24 July 2014

Would You Pay More for Tickets if the Orioles Paid More for Players?

Writers for Camden Depot have written a number of articles discussing how the Orioles could improve their team for the playoff run. These articles have primarily focused on the fact that the Orioles should consider trying to find upgrades because they're currently in first place. But there's another factor that the Orioles and other teams consider when they decide whether it makes sense to buy and sell that hasn't been discussed --- money.

Most fans want to see a winner and Orioles fans are no exception. The Orioles had an average attendance larger than 40,000 fans per game from 1992-1999 when they were reasonably good. From 2006 to 2011 attendance was nearly half of that at about 21,000 to 26,000 fans per game. What's interesting is that attendance has been increasing from 2012 to 2014. Attendance has increased from 21k fans per game in 2011 to 29k fans per game in 2013 and 2014.

According to Baseball Reference, Orioles attendance is down slightly in 2014 from 2013. Baseball Reference determines this by comparing how many fans showed up in 2013 through the number of games played at home in 2014. They're comparing 2013 attendance through 49 games to 2014 attendance through 49 games.

There are problems with this approach. More fans attend games on Friday, Saturday and Sunday then attend games on Monday through Thursday. More fans attend Orioles' games against the Red Sox, Yankees and interleague teams then they do against the Rays and Royals. If a double header is played due to a game being postponed and tickets are good for both games (which has happened once this year) then Baseball Reference considers the second game as having 0 attendance. While this is technically accurate, it is unhelpful when trying to determine trends. Without finding a way to account for these issues it really isn't possible to compare 2013 attendance to 2014 attendance.

What I decided to do was build a dataset with all Orioles home games from 2006 to 2014 and determine average attendance based on the day of week that a game is played as well as the opponent type in order to be able to compare attendance from 2006 to 2014. The chart below shows the season, attendance above average season and attendance above average season through 48 games. The reason why I use 48 games instead of 49 is because I omit all games with an attendance of 0 due to a double header.

Year Extra Fans Full Season Extra Fans Looking at First 48 Games
2006 76640 104549
2007 107976 64095
2008 -37139 2204
2009 -150904 -58753
2010 -310915 -253807
2011 -278696 -272159
2012 101641 112653
2013 250777 317547
2014 401421 401421

The chart shows that when these factors are taken into account we should expect the 2014 Orioles to have 100,000 to 150,000 more fans in attendance than the 2013 Orioles and about 650,000 to 710,000 more fans in attendance than the 2010 Orioles. The reason why the numbers look different can be explained by the following two charts. The first chart shows the number of games that the Orioles have played against different types of opponents on different days of the weeks.

Opponent Rank Day of Week 2006 2007 2008 2009 2010 2011 2012 2013 2014
Average Fri/Sun 16 17 16 18 18 19 19 16 14
Average Middle 35 33 32 33 32 27 29 32 16
Average Saturday 8 9 9 9 9 10 10 8 7
Elite Fri/Sun 10 8 8 8 8 6 6 9 2
Elite Middle 7 9 9 9 9 16 12 10 8
Elite Saturday 5 4 4 4 4 2 3 6 1

The Orioles haven't played very many elite opponents on the weekend yet this year and it's showing in the attendance numbers. On the other hand, this team hasn't played a lot of home games during the middle of the week against average opponents. The next chart shows the attendance for each type of game.

The chart shows that the Orioles are seeing an increase in attendance in just about every category from 2014 to 2013 with the one exception being average games on a Saturday. It also shows a large increase in attendance in 2013 and 2014 compared to 2008 through 2011.

Orioles' fans have shown they'll go to games to support even a competitive team. The Orioles only made it to the playoffs once in that two year span and didn't win the AL East in either of those years. If the Orioles can win the AL East and/or advance in the playoffs then it seems reasonable to expect an even larger increase in attendance. Management will need to consider that when making decisions about the team. It means that another reason why they'll want to buy is because they see the benefits of having a good team.

There's really only one problem. The Orioles were eligible for Wednesday's Competitive Balance Lottery. The only teams available for this lottery are those that are in the bottom ten in either market or revenue. According to the CBA, the Orioles' market is considered the eleventh smallest meaning that the Orioles revenue is in the bottom ten. Given the Orioles payroll is 14th highest in the majors already it's hard to see the team spending a lot more money on payroll when the team simply doesn't have that kind of revenue.

The reason why the Orioles have such a large revenue problem is simple. Their average ticket price is one of the lowest in the majors. At a cost of $25 per average ticket and $45 per premium ticket, the Orioles are charging considerably less than the average MLB cost of $28 per average ticket and $93 per premium ticket. One reason why the Red Sox can spend so much money on players is because they charge $52 per average ticket and $176 per premium ticket. Each Red Sox fan brings in at least twice as much revenue as each Orioles fan. And when you consider that the Red Sox attendance is usually greater then the Orioles by about 500,000 fans it is clear why they can afford a larger payroll then the Orioles.

If the Orioles' attendance increases by a million fans from 2011 to 2015 then the team would see an increase of revenue between $25 and $30 million dollars. Realistically, all of that money wouldn't go solely to payroll so we're talking enough revenue to add some talent but not enough to make a real splurge.

The Nationals charge $34 per average ticket and $187 per premium ticket. Suppose the Orioles attendance was 3,000,000 in 2015 and they charged the same ticket prices as the Nationals. In that case, the Orioles might see an increase of revenue of about $80 million dollars which is easily enough to make a splurge. With that kind of increase in revenue a payroll of $130 to $140 million is very possible and with that kind of money the Orioles could go after a top free agent.

Which begs my question. Would you pay the same average ticket prices that Nationals fans pay if it meant the club could spend $40 million more on payroll?


Anonymous said...

I'm sorry, but you have no idea what the Orioles' overall revenues are. Attendance is just a portion of the revenues. This is written from a peasant/serf perspective.

Matt Perez said...

Certainly you'd agree that we got a competitive balance pick in yesterdays' lottery, yes?

So do you think that the CBA is simply wrong when it says the Orioles aren't a bottom ten market or do you think the Orioles are hiding revenue from MLB?

Jon Shepherd said...

Phillies serve as a good representation of what increased ticket prices can do. I think your assumptions are actually pretty valid.

Anonymous said...

Matt -- the issue is what share of revenues that ticket sales are of the total. You're suggesting that fans should support the team by buying tickets. Well, what if the revenue issue was that the Orioles were incompetent at selling advertising and sponsorships through masn, and that this issue dwarfed any boost in ticket sales? That's one scenario rebuttal to your scenario. Both have the weakenss that we have no real clue what the revenue streams are for the Orioles.

Matt Perez said...

So are you arguing that the average ticket prices reported by TCR are inaccurate? Or are you arguing that Baseball Reference's attendance numbers are inaccurate?

I'm suggesting that if the Orioles received another $80 million in revenue from ticket sales (or anything) then they'd be able to spend more on payroll.

Obviously, if they earned revenue via a different method then that would work also. I'm not sure why that's relevant.

TJ said...

I'd answer your question as Yes, but that would be only because I undserstand the entire system is broken. Where do fans draw the line? Pay lower prices to watch losers or empty your pockets at a chance to witness victory? Money doesn't always bring you rings (Yanks and that other team up north) but it does help your chances and big names bring in new faces.

Small market teams win through their farm system. I admire Dan for not gutting our prospects but sometimes guys like Jake just need a new start. O's fans can't get too fired up if ticket prices mirror the Nats' prices.

Anonymous said...

The overall answer would be a YES. But, that is what as a fan, I believe you are "investing" in your own favorite team. Thus, the more you invest the more return you expect. However, the would also assume that the money will be spent wisely and not haphazardly in an attempt to bring more fans and more revenue.

very intriguing question though.

Matt Perez said...

Agreed that it's tough watching prices go up and up.

Presumably the team would spend the money wisely to try and get better.

But free agent signings bust all the time. Payroll helps but there are no promises. The only thing the Os could do is try their best to get good players that won't bust.

Scott said...

Wouldn't ticket sales decrease if the price increased? I think some fans go to games because of the low ticket prices and may stay home if raised.

jco said...

Nice data analysis.

This would help explain the O's new ticket pricing: Value/Classic/Select/Prime/Elite.

I'm okay with spending more for a ticket if it means that my money is being spent on acquiring better talent. However, the masses probably won't.

Also, did you consider revenue from concessions? A buddy and I were discussing this last week - wondering how much money the O's generated for the city of Baltimore on a Friday night when the Yankees came to town. I guesstimated about $3 million: Attendance at ~40,000, each fan spends on average $30/person on concessions (including parking) plus an average of $40/ticket. Then you'd got hotel stay, bar fare, etc. Thus, it's in the city's best interest to field a winning team.

Jon Shepherd said...

I would think concessions are much more difficult to figure based on taxes, sub-contracts, etc. Money into the city is also a difficult thing to figure out true value because tourists often flocked to familiar corporate entities, which tend to flow money back to headquarters.

In no way is it exactly like this, but think of it this way. Government money as aid flows into poor communities at some level. People use it and maybe get jobs at local businesses. Those local businesses tend to be chains like McDonalds who employ people full time at such low wages that the employment can be subsidized with food stamps. Free money is spent on things like fast food while credit is spent on things like franchised convenience stores. Net effect is that more money leaves communities through franchising than stays in there.

With that in mind, revenue to Baltimore city may mean more to taxes (although I think the city heavily subsidizes business taxes) than to the pockets of those actually living in Baltimore. But, by no means, is this a feast and famine relationship.

Matt Perez said...

Ticket sales would probably go down if prices went up but ticket sales would go up if the team did well.

The question the Orioles need to answer is whether they think they can raise prices without taking an attendance hit if they can field a team that wins the AL East.

If the answer is yes then they can spend more on payroll next year and try to win a world series. If the answer is no then they need to try and stay the course.

This is something that I'm sure they're thinking about and will have a direct impact on what they do at the trade deadline and during the offseason. It's not just about wins and losses.

I didn't really consider revenue from concessions. You're right that it's something else to keep in mind.

Jon Shepherd said...

Matt and I have discussed addressing issues like these in the past. It really is difficult nailing down a good and proper methodology. With that in mind, it usually is better to be broad and to look at these things at a 30,000 foot level because there are so many pieces that could interplay.

This is how Forbes handles it and from the leaked revenue documents a few years back you could see how some things simply are not taken into consideration well.

That said, I do not think the Forbes efforts are fruitless. They do give a general sense of where things are and where they are moving just like our own exercise here. That said, no one should be waving a print out of this to congress and be naming names.

Anonymous said...

Jon, I think that you also need to look at the MASN network benefits that the Orioles receive in comparison to other teams as well. For instance, your comparison to the Nationals is in the post in interesting because the Orioles receive the vast majority of revenue from the network (struck by Angelos when the Nationals moved back and took the DC market away).

At the same time, I think your article assumes that the Orioles would have to buy more expensive players or extend them (e.g. Chris Davis, Matt Wieters) in order to continue being successful. As we have seen with the Ubaldo (and Albert Belle before), the Yankees with Sabathia/Rodriguez, the Dodgers with Kemp, Phillies with Lee, and on and on, the most expensive players are not worth the wins they bring (WAR). The Orioles, Athletics, Cardinals, and Rays among others have built contenders on more of a budget and can continue to do so. Organizational strength builds winners. Turning draft picks and young pitchers into good to great ones (Wainwright), and finding unheralded or undervalued talent that your coaches and organization can groom to fit your needs. I will say that at times, extending this talent becomes difficult. Purchasing some expensive free agents can help, but its more of adding a missing final piece, not building the nucleus of a winner. I'd rather see Duquette and Showalter continue to stock the farm system, help young pitchers and others along, so that when some players like Davis and Wieters become un-retainable we have viable options to step in and grow (not replace) into their roles.

Jon Shepherd said...

Anon - I did not write this article.

Also, please check out our multi-part series on MASN that we published with much fanfare this past Spring. Perez wrote that series as well.

Matt Perez said...

The point of this article wasn't to claim that the team needs another $80 million in revenue so that they can be competitive.

The point was to note that attendance revenue is a factor in trade deadline decisions and to ask whether fans would pay more to get more.

I'm not saying the club needs to spend $140 million to win. I'm not saying we should follow the Yankees model. I'm just noting that attendance is going up. If attendance and price can go up then this team will have more money to spend on players.

Unknown said...

Sure. I've had one of the 13 game plans for maybe 7 years now, section 43. Awesome seats. I think they only come out to around $25 a game with the plan. It depends how much they would raise them, but I'm sure I'd keep getting the plan unless it was insane. I probably attend 17-20 games a season.

Unknown said...

Also, for anyone interested I know Camden Depot has done several articles on the whole Orioles-Nationals-MASN dynamic and the money involved.

CompSciPhd said...

I'm wondering if concessions bring any direct profit to the Orioles.

In general, isn't how most stadiums work that they rent out the concession rights to some company (like Aramark). I guess they might get a small percentage of the revenue as well, but I'd think the majority they make is on the up front rental. could be wrong though. So, it could be that a winning team would either bring in more concession revenue (and hence more of their percentage) or it could cause them to charge more for the concession rights up front. But unsure if the latter changes year to year or if they are long term contracts.

Dave Morgan said...

We are a competitive team right now with the low prices. I would hate to see us screw up our attendances by raising prices unnecessarily.
I think with the pricing in place, the Orioles really is a 'club for the working man', which is rare in professional sports these days. Long may it continue.