I have griped here about the New York Times’ Ken Belson on so many occasions, usually right after he’s written a long article drawing sweeping conclusions that aren’t actually quite justified by the facts of what he’s describing. Today, Belson is back with a report on concessions prices at the new Atlanta Falcons stadium, and let’s see if he has improved any:
In Atlanta, Concessions Prices Go Down and Revenue Goes Up
Wow, that would be an impressive feat! How did they manage this?
Despite a 50 percent decrease in prices for food and nonalcoholic drinks compared to prices in the Georgia Dome, the amount spent per fan increased by 16 percent, Blank’s sports company, AMB Sports and Entertainment, said on Thursday.
The results suggest that fans will consume more if prices are kept at more reasonable levels, with potentially no effects on the team’s bottom line.
That … is not how math works. Even if fans spend more overall on cheaper food, actual team revenue from concessions depends on what’s left over after you pay for all that additional food — so if you bring in 16% more in cash but spend, say, 30% more on buying frozen hot dogs, that’s not “no effects on the team’s bottom line.” So how did this gambit actually work out in terms of net revenue?
Belson doesn’t actually say, but fortunately Bloomberg has the full story:
[Fans] bought more food — sales were up 53 percent — and each fan spent, on average, 16 percent more on concessions. It wasn’t enough to offset the drop in prices, though. The team made less on concessions in 2017 than it did the year before, according Steve Cannon, chief executive officer of AMB Group, the company through which Blank owns the team.
Okay, then! So Belson’s article really should have been headlined “Falcons Cut Food Prices by Half, But Make It Up in Volume.’
To be fair: Belson doesn’t explicitly say that the Falcons are profiting on the food price cuts (though he implies that they could), and even the headline could mean “gross revenue goes up” and not “net revenue (i.e., profit) goes up,” though that’s not how normal humans tend to read that word. Still, it’s all very misleading, especially when Bloomberg shows how to get it right.
Why is this all important, aside from getting to poke fun at the Paper of Record yet again? Because the true numbers hint at the reason why concession prices — and ticket prices, and everything prices — at sporting events are so crazy high: Yes, you can make more fans happy by setting prices lower, but in the early 21st-century economy, you make more money by selling fewer seats/pulled pork sandwiches to fewer people than by selling more of them to more people.
Props to the Falcons management for not choosing to do it that way — given Cannon’s quote to Bloomberg that “sure, we could shake out a few more dollars of margin under the old model, but we believe that the direction we’ve taken, given all the other positive benefits, is the bigger revenue play, period,” it sounds like they figure this is a necessary loss leader to keep people interested in live football, especially with fans increasingly choosing to watch on TV or not at all. Or maybe they figure fans will spend more willingly on pricey tickets this way, as I predicted when they announced the food pricing scheme back in 2016. Either way, it’s a move that’s worth not oversimplifying if we want to understand how sports teams try to extract maximum dollars from our pockets, and that’s what we’re here to do every day, right?