By Robbie Butler
This week the GAA announced that ticket prices would increase for the 2019 season following ratification of this by the organisation's Central Council. The move will see price hikes in both the National League and Championship matches. As one might expect, the reaction to this decision amongst supporters has been mixed.
To understand the motivation behind this decision, economic theory can help.
A standard sports economics textbook will address the demand function for sport (normally match tickets) at an early stage. Teams, or in this case the organisation running Gaelic Games, will set prices based on the typical fan’s willingness to pay. This prices is related to consumer surplus: the difference between what one is willing to pay and what one actually pays.
It is intuitive to reason that as prices go up, demand falls. Raising the price of a ticket will invariably reduce the number of fans willing to spend money to attend matches. This is offset by the increase in price. Whether the increase in ticket prices is worth the cost (loss of some fans) depends on the price elasticity of demand for match tickets. And herein lies the key.
So why don't they? Various reasons are proposed such as empathy with supporters, a desire to maximise attendance or the “fan experience, due to pressure exerted by supporter interest groups to keep prices down, maximising non-gate revenue, etc. It might even be the case that increases in ticket prices have no effect on quantity demand; none that is visible anyway. e.g. a stadium continues to sell out.
The GAA implicitly believe this to be the case anyway. The organisation as gone to great lengths to explain that this is their first major pricing increase since 2011. A statement released by the GAA ensured supporters that the additional revenue that is expected to be generated will be ring-fenced and benefit all counties as:
“A national pool will ensure that counties in lower tiers with smaller crowds are accommodated via the national pool. Additional revenue from these Championship ticket changes will be ring-fenced to fund an increase in grants to club facility redevelopments to a new high of €3 million, fund additional grant aid to overseas units and the staging of the GAA World Games in July, and make increases in capital grants and funding to county boards.”
The key words in this statement are at the start of the second sentence. "Additional revenue". In other words the Association is implicitly stating that they believe they are currently undercharging, if the objective is to maximise total revenue.
At a practical level here are two of the changes:
Attendance (quantity demanded) for point 1. above will remain unchanged (sold-out) hence total revenue will rise.
In the case of point 2. a 25% increase in price would need to result in a 25% drop in attendance in order to this decision to backfire. If 40,000 fans attended at Round 3 qualifier last year when the price was €15 will this drop, ceteris paribus, to 30,000?
I think not. Demand is inelastic.
This week the GAA announced that ticket prices would increase for the 2019 season following ratification of this by the organisation's Central Council. The move will see price hikes in both the National League and Championship matches. As one might expect, the reaction to this decision amongst supporters has been mixed.
To understand the motivation behind this decision, economic theory can help.
A standard sports economics textbook will address the demand function for sport (normally match tickets) at an early stage. Teams, or in this case the organisation running Gaelic Games, will set prices based on the typical fan’s willingness to pay. This prices is related to consumer surplus: the difference between what one is willing to pay and what one actually pays.
It is intuitive to reason that as prices go up, demand falls. Raising the price of a ticket will invariably reduce the number of fans willing to spend money to attend matches. This is offset by the increase in price. Whether the increase in ticket prices is worth the cost (loss of some fans) depends on the price elasticity of demand for match tickets. And herein lies the key.
- If one increases the price of a good or service, demand falls (as expected) yet total revenue (PxQd) goes UP then the decision was correct, from a revenue-raising perspective.
- If one increases the price of a good or service, demand falls (as expected) and total revenue (PxQd) goes DOWN then the decision was incorrect, from a revenue-raising perspective, and prices should revert to their original level.
So why don't they? Various reasons are proposed such as empathy with supporters, a desire to maximise attendance or the “fan experience, due to pressure exerted by supporter interest groups to keep prices down, maximising non-gate revenue, etc. It might even be the case that increases in ticket prices have no effect on quantity demand; none that is visible anyway. e.g. a stadium continues to sell out.
The GAA implicitly believe this to be the case anyway. The organisation as gone to great lengths to explain that this is their first major pricing increase since 2011. A statement released by the GAA ensured supporters that the additional revenue that is expected to be generated will be ring-fenced and benefit all counties as:
“A national pool will ensure that counties in lower tiers with smaller crowds are accommodated via the national pool. Additional revenue from these Championship ticket changes will be ring-fenced to fund an increase in grants to club facility redevelopments to a new high of €3 million, fund additional grant aid to overseas units and the staging of the GAA World Games in July, and make increases in capital grants and funding to county boards.”
The key words in this statement are at the start of the second sentence. "Additional revenue". In other words the Association is implicitly stating that they believe they are currently undercharging, if the objective is to maximise total revenue.
At a practical level here are two of the changes:
- All-Ireland senior final stand tickets go to €90 from €80 while a Hill 16 ticket will now cost €45, as opposed to €40 previously.
- Rounds 1 to 3 of the All-Ireland Senior Football Championship Qualifiers tickets will rise from €15 to €20.
Attendance (quantity demanded) for point 1. above will remain unchanged (sold-out) hence total revenue will rise.
In the case of point 2. a 25% increase in price would need to result in a 25% drop in attendance in order to this decision to backfire. If 40,000 fans attended at Round 3 qualifier last year when the price was €15 will this drop, ceteris paribus, to 30,000?
I think not. Demand is inelastic.
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