Nationwide Arena, the county-owned home of the Columbus Blue Jackets, is still barely bringing in enough money to pay operating costs, something that has been a problem for years now, ever since the city, county, and state teamed up to bail out the team from its money-losing private arena construction deal. Now, the Franklin County Convention Facilities Authority is proposing a solution: adding a ticket surcharge to build up a surplus to pay for any unexpected repair expenses.
There are probably those among you reading this thinking, “Those bastards! First they take a money-losing arena off the hands of a private sports team, now they’re forcing fans to pay for it with higher ticket prices!” It’s a reasonable enough response, but it’s dead wrong — at least the last part is. Allow me to explain why.
So you’re the head of the ticket sales office for a not-overly-popular NHL team. (Or a super-popular one — it doesn’t matter for our purposes here.) Your job is to figure out how much you can charge for tickets that will make your bosses the most money possible. Selling more tickets doesn’t really cost you anything — you may have to hire a few extra concessions workers for the night, but it’s not like you have to manufacture more hockey — so your calculus is just: How far can I raise prices before fans decide to stay home and watch on TV?
Now, let’s add a ticket tax to the mix — say it’s $2. If you were charging $50 previously for a certain tier of seats, that’s because you figured that $51 would drive enough fans away that it would end up costing you money. So do you now add $2 to that $50, and charge $52 a ticket? Only if you’re an idiot — we just said you’re going to bring in less money if you charge more than $50, remember? So the only solution is to keep charging $50, and eat the $2 ticket tax yourself.
It’s a bit counterintuitive, because it doesn’t work that way in other economic realms — add a 1% sales tax, and stores don’t all cut their list prices by 1%. But those are for good that actually cost something to procure — if you sell one less of them, that’s one less that you have to buy from the wholesaler — and besides, if consumers choose not to shop at your store (or restaurant or whatever), they’ll still have to pay the same tax if they do something else that evening. Unless people are so desperate for hockey that they’ll pay any price to see it, you’d be insane to do the same for tickets — and if the fans are that desperate, you should be raising ticket prices already, with or without a tax.
There is much that is terrible about the Blue Jackets arena deal: Taxpayers essentially took responsibility for the arena’s losses for no damn reason after the team had initially built it with private money, and now it’s left for the city and state to squabble over who’ll pick up the check. But whenever you hear “ticket tax,” remember, that’s a good thing for fans and taxpayers alike — because the peculiar economics of sports venues means that it’s really a stealth way of sticking it to the team owners. Say, is there anything in the Blue Jackets’ lease preventing the facilities authority from setting fees at, say, $20 a ticket to get taxpayers some of their money back…?