American sports have been a central focus for entertainment since they became sensationalized during the 1920s after the conception of the radio. This medium of information exchange helped market such sporting events on a national scale. Since then, consumers have fallen in love with sports such as Baseball, Basketball, Football, Soccer and Golf. Today, consumers are willing to spend substantial amounts of money to attend sporting events starring their beloved teams or players. For example, the average price for general admission tickets to the most recent Super Bowl this year ranged from $4,744 to a whopping $5,650. But why do consumers buy tickets to these events when they have the opportunity to view the same event on television for no cost? This economic enigma has puzzled me as a lifelong sports fan and economics major because, at first glance, it seems irrational for consumers to attend a sports event at a high cost when alternative viewing options are free and can be viewed around an individual’s personal schedule by recording. In this paper I will be analyzing and observing what factors compel consumers to purchase tickets to sporting events when they are available to be viewed for free on televisions in their homes. I will focus on the economic concepts of Law of Demand, consumer preferences, cost-benefit analysis and product differentiation as bases to explain this economic enigma.
There are a multitude of factors that affect consumers’ decisions when purchasing tickets to sporting events. The first thing that the majority of consumers analyze before deciding to buy tickets to a sporting event are ticket prices. Regardless of which sport you plan on viewing, the main driver behind ticket price is the Law of Demand. The law of Demand states that if the price for a product or service rises, then the demand for that same product will fall and vice versa. This widely accepted economic theory stands true in the market for sporting event tickets and is the primary factor in determining ticket prices. In addition to ticket pricing, there are many other costs associated with attending sporting events that determine whether or not a consumer thinks that it is worth the cost to attend. According to an Investopedia.com article written by Tim Parker, “The average cost for a family of four to attend a game, purchase food and drinks, park the car and come away with a baseball cap or two is $207.68”, while “the average price of one Major League Baseball ticket is $26.98, making the cost to see the game about 50% of the total cost” (Parker). Aside from the cost of purchasing tickets, there are numerous costs to attend sporting events, usually including parking fees, concessions, fan merchandise, and others. These costs can very well determine the marginal willingness for consumers to attend events as they can even outweigh ticket costs in some instances depending on the event. Other relevant determinants of demand for sporting event tickets include a consumer’s age, gender, geography, the competition level of the event, and even relationship or parental status. Many times, middle-aged male consumers are more likely to purchase sporting event tickets than other female demographics, but those males are even more likely to attend a sporting event if they have a partner to attend the event with them. On the contrary, those consumers holding parental status may be weary to attend games in person, as additional variable costs of attendance mentioned above can increase quickly as the number of people attending increases. In addition, consumers are more likely to attend a sporting event that is projected to be an entertaining matchup with a high level of competition, rather than an event that does not debut big name athletes or teams.
Another economic concept that plays a role in explaining this economic enigma is the concept of product differentiation. Product differentiation is the process of distinguishing a product or service from others, to make it more attractive to a particular target market. This gives ticket sellers price setting power and is a powerful aspect in how they make profits. As sporting event viewing is becoming more easily available through the television and internet, professional sports associations such as the NFL, NBA, MLS, MLB and others are continuing to find better ways to differentiate their sporting event from simply viewing it in your home. Ways that these organizations successfully product differentiate is through additional entertainment throughout the event. This includes half-time shows, incentivized fan competitions, fan giveaways, and even including light and visual shows when announcing team lineups. For example, the Dallas Cowboys football organization is welcomed at their home games with a light show and pyrotechnics to give fans a more entertaining experience and to keep them engaged throughout the event. Other ways that attending a sporting event can be differentiated is through the experience in general. Fans enjoy tailgating, being with other fans, and the group energy provided when attending games in person. For many consumers, these aspects of event attendance provide enough benefit to make the extra cost of attendance worthwhile.
Most consumers will participate in a cost-benefit analysis to analyze whether or not the aspects of this differentiated product are worth the explicit cost of attendance plus the opportunity cost involved in attendance. A cost benefit analysis is a systematic approach to estimating the strengths and weaknesses of alternatives; it is used to determine options that provide the best approach to achieve benefits while preserving savings. In simpler terms, a cost-benefit analysis determines whether or not the benefits of making a decision outweigh the costs associated with that decision. This process can be done explicitly in the form of a pros and cons list or implicitly through analyzing individual preferences and alternatives. Fans will compare the factors which typically differentiate the experience of physically attending (i.e. the “overall experience”) like tailgating, group energy and enhanced entertainment to both the explicit costs of attendance as well as the implicit opportunity costs incurred. Explicit costs are ticket costs and additional variable costs, while implicit costs can range from travel time, preparation and viewing convenience to the opportunity cost associated with the money and time spent. This can include the benefit received from alternative spending options and the option for alternate use of time spent. Based on this cost-benefit analysis, consumers form their own individual marginal willingness to pay and decide whether or not the benefits outweigh the costs for them personally.
To summarize, there are many factors that compel sports fans to buy tickets and attend events rather than to view those events at home free of cost. The main factors that play a part in consumers’ decisions are the Law of Demand, the degree of product differentiation, associated opportunity costs, and a cost-benefit analysis made by consumers. By combining these factors I was able to use my knowledge of microeconomic concepts to explain the motives that compel consumers to attend sporting events, and to provide insight as to why this enigma still exists today.