Fan Attendance Economics in the NFL

6 minute read · Issue Number 46 · December 11th, 2020

Dec 11, 2020

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As the NFL enters the final third of its season, some teams are allowing fans into stadiums, while others are still playing in empty arenas.

In the middle of the global pandemic, the NFL allowed teams to make their own decisions on whether fans can attend games this season based on local guidelines and health restrictions.

Even though the US continues to break records every week in COVID cases & deaths, the NFL season has been progressing almost flawlessly, and teams continue to insist on bringing fans to the arenas.

Why are NFL teams pushing harder than any other league in the world to bring fans into games under such risky circumstances? To understand that, we must better understand the economic value of fans.

Today’s article is a lesson on economics through the lens of the world's biggest sports brand. Specifically, we’ll learn about price elasticity, market power, and experience differentiation for fans in the NFL.

Let’s jump right in!

NFL VS. COVID19

Despite having very short seasons (August-February), the NFL is one of the most lucrative brands in the world of sports year after year.

Each team plays a minimum of 8 home games during a regular season. According to Statista, the average attendance per game in the 2019 season was 66,151 (over half a million people per team-season).

Teams have multiple revenue sources: television and licensing rights, ticket sales, concessions (food & beverages), and corporate sponsors.

During the coronavirus pandemic, TicketIQ estimated the losses from the ticket market per NFL team:

While some teams (such as the Raiders) announced at the beginning of the season that they’re not allowing fans into the stadium for the whole campaign, other organizations have been allowing fans in a reduced capacity, hence, decreasing losses. Nevertheless, a question remains; how much can they juggle around with their pricing?

During a regular, non-pandemic era, NFL teams made, on average, about 25% of their revenues from tickets and concessions sold.

Price Elasticity

Due to the increasing popularity in recent years, the strong demand for game-day attendance and viewership has allowed the teams to increase the ticket and concession prices.

For instance, according to SeatGeek, the cost of the cheapest ticket for the Super Bowl in February was $4,500.

For the upcoming Super Bowl in 2021, the limited capacity of 20% (13-15 thousand fans) could potentially generate a significant price change. The lowest denoted price in SeatGeek today is $4,700. However, this price will fluctuate a lot through time, depending on which teams make it to the Super Bowl and how the pandemic will look.

With such market power, teams maximize profits by pricing the inelastic demand for American Football matches. In other words, an increase in price does not have a significant negative impact on ticket-demand.

Sometimes, teams have to give up potential profits to fill up the stadiums to promote home-field advantage. Lower prices increase the number of home-town fans, which increases the home team’s probability of winning.

More wins equal more fans, which means increased revenues across the board dramatically. Hence, the correlation between performance and attendance.

For any team, the non-ticket revenue stream (i.e., concessions) is a function of the ticket price, attendance, win percentage, income, stadium age, and the number of professional sports teams in the local market.

Lower ticket prices increase attendance, which in turn positively affects non-ticket revenues. Therefore, there is a significant correlation between ticket prices and non-ticket incomes.

NFL teams rationally set prices consistently balancing between overall ticketing profit maximization and non-ticket revenue streams.

Experience Differentiation

One of the main things that support the NFL's market power is its unique, differentiated gameday experience.

The standard experiences offered through General Admission (GA) tickets are the cheapest but will not have the most comfort, amenities, and certainly not the seats with the best view.

On the other hand, Luxury Suite Tickets are substantially pricier than those of the GA, as those will offer a premium experience with the highest degree of comfort, private parking spots, deluxe food, drinks, and other elegant amenities.

Lastly, Club Seat Tickets are licenses bought per-season by fans who want season-long access to the games. While Club Seats won’t be as expensive as Luxury Suites, Club Seats may also have preferential access to the stadium's several premium amenities.

While Pfizer and Moderna are currently distributing a few potential game-changing vaccines in the markets, no one knows if the end of the pandemic is right around the corner.

For the rest of the season, the teams that continue to play in empty stadiums will give up a substantial economic value sourced from fan attendance.

If lower capacity plans continue to prove useful, teams should first try to sell the most lucrative experiences to maximize the opportunity cost losses due to the global pandemic.

The NFL is a business. Understanding one of the NFL’s leading revenue sources' economic value is vital to learn about the pandemic's second and third-order consequences in sports and the economy.

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