How many MLB games did you go to in 2018?
The answer rests heavily on your geographic location, of course. Readers in the Pacific Northwest or Deep South will naturally have fewer opportunities to attend games in-person than someone living in Queens. Of course, your individual level of income and living situation probably had a lot to do with how many games you saw as well.
I’m fortunate in that I’m 24, with no kids or other dependents. If I go to a game with a friend from work, my girlfriend or my dad, I’m just responsible for my own ticket and whatever else I buy along the way. If you’re going to a game with your spouse, your child and their friend, the cost of attending a game rises proportionally. Eight-year-olds tend not to pay for their own food and souvenir cap.
What drives that cost, though? Fans are quick to point fingers at supposedly overpaid players who keep ticket prices high. The natural assumption is that since on-field costs have risen, those costs get passed to the consumer. “It’s economics 101!” they say.
I have a personal belief that the more someone says “It’s economics 101!”, the less likely they are to have actually studied economics in any sort of formal way. Fortunately, I have, and a large part of my actual job is finding the “problem spots” in a company’s finances that cause them to raise prices.
I thought I’d explore the concept that on-field payroll contributes to ticket prices. Tickets are only one of the costs associated with a baseball game — concessions, parking or transit, souvenirs all factor in too — but they’re the easiest to find reliable, robust data on.
So, one can see that ticket prices have remained relatively constant, dipping a little to follow the recent payroll cuts to get under the competitive balance tax. At first glance, it looks like on-field payroll does have a slight affect on ticket prices, but this is pretty skin-deep analysis. It’s much better to look at real year-over-year changes. For example, does a particular percentage change in payroll equal the same percentage change in ticket price?
Well now this all goes to hell, doesn’t it? Not only is there no real correlation between year-over-year changes — the correlation coefficient is just 0.1 — but there isn’t a correlation between Year X and Year X+1. That is, the team doesn’t absorb the cost for one season then increase prices the next.
The fact is, payroll just doesn’t affect the price of a ticket to a Yankees game. What does is the massive demand in a city the size of New York and the high proportion of sold season tickets. Combining that with the headache that is selling tickets on secondary markets, and the Yankees have a pretty tight hold on prices.
The other factor at play is the relative elasticity in demand for baseball tickets. Especially in a city like New York, there are a variety of possible entertainment options. You can go to a Yankees game, Mets game, or basketball, hockey and soccer games depending on the time of year. If you’re just looking for a night out, you can go clubbing or to a nice dinner. Therefore, baseball tickets tend to be relatively elastic; the demand fluctuates greatly with price.
Over the last two years, the elasticity for Yankee tickets has been -1.25, or for every 1% change in price up or down, there is a 1.25% change in demand down or up. Balancing this elasticity with the control over the market is the primary driver of ballpark costs, far more than payroll considerations.