Is The Pro Team Per Cap Model Outdated?
While two-thirds of MLB clubs will be utilizing dynamic ticket pricing for the 2013 season, they may be leaving large sums of money on the table without realizing it.
A lot of this has to do with a relic, the annual per cap measurement.
Designed back prior to computers, written down on a ledge somewhere in the early 1900s, the “per cap” has been used as a way to determine whether the franchise is making money.
It accounts for each seat’s average revenue on tickets, concessions, parking, merchandise and whatever other ancillaries are out there.
Success or failure is determined on an annual basis of whether the team gained or lost revenue.
In the era of dynamic ticket pricing which changes price points and revenue within seconds, the per cap remains an antiquated system of achieving income. And may also be costing the team some valuable income without the franchise recognizing it.
Here’s a quick scenario:
A MLB team with dynamic ticket pricing charges 60 percent more for a Thursday night game against its league opponent, because it is a Bobblehead Night and the No. 2 starting pitchers in the rotation are facing each other.
Sounds pretty good. The MLB team is going to make 60 percent more off of ticket revenue for that game.
Here’s where it gets murky: That’s only 60 percent more off of the individual tickets sold – which may only be able to 10,000 or less fans. Depends on how many purchased it.
Because that’s 60 percent above the original set price of the ticket in general, it looks to be a win.
But here where it may be a negative: What if that 60 percent charge is masking a loss within the per cap overall for that game?
Notice that the per cap isn’t just ticket sales, otherwise the argument is finished before it gets started and the franchise is winning on that account. The per cap is every component of the ancillaries; ticket sales is merely a part of the larger revenue wheel.
That 60 percent inflation charge may be hiding a loss at the other ancillaries, because fans are now paying more at the ticket counter. Thus the per cap is having components of its revenue tree cannibalized by one portion of it.
My argument for drastically changing how we calculate the per cap goes further: How can you have an annual, static system when one of the components is dynamically priced each game?
To have one static metric which is examined as an annual average, combined with a fluctuating metric inside of that static one, makes little or no sense. Plus, because the ticket pricing is changing continuously within the measure, there is no examination on whether or not the other ancillaries are being affected by the ticket revenue.
Consider this scenario within the Thursday game at a 60 percent ticket price jump: What if the actual per cap drops for that game because fans choose to spend 45 percent less overall on other ancillaries? So, on average at the end of the year, the franchise looks at the per cap, but sees a gain because of the fluctuating ticket price, but it is actually a loss, because of the money that the franchise didn’t make from the concessions stand, etc.
This is not a critique about whether dynamic ticket pricing is good or bad.
This is a critique on whether a static measurement such as the per cap should be judged on an annual basis and not examined game-by-game.
Some questions I have at this point of the post:
- Why is ticket revenue the only component which are measured each game?
What if franchises measured per cap by seat during each game?
With the complex number of digital systems out there, franchises have the ability to track sales via credit card and loyalty points.
Another question that comes up:
- What if you are fostering the wrong customer in terms of actual spend at the ballpark?
If you could isolate each customer’s actual per cap spend in their seats, it may be telling which customers are not worth a franchise’s time to sell to. Say a season ticket holder who sits in the bleachers, buys little in terms of ancillaries, may actually have a lower per cap than that of a group night in that same section.
This type of thinking may transform how and what we sell to specific clientele to know exactly what each customer may spend in the area that they are sitting at. Plus, if a customer isn’t amounting to a large portion of their estimated per cap on that seat, but being a nuisance to others, including the franchise’s customer service staff, it may be worth the time of the team to jettison the customer in general when season ticket sales come around.
As one of my old bosses used to say, the bottom line is the bottom line. The per cap needs to evolve with the changing times and technologies, otherwise its not making the most effective bottom line for the franchise.