Season's Greetings

The club today announced its season ticket pricing policy for next season.

They are offering two forms of related incentives:

1. A general £50 reduction on 2008/9 prices (except for the cheapest seats in the Lower North, which remain unchanged); and

2. A punishing and 'guaranteed' minimum cost of 23 equivalent match-by-match tickets, to encourage the purchase of a season ticket.

I think the club has a confused view of its support base, and that its policy will not only fail to maximise revenues (its stated aim), but will also fail to maximise attendances (a potential key contributing factor to the team's success).

I have often argued that the seven consecutive years of Premiership football from 2000-2007, may lead the Board to overestimate its core support, if it extrapolates too much from season ticket sales.

When The Valley was sold out for every single Premiership game, a season ticket was almost a pre-requisite for those casual (but still somewhat committed) fans who wished to guarantee a seat at the glamour matches.

By way of example, even after I'd moved to New York on a permament basis, I retained a season ticket in 2005/6 and 2006/7. Once relegation guaranteed a less than full stadium, there was no reason to renew it.

Although my non-commitment was purely a continental issue, it was at this point that the first wave of non-renewals kicked in because match-by-match availability was now assured.

Season ticket sales have held up well in both seasons post-relegation, because it was reasonable to expect the team would be somewhat competitive on both occasions. Moreover the club offered a free Premiership ticket if successful, a smart but ultimately irrelevant ruse.

However with League One football now upon us, and with no equivalent Premiership offer on the table, the next wave of non-renewals will kick in almost regardless. Thus I think the club has tried to get too cute with its pricing, and unnecessarily so.

In my view, the demand function for 2009/10 season tickets will resemble the chart I have constructed above. It assumes for simplification that there is only one single season ticket price, and that the equivalent match-by-match cost is £20 per game, or £460 per season.

Ignoring visiting supporters for the timebeing, the club could probably fill The Valley entirely with Charlton fans if it charged around £80 for a season ticket.

This would probably be too much to entice the merely curious, but low enough to attract all fans from the most casual to the fanatical (whether or not they all turned up is a different matter of course).

However at £80 per ticket, the club's match ticket revenue would be a mere £2.1million for the entire season, compared to more than £8million in 2007/8 from 'ticket income and matchday activities.'

As the price rises from £80 however, demand falls very rapidly (as the casual fans are disincentivised) until it begins to stabilise around £150 at the 12,000 or so mark.

Interestingly in my view, demand then falls only slowly as the price rises, until it approaches the £460 mark at which point there is no financial incentive to renew (although there may be non-financial incentives such as the surety that you will be able to sit with friends etc..).

In short, I would estimate that even in League One, there will be 10,000-12,000 'committed' fans whose price sensitivity is relatively limited until that match-by-match comparative is reached.

At that point, demand obviously falls off very rapidly with only the most well-off committed fans, and those who greatly value the consistency of the same seat, willing to pay more than the match-by-match equivalent.

Thus whilst far from an exact science, the revenue maximisation from season tickets will occur fairly close in my view to the match-by-match equivalent price, and certainly much closer than the £101-£285 savings the club are actually offering.

Little additional incentive is needed (by way of a further discount) to these hardcore fans, because they intend to attend every match anyway. In economist speak, they are price inelastic.

Yet strangely, the club has sought to effectively 'punish' the less committed (but nonetheless important) fans, in order to provide an extremely flaky 'incentive' to the committed fans, who frankly didn't need much incentive anyway!

And most absurdly, by setting a 'guaranteed' minimum price for match-by-match tickets, the club has left itself virtually no flexibility to run clever ad hoc marketing promotions, which would improve attendances and might lift the atmosphere.

Why did the club even need to even mention what match-by-match prices would be? A season ticket and 23 individual match tickets are different products.

In my example above therefore, fans would have to estimate the likely cost of the equivalent match-by-match tickets and make a value judgment, but the club has no long-term incentive to screw its most loyal customers.

The club could have guaranteed merely that 23 individual matchday tickets, would be no less than a season ticket for the equivalent seat.

Even more drastically, they would have been far better served in my view, if they'd merely announced the prices of season tickets and left it at that. No need for fanfare or marketing spin - this is the price, take it or leave it.

Either would have been a reasonable compromise; after all why should hardcore fans resent some occasional discount ticket promotions if they boost the crowd and atmosphere?

My guess is that season ticket renewals will come in roughly as expected, but it will quickly become apparent that matchday sales are poor.

The club may thus have to consider retrospectively reneging on its discount guarantee, with an inevitable backlash from season ticket holders.

I would imagine the club felt obliged to make a 'statement' about how much it understands the fans' pain (financial and footballing), and wants to ease its burden.

However I suspect it overestimates how much in the current circumstances it can realistically do, to sway those wavering fans that it is most focused upon.

Most had probably already made their mind up, absent an enormous discount that would never have realistically been forthcoming (and wasn't).

The club is misguided therefore to fall into this trap and disincentivise some of those same fans from attending match-by-match.

Price discrimination is a fact of life, and particularly prevalent in the service industry. When the time/place aspect of a product is relevant (flights, movies, hotels etc..), then the idea of fixed or inflexible prices is perverse.

The average cost of a matchday adult ticket for League One football will be guaranteed between £17 and £25.

There's always considerable debate about whether football tickets are 'overpriced'. Given that every stadium in the Championship is at least half full (Southampton is lowest at 51.4% of capacity), and that half are at least 75% full, then one might reasonably argue they are only moderately overpriced.

Given that the marginal cost of admitting an additional fan is essentially zero, any pricing policy is flawed if a stadium is less than full. However short of having a "Tickets for £1" promotion 30 minutes before kick-off, this is perhaps unavoidable for most clubs.

I have friends who pay over a grand for a Premiership season ticket, or over £50 per game. Because they pay for it in a lump sum, it hits their credit card and they don't pay it too much attention.

However they typically agree that if they were required to give a turnstile operator fifty sovs in cash, to watch their team play Stoke or Hull, they would pause for a second, turn straight around and head back to the pub.

But for them it's a cost worth paying, for a guaranteed seat to watch the dozen or so games they'd always want to see. When these clubs clamour for bigger stadiums, I wonder if they really understand this dynamic (Charlton clearly didn't....we once wanted to go to 40,000).

Those ambitions are thankfully in the past, but we will still expect fans to pay perhaps £25 at the gate, to watch their team play Hartlepool United on a wet Tuesday night. And all to provide a supposed incentive to hardcore fans who didn't even need one.

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Footnote: the price of £49 for all Under-11s, and £75 for Under-18s is undoubtedly an outstanding offer, and one for which the club should unconditionally be applauded. Looks like my sons will have to become Charlton fans after all (poor souls).