Take out a pen and paper for this parable. Herein lies an occasion of sports management at its worst and a paradigm of compunction at its best.
A baseball fan sold four tickets (with a total face value of $260) for Game 3 of the 1999 American League Championship Series at Fenway Park for $12,100 via eBay?s online trading service. Not bad for a day?s work ? in Ken Griffey Jr.?s case, an hour?s work. Nevertheless, the prevailing reasons to sway a ticket buyer to make such a purchase seems incredulous to the average fan. After all, not even the allure of an ALCS game between the Boston Red Sox and New York Yankees, the anticipation of a Pedro Martinez-Roger Clemens match-up with biblical proportions, nor the ?priceless? moments, presented by MasterCard, between a father and son can be intoxicating enough for most fans to exhaust a savings account for playoff tickets. And yet, it happens every October.
Paying 4,554 percent above face value, in most instances, does not appear to be a rational decision. Of course, with a bloated economy, there is still trickling of ?irrational exuberance,? the euphoric buzzword of Federal Reserve Chairman Alan Greenspan.
Playoff time signifies more than just the best teams competing for top billing. It also brings out the biggest spenders ? some of which may not even be rooting for the home team, nor even the visiting team. Instead, postseason play cultivates an upper class with greater purchasing power, collectively, than some small countries. Quite often, these individuals are not season ticket holders, rather they only attend the grand attractions.
The economic medium that upwardly shifts the wealth of tickets is better known as the secondary market. It comes as no surprise to most economists why secondary marketplaces like eBay are successful. Fans can routinely utilize this online service hoping to capitalize on arbitrage opportunities, especially for sporting events. The unfettered pricing mechanism has created a mutually beneficial relationship for both the buyer and seller. Surely, Adam Smith would have approved.
However, Red Sox executives have not welcomed the secondary market with open arms. CEO John Harrington and his staff responded quite adamantly against the resale of playoff ducats. Rather than conceal their jealousy of season ticket holders assessing the marketplace more accurately, Red Sox representatives opted to publicly reprimand their customers, who abidingly sustain the franchise?s profit margins.
?Anyone who has resold even a single ticket to these playoffs will have his season tickets taken away permanently,? exclaimed Boston Red Sox public relations director Kevin Shea, prototypical counterpart to the political ?hatchet man.? Forget the palpable notion that it was the wrong messenger, and especially the wrong message. At its core, Red Sox executives have contradicted themselves by denouncing the same free market system that allows them to price their tickets through natural market forces.
The Red Sox would have little economic incentive if the federal government regulated ticket prices, so that the franchise and others would hardly profit from stadium revenue. The outlandish decision to formulate an ?anti-ticket resell? policy inexorably degenerates for two reasons. First, Red Sox executives have little leverage in executing this plan. Although eBay may nullify online transactions, if reported, that violate state or local law, the company is not obligated to do so. Second, they erode brand equity and public relations when threatening the fans. It is hardly blasphemous to recognize that not every Red Sox fan is a diehard loyalist.
There is no justifiably defense for the franchise?s recent actions. Clearly, the p.r. repercussions are disastrous, but also financially, there is nothing to gain and everything to lose. A secondary market creates a viable solution for maximizing actual attendance. Even in the playoffs, as evident by the Atlanta Braves? sluggish attendance figures, not every ticket holder comes through the turnstile. Hence, in the peak of their financial season, franchises operate below capacity and fail to reap the full benefits of having more warm bodies in the stands.
The opportunity cost of ignoring a secondary market can equate to losing millions of dollars spent at the concessions. Moreover, having wealthier fans acquire these tickets can only increase a franchise?s volume of sales.
Many other Major League Baseball franchise executives agree. In fact, some teams have adopted the credo, ?If you can?t beat ?em, join ?em.? The San Francisco Giants recently formed a strategic alliance with eBay, exemplifying how teams can use the secondary market to their advantage. In fact, the team?s web site, Giants Virtual Dugout, provides a direct link for Internet users to access eBay.
?New technology provides a way for franchises and venues to offer customers better access to the secondary market,? said Giants senior vice president Pat Gallagher. ?If managed responsibly, it can help long term retention of season ticket accounts and reduce the number of empty seats at sold out events.?
As Giants executives and others demonstrate more economic savvy, Red Sox officials face the unenviable task of restoring public approval and then reevaluating their marketing strategy. They should be flattered that their product was valued so highly, or be upset that they priced it so poorly. Either way, the franchise must reconsider its position on secondary markets or face serious consequences. Some Red Sox season ticket holders will face financial tribulation when making such large capital expenditures before the season just to procure their seating rights. Without a secondary market, the cost of holding unused tickets can add up quickly during the season.
?We want our seats, but the Red Sox have no business telling us how to use them,? a 1999 season ticket holder said. ?If they want to increase ticket prices, fine. Just don?t preach that we can?t do the same.?
Are Red Sox executives having second thoughts? Probably not. The correlation between a verbal faux pas and responsive management in professional sports is virtually nonexistent. Some franchise owners have mitigated corporate blunders by appointing stronger leaders to the helm. Others have addressed the exigence with grace and humility ? a suitable strategy in Boston.
Apologia may restore some of the damage by Red Sox executives, but this gross miscalculation will not be misconstrued with the ?Curse of the Bambino.? No, they committed this error without Bill Buckner?s assistance, entirely of their own choosing.
? 2007 LineDrives.com, Michael Wissot,
Michael Wissot is a managing partner at SymAction Communications, a corporate communications and market research firm. He serves as an adjunct professor of communication at Pepperdine University and a political analyst for KABC talk radio in Los Angeles. Wissot ? an expert in crisis management, messaging, public relations and Internet communications ? previously worked as Vice President of Luntz Research, a premier public affairs firm. He has moderated focus groups and conducted surveys for Fortune 100 companies and leading industry associations. Wissot, a former aide to U.S. Senator John McCain, has contributed to high-level messaging projects for President George W. Bush, Governor Arnold Schwarzenegger, former Secretary of State Henry Kissinger and several other world leaders and CEOs. He served three years as CEO of Dentistry.com, a leading dentist-matching company. Wissot received a BA from James Madison University, a MBA from The University of Arizona, and a MIM from Thunderbird.
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