T-Wolves GM David Kahn talks ticket prices

In an interesting post over at TrueHoop, Minnesota Timberwolves GM David Kahn — yes, the guy who drafted Ricky Rubio — discussed his decision to slash ticket prices to as low as $10 for lower level seats.

One simile caught my attention…

Have you heard from any of the other 29 teams, or the NBA about this? I could see somebody making an argument that you’re devaluing the brand a bit. Ten-dollar lower bowl seats could theoretically make $100 lower bowl seats a tougher sell in another market.
The pricing of the very best seats are hardly ten dollars. There’s some prime beachfront real estate, and the pricing is still quite expensive by anybody’s standards. But the analogy that I’ve used is to think of the iPhone. Check me on this but I believe when it first came out, it was priced at $399. It came back a year later for $199 and with a better phone. I don’t think anybody thought the iPhone had become devalued. It was just a way for it to broaden its usage, and it became even more iconic.

I see this as being a very similar product. Are tickets are being reduced in price in many cases, but I still believe there’s enormous value, and hopefully this will mean there are more users.

Whaa? Did he just compare NBA tickets to the iPhone?

I actually agree with most of what Kahn says in the interview, but this comparison is a head-scratcher. Most electronics improve and fall in price as second or third generations are released. How does this relate to basketball tickets, which are either sold or left unsold depending on the supply and demand of each individual market. This depends on the size of the market, the quality of the team and the location of the seats.

I do think that slashing ticket prices can devalue the product, but in most cases it doesn’t matter. If an arena has a bunch of empty seats, it doesn’t take a rocket scientist to figure out that the tickets aren’t worth what they’re being sold for. The value of the ticket is already devalued — slashing prices simply acknowledges that new value. The quality of the team is the root cause of the devaluation.

Kahn is right that filling up the arena should be the most important thing. Increase attendance adds to revenue from parking and concessions, not to mention selling a seat that would have otherwise gone unsold. And, of course, a capacity crowd has the potential to swing the momentum (and outcome) of a game. This theoretically makes the team better and will drive up demand for tickets.

One interesting point that Henry Abbott makes at the beginning of the post is how the NBA crowd is very business-oriented. One way to increase the excitement at NBA venues is to eliminate the tax write-off for sports tickets. Then, those seats will actually be filled by fans of the team instead of a sales guy taking a prospective client out for a night on the town. Since the write-off is essentially paid for by the government, our nation’s tax laws are partly to blame for bloated NBA ticket prices.

If I were VP of Marketing for an NBA team struggling to fill the arena, I’d use the law of supply and demand to sell out the arena for virtually every game. A week before each game, I’d hold an two-day, online auction for all the unsold seats. Fans could then place a bid for the remaining seats. The highest bids get the best seats, and the worst seats could go for as little as $2 or $5 each. Whatever the price, those fans would have gone through the trouble of bidding in the auction, so they’ll probably end up going to the game. Just like that — a full arena…increased revenue from parking and concessions, and an all-around better atmosphere in which to play.

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