Aug 20, 2012

As we sit on the cusp of the start of the 2012 NFL season, we need to take the time and be honest with ourselves, and the NFL.  Regardless of what you might say to yourself, or what you might hear from the league itself…they are not overly concerned with consistently declining in-game attendance.

Hear me out.

Of course, the NFL is taking ‘significant’ strides to make the game more exciting for the fans in-stadium, and to make the entire stadium experience more family friendly.  They’re looking to add high-speed wireless internet in all NFL stadiums — an effort to replicate the home experience for stadium goers — and they’ve taken a significant step forward with instant replay, putting the same replays that officials look at during reviews on the in-stadium jumbotron.  Moves like these are apparently in response to the league’s declining attendance figures — a 4.5% drop since 2007 — but the larger response seems to be the league’s new take on an old favorite…the blackout rule.

Arguably the most draconian rule in the NFL rulebook, the blackout rule finally saw an update this year, with home teams having the option of selling 85% of their game tickets — within 72 hours of the start of the game, to prevent a blackout in their local TV market.  Prior to the change, teams were forced to sell 100% of their tickets, less they game be blacked out on local television.  The new rule does have a catch though: revenue beyond the threshold amount must be split equally with the away team (teams operating under the old rules have a 66-34 revenue split).  The rule, which was initially implemented to increase attendance at games, has looked increasingly inefficient in recent years due to the advent of the tablet, smart phones, and high-definition television.  Those technological advances, combined with ticket prices that average around $77 per ticket and a still recovering economy?  That equals a lot of fans rooting on their favorite teams from their couch, instead of the 50-yard line.  Granted, the league only experienced 16 blackouts last year, but one can argue that that was in part due to corporate sponsors or the team itself purchasing additional tickets prior to the 72 hour deadline.  The logic behind lessening the restrictions on the blackout rule is that it now takes fewer fans going to the stadium to benefit those people watching at home.  Or, said from the team aspect, teams now have more flexibility when they’re looking to fill their seats; alienating one’s fan base is less likely if there is an increased likelihood that they’ll be able to watch every game on television.

Fewer fans needed to prevent blackouts. Teams now have more flexibility and less worry about alienating fan bases. Understood.

Of course, this doesn’t really help a team fill seats, directly, but it does make the team look more attractive when you’re trying to sell personal seat licenses for a new stadium.  Just ask the Vikings, who last week announced a threshold of 90% for their 2012 home game’s attendance, to avoid a blackout,

…More important to owners Zygi and Mark Wilf, the move most likely assures their team will be on television all season as it prepares to sell premium seating at a new stadium to be built with $500 million in public subsidies.

“The Wilfs’ entire focus is the new stadium,” said sports economist Marc Ganis, president of his Chicago-based SportsCorp consulting firm. “When you’re trying to market personal-seat licenses and club seats, you don’t want to be in a position scrambling to sell the last 4,000 seats to an existing game. It sends the wrong signal.” (via TwinCities)

Exactly.  If NFL teams are marketing their businesses as exciting and worth your hard-earned dollar, a localized blackout is definitely counter-intuitive.  Of course, this is a round-a-bout way to generate an increase in attendance: fans always flock to new stadiums.  But, new stadiums do little to impact sustainable, long-term attendance increases.  The team needs to perform well on the field or else they’re back in the same situation.

At the end of the day, its still all supply and demand.

But therein lies the problem.  Demand for the in-stadium experience has decreased, yet supply still exists at the exact same price point.  According to Team Marketing Report (via WSJ) the average ticket price for an NFL game has increased more than five-dollars from $72.20 to $77.34 since 2008.  If demand has waned, the economically sound move is to decrease your price to meet demand, less you end up with a surplus.  In this case, the surplus is measured in empty seats.  Instead of really focusing on fixing the broken model, the NFL instead wants to continue to charge at a premium price point, but give you fringe benefits (Wi-Fi and instant replay) to make up the difference.

It doesn’t necessarily add up.

So, surely the NFL is panicking, right?  Not quite.  Sure, gate receipts are wonderful, because its a revenue stream, and no one wants to look at empty stadiums, but, the NFL is making so much money off of television contracts to be overly concerned.  The league is guaranteed to bring in nearly $28 billion from television contracts in between 2014 and 2022.  As quiet, or maybe not so quiet, as its kept, the NFL has shifted away from an in-game model to a television/media-based revenue model.  At the end of the day, it certainly makes sense — the potential television viewer base is exponentially larger than the number of stadium seats, technological advances make television viewing more enjoyable, economic factors lead to a decrease in disposable income, and the NFL is in the business of making money.  Until the television experience is somehow threatened by the lack of fans at the game, the model won’t dramatically change.  The price point will not dramatically change.  I, for one, am okay with that — the NFL makes its money, I get to watch on my big screen TV and eat snacks.  It’s a win-win, and the facade regarding the in-game experience isn’t necessary.

Unless the NFL really thinks that offering Wi-Fi is going to bring a litany of new fans to the games?  Maybe that’s the answer.

Be Sociable, Share!