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Sports Feeling Economy—Boston Red Sox Freeze Ticket Prices

Wednesday, 12 Nov 2008 | 3:01 PM ET
CNBC.com

This post is from CNBC sports producer Tom Rotunno:

In another sign of tough economic times, the Boston Red Sox announced today that they are putting a freeze on ticket prices. Clearly the Red Sox—owners of the longest consecutive sellout streak in MLB at 469—do not need to worry about filling Fenway.

But it's a stunning indication of how the economy is impacting the sports business. Commissioner Bud Selig warned teams a couple of months ago to be careful when setting 2009 prices. Today’s announcement shows that owners and teams are taking the warning seriously.

It’s the first time in 14 years the Red Sox have held ticket prices across the board. Premium seat ticket holders who are contractually obligated to an increase ticket prices are being given the option of freezing their tickets at 2008 prices for 2009 season—if they agree for the contracts to be extended for one additional season.

I caught up with Red Sox Senior Vice-President and Chief Sales & Marketing Officer Sam Kennedy shortly after the announcement was made.

What are you hearing from fans that led to this decision?
We’ve had lots of focus groups and discussions with season ticket holders and individual game buyers and obviously we are in touch with what is going on in the real world outside of baseball. It became increasingly clear that freezing prices is just absolutely 100% the right thing to do. The current economic conditions are presenting huge challenges to just about everyone. No one is immune from what is going on and so our ownership deserves a lot of credit for stepping up and holding the line. Hopefully it’s a gesture to thank fans and to try and be sensitive because times are tough.

Since the Red Sox having some of the highest prices in baseball, you know the skeptical fan is going say “how much higher can they go?”
I understand that. We recognize that we do have some of the highest prices in the league and that’s even more of a reason to freeze prices at this time. I think the secondary market for Red Sox tickets would indicate that there is certainly room for our ticket prices to grow and increase but despite that our owners really felt it was important to do this at this moment.

With 469 consecutive sell-outs, you probably could charge a lot more for tickets. How closely do you monitor the secondary market to see how much money you might be leaving on the table?
We are very focused on the secondary market. We spend a lot of time working with our partners in the secondary market. We actually engaged a Harvard professor to run some regression analysis to look at the true value of Red Sox tickets on the secondary market and there is significant elasticity for our tickets. Yet the strategy is not – and this is very important – it’s absolutely not to get every last dollar out of the market place for our tickets. The strategy has always been to preserve the lower end prices, the $12 seat, the $50 seat the $28 dollar seat and play “Robin Hood” and tax wealthier people and corporations that can afford the premium tickets. So we’ve had a balance over the years. We know the margins that the secondary market gets for our $12 bleacher seats, our $26 bleacher seats, our $30 Grandstand seats is substantial. It presents a business challenge for us that we are constantly battling and its difficult. Make no mistake, we are in the business of generating as much revenue as possible but it’s not simply a dollar decision for us when we price tickets. Accessibility is just as important.

The Commissioner has issued a warning to all teams about 2009. What are you hearing about the economy and how MLB is approaching next year from a financial standpoint?
The Commissioner’s office is clearly in touch with the fan base, corporate sponsors and the various communities. That’s why he gave that direction to the clubs. I think you’ve seen the clubs listen to him loud and clear. It is real. I’m out there everyday talking with corporate sponsors and premium seat holders. This is a unique situation that we are all going through. You have to recognize what is going on in the economy and that’s one of the reasons why we’re doing what we’re doing with the ticket prices.

With the strength of the Red Sox brand do you feel more insulated from the downturn than some other clubs?
Yes. I think in volatile times being a blue chip brand or a tier one franchise certainly helps. The Red Sox are a brand that may have a chance of staying in an advertiser’s budget or staying in the hearts and minds of a fan when they’re thinking about spending that discretionary dollar.

Switching gears to the Fenway Sports Group, how is that side of the business feeling any impact from the economy?
I wouldn’t say we’re feeling the effect because we had a good year and we’re projecting a good year in 2009. We’re projecting a good year with all of our properties. We are out there in the corporate sponsorship community every day talking with advertisers and they are making it very clear that they are going to have to make hard budget decisions. So we haven’t necessary felt the negative impact of the economy yet, but I would anticipate that there’s a chance that we will. On the Red Sox side, we have several sponsors call and say that their budgets will be slashed for next year. I think 2009 will be a challenging year for everybody.

Last question, Carl Edwards is in second place in the race for the NASCAR Sprint Cup championship but 141 points back heading into the last weekend. It would pretty much take a miracle for him to win it but are you willing to go on the record and predict a miracle?
I don’t know how much luck and good fortune one organization can have! If you remember 2004 - the playoffs and World Series. Then 2007 - the comeback against Cleveland. The no–hitters we’ve had, the David Ortiz home runs in the bottom of the 9th type things. Hopefully the good luck - and miracles as you put it - hopefully some of that can translate over to Carl. What a season he’s had. If you wanted anyone in that position it’d be Carl.

Questions? Comments? SportsBiz@cnbc.com

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