to say that the “tanking” is not the result of them trying to “profiteer” simply to recoup the initial investment before they actually try to win.

      1. Edwin

        Maybe they think they can make more money with a flop than with a hit.

      2. aaronb

        mjhurdle,

        The short answer is that it cost money for them to be good at this point. It would cost an actual financial commitment to players NOW.

        They can guarantee a profit level now with payroll down to half what it was when they purchased the team. And their cut of MLB media revenue up 25-50 million annually from when they purchased.

        They would rather win sure…They just aren’t willing to win on anything other than a bare bones payroll.

      3. brainiac

        this is a very good response to my position. my short answer is that they have many, many accountants who calculated which road would be more profitable over what duration, with expected collateral damage to the brand. this is a family of speculators, guys. bottom line first. employees tenth. fans never.

        1. brainiac

          this is how financial institutions work. it’s not how sports teams usually work, but this isn’t a “sports family”. they’re a new kind of supra-capitalist firm with a family name that *only* sees it as a business. theo’s job as president, not GM, is to voice on behalf of his CEO. second is the team. he does a great job being a company man, is very talented at it and is paid well, but i’m *sure* this isn’t what he thought he’d signed up for.

          for the rest of us schmoes, and anyone reading the blog with your resident brains is a fellow schmoe, we can sit here and take pleasure in their business “plan”, or not. it’s really a case of temperament in the face of inevitability.

      4. MattM

        MJhurdle you are speaking with generalities that don’t make sense. Think about what you are saying.

        The Cubs TANKED the last two years and WERE absolutely more profitable that the teams that tried to win. It’s no contest! What don’t you get.

        They were more profitable than the Yankees, Dodgers, Cardinals, etc.. Clearly the tank now philosophy is working. It also shows that if you are not trying to build the actual team value like the Yankees are doing then the alternative is to tank and take your money straight to the bank.

        The Yankees aren’t worried about making a profit not and likewise the Dodgers. They are worried about making their teams more valuable in the future. The Cubs are only worried about profiting every year and not building the value of the Cubs. The best way to do that is to try to convince your fans of something so they will keep coming to games and then tank to save that money.

        As a business plan goes it’s actually a great business plan. The part where their business plan sucks is that they are only going to renovate by using money generated by the Cubs in the form of advertising. The problem with that is that they still don’t know if they can even begin to advertise until/if an injunction is filed. As a result the value will not go up either for the length of the suit. That could be years…

        That’s where the “plan” falls flat…

        1. twinkletoez

          Please explain to me how the Cubs were more profitable then the Yankees?

          Yankees revenue was $471M
          Cubs revenue was $274M

          1. aaronb
            1. twinkletoez

              There is no way Forbes would estimate the Yankees being worth 2.3billion if they are only making 1.4million per year. That list has to be missing something, NO?

              1. brainiac

                can we stop saying “forbes must be wrong” because the ricketts’ sent out a few advertisements that said so? are we really going to believe a promo over professional economic analysis?

                1. twinkletoez

                  My question on the article has nothing to do with the Ricketts’ or the Cubs. I was confused on how Forbes could estimate the Yankees worth 2.3Billion when they supposedly only make 1.4Million

                2. bbmoney

                  I don’t know that Forbes is wrong. I don’t know that they’re right.

                  But I’m pretty sure they don’t have all the private financial records they’d need to really do their analysis super accurately. And that any valuation has a lot of assumptions (growth rate, discount rate, EBITDA multiplier, etc.) and inputs (revenues, expenses, debt load, etc.), so there are a lot of things that can go wrong. You can use faulty assumptions and if you don’t have all the data you need (and are estimating it) to do the valuation right it only exacerbates the concerns about using the right assumptions.

                  So I’m not saying Forbes is wrong they’re obviously pretty well respected and have some smart people working for them, but because of the data issues my confidence in their valuation being accurate isn’t all that high. So I don’t take it as gospel or rely on it as proof.

                  1. MattM

                    I love this!!! You guys are amazing! So now when the Cubs or their lackey media palls release something you guys take that as gospel. That is hilarious. When two extremely smart and respected magazines come out with very exhaustive analysis about their financials and what they have profited the last two years….Well they are just plain wrong because well Ricketts said they are wrong…

                    COME ON!!!! You all believe that just because Kaplan released a SMALL portion of the contract that the Cubs absolutely have the legal rights hands down etc. Evidence is showing that not to be the case just by how the Cubs are acting.

                    If they Cubs were on completely solid ground with regards to the contract they wouldn’t be spouting crap in the media about the rooftops and trying to get public support. Clearly they have looked at everything and are not confident or they would have already gone ahead with everything.

                    It’s just funny Brett that you can come on and chastise me for seeing everything as gospel and yet when again two extremely respected business sources come out with analyses that both point to the Cubs being extremely profitable you balk at that. When Kaplan says anything for the Cubs it’s gospel! Anything that is against what Ricketts wants you to think is automatically poopood.

                    1. farmerjon

                      Matt M…hmmm, Matt Murphy? Are you Beth’s son?

                    2. TWC

                      Oh hell, it’s — again — that time of the day when MattM comes on to repeat his ennnnnnnnnndless, tedious screed, over and over again.

                      *yawn*

                    3. TWC

                      Larf.

                    4. DarthHater

                      Nah, I figure Matt Morgan :-P

                      f363cd7ffe8363c84c0ce5a1fd088429.jpg

                    5. DarthHater

                      Uh oh, Bert’s gettin’ all memey…

                    6. hansman

                      “So now when the Cubs or their lackey media palls release something you guys take that as gospel”

                      OHHHHHHHHHHHHH PRAISE TOMMY HE ALLOWED US TO BE CUBS FANS!!!!!

                      PRAISE TOMMY, PRAISE THEO, PRAISE JED!!!!

  8. V23

    I believe the Cubs are hiding STH data. I heard people who were on list and declined and missed the date, then were called back again saying the “deadline” has been extended.

    That 100k names is crap, it’s just email addresses.

    1. hansman

      There was shitty weather the weekend they held the “Pick Your Seat” affair.

      I think I got an email from them pretty quickly thereafter telling me I had more time.

    2. BT

      It is just email addresses, but that’s all anyone claims it to be. If it were truly 100k people waiting to pony up for season tickets, then there would be no point in taking names anymore as it would be 100 years before the end of the line saw their number called, if that. No one is trying to pull a fast one here. Everyone knows to get on the list you just have to enter your email address.

    3. When The Musics Over

      Yes, I posted the same thing I heard from people above.

  9. 5412

    Hi,

    All season ticket holders are guaranteed seats somewhere in the playoffs. At the time I got mine, they said they grandfathered in all those who had partial packages like nights and weekends. All future buyers had to buy the entire season. That means they could have two partial season ticket holders with the same seats; both guaranteed playoff tickets.

    Couple that with the fact that MLB commandeers a certain number of playoff seats. Many folks who had grandstand seats got pushed to the bleachers for playoffs…..playoffs -remember them?

    With all that being said, in the mid 2000′s they sold almost 100% of their available inventory.

    regards,
    5412

    1. Brocktoon

      That may have been the case in the past, but just last year I got the call and I got a Nights and Weekends package in the Bleachers.

  10. CubFanBob

    Something to consider into your equations as well is all the six or nine game packs, whatever number they are, they sell as gift packs etc.

  11. Patrick W.

    MLB might also set aside rules for how many season tickets you can sell. My hypothesis would be that if a lot of teams sold out all of their tickets to season ticket holders, and no seats were available for individual buyers, the anti-trust exemption might be looked at more closely.

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