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Downsizing

2008 July 25
by Skip Sauer

At Baseball Prospectus, Nate Silver provides a thorough analysis of the downsizing of Major League Baseball stadiums in recent years. (Silver’s piece is free until 7/27, gated thereafter). I’m struck by two things. New stadia have almost 10,00 fewer seats, a considerable decline. Yet the trend in the English Premier League is the reverse – the top clubs adding a significant number of seats to their stadia. Second, Silver mentions an problem at Wrigley Field which strikes me as moderately serious: “Wrigley Field’s bathrooms can require an inning-long trip once everyone has had their fill of Old Style, and it can take 15-20 minutes to exit the ballpark from the upper deck.” In light of yesterday’s post on unitized ownership of the Cubs and Wrigley, if this issue is as serious as Silver makes it sound, why hasn’t ownership addressed it? (On second thought, I suppose waiting for the subsidy solution applies here too.)

Here the reasons offered by Silver [numbered by me] for why downsizing makes sense in MLB:

1) Firstly, although the number of seats has few theoretical constraints—there are soccer stadiums in Latin America and college football stadiums in the United States whose capacities exceed 100,000—the number of desirable seats is limited. Baseball, more so than football or soccer, is a game that loses a lot when viewed at a significant distance, and particularly when the pitcher-batter confrontation cannot be watched adequately. Dodger Stadium is probably fairly close to the theoretical maximum of “good” baseball seats at 56,000, and more modern facilities will eat into that number by using space on luxury boxes and the like.

2) The availability of cheaply-priced seats might cannibalize one’s market for premium seats, as fans may purchase the cheapest seats available and attempt to ‘upgrade’ them later. Although such strategies can be combated by hiring ushers or creating firewalls between different parts of the stadium, this may make the ballpark experience less pleasant for fans going to and from their legitimately-purchased seats.

3) Teams are increasingly able to reap the benefits of price discrimination by introducing tiered pricing schemes, and by participating in the resale market through partners like StubHub. Therefore, they can recoup some of the loss stemming from excess demand by charging higher effective ticket prices, without having to bear the negative public relations impact of higher face values.

4) There are some marginal costs associated with each additional fan that attends the game, such as security and janitorial services. The price of such services is trivial in comparison to premium seats that are booked at $50 or $100 each, but become more tangible as compared to the cheap seats.

5) In addition, higher seating capacities can create additional congestion both in and around the ballpark, making the experience less pleasurable for all those that attend. Indeed, some existing stadiums are not especially well equipped to handle a capacity crowd. Wrigley Field’s bathrooms can require an inning-long trip once everyone has had their fill of Old Style, and it can take 15-20 minutes to exit the ballpark from the upper deck.

6) Larger seating capacities may require a larger ballpark footprint, and therefore higher rents or land-purchase prices.

7) The easiest place to add seats is usually in the outfield, but this may impair aesthetics by blocking views of city skylines or natural landmarks.

8) Stadiums with empty seats look less attractive on television—the importance of which should not be understated.

9) In addition, stadiums with empty seats may create a less intimate experience for people at the ballpark, thereby potentially reducing demand. Baseball tickets may be what is known as a “mob good”, in which there are mutually-reinforcing, positive externalities conveyed by crowd behavior. To limit the number of seats is arguably to select out the most intense and passionate fans, who are (within certain boundaries) good fans to have sitting around you.

10) Limiting the supply of tickets may create a greater endowment effect (basically, a sense of ownership) for those fans who do hold seats, thereby increasing the amount of repeat business and encouraging fans to purchase season tickets.

After having articulated all of this, you might conclude that I think teams like the Mets are making the right economic decision by substantially reducing their seating capacities, but I do not. I think it may be the right near-term decision, but I do not know that it is the right long-run decision. By limiting their number of seats, a large fraction of which will be occupied by season ticket holders, corporate clients, or fans that are wealthy enough to pay above-face prices to scalpers and brokers, teams risk shutting out a large fraction of their fan bases from the ballpark experience.

Reasons 4,5, and 6 make the most sense to me, particularly in light of the move back towards the inner city, where land prices are higher. I’d not thought about the issue of spending resources to serve and monitor $5 seats, when more lavish attention to the $50 seats might pay higher dividends. I’m with Silver on the future costs of high current prices though. There is so much televised sport now, that I’m not confident that baseball (or basketball, for that matter) on television will generate the fan base like it did when there were only three channels on the dial.

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