An Analysis of the National Football League Ticket Market By Mike Lloyd, Frank Kingston, Ryan Zink Introduction In our analysis of the NFL ticket market we focused on ticket sales from both NFL teams and online ticket vendors. The market for NFL tickets is a monopolistic competition because of the low supply of tickets and many vendors selling that supply. In this market, there are multiple competitors that sell similar, yet unique products. The differences in these products vary based on the consumer’s experience at the stadium. Seating, weather, concessions, and team success are some factors that play a role in the value that a consumer gets out of purchasing an NFL ticket. Information -The NFL is an oligopoly however; there is monopolistic competition in regards to the NFL ticket market. -The NFL’s BIGGEST COMPETITORS are HIGH END RESTAURANTS. -Large corporations purchase the most tickets. These corporations use NFL games as an arena to accrue clients. If the representative of a firm elects to not take a potential or current client to a game, they usually go to a high-end restaurant to woo the client. 1. Who are the customers for NFL tickets? -Firms that want to take their clients to games -Season ticket holders -Consumers that buy ticketsfor individual games 2. What are their strengths and weaknesses? How elastic are they? -Firms have large budgets and can afford drastic increases in price, but they are more apt to lose (spend) more money because of this. -Firms are very elastic because they have large budgets. Moreover, they receive marginal benefit per each client they can accrue. -Season ticket holders receive special benefits from the team, however, they have already sunk their money into the tickets and can potentially move midseason, lose their job, etc. -Season ticket holders are elastic because they buy tickets at a discounted price and the tickets have sentimental value. These individuals receive marginal benefit per each game they attend. -Individual buyers have the most flexibility in regards to purchasing tickets, however, they are the group that is most affected by inflated ticket prices. -Your average individual buyers are relatively inelastic because they have limited budgets and are more inclined to purchase a substitute good (i.e., television). These individuals receive marginal benefit per each game they attend. Conclusion We would either begin a new ticket resale company, or purchase an existing ticket sale company. We would do so because there is relatively small supply for very large demand. We believe that this would allow us to take advantage of the producer surplus in the market. Substitutes -In the short run, there may be comparable prices depending on how much the tickets cost compared to how much the substitutes cost. -The switching costs depend on the consumer's preferences and the prices of the tickets and substitutes. -The primary substitute for NFL tickets is high end restaurants. This is because most tickets are bought by companies so they can entertain and speak with clients. Costumers Prices are driven down because; -There are consumers who buy in large volume (companies/corporations). -The products are standardized; the substitutes are diversified. -There are no switching costs in regard to substitutes. -Consumes spend a lot of money on tickets. Rivalry Intensity: -There are numerous competitors of equal power -There are low barriers to entry, not high -There is very high commitment to the industry. -There is no/very low information asymmetry. Price: -Products are similar, but vary in price according to seating and team. -Tickets are perishable because they become worthless after the completion of the game. Threat of New Entrants Barriers to entry: -There are several market externalities (i.e., scalpers, television owners, computer owners, high end restaurant owners, firms that buy tickets in bulk for employees/clients, etc.). -Online ticket vendors act as a distribution channel. -States have scalping laws that restrict resale of tickets Market Forces Graph Information Demand curve: There is a very low slope because there is a one-time cost and few substitutes Y-intercept: -shows maximum price consumers are willing to play. -Y-intercept will be very high because businesses/corporations/die-hard fans are willing to pay high prices. Supply curve: There is a very low slope because there are consumers that have the purchasing power to continue buying NFL tickets even if the price is above the equilibrium. Y-intercept: -The supply y-intercept shows the lowest price tickets sell for (lowest price market is willing to sell). -Y-intercept is still high because tickets sell out at a relatively high price. Producer Surplus: Producer surplus is large because the demand and marginal cost curves both have low slopes due to inelasticity.