Unit 1: Elasticity of demand in action

The issue of rising football ticket prices has been getting increasing coverage in the media lately. Tickets for top flight football matches in England have risen at an exponential rate since the old Football League First Division was revamped in 1992. We are constantly told by pundits and clever advertisements that the Barclays Premier League is the best (it’s not) and the most exciting (it might be) league in the world; but even if these two claims were proved correct the reason why fans continue to pay increasing prices can be explained to some extent by simple economic theory.

In 1990 you could buy a ticket to see the then league champions Liverpool for £4. If you wanted a season ticket these could be bought via the ticket office over the counter. Fast forward twenty years and the price of the same ticket had increased by an eye watering 975%! If you want a season ticket at Liverpool today you will have to join the waiting list – behind 28,000 other fans. This isn’t an isolated example – demand has been increasing in line with prices pretty much across the country. It’s safe to say that demand for top flight tickets is price inelastic. There are a number of potential reasons for this:

1. Lack of close substitutes – match going fans will argue that there is no feeling quite like going to the match. Despite the dominance of Sky and BT and various other not-so-legal ways of watching football on the internet it still can’t replicate being at the match. As well as this the majority of match going fans would be highly unlikely to swap football for a different sport (although this does happen in a small number of cases).
2. Habitual consumption – going to the football is a weekly ritual for most fans. It’s an event that is attended by families and groups of friends alike. In some cases the match is a secondary event to the other social aspects of the match going experience!
3. Emotional attachment – Eric Cantona once said that “You can change your wife, your politics, your religion, but never, never can you change your favourite football team.” Football fans often build up an unbreakable emotional attachment to their team which inevitably has an influence of their responsiveness to ticket price changes.

Price discrimination

Football clubs have inevitably exploited this situation to increase their revenues by engaging in price discrimination which is defined as when a firm charges a different price to different groups of consumers for an identical good or service, for reasons not associated with costs.

This has particularly been the case for away fans that travel up and down the country following their football teams. In April of this year Liverpool fans were charged £50 each for an away ticket at Hull. In August of the same season Stoke fans were only charged £16 each by Hull. Same stadium, same seats……same dull affair!

This is a classic example of third degree price discrimination where fans of bigger clubs are being exploited because they are part of a larger fan base and have more inelastic demand. An added factor that contributes to this inelastic demand for fans of the bigger clubs is that if they want to go to the more prestigious away matches e.g. Chelsea or Man Utd then fans need to build credits up on their season tickets by purchasing tickets for “lower tier” games. Clubs like Hull know this and ramp the prices up.

Away fans from northern clubs are also discriminated on price by location. Manchester City fans were charged £62 for an away ticket at North London club Arsenal in 2013 – nearly twice as much as the £35 they were being charged by Southampton the following month.

This particular incident sparked the Football Supporters Federation to launch theTwenty’s Plenty for Away Tickets campaign which had its national weekend of action just a couple of weeks ago. This excellent article in the Guardian touches on a number of issues that I’ve discussed and also puts forward some innovative pricing strategies that could be employed by clubs.

In evaluation to this analysis clubs will argue that the extra revenue they have been generating from ticket prices has been ploughed back into the clubs which has seen safer all seater stadiums, better facilities, more inclusive fanbases, higher wages, better players and better football. In reality though match day revenue now makes up a much smaller percentage of total revenue when you compare it to huge sponsorship deals and particularly the new TV deal which would allow clubs to lower prices and still leave them with more money than they have had before.