The Development of Ticket Prices in German Professional Soccer. Dynamic Pricing in Soccer


Bachelor Thesis, 2017

53 Pages, Grade: 1,7


Excerpt

Table of Contents

List of figures

List of tables

1 Introduction and Motivation

2 Ticket Prices in the Professional Team Sport Indust
2.1 Ticket Prices in German Soccer
2.2 Ticket Prices in other European Soccer Leagues
2.3 Ticket Prices in the US Major Leagues

3 Ticket Sales in German Professional Soc
3.1 Pricing Strategies in German First and Second Bundesliga
3.2 Dynamic Pricing as the Future of Ticket Pricing in Sports
3.3 Dynamic Pricing in German Soccer

4 Discuss

5 Further Research and Recommendations for Practitioners

References

Appendix

List of figures

Figure 1: Price development in the First Bundesliga 1st Tier

Figure 2: Price development in the First Bundesliga 2nd Tier, 3rd Tier & 4th Tier

Figure 3: Different areas of clubs' locations of the First Bundesliga

Figure 4: Ticket prices in areas 1st Tier First Bundesliga

Figure 5: Ticket prices in areas 2nd Tier, 3rd Tier & 4th Tier First Bundesliga

Figure 6: Price development in the Second Bundesliga 1st Tier

Figure 7: Price development in the Second Bundesliga 2nd Tier, 3rd Tier & 4th Tier

Figure 8: Different areas of clubs' locations of the Second Bundesliga

Figure 9: Ticket prices in areas 1st Tier Second Bundesliga

Figure 10: Ticket prices in areas 2nd Tier, 3rd Tier & 4th Tier Second Bundesliga

List of tables

Table 1: Degree of Capacity Utilization 2016/17

Table 2: Average Size of Stadium by Country

Table 3: Available Seats and Season Tickets sold per Club First Bundesliga

Table 4: Available Seats and Season Tickets sold per Club Second Bundesliga

1 Introduction and Motivation

Nowadays in professional sports, clubs are forced to focus on much more than just the sport itself. The clubs in the European top leagues function on the same level to international com­panies. Bayern Munich, for example, had a turnover of 626.8 million Euro in 2015/2016 sea­son (Statista, 2017). Due to rising salaries for the players and increasing costs in general, clubs are challenged to retain a certain income in order to stay financially and athletically competitive. “With increasing operating costs resulting from rising player salaries and lavish sport-specific facilities, sport managers have been forced to search for additional revenue streams” (Shapiro, S.; Drayer, J.; 2012: p. 532). Aside from advertising revenues and spon­sorships, the tickets to the stadium are a regular source of income, as matches generally take place at least once a week. During an average game day over 700,000 people visit the stadi­ums across the first German soccer league (First Bundesliga). Statistics show that stadiums are often sold out or the number of visitors, on average, is close to the capacity of the stadium. In Season 2016/17 out of 801,872 available seats to first league stadiums on average 747,486 are filled (Transfermarkt, 2017). Additional information reveals that this degree of capacity utilization cannot be replicated in the second German league. Only 391,446 out of 605,896 available seats are filled on an average game day. This means that only 64.61% of the tickets are sold. That being said, some clubs are able to sell nearly all of their tickets whereas some clubs can only fill less than half of their stadium. FC St. Pauli could fill up their stadium to a degree of 99.05% as an average during the season 2016/2017, whereas other clubs like Karls­ruher SC and Fortuna Düsseldorf could not break the 50.00% for the same season (Transfer­markt, 2017a). Moreover, Germany's second league performs better in selling tickets to the games than other top leagues across Europe:

Table 1: Degree of Capacity Utilization 2016/17

Abbildung in dieser Leseprobe nicht enthalten

Source: Based on Transfermarkt.de 2016/17.

The Second Bundesliga has nearly as many available seats as the Ligue 1 in France. The de­gree of capacity utilization of the second German League is with approximately 65% also as high as in the French first league. With less seats available than in the First Bundesliga, Eng­land's Premier League can achieve the highest degree of capacity utilization. It is slightly ahead of the First Bundesliga, but these two leagues get with 95.22% and 93.22% a percent­age that is over 20% higher than all other leagues. The Spanish first League, with 73.10%, is in between of Premier League, next First Bundesliga and Ligue 1, and then Second Bun­desliga. The Serie A has more available seats, but it cannot fill the stadiums so that the degree of capacity utilization is as low as only 54.56%. This means that in Italy's top league only slightly more than half of the stadium is filled with visitors on average.

The First and the Second Bundesliga consist of eighteen clubs each. All other leagues men­tioned above consist of twenty clubs each. It should be easier to divide fans among lesser teams so that it is easier to gain a higher degree of capacity utilization.

Soccer generates numerous fans in Germany who visit their club's stadium regularly, and spend money on more than just a ticket during their visits (Drayer, J.; Shapiro, S.; Lee, S.; 2012: p. 188). Food, drinks, and merchandise are a great source of revenue for clubs. “In sports and any other industry, knowing how to satisfy your customers and give them a better experience will bring additional dollars to the organization” (Castro Jr., S. M., 2014: p. 3). Filling up the stadiums will activate these multiplier effects.

Thus, besides winning games, management should focus on two things in regard to their cus­tomer base:

1. Maximizing the revenue of the ticket sale
2. Maximizing the degree of capacity utilization

Clubs should consider different pricing strategies to optimize their ticket revenue. Most seem to define their ticket pricing during the preseason. However, this leaves little room for other factors, such as athletic performance over the course of the season that cannot be taken into consideration. In conclusion, clubs are not currently flexible with their pricing strategy. Dy­namic Pricing could be “the future of ticket pricing in sports” (Rishe, P., 2012: p. 1).

Can dynamic pricing help to realize the two aforementioned goals?

This Bachelor Thesis will examine the development of ticket prices in German professional soccer. The data gathered from the first and second divisions will be compared to current prices in other European leagues as well as other sports to determine if clubs should charge more money for tickets.

Furthermore, this thesis will discuss the viability of dynamic pricing strategies in German professional soccer. Therefore, dynamic pricing in the hotel and tourism sector will be adapted to the current situation at German professional soccer. Advantages and disadvantages of dynamic pricing will be analyzed to optimize pricing strategies for German soccer clubs. These recommendations will be separately projected on the First and the Second Bundesliga.

2 Ticket Prices in the Professional Team Sport Industry

For the empirical part of this thesis, the ticket fees from the first and second German soccer leagues were analyzed. The time frame that was observed spans the last ten seasons, from 2007/2008 to 2016/2017. Ticket prices are categorized in four different tiers: First and second tier are the most expensive, and the cheapest, tickets for seats. Third and fourth tier are the most expensive, and the cheapest, tickets for standing room only. The following graphics be­low show the average ticket prices of every club for each tier group of every season.

2.1 Ticket Prices in German Soccer

Figure 1: Price development in the First Bundesliga 1st Tier

Abbildung in dieser Leseprobe nicht enthalten

Source: Based on Sportbild Sonderhefte Bundesliga 2007/08 - 2016/17.

Statistically, a rise in price was seen among every different tier of observed tickets. However, there was a dramatic increase in price for top tier seating. In 2007, the average top tier ticket price was 49.64€. Whereas in 2016, one had to pay an average of 65.56€ for a ticket in the same price group.

The rise in price for the other three categories was steady, and went up approximately 4€ within these past ten seasons. Due to the differing increase between the average top tier tick­ets and the remaining three tiers, the gap between these average prices rose from approximate­ly 35€ in 2007, to 45€ in 2016. Clubs seem to want to charge their wealthiest guests more money, but still keep their average fans coming to the stadium. When dynamic pricing is ana­lyzed later, this aspect will be further discussed.

In the first, second and third tier, top clubs like Bayern Munich and Borussia Dortmund are setting low prices compared to other leagues in Europe. These clubs are giving the tenor con­cerning the prices of the other clubs. Fans will not accept much higher prices than to stadiums of the top clubs. Thus, clubs like Bayern Munich can dictate the maximum prices for these three tiers. These top clubs have bigger revenue besides their ticket revenue. This is because of better sponsorship, more advertising revenue and so on. This means that they do not de­pend on the ticket revenue as much as the smaller clubs in the league. By keeping the prices on a lower level, they can control the smaller clubs and discriminate against them. This is because these smaller clubs cannot ask for higher prices. However, the data shows that this does not apply for the first tier tickets. In 2016, Borussia Dortmund prices first tier tickets with 54.40€. Only four teams are pricing their tickets for the first tier cheaper, whereas Bay­ern Munich is on fifth place together with VFL Wolfsburg, Werder Bremen and TSG Hoffen­heim all asking for 70€.

If clubs like Bayern Munich and Borussia Dortmund would higher the ticket prices on a level comparing to other European leagues, smaller clubs could also ask for more money to their stadiums. Their fans would accept higher prices easier if these prices are comparable to the prices of the top clubs within the league.

In general, the clubs in the First German league can be considered as rivals who want to gain many fans. Especially, the geographic location of a club can win fans that live nearby the sta­dium. However, if more clubs are located in the same area, it might be more difficult to sell tickets for the games. The following map shows the clubs of the First Bundesliga in 2016/2017 season:

Abbildung in dieser Leseprobe nicht enthalten

The highest concentration of clubs can be found in the Ruhr area (1). Five big clubs, FC Schalke 04, Borussia Dortmund, Bayer 04 Leverkusen, 1. FC Köln and Borussia Mönchen­gladbach, are located within a radius of less than a hundred kilometers.

The second area, which is not far away from the first area, consists of Eintracht Frankfurt, FSV Mainz. Darmstadt 98 and TSG 1899 Hoffenheim.

The third area includes Bayern Munich, FC Augsburg and Ingolstadt in South Germany.

Hamburger SV, Werder Bremen and VFL Wolfsburg build the area in North Germany (4).

The remaining clubs, SC Freiburg, RB Leipzig and Hertha BSC, are located by themselves and have a greater distance to other clubs. Especially RB Leipzig is located in East Germany as the only club representing this area. Hertha BSC is with a distance of 190 kilometers the closest club to RB Leipzig. The second closest club, VFL Wolfsburg, is over 200 kilometers away.

The collected data for 2016/2017 season was classified in these categories and the following figures present the results:

Abbildung in dieser Leseprobe nicht enthalten

Source: Based on Sportbild Sonderhefte Bundesliga 2007/08 - 2016/17.

The figures show that the clubs of the fifth area, that have no other clubs nearby their location, can ask for higher prices. RB Leipzig categorizes the ticket prices depending on the opponent they have to face. Therefore, their prices are not included in the statistics. Regardless, Hertha BSC, and SC Freiburg demand higher prices for first and third tier tickets than all other areas. In the first tier tickets cost 85.50€ for Hertha BSC Berlin and SC Freiburg, and for example, under 60.00€ for areas 2 and 3. In the third tier, prices compare 19€ (area 5) to approximately 14€ to 16€ in other areas.

In the second tier these clubs demand a much higher price (24.50€) than areas 1, 2 and 4 (17€ to 20€), but lower prices than area 3 (25.67€), consisting of Bayern Munich, FC Augsburg and FC Ingolstadt. In the fourth tier, the cheapest tickets to the stadium, all areas are close together and the prices range from 11.38€ to 14.33€.

Finally, clubs without any nearby rivals can ask for higher prices for tickets.

The following figures present the Second Bundesliga which development in ticket prices will be analyzed in the next paragraph:

Source: Based on Sportbild Sonderhefte Bundesliga 2007/08 - 2016/17.

Abbildung in dieser Leseprobe nicht enthalten

Figure 7: Price development in the Second Bundesliga 2nd Tier, 3rd Tier & 4th Tier

The average ticket prices for a second league game show the same tendencies. A small in­crease was recorded in the three lower tiers and a large increase among the top tier seats. In general, the average rise in ticket price was about half as high as in the First league. On game day, fans must pay about 8€ more for the top tier seats, and additional 2€ for the other catego­ries. The most expensively priced seats are on average 28€ cheaper in the second league, than in the first league. The remaining ticket groups are only about 2€ to 4€ cheaper.

People might not be willing to pay these higher prices for a Second league game, and prefer to visit a first league game in seats of equal coast that is nearby their place of residence. First tier tickets in season 2014/2015 are especially high because FC Heidenheim sold these tickets for 200€. Without this outlier, the graph would show a steady increase from 2013 to 2016. Even though tickets to the second league are significantly cheaper than to the first league, stadiums have a lower turnout (compared in the Introduction). A possible explanation for this is that German second league stadiums have nearly the same capacity than other European top leagues.

Table 2: Average Size of Stadium by Country

Abbildung in dieser Leseprobe nicht enthalten

Source: Based on Transfermarkt, 2016/17.

The average stadium in the Second Bundesliga offers slightly more seats than the average in Ligue 1 (France). The biggest stadiums, on average, can be found in the First Bundesliga and in Serie A (Italy). However, the degree of capacity utilization compares 93.22% to just 54.56%. Italy seems to have the biggest problem to fill their stadiums across Europe. “Some stadiums have failed to renovate since the World Cup 1990 and the poor conditions have failed to attract fans” (Kelly, D., 2016: p. 1). Opposite to Italy, “in the Bundesliga season 2011/2012, 8 out of 18 clubs play in stadiums that opened their gates for the first time in the new millennium” (Nufer, G.; Fischer, J., 2013: p. 50). Besides old stadiums, the Series A is aired on television for free. “Anyone can basically stay in the comfort of their own home and watch their favorite team” (Kelly, D., 2016: p. 1). This is said to help other European leagues where soccer is not aired on television for free. Empty stadiums lead to “a match atmosphere that has less electricity than an EA Sports video game” (Henderson, J., 2016: p. 1). Empty stadiums mean missing revenue of ticket sales, missing revenue of cross-selling products at the stadium, and failing to bind fans to the club. It also means that playing for this club is less attractive to top players who prefer playing for a club with a crowded stadium every home game.

The clubs in the Second Bundesliga can also be categorized into different areas (2016/2017 season):

Figure 8: Different areas of clubs' locations of the Second Bundesliga

Abbildung in dieser Leseprobe nicht enthalten

[...]

Excerpt out of 53 pages

Details

Title
The Development of Ticket Prices in German Professional Soccer. Dynamic Pricing in Soccer
College
University of Paderborn
Grade
1,7
Author
Year
2017
Pages
53
Catalog Number
V947378
ISBN (eBook)
9783346284938
ISBN (Book)
9783346284945
Language
English
Tags
Dynamic Pricing, Soccer, Sport Economics, Germany, USA, Football
Quote paper
Nils Sifrin (Author), 2017, The Development of Ticket Prices in German Professional Soccer. Dynamic Pricing in Soccer, Munich, GRIN Verlag, https://www.grin.com/document/947378

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