Economists ask and answer: who is to blame for NHL ticket prices?
The following post is from Hockey Night in Headingley, a new(ish) blog created by University of Manitoba economics professors and hockey parents, Ryan and Janice Compton.
As the Comptons write in their inaugural Oct. 16, 2013 post introducing themselves:
“Janice spends most semesters teaching large classes in first year microeconomics where hockey examples tend to be class favourites, while Ryan frequently offers a course in sports economics with a significant focus on hockey. With the recent return of the NHL to Winnipeg, coupled with our boys playing hockey most months of the year, hockey and economics is a frequent topic in our household, and we hope this blog will be a place to give our thoughts as well as learn a thing or two ourselves.”
Who to Blame for NHL Ticket Prices
Not a big point to raise today, but a timely one given recent events in Winnipeg. Since the summer we’ve seen the Winnipeg Jets successfully sign a number of their key free agents to fairly significant long term contracts, the NHL recently announced a $5.2 billion Canadian TV deal with Rogers Media, and today came the announcement that Winnipeg will host the 2016 Heritage Classic (apparently the game will be held in February, though I hope for the fans’ sake it’s March or April, either way it will be a real money maker for the Jets).
The reason I mention these events is that inevitably you hear about how the players and owners are making money hand over fist, and if these players weren’t so overpaid (a blog for another time) and the owners weren’t so greedy, then tickets wouldn’t be so expensive and average folks wouldn’t have to struggle to take the family to an NHL game. Economists of course are at this point saying to themselves “the Jets price according to demand and this other stuff really has little to do with anything”. And of course that’s the point people often fail to understand. Teams like the Jets hold monopoly power (there is no close substitute for the good, professional hockey, that they provide to the people of Winnipeg). When they make pricing decisions they are simply responding to the demand they face in their marketplace. It shouldn’t be surprising then that when you look at the recent Forbes data on the most expensive average ticket, Toronto tops the list followed by Chicago, Winnipeg, Edmonton, Vancouver, Calgary, Montreal. What stands out here (beside the large number of Canadian teams) is that these are major hockey markets with extremely strong demand for professional hockey (Phoenix has the cheapest tickets by the way). These teams charge the most because they face the largest demand for their tickets. Again, it’s not because they have the largest payrolls or the greediest owners, but simply lots of people who are willing and able (even if it’s a stretch) to buy tickets at these prices. Player costs are not driving ticket prices, and if owners charged lower prices, it would simply make it even more difficult to find what are already tough tickets in places like Winnipeg and Toronto. NHL teams are businesses after all and if they sell out when ticket prices are high, it makes little sense to lower their price.
Are Jets tickets expensive? Well for most people (including me) the answer is yes. I have gone to three games this year and depending on the game, a pair of decent seats can run you close to $300 once all the fees and taxes are added. It’s a costly event no doubt, but keep in mind that every time I’ve gone the game has sold out, tickets are generally quite difficult to come across, and those on the secondary market like StubHub sell well above face value. These are all indicative of substantial demand and no lack of people wanting to buy tickets.
So unfortunately it appears when looking for someone to blame for high ticket prices we can’t blame the players or the owners. We really only have ourselves to blame and those like us who really enjoy going to a game and clearly are willing to pay the price to do so!
Janice Compton is an assistant professor of economics and holds a PhD from Washington University.
Ryan Compton is an associate professor of economics and holds a PhD from Washington University.
The above post originally appeared on their blog on December 11, 2013.
Research at the University of Manitoba is partially supported by funding from the Government of Canada Research Support Fund.