The NBA finals between the Golden State Warriors and the Cleveland Cavaliers, which started last week, has kicked off a debate about rising ticket prices. A seat at Oracle Arena to watch the nation's top teams battle for the trophy has skyrocketed to over $1,500---and many Warrior fans were priced out long before this year's playoffs began.
But the Warriors could pick-up something from Mark Cuban's ticket pricing strategy for his own team, the Dallas Mavericks.
Cuban recently told The New York Times that unlike the Warriors, he hasn't pushed up prices across the board. "The only tickets that have gone up marginally are our best seats," he said. "I don't run the Mavs to maximize profits. We now make money. But it's more important to me that fans can always afford to come to games."
Since the start of golden boy Stephen Curry's career with the Warriors in 2009, the average ticket price for regular season games has more than doubled to almost $80, according to Team Marketing Report data.
The Warriors' owners (who are mostly Silicon Valley investors) are "trying to price on market demand because they believe that's what's fair," says Tony Knopp, whose corporate ticket manager firm, InviteManager, partners with the Warriors and sponsors the arena where the Mavericks play.
Knopp adds that the Warriors try to match market prices so that tickets aren't resold on the secondary markets at a higher price. "'Why wouldn't we do this to protect the fans and get more revenue for ourselves?'" says Knapp, about the Golden State team's reasoning.
Yet during the same time period, under a Cuban ownership, the average ticket price for the Mavericks' games decreased about 3 percent--which means the shark kept to his word even in 2011, when the Mavs won the NBA championship.
Lessons from a shark
Cuban's stable pricing is a good long-term strategy, some pricing experts say. Not only can it help maintain a dedicated fan base, it's also less risky. Base-price stability, according to Vanderbilt University economics professor and sports economics expert Dr. John Vrooman, is critical for a team to establish low-risk cash flow during the ebbs and flows of what he calls players' "talent cycle" over several seasons.
Vrooman explains that if fans are gouged and ticket prices are raised during good seasons without a similar price-lowering during the bad ones, the fan deficit will become greater than the fan surplus. "The opportunistic club has violated the implicit contract [with the fans] and the season-ticket base will deteriorate," he says.
Additionally, with such a large number of revenue streams for basketball teams today, including TV rights and sponsorships, ticket prices are not as important for the bottom line as they were historically.
For his part, Knopp adds that the Dallas-based investor's strategy, which ensures that fans in different economic stages of their lives are able to attend the games, has corporate appeal.
"You can sell that to sponsors," Knopp says, referring to the community and family environment at Mavericks' games. "A sponsor is trying to reach a specific demographic and the team is trying to build that demographic, so that they can sell it to sponsors. And they are doing a good job at it."
It's just two different approaches, Knopp concludes about the ticket pricing strategies of the two NBA teams. "And we don't know which one is right," he says. "History will tell us."