Maximising Revenue from Sports Ticketing: The Complete Guide
Executive Summary
Sports ticketing - still the key income earner
As the cost of running sports teams and events spirals ever upwards, managers must identify new streams of revenue and maximise income from existing sources. On either count, ticketing has a central role to play in building the future of sport.
Despite the recent growth in the value of major e vent sponsorship and broadcast rights, ticketing remains the pre-eminent income source for the sports industry, even those individual clubs whose profiles command the highest rights fees.
The General Association of International Sports Fe d e rations (GAISF) estimates that global ticketing revenues exceed those derived from broadcast rights by $7 billion. Manchester United, the world's most heavily marketed football club, draws approaching half of its turn over from gate receipts. This comfortably exceeds television and sponsorship fees combined.
While the possibilities presented by developments such as broadband internet and pay per view television afford opportunities for further growth in rights revenues, ticketing refuses to be left behind on the balance sheet. Stadium development programmes, online sales and distribution systems, scientific pricing strategies and targeted marketing all promise heightened income and improved efficiency in the sector.
Ticketing is also ready to develop new revenue streams and enhance existing ones through its ancillary and incremental effects. Raising attendances impacts positively on, among others, stadium catering and concession revenues, while the customer relationship management (CRM) elements of online ticketing open up a new vista of opportunities for direct marketing, loyalty applications and increased operational efficiency on event day.
New grades of seating drive revenues upwards
Creating a hierarchy of ticketing within a venue creates opportunities to increase revenues and profitability through differential pricing according to quality of view and standard of facilities attached.
The luxury suite market has approximately trebled in size during the last decade. From being sold outright for $100,000 apiece in the 1960s, suites are now leased for five or 10- year periods at annual rates of up to $150,000 or more in American football's National Football League (NFL).
Demand for suites shows little sign of declining despite the global economic downturn, with occupancy levels running at around 90% in US major league sports. Clubs and venues are developing new sales and renewal strategies to ensure the status quo persists .
Leases are be coming shorter to re d u cebottom line prices and so expand the potential market . Per-event rental will become increasingly common, but at proportionately higher rates than those charged to long-lease holders.
Multiple occupancy, allowing companies to share a suite at reduced total but higher proportionate cost, is raising revenues and preventing facilities lying empty. Software systems are enabling owners to identify the value of business that stems directly from their suite usage.
The development of 'club suites' will provide another lucrative level of accommodation for companies that desire superior facilities to those offered in club, but do not wish to pay the cost of a suite.
Club seating has undergone major expansion in recent years and, in overall revenue terms, is now more valuable to facilities than the luxury suite market. Club seats may be less expensive than suite tickets, but far more of them can be accommodated in a venue.
The desire for club seating has been one of the drivers of redevelopment among facilities built in the 1970s or earlier, when no provision was made for such premium facilities.
The positioning of club seats has a major influence on their value. New build stadia are increasingly positioning additional club sections closer to the playing area, in line with customer preferences and to provide greater consumer choice.
The stadium development wave of the 1990s made possible the expansion of seating choice. But to free the enhanced ticketing revenues that facility construction creates, alternative sources of finance must be found to service the debt such projects incur.
During the boom, personal seat licences (PSLs) emerged as the favoured method of meeting this need. Now, however, clubs and venues are moving away from this instrument as a result of its potential for alienating long-term, high spending support.
PSL use will increasingly be targeted at specific markets, working best in those where there is little or no tradition of professional sport, as well as in premium areas of the stadium.
Online and new media ticketing set to cut costs and increase market penetration
Online ticketing is projected to grow from a $300 million business worldwide in 1999, to one worth $2.7 billion in 2003.Almost $1 billion of that total will be derived from major sporting events, a contribution that is expected to continue rising even more sharply to $4 billion by 2004.
Online sales benefit ticketing operations by expanding the customer base and improving consumers' ease of access to tickets, as well as cutting costs through reduced staffing and hardware requirements.
There are significant CRM gains to be made through online ticketing. The more detailed personal data supplied in the course of internet purchasing allows clubs to create individual spending profiles and tailor all marketing and promotional activities to best fit these needs. New media distribution systems are set to reduce costs and increase convenience for spectators. However, there are several security implications that have to be addressed before much of this technology can be launched in confidence on the mass ticketing market. Smartcard technology is beginning to replace the season ticket book as a means of quick, convenient and secure stadium access. It also has additional value as a loyalty device, cash card and CRM tool.
Barcoding of tickets has led directly to the development of print at home technology as a means of satisfying online purchasers' desire for instant receipt of tickets and reducing distribution costs further. However, barcode security and access control system compatibility continue to place question marks against the technology's applicability for sport. Mobile ticketing through WAP phones and other wireless devices will see spectators downloading barcodes and seating information to be scanned by readers at the stadium gate.
Outsourced v in-house operations - a third way is emerging
In deciding whether to manage ticketing in-house or outsource to a dedicated service provider, clubs and venues have to consider elements of risk, cost, control, CRM,and available resources and expertise.
Neither model has conclusively proved its superiority over the other. The rapid development of new technology increased levels of outsourcing for reasons of cost and available expertise. However, the latest evidence suggests that growing recognition of the importance of CRM and brand control has created a trend of movement back towards inhouse systems, facilitated by the ease of operation of internet ticketing methods.
This pattern of ebb and flow has led to the emergence of a new system built on the middle ground between the two opposing models. Ticketing companies that both supply in-house systems and offer full outsourcing services are now allowing clients to pick and mix the options available.
Ticket price rises do not always reduce demand
Comparison of ticket pricing and attendance trends at major sporting events has revealed demand for these occasions to be price inelastic, allowing managers to raise prices without shrinking total revenue through reduced gates.
By extension, demand for tickets is determined in large part by a range of other, non-price factors including spectator income, team performance, stadium location, standard of facilities and even the age of the venue. US figures show that NFL and National Hockey League (NHL) teams moving to new arenas have been able to raise ticket prices by between twice and eight times the league average while still increasing attendances.
Ticketing executives must consider these factors as well as the aims of their pricing policies in terms of whether they seek to maximise profit, revenue or attendance. There are a variety of motivations for these goals and methods of achieving them.
Targeted marketing increasingly important to maintain and stimulate demand
The widening activity spectrum has increased the competition sport faces for the leisure or entertainment spend. The consequent heightened need to retain existing support and attract new customers requires more innovative and aggressive marketing techniques to stimulate demand for tickets.
A club or event's brand is increasingly important to the development of revenue streams. All promotion and marketing must be directed towards enhancing that brand.
CRM and the data procurement aspects of online ticketing enable direct marketing to be personalised and targeted at individual customers' specific tastes and needs.
Successful marketing techniques to stimulate advance demand for events include incentive provision,limited on-sale periods, community programme development and image advertising. Timing of promotions and event scheduling can also be manipulated by marketers to maximise advance demand.
Taking a slice of the black market pays dividends for clubs
Ticket scalping is estimated to be a $30 billion industry in the US alone. Clubs and venues are increasingly keen to reclaim a slice of that black market revenue for themselves. The limited success of efforts to legislate or regulate the industry is leading to clubs moving into the secondary ticket market themselves.
Auctioning tickets online to the highest bidder can earn substantial revenues over and above face values. However, this strategy works better for one-off events than in season-long and annual competitions, where essential team loyalty can rapidly be eroded by such systems.
Creating official secondary ticket markets online allows clubs to set maximum prices - at levels t h at do not endanger loyalty - for resold tickets and provides more scope for loyalty and CRM applications through the additional data supplied during the sale and purchase processes. Official secondary markets may not reduce the size of the black market as their capped pricing limits the resale profits to be made, but they attract custom from ticket holders who would otherwise become 'no-shows', whose absence has knock-on effects for other areas of stadium revenue.
Counterfeiting a continued threat in the age of the hi-tech ticket
Industry estimates suggest levels of counterfeiting at sporting events are running as high as 20%.Increasing demand and prices have made the sector attractive to forgers, while cheaper, more advanced computer and copying technology has made the process simpler and more accessible than ever before.
The development of new ticketing methods aimed at customer convenience and data and revenue procurement, could be slowed by security concerns. Print at home tickets are easily forged, while access control systems are currently unable to distinguish between genuine barcodes and copies.
Scope of report
This report aims to provide an overview of all aspects of sports event ticketing. It includes:
- • Recent historical development
- • Current status of ticketing technology and methods
- • Implications for ticketing of developments in all areas of the industry
- • Case studies of events setting trends and pioneering new methodology within the sector
- • Analysis and forecasts.
For further details, contact:
Debra Lestrade
Information Sales Manager SportBusiness Group
E-mail : debra.lestrade@sportbusiness.com
URL : www.sportsbusiness.com/reports
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