Wednesday, March 07, 2007

Just the Ticket?

Monday's announcement about season ticket prices was a smart public relations move, but it didn't "...send shockwaves through the game..." and rightly so.

As Charlton fans we've never been able to quibble about ticket prices (at least not in a relative sense), and the club has been proactively early in announcing its plans, aware of course that many are disenchanted with on-pitch performances.

In order for the headline-grabbing 'free season ticket' offer to come into fruition, it requires that we are both relegated then promoted. Our current probability of being relegated is approx 74% (per Betfair) whilst if it occurs, I would estimate our probability of bouncing straight back to be approx 5/2 or 28% (others may disagree of course). Hence the probability that the free offer becomes reality is only 21% (74% x 28%).

From memory we have approx 17,000 season ticket holders, and I would estimate that under normal circumstances something like 50% would renew in the Championship. I doubt whether those fans unlikely to renew will be swayed by a 28% chance of a free Premiership season ticket in 08/09 (and certainly will be unlikely to move before April 30). That doesn't necessarily imply that 50% of our fans are Premiership glory-hunters, but it is not unreasonable to pick and choose a little more from 23 League games, particularly with none likely to sell out.

However of those 50% who in my view will renew, they are probably diehard enough to take advantage of the 'free offer' by applying before April 30 (cashflow considerations permitting). Hence, the expected cost of the 'free offer' (assuming an average season ticket price of £400) is approx £715,000 (21% x £400 x 8,500). As I said at the start, it's nice PR but not much more; after all £715k represents the typical annual wages of a first-teamer or 1/3 of a Madjid Bougherra. Of course, in the event that we are relegated then promoted, then it will 'actually' cost the club approx £3.4m (£400 x 8,500) , but the TV money will more than compensate for it.

It is worth considering then what other options the club might have considered with a ticket price-cutting budget of £715k in addition to the welcome pre-April 30 discounts announced anyhow. Would for example a general price cut (in the event of relegation) of approx £85 per ticket (£715k/8,500) have been more appropriate? Such a price cut would almost certainly have seen a tick-up in demand too, hence such a discount would either cost the club less, or offer scope for an even greater cut.

As I discussed back in November, the goal of a high fixed cost business like Charlton should be to maximise revenues (since every marginal pound goes virtually straight to the bottom line). A football club is a little different though since most fans either 'consume Charlton' or no football at all (they don't switch allegiance to the team down the road). Hence building goodwill is important (I just doubt this is the best way of doing it).

Simply offering a free season-ticket offer in the circumstances described above is gimmicky (as well as costly), because virtually all fans that are willing to renew in the Championship, would be willing to pay for their Premiership season ticket. It's nice to reward their loyalty but with a flimsy Zheng Zhi replica shirt costing £51.99, you'll excuse my cynicism. Personally I'd like to see our loyalty rewarded by the Board promising never again to piss away £2m on Djimi Traore and his ilk.

The key to successful pricing in my view lies in diversifying the types of season tickets offered as far as possible, and allowing each fan to 'signal' how much he/she is willing to pay via their selection. The possibility one day of standing in the lower tier of the North Stand would be an important step in this direction, and hence I support Peter Varney in this regard. However there must be more that can be done to segment the stadium further and thus permit far higher prices for those willing and able to pay up for a 'luxury experience', whilst reducing the prices for those not so inclined (yet leaving total revenues higher). It seems bizarre for example that a lower tier West Stand seat next to the goalline costs the same as one on the halfway line.

The ultimate goal of any ticketing strategy should be to fill every seat in the stadium ensuring that every fan is paying the maximum they would have been willing to pay (and not a penny less). This is essentially the strategy that the hotels and airlines utilise so effectively. Lack of information and ticketing technology prevents this from occurring easily, but offering (unlikely) free tickets in a blaze of publicity (to those that would have been happy to pay anyway), whilst doing virtually nothing to encourage the less committed fans (aside from a early-bird discount) just doesn't seem great business with relegation looming.

9 Comments:

At 1:38 PM, Anonymous Ralph Milne said...

NYA - This is exactly why I read this blog. Fascinating stuff and unique in it's glorious statto style content not to be found in other blogs.

Reading Murray's notes in the West Ham program I couldn't help thinking that he felt v agrieved that the likes of Bolton etc had been getting such great press for freezing ticket prices.

It seems that he thought that Charlton owned the sole rights to "Friendly Family Premiership Club" so in a desperate attempt to claw it back we have this new outrageous offer which gazumps all other prem clubs iniatives and could end up costing the club valuable revenue.

Still a 1 in 5 chance of a freebie ticket, be silly not to from a fan's point of view wouldn't it?

 
At 12:15 AM, Anonymous Vancouver Addick said...

I would disagree with the 50% figure to renew. Remember back in 1999 we got pretty much everyone back at the valley after going down and had pretty much capacity crowds every week to watch our championship winning season.

Like your article however and great blog.

 
At 2:51 AM, Anonymous newyorkaddick said...

I think it's worth recalling that back in 1999 when we last went down, the capacity was only 20,000 so there was a very real chance of games selling out even in the lower division. Also the novelty of Premiership football has worn off after 7 seasons, and the 'dream' of promotion is less enticing than it was back in 1999.

With an enhanced capacity, I would not expect any games to sell out and hence I would imagine many thousands of fans will opt to attend on a game-by-game basis rather than commit for the full season. Hence I don't expect our crowds to drop by 50% overnight, but they will become much more variable.

Ralph Milne is correct that the 'free offer' is a very good one for those diehards who would renew in any division, but a 'budget' for ticket price-cutting could have been used more intelligently. As much as it's nice to reward loyalty, it is actually the 'marginal' fairweather fan that will determine whether we can keep the crowds up (and they will not be swayed in my view by this offer).

 
At 12:57 PM, Anonymous Anonymous said...

I think that your expected cost analysis is a bit naive.

Using your figures it will cost either £3.4m (£400 x 8,500) or it will cost nothing and there is a 21% chance that it will occur. To devalue the offer by calculating an expectation value is misleading.

 
At 1:30 PM, Anonymous Frankie Valley said...

If the sole aim of Mr Murray's ticket-pricing scheme is to maximise income (or at least to guarantee an acceptable level of income) then yes - it makes no sense. There's no point in having us all sitting there if we haven't paid for our seats, is there?

However, as the great man himself has intimated, there is another purpose to this policy - to make sure as many seats as possible are filled next year.

I know this is overly simplistic, but what would you rather have - 10,000 people at the Valley paying £20 for each seat, or 25,000 people paying a fiver? The former brings in more money, the latter makes for a better matchday experience - for the players, for us, and indeed for Mr Murray himself. If Mr Murray wants to spend a bit of cash on keeping the Valley full, good on him - thats what I say.

Just my opinion of course...

 
At 1:44 PM, Anonymous newyorkaddick said...

I don't disagree - I think we can fill the stadium without having revenue cuts by having more variability in pricing.
Otherwise I think we are singing from the same hymn sheet as they say.

Would not agree that it's Murrays' money though!

 
At 9:58 PM, Anonymous Anonymous said...

Well I agree with NYA, the club needs far more variability in its season ticket prices. I can remember two years ago complaining to the club and to the ticketing director that people paid the same price to sit in any seat in the entire West Stand, when the pricing should be on a block by block basis (like most clubs do). For this season 06/07 im pleased to see the club bring in a new pricing structure but it's still a long way from where it should be.

I used to sit on the third to last seat on the right hand side of the West Stand with an appalling view and bemoaned having to pay the same as someone who sits right on half way. I would happily pay more for a better view and now that I have moved nearer to the halfway line, above the away team dugout, I would still pay a premium for this much improved view. That is missed revenue for the club.

 
At 11:57 AM, Anonymous Estu24 said...

I agree with Anonymous, it's just odd. I felt guilty every game last year when I sat 6 seats away from the halfway line and 7 rows back from the pitch paying the same as everyone else.

 
At 6:07 PM, Anonymous Tillers said...

Increasing pricing for those that have sat in the same seat for many years seems unfair. I would not want to pay much more for my ticket on the half way line, but I would like to move my seat even less. I would imagine that the best seats are those occupied by the fans that have been coming the longest.

I know this is a business and needs to maximise revenues, but I think it just highlights the "loyalty" issues that the modern game has caused by fleecing the diehards to enable you to pamper to those that would "take it or leave it". As you state fans will not switch their support, but everyone has a maximum price, and even if you will continue to renew irrespective of price I think the club has a responsibility to reward long term loyality.

 

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