Blog PostsSportstao Industry Posts

Spring Training trip continues: Death by free tickets

If a sports executive were to peer into a crystal ball, what would they see? Would they be witnessing a world of innovation that was matching the overall technological boom? Or would it remain the slow machinations of an industry slow to adapt for fear of change, criticism, and overall indifference. The world of mobile, dynamic/variable pricing, player scouting, new media and other advances are upon the sports industry, but in many ways, it is catching up to its peers in terms of use.

This is where the Society of American Baseball Research’s second annual analytic conference in Phoenix left its members March 9. On the cusp of things already in use by the rest of the world, yet to be implemented fully by the sports industry. One team has to be the pioneer, go through the wall first, in order to allow the others to follow and claim their own “credit” in that portion of the revenue generation field. It is fitting that the film “42” is being released this year, where the Brooklyn Dodgers broke through traditions, norms, and out-right bigotry to allow Jackie Robinson to play second base in 1947. Boxing (1897 – Jack Johnson) and Pro Football (1904 – Charlie Follis) had already set the trend because baseball took longer to adapt. Only Basketball (1950) and Hockey (1958) took longer to allow fairness on their rosters.

Like all good things, the SABR Analytics Conference had to come to an end.
Like all good things, the SABR Analytics Conference had to come to an end.

This type of slow to adapt mentality isn’t reserved for the roster. Although people talk about Moneyball, where Billy Beane utilized sabermetrics to build a better Oakland Athletics team, the concept of using complex weighted statistics for scouting had been around with the S.A.B.R. organization since its inception in the early 1970s. But baseball wasn’t ready until it was ready, and still found Beane at every turn during the mid-2000s, because sometimes a 35-year lead time between invention and implementation may not be long enough.

This is where East Bay Moneyball comes into play. That concept of knowing how to build revenue in different ways, which has been around as a standard since the beginning of time with most retail companies in one form or another. Except for the sports industry, where prices were typically set in June to be implemented for the next season. This static system of pricing meant that it was usually wrong, out of touch, and either priced the product too low or not enough.

East Bay Moneyball is the risk that San Francisco VP of Tickets Russ Stanley took on twice; first in the secondary market in 2003, second in dynamic pricing in 2009. Both times he was criticized by his peers because it was something new, something that wouldn’t work. And even though you likely won’t see Brad Pitt starring in a film about implementing these revenue concepts, what Stanley has done changed sports economics forever. The fact that the members of S.A.B.R. half attended the “business of baseball” meetings which explained dynamic pricing, compared to the sexy world of roster management with scouting statistics research, is telling. Even the stat geeks aren’t fully on board yet.

Dr. Barry Kahn, PhD. founded QCue, Inc. in Austin, Texas after working for the University of Texas Athletic Department. Seeing how there were people standing in line for static pricing for a UT home football game, he wondered how much revenue UT was losing by not having a dynamic system. When we talk about the evolution of sport, especially on the industry side, universities are even slower to adapt than the professional, and mainly go kicking and screaming into the future, upset that anyone dare tell them that the concepts used over the last hundred years are no longer relevant. It is shocking when considering that these institutions are supposed to be at the forefront of innovation, in a complex learning environment, yet have departments and directors who refuse to do anything but change.

Dr. Barry Kahn, PhD. founded QCue, Inc. in Austin, Texas after working for the University of Texas Athletic Department.
Dr. Barry Kahn, PhD. founded QCue, Inc. in Austin, Texas after working for the University of Texas Athletic Department.

Kahn headed the QCue, Inc.’s involvement with the San Francisco Giants dynamic pricing. What was initially 2,000 seats in 2009 that were dynamically priced, became the entire stadium by 2010. Yet the criticisms remained, until the Giants started to sell out each game of the season. Now over 75 percent of Major League Baseball is using dynamic pricing, but as Kahn told me yesterday, the industry is still at the start of understanding what they are doing.

Kahn: “I think most teams are going to look back 2-3 years from now and realize that instead of dynamically pricing correctly, they were shifting pricing up or down with less than they should. The San Francisco Giants model shifts daily, dramatically in concert with actual demand.”

Major League teams continue to hold on to many of their old ticket ways, though some are slowly adopting different pricing structures that will help it gain more revenue.
Major League teams continue to hold on to many of their old ticket ways, though some are slowly adopting different pricing structures that will help it gain more revenue.

S.A.B.R.’s Business of Baseball panel was moderated by Dan Migala, with Kahn, Andrew Miller (Cleveland Indians), Zaheer Benjamin (Phoenix Suns), and Dan Derian (Major League Baseball) speaking. Between the four on the panel, there are due to be monumental shifts in how team revenue is calculated, although it may be something which S.A.B.R. merely monitors rarely than pushes as an organization. Player development is much more enticing, the idea of utilizing athlete skills through statistics as a commodity intrigues people, in ways that actual dollar generation somehow can’t.

When Author Bill James had mentioned in his March 8 Keynote that he didn’t know what the administration side of the Boston Red Sox did, except that selling tickets was important and that the team administration side controlled the operational side but not the other way around, it was a simplistic statement to a complex issue. Team revenue streams are changing, in some ways they are for the better, in others they are dying. The worry of mobile, HD, streaming, etc., is that there is no need to attend any of those games to which S.A.B.R. members want to scout a player’s W.A.R. or Win Shares. This trend continues as the sports industry continues to become slower to adapt to concepts that the rest of the business world implemented years ago.

After the Business of Baseball Panel, I met Pedro Gutiérrez and decided to have him on the podcast. Media Director of the Mexican Winter League, Gutiérrez deals with the issue of trying to achieve coverage for a sport which is far below the South American love affair with futbol. Gutiérrez talked to me about sports economics in Mexico, how players are drafted, signed, and play in the Winter League, and whether or not Cuba would ever join. I questioned whether Cuba’s inability to keep its players from defecting might have some reasoning behind why they haven’t joined the Winter League, but Gutiérrez corrected me. Cuba apparently doesn’t have the stadium, hotel, etc., to host a Caribbean Series. Even the communists of Cuba have to live up to the capitalist demands from the rest of the world.

Pedro Gutiérrez is the media director of the Mexican Winter League.
Pedro Gutiérrez is the media director of the Mexican Winter League.

I decided to do my podcast interview with Barry Kahn at the World Baseball Classic game of U.S.A. vs. Italy. It was funny because we both realized that neither of us had tickets to the game. There was a deflated sense because Kahn and I shared with each other that we hadn’t paid for tickets in years, which extends to a larger issue of whether those who receive something for free will ever pay for it later. I agreed with meet Kahn down at Chase Field for the WBC game, got there first, and decided to stand in line to pay for both of our tickets. Kahn mentioned to me later that he was trying to arrive early to purchase my ticket as well as his, so we had the same intentions.

Standing in line, there was this look of dread over my face. I didn’t want to pay for a ticket. Its that weird psychology of knowing that if you can gain something for free, you will find anyway never to pay for it ever again. I looked around the Chase Field parking garages and streets, noticing that the lots were half full. Obviously, since five blocks beyond The Legends District which houses both the U.S. Airways Center and Chase Field, all of the parking on Saturdays and Sundays is free. Anyone would be a sucker to pay $20 to park five blocks closer.

I had my credit card out to pay, only about two or three people in front of me at the ticket window, when I had a person come up and give me three free tickets.

“Just trying to fill the place,” the older gentleman said and started handing out free tickets to others in line. “Just scan all of them, that way it don’t look so bad tomorrow in the attendance count.”

This amid scalpers and Diamondback employees trying to sell the public something, and yet I received three tickets for free. When Kahn arrived, I handed him a ticket, scanned the other two, which Kahn didn’t understand why I scanned both since he wasn’t there when I received three of them, so he didn’t understand the older man’s request. Right there, we had affected the WBC per cap for that game. We went to our seats, but saw a whole empty section about twelve rows lower and decided to sit there.

No scalping! Either way, couldn't have been good business at the WBC, who was giving out free tickets to help boost attendance figures.
No scalping! Either way, couldn’t have been good business at the WBC, who was giving out free tickets to help boost attendance figures.

And this is where we began to talk on the podcast at the game about deflation of value, the abuse of free tickets, the uses of dynamic pricing, and where mobile is headed. All of these things were evident to both of us as neither of us spent a dime on concessions, merchandise, parking or the tickets themselves. My invisible friend utilizing the third ticket scanned through didn’t, to my knowledge, buy anything either. It is a testament to the new business of baseball or the sports industry in general. That which you give away does not earn you anything, nor does that model work now, if ever it did.

Whoever the older gentleman was, he likely was trying to “help” boost the attendance count of the WBC, but what he did was hurt the revenue. But that’s a concept that the sports industry is slow adapt to. Because giving away things is easy too boost attendance. Desperation cost the WBC at least $50 from Kahn and I collectively. All the WBC possibly gained was holding onto the past. New revenue generation is a concept that the industry needs to adapt in the future, but will it? As S.A.B.R. and Moneyball proved on the player development side, its either adapt or die. Hopefully East Bay Moneyball provides the same influence and “jolt” to the system before its too late.

Previous post

QCue's Barry Kahn told me this at the WBC Italy vs USA tonight

Next post

Minor League Baseball & NBADL Team Owner Mike Savit Told Me This Today

1 Comment

  1. March 15, 2013 at 8:06 pm — Reply

    […] Death By Free Tickets – Kirby, Sports Tao.  All about dynamic pricing and free tickets.  Still a bit of a touchy subject – not even stats geeks are big on it yet – but a great read. […]

Leave a reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.