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Demand Curves Slope Down

From the Charlotte Observer (membership req'd):

In two months, the Charlotte Bobcats begin playing in a new, publicly funded uptown arena. Typically, new arenas boost home attendance for NBA teams, but so far that's not the indication for the Bobcats.

Two informed sources say the Bobcats have sold about 7,000 season tickets -- roughly 2,000 behind last season's season-ticket base, when they had the third-lowest home attendance in the NBA. Several fans said they dropped their tickets in part because of a steep rise in ticket prices.

... So far this new building hasn't created much buzz for the Bobcats. That could be because of the ticket prices -- most jumping 25 percent to 100 percent -- that accompany the move to the new building.

Mark Thompson, a Charlotte-based money manager, was part of a group last season that bought two Bobcats season tickets. The seats were close to the floor, at center court, and each ticket cost $75. Thompson bought a pair of tickets to 10 games.

He seems like the Bobcats' target customer -- young, affluent and a sports fan who buys Carolina Panthers and Davidson basketball tickets. But he passed on Bobcats tickets this season because he felt the cost exceeds the value.

Earlier in the piece:

Sixteen of the past 17 NBA teams moving to a new arena in the same city saw home attendance rise in the first season. Most recently, the Houston Rockets sold an extra 1,844 seats per game, moving into the Toyota Center. The only team that saw home attendance fall -- the San Antonio Spurs -- did so intentionally, moving out of the Alamodome, a football stadium with poor sight lines for basketball.

On average, those teams increased home attendance by 2,366 per game -- an extra 97,000 tickets, per team, over a 41-game home season.

The hope for teams is that new arenas will have amenities that fans are willing to pay extra for, so the hope is that the new arena will increase demand for the team's games. But demand curves still slope downward, and this is borne out by the article.

Price-setting is largely a trial-and-error process since businesses never really know what the demand for their product would be. But one would expect that the Bobcat officials would have a decent handle on the demand for their team's games, even in the new arena.

Cross posted at Market Power.