EWOT Goggles #13

I subscribe to the magazine Sports Business Journal, a weekly publication covering just what the title says it does: sports business!

I usually read through the entire magazine and find countless examples of things that pertain to our learnings in ECON 108. This week's edition fit that bill once again.

For my EWOT, I want to discuss an article written by John Lombardo about the new Philadelphia 76ers (of the National Basketball Association) owner Adam Aron. Aron bought the 76ers, a struggling franchise (both economically and talent-wise), from Comcast Spectacor a few weeks ago.

Comcast was in dire need of selling the team. Comcast was in debt due to its ownership of the 76ers, who failed to earn a profit for the company over the past few years. I can recall watching games on television and at the Wells Fargo Center (where the 76ers play) where more than half of the stadium's seats were empty.

In recent years, fan support for the 76ers has been very poor and very few people have been attending home games. In fact, the article points out that "Last season, the Sixers averaged 14,567 fans per game at 20,328-seat Wells Fargo Center, the seventh-lowest attendance in the 30-team NBA."

The lack of fans last year in 2010 had a lot to do with the loss in profits, as the team was not selling tickets as much as it needed to. And the bottom line is that ticket sales make up the bulk of revenue for professional sports team.

So, the first thing Aron did after buying the team was cut ticket prices on 9,000 of the tickets in the Wells Fargo Center, some by as much as 50%.

This very fact brought me back to class, specifically what we have learned about demand curves.

In 2010, Sixers home-game attendance was very low as fans did not want to go to the games. Some of this may have had to do with the price being too high for tickets for how much fans valued the 76ers. Therefore, on the demand curve, price would be high and quantity demanded would be low (because as the Law of Demand states, when prices are higher, quantity demanded is lower). Now that prices are being lowered by Aron, quantity demanded will most likely increase and more people will want to attend 76ers games since the price to attend (in monetary terms) will be lower.

Based on what we have learned so far about demand curves, Aron seems to be doing the right thing. Quantity demanded for tickets was low in 2010 and that very much had to do with the expensive monetary price to attend games, as well as the "expensive" price of having to support a bad team. But since the price for tickets has been lowered, people will have more of a reason to attend games because there is less of a monetary cost, and therefore, we should expect to see quantity demanded increase.

I know I am very interested to see how this business decision pans out for Aron and the 76ers. Like I said above, we should see 76ers ticket sales increase, but it will be interesting to see what actually happens come the NBA season, which is slated to open up on Christmas day (the NBA Lockout is finally over!)