Twitter Analysis: Who Really Talks About Their Rivals?

It’s rivalry week, and while there is much debate about the best rivalry in college football, it is generally agreed that the Iron Bowl (Auburn versus Alabama) and Ohio State versus Michigan are two of the top rivalry games in college football.  While both sides in these rivalries seem to hate each other, we were curious to determine if the level of vitriol was even or more one-sided in these two storied matchups.  What we found was interesting:  1) discussion around Michigan football seems to encompass A LOT more of the general conversation in Columbus than discussion of Buckeye football in Ann Arbor and 2) after accounting for where the game is being played, the relative level of discussion about the rival school is fairly even in Auburn and Tuscaloosa.

Similar to previous studies, we used geo-coded data from Twitter to serve as a proxy for fan conversation.  We collected all Twitter conversation in Ann Arbor, Columbus, Auburn, and Tuscaloosa for the Monday before the rivalry game in 2010, 2011, 2012, and 2013.  We then calculated the percentage of tweets in that city that were about the opposing school’s football team (“Rival Team Share of Twitter Voice”).   Thus, we had a metric for how much of the conversation in a city was about the rival team.  It is interesting to note that we also determined the average sentiment for tweets in a city that were about the rival football team.  The average sentiment was very negative, but similar across years and cities (translation:  the toxicity of the comments about rivals is the same whether you are in Columbus, Ann Arbor, Auburn, or Tuscaloosa).

We would expect that a rivalry where both local fan bases hated (or were obsessed with) each other at a similar level would have relatively similar “Rival Team Share of Twitter Voice”.  However, we found that in the past four years, regardless of where the game is played, or who won the previous year, the percentage of conversation in Columbus regarding Michigan Football is at least twice the percentage of conversation in Ann Arbor regarding Ohio State football.  Thus, there seems to be a bit of an asymmetric rivalry here with respect to how much one of local fan bases spends its time talking about their rival.  It should be noted that 7% of the population of Columbus are Ohio State students (57,466 out of  809,798) while 37% of the population of Ann Arbor are Michigan students (43,426 out of 116,121).

The Auburn-Alabama rivalry seems to be more even with respect to the level of conversation regarding one’s rivals.  We found that the site of the game seems to change the direction of the ratio of the “Rival Team Share of Twitter Voice”.  If the game is in Tuscaloosa, then local Alabama fans spend more of their time talking about Auburn football than local Auburn fans spend discussing Alabama football.  If the game is in Auburn, then that trend is reversed.  Perhaps the Iron Bowl being played in their hometown adds some more desire to trash talk for the local fans.  It should be noted that 45% of the population of Auburn are Auburn students (25,469 out of 56,908) while 37% of the population of Tuscaloosa are Alabama students (34,852 out of 93,357).

Mike Lewis & Manish Tripathi, Emory University 2013.

Twitter Analysis: The Seat is Warm for Philbin & Shanahan

During the NFL season, columnists & “insiders” provide their speculation on coaches that are on the proverbial “hot seat”.  It seems like coaches can be on the “hot seat” before the season even starts, and they can jump on and off the seat on a weekly basis.  We assume that the columnists & “insiders” are basing their speculation on institutional knowledge.  While Emory Sports Marketing Analytics does not have access to NFL team management, we do have the ability to gauge fan/customer opinion through Twitter.  We would like to present the NFL Coaching Hot Seat from the fan perspective.

The methodology for creating our “hot seat” is straightforward.  Using Topsy Pro, we collected all tweets from the last thirty days that mention a head coach.  Each tweet was then characterized as having positive, negative, or neutral sentiment based on its content.  We computed the ratio of negative to positive tweets for each coach (e.g. If the ratio is 2, the coach has twice as many negative tweets as positive).  We believe that this ratio can serve as a proxy for public sentiment towards a coach.

A quick scan of today’s sports news shows that most columnists & “insiders” believe that Greg Schiano (Tampa Bay) and Leslie Frazier (Minnesota) are receiving the most heat from their coaching seats.  Our analysis of public sentiment over the last thirty days shows that Joe Philbin (Miami) has the highest negative to positive tweet ratio (2.47).  At a distant second is Mike Shanahan (Washington), and Mike Tomlin (Pittsburgh) is in third.  Thus, it seems that if the public were making coaching decisions,  Philbin and Shanahan would be on the hottest seats!  We realize that much of the negative tweeting about Coach Philbin is probably connected to the Martin-Incognito incident, but ultimately this does reflect on Philbin’s job status.

It is interesting to note that in terms of sheer quantity of  tweets (number of mentions), Rex Ryan is the leader in the NFL over the last thirty days.  Schiano  and Philbin are second and third, respectively.

Mike Lewis & Manish Tripathi, Emory 2013

Ranking Sports Cities: Nashville & New Orleans Are the Best “Two-Sport” Towns

There are ten cities on our list with teams in two pro leagues.  These cities include Baltimore, Buffalo, Cincinnati, Indianapolis, Kansas City, Nashville, New Orleans, Oakland, Seattle and San Diego.  While our previous analysis of one team towns was driven by a single team’s results, we now shift to cities with multiple franchises.

#1 Nashville

We have to admit, this was a bit of a surprise.  Not because of anything negative about Nashville itself, but because both Nashville teams are relative newcomers.  Our data suggest that Nashville has a population that will support teams even without having generations of history. This is somewhat unusual and suggests that Nashville should be considered as a candidate for future expansion clubs.

When Mike thinks of the Titans his mind goes back to Bum Phillips and Earl Campbell (Manish thinks of the Music City Miracle).  But despite Mike’s aging memory, the numbers suggest that the Titans have been able to develop a strong following in a relatively short time.  The Titans rank 10th in terms of NFL fan equity.  According to ESPN, Tennessee has sold out all tickets for the last several years.  Notably, these sell-outs continue whether the team goes 10-6 or 6-10.

Over the past 3 seasons, the Nashville Predators have sold at least 94% of available tickets.  This is impressive attendance considering the size of the market and ticket prices.  The Nashville market contains only 1.7 million people but Predators are able to charge ticket prices in excess of teams in larger markets.  The Predators rank 11th in our fan equity ranking and 15th in our social media ranking.

#2 New Orleans

New Orleans was one of the markets that enthusiastically embraced some of our earlier studies, so New Orleans finishing number two in our 2-sport city rankings was not a surprise.  Well, maybe it was a little bit of a surprise because we are old enough to remember the “Aints.”

New Orleans provides amazing support to the Saints.  In our fan equity rankings the Saints finished 4th in the NFL.  This placed the Saints ahead of more “prominent” teams like the Giants or the Bears.  The key is that our rankings account for population and variation in winning percent.  The results therefore mean that when you control for these factors, Saints fans are truly exceptional.

The Pelicans also have a solid fan base.  The Pelicans finished 16th in terms of fan equity and 7th in social media equity.

#3 Baltimore

We now turn to the top two-professional team markets.  At #3 we have the tradition rich Baltimore metro area.

The Orioles rank a solid 14th in our fan equity rankings of MLB.  This is impressive since up until the past two seasons, the Orioles struggled to compete in the AL East.  It is also impressive since some of the Orioles support was likely lost to the Nationals.  The Orioles also ranked 14th in our social media equity ranking.  The key to the Orioles success in the rankings?  If we had to guess we would say it is tradition. Frank Robinson, Jim Palmer, Brooks Robinson, Cal Ripken etc… Also students have told Professor Lewis that he looks like Ripken.

The Ravens actually score bit better in our rankings with a 8th place fan equity and a 9th place social equity ranking.  Again, this is no surprise given the success of the Ravens franchise.  It is interesting, however, that each team’s equity seems to come from a different era.  While the Orioles glory days were probably from the late 60s to the early 90s, the Ravens equity has been built on recent success and stars.

#4 Buffalo

Just as we find that teams in warm markets seem to struggle to build followings, teams in colder climates seem to outperform their competition.  So it is no surprise that Buffalo (where Manish will be spending Thanksgiving) is in the top half of two team cities.

For the respective teams, the Bills finish 24th in fan equity and 14th is social media equity.  The Sabers finish 16th in the NHL fan equity rankings.

#5 Indianapolis

The Pacers and the Colts fan bases combine to give Indiana/Indianapolis a rank right in the middle of the list.  Despite their recent success, the Pacers rank near the bottom of the NBA with a fan equity ranking of 23rd.  In contrast, the Colts have a very solid fan equity ranking of 6th.  It will be interesting to see if the Colts can maintain this performance as a quarterback now playing in Denver becomes a memory.

#6 Seattle

Seattle ranks 6th on the list.  The Seahawks rank 23rd in the NFL in both fan equity and social media equity. The Mariners do a bit better with a fan equity ranking of 20th in MLB and a social media rank of 12th.

#7 Cincinnati

At number seven on our list of cities with two professional teams we have the home of the Bengals and Reds.  Even prior to running the numbers, this is about what we would have expected.  Our expectations were that the Reds had a strong fan base while the Bengals were fairly weak.  In terms of population Cincinnati is the 28th largest market in the US and the median income rank is #55.

The Bengals’ fan base is relatively weak.  The team usually ranks below average in terms of attendance and finished dead last in 2011.  The Bengals also do not have a great deal of pricing power as the average price of a Bengals’ ticket is well below the league average ($68.96 versus $81.54 league average in 2013).  The end result of this data is that the Bengals ranked 19th in our fan equity rankings.  The team scored even worse in social media with a ranking of 26.

The Reds do indeed have a stronger fan base.  In terms of fan equity the Reds ranked 11th in MLB and the social media rank was a strong 13th.  The Reds also price well below the MLB average ($21.35 versus $27.48 league average) but the team ranks right in the middle of the pack with attendance of more than 2.2 million in each of the last three years.

#8 San Diego

San Diego ranks 8th on our list of “2 sport” cities.  As we have noted, it seems that the better the weather, the more “fair-weather” the fans.  In terms of demographics, San Diego is a respectable market with a population of about 3.2 million (17th largest market) and the 27th highest median income.  But, fan support is questionable.  Strangely, especially for California, the NFL Chargers perform a bit better on our fan indexes than the Padres.

Last year the Chargers ranked 28th in attendance and only sold 84% of capacity.  In our fan equity rankings, the Chargers were ranked 11th.  The social media rank was 15th.  These are respectable numbers.  The reason that the Chargers are fairly highly ranked is that while attendance is low the team is able to charge relatively high prices.  This season, the Chargers average ticket price is actually higher than NFL stalwarts such as Green Bay and Pittsburgh.

The Padres ranked 20th in attendance this past season and 21st in 2012.  The Padres showing is particularly bad because the team’s average ticket price is the lowest in the league.  In terms of fan equity, the Padres ranked 19th in MLB.  The team’s social media rank was also 19th.

#9 Kansas City

Kansas City is our 9th ranked “Two Sport” town.  While Kansas City has been a poster child for the issue of the competitive balance between big and small markets, our analyses suggest that even after controlling for population and income differences that Kansas City is a relatively poor sports market.

This past season the Royals ranked 26th in terms of attendance and only sold 57% of capacity despite being in the hunt for a playoff spot.  And given that Royals prices are well below the league average, it is hard to make the case that price is the factor that is limiting support.  In terms of fan equity the Royals ranked 15th in MLB.

Chiefs are more of a middle of the road team in terms of attendance.  The Chiefs ranked 8th in terms of attendance in 2011 and 16th in 2012.  However, while the Chiefs raw attendance is higher many of their competitor’s attendance figures are limited by capacity constraints.  In 2012, KC attendance was just 89% of capacity.  And like the Royals, the Chiefs also price well below the league average.  In terms of fan equity, the Chiefs ranked 21st in the NFL.

#10 Oakland

At the bottom of the list we have the city of Oakland.  Oakland has two storied franchises in the A’s and the Raiders.  But despite the previous success of these teams they both rank near the bottom of their respective leagues.  The A’s finish 26th in terms of fan equity and 28th in social media equity in our MLB results.  The Raiders finish dead last in fan equity in the NFL.

Interestingly, the Raiders finish 10th in the social media ranking of NFL teams.  This is an important finding because it suggests that the Raiders may enjoy an above average following nationally while they struggle locally.  This means that the Raiders are likely to benefit from relocating.  Of course, this has been tried in the past, but perhaps the key is to move to a place where the team doesn’t compete with the weather.  How about the Portland Raiders?

To some degree Oakland’s finish at the bottom is not surprising.  While both teams have tremendous histories of success, this success mainly occurred in the 70s and 80s.  The Oakland teams may be suffering from fans being disappointed that the teams have fallen a long ways.  This type of “reference” effect is critical because the primary segment of affluent fans is likely to be in their 40s and 50s.

We have also noted in previous posts that there does seem to be a systematic weakness that happens in markets located in California, Florida and other “good” weather cities.  For whatever reason fans in these regions tend not to show the support that fans in colder climates tend to exhibit.

Mike Lewis & Manish Tripathi, Emory University 2013.

Ranking American Sports Cities: The Top “One Team” Markets – Candidates for Expansion Teams?

Over the last 9 months we have looked at fan support across the 4 major US professional sports leagues using a variety of financial and social media metrics.  The thing that sets our  evaluations of fan support apart is that we focus on observable, objective measures of support AND we control for factors related to market size and team quality.  Our measures are therefore not biased towards large cities and we adjust for the bandwagon nature of fans in markets with teams that are currently winning.

To end the year, we are putting all of these rankings together in order to create a ranking of cities.  For this list we combine our revenue premium based fan equity measure with our social media measure.  To combine these we assume that a social media follower or like is worth $1.  Today we begin our list of the best and worst one team sport towns (cities that have a professional team in only one of the four major sports).  The set of single team sports towns includes Columbus, Jacksonville, Memphis, Oklahoma City, Orlando, Portland, Sacramento, Salt Lake City and San Antonio.

#1 Portland

The number one small market (only one professional team) sports city is Portland.  Portland provides exceptional support to the Trail Blazers.  In terms of the fan equity measure the Trail Blazers ranked 4th in the NBA and the social media ranking was 11th.

According to the US Census, the Portland metropolitan area is the 24th largest with a population of almost 2.3 million.  But despite this mid-level population base the Trail Blazers had the 4th highest attendance in the NBA last season and the second highest in 2012.  Notably, this support occurred despite the team missing the playoffs in each season.  The attendance also was NOT generated by deep discounts as the Trail Blazers price at just below the league average.

Our analysis suggests that the Portland market has a great deal of potential.  The population base is decent, median income is above average and the fans seem to be extremely supportive.  We know that there has been some interest in trying to attract an MLB team to Portland.  With the number of struggling franchises across all the major leagues, it is somewhat surprising to us that Portland isn’t mentioned more frequently.

#2 Sacramento

The Sacramento market’s 2nd place ranking was a bit of a surprise.  Sacramento just doesn’t ever seem to be top of mind when we think about sports cities.  The most recent time Sacramento has really been in the news was during the controversy surrounding the proposed sale of the team to a Seattle based group.

The Kings have struggled in recent years.  The last two years’ annual attendance rankings have been 30th and 27th.  But we need to consider that these attendance numbers have occurred in seasons when the team has played well below .500 basketball.  If we go back a few years to when the Kings were winning, the team was able to generate consistent sell-outs.  When we run our analysis over a ten year period the Kings end up with a fan equity ranking of 6thWhat this means is that Sacramento fans are well above average in terms of supporting their team.  If the Kings are reasonably successful then our data suggests that the fans will turn out.

The Sacramento market has a population of more than 2 million and a respectable median income of more than $46,000.  These demographics are favorable to many small markets so it is a bit surprising that Sacramento has been in danger of becoming a “zero” team market.

#3 Salt Lake City

Salt Lake City is our number three “one sport” city.  Salt Lake City is a small market with a population of just 1.1 million but the metro area’s median income is a solid $48K (ranking 21st).

The Jazz rank 11th in our NBA fan equity ranking and 19th in the social media ranking.  These rankings are not surprising.  The Jazz has been a very successful franchise with notable players such as John Stockton and Karl Malone.  But recent seasons may not be meeting fan expectations causing the relatively poor social media results.

Based on the metro area population we don’t know that the city could support multiple pro franchises but Salt Lake City is a tremendous “one sport” city.

#4 San Antonio

Now we are getting into the “good” one team cities, but my guess is that folks in San Antonio will be upset by a 4th place finish.  This is the beauty (or enraging) part of our rankings.  When we assess revenue or social media we explicitly control for team performance.  This is important because it is obviously easier and more enjoyable to be a fan of a team that is winning.  It is also likely that fans are willing to pay more for a winning team.  The goal of our rankings is to get at the underlying passion and support of each city’s fans.

The Spurs ranked 10th in our NBA fan equity measure and only 24th in social media.  This is a very solid showing on the fan equity metric.  In terms of social media, San Antonio is an under performer. Based on the San Antonio market’s demographics and the Spurs on-court success our model suggests that the Spurs should have an additional 1.7 million Facebook Likes and Twitter followers.  In other words, in comparison to other NBA teams’ social media communities the Spurs fall short of what is expected for a market with San Antonio’s population and the Spurs’ winning rate.

#5 Orlando

The number 5 city on the list is Orlando.  While many observers might question the intensity of the Magic fans, the numbers tell an interesting  story.  For example, last season the Magic won only 24% of their games.  However, despite this futility, the team reported a 93.4% attendance rate.

Orlando also has a relatively rich history for a newer team. In addition to two conference titles, the team has featured notable players such as Shaquille O’Neal, Tracy McGrady and Dwight Howard.

Within the NBA, the Magic rank 17th in terms of fan equity and 21st in social media equity.  As we noted below, Florida teams tend to struggle in our rankings.  Demographically Orlando is a decent market with a population of over 2.2 million.  However, while the Magic doesn’t compete with other pro teams, the Magic does face tough competition. In the case of Orlando, pro sports compete with the weather, golf and the mouse.

#6 Oklahoma City

Oklahoma at number 6 may be a bit of a surprise. The Thunder has enjoyed recent success, Kevin Durant is a marquee player and over the past few years the team has usually played  before a packed arena.  But the sellouts have only been achieved as the team has become a winner.

Our analysis explicitly controls for bandwagon fans.  After controlling for winning percentage and market characteristics we find that the Thunder ranks 19th in terms of revenue based fan equity and 15th in social media equity.

From a marketing perspective, the Oklahoma City NBA franchise made an interesting decision to drop ties to the team’s previous incarnation.  Typically, the belief is that the previous brand contains some value.  By keeping names like the Jazz or Colts some connection to historical achievements is often retained. We should note that we don’t know why the Sonics name was dropped – perhaps this was negotiated with the city of Seattle.

On the plus side, our analyses also confirm that the key to building fan equity is a tradition of winning.  The Thunder has not gotten over the hump but they have made strides.  We also suspect that the social media results are a leading indicator for fan equity.   

#7 Columbus

Columbus finishes #7 on the list of one team towns.  Columbus is the 32nd largest metropolitan area by population and the 57th ranked based on median income.  In terms of our rankings the Blue Jackets ranked 23rd in the NHL based on revenue premium based fan equity and 29th for social media equity.

The Blue Jackets were founded in 2000 and they therefore lack the multi-generation history of other franchises.  The team has also struggled on the ice as it took 9 years for the team to reach the NHL playoffs.  As such it’s not surprising that Blue Jackets are below average in terms of fan support.  Of course, the real issue with the Columbus market is that it is dominated by Ohio State sports.

#8 Jacksonville

The state of Florida is an interesting situation for professional leagues.  The state population has boomed and college sports have great following.  However, almost all professional franchises have struggled and many believe that the pro leagues have created too many Florida teams.  In terms of key demographics, Jacksonville ranks 82 in median income and 40th in population.  This is a bad combination of population and income given that the average ticket price in the NFL exceeds $80.

Within the NFL, the Jaguars ranked 27th in terms of revenue premium based fan equity but the team did score a much healthier ranking of 17th for our social media measure. It’s not surprising that Jacksonville ranks low as a market given these marginal demographics, a lack of franchise history and stiff competition from college teams. 

On the plus side, Tebow is still available.

#9 Memphis

In last place on our list we have the city of Memphis.  The Grizzlies are the only pro game in town.  Within our NBA rankings the Grizzlies were ranked 25th in terms of revenue premium based brand equity and 20th in terms of social media equity.  Of the nine onesport markets, Memphis was ranked last in terms of revenue premium equity and 7th for social media equity.

Memphis as a market has some natural disadvantages for teams in terms of population base (ranked number #41) and income levels (ranked number 104).  But even after controlling for these factors Memphis fans support levels are well below the levels provided by other cities.  For example, the Grizzlies average ticket price of $29.49 is far less than the league average of $50.99).  Even at these low levels attendance has been poor.  Despite winning 56% of games in the 2010-2011 season, the Grizzlies only sold 74.4% of their available seats (ESPN.com).  It was only last year when the Grizzlies broke the 90% capacity utilization rate and the team needed to win 68% of its game to do that well.  In comparison, Orlando sold about 94% of seats with a winning percentage of 24%.  In terms of social media, the Grizzlies have just over 407,000 Facebook Likes compared to Portland with 550,000 and Oklahoma City with about 2.3 million.  For reference the Lakers have 17 million Facebook Likes.

But while Memphis ranks last on our list, there are a few positive indicators.  Last year was the team’s most successful season and ESPN has ranked the Grizzlies organization as the top professional franchise.  It is also true that the Grizzlies have only been in Memphis since 2001.

Mike Lewis & Manish Tripathi, Emory University 2013.

NHL Pricing: A Social Media Based Approach to Assessing Ticket Pricing “Fairness”

Of late we have been looking at value provided by sports franchises in different leagues.  For most of these analyses, we have basically focused on how much fans are asked to pay for each win.  We also make adjustments for factors related to market size, median income and capacity.  Today’s analysis looks at pricing in the NHL.

Of all the pricing analyses we have done, the NHL is the strangest.  The most surprising result is a lack of a positive correlation between winning rates and ticket prices.  Our standard procedure is to develop a model that predicts ticket prices as a function of winning percentage, payroll, market size, median income and other factors that we would expect to be related to demand for tickets.  We do a lot of testing in these models in terms of evaluating different specifications (interactions, nonlinear effects, etc…). In none of these specifications did we find a significant positive relationship between winning rates and prices.  The most powerful predictor was median income.

The other thing that we have been experimenting with in these models is using social media data as an explanatory variable.  The logic is that social media metrics (follows and likes) provide an unconstrained measure of fan support.  This provides a means to assess the relative aggressiveness of how team’s price.

Something to consider in these pricing analysis is the question of how prices are set.  At one extreme, we might suppose that prices are set in order to maximize revenues.  This is a reasonable starting assumption but the implication is that teams are extracting every dollar possible.  On the other hand, teams may price below fan’s reservation prices if the team is trying to build brand loyalty.  The key point is that while consumers might be willing to pay very high prices, if they don’t view the prices as “fair” then loyalty can be adversely affected.  Perhaps the best way to look at our list is that the teams at one extreme price the least aggressively (most benevolently?) while the teams at the other extreme are trying to extract every dollar they can from their fans.

At the top of the list we have Ottawa, Dallas, Boston, San Jose and Chicago.  After adjusting for market sizes, income levels and social media presences we find that these teams underprice. This is an interesting list as it contains both high brand equity teams like the Blackhawks and the Bruins as well as less prominent teams like Dallas and San Jose.  It is also notable that the Blackhawks and Bruins price above the league average while Dallas and Ottawa price near the bottom.  Interestingly, over the past 3 years Ottawa has basically sold out its arena.  The implication is that Ottawa (and the other teams on the list) could likely impose a price increase without too much loss of demand).

At the other extreme we have Philadelphia, Florida, Winnipeg, Toronto and Edmonton.  Again, this list contains both high (Toronto, Philly) and low profile teams (Florida).  Toronto is especially notable as they charge by far the highest prices in the league.  Winnipeg’s price are also extreme as they price higher (according to Team Marketing Report) than teams in New York, Chicago or Los Angeles.

Mike Lewis & Manish Tripathi, Emory University 2013.

NBA Pricing: Teams that Provide the Best Value

Today we are taking a look at pricing in the NBA: according to the Team Market Report’s fan cost index there is a wide range of prices across the league.  Last year, the Knicks had the highest average price at $123.22 while Charlotte’s average was just $29.27.  Rather than compare raw prices our objective is to look at the value provided by teams.

For our first look at value, we created a model of average prices as a function of variables such as team winning percentage, team payroll, metro area population and metro area average income.  This model is used to predict how team and market quality influence ticket prices.  A comparison of actual prices to predicted prices tells us which teams provide the best value.  This is along the lines of looking at the ratio of price to wins but with a bit more sophistication as we also control for factors such as market size and star power.

Astute readers will likely realize that this analysis is somewhat related to our fan equity rankings.  A key assumption of that analysis was that teams price in order to maximize revenue.  Today’s analysis can be interpreted in two ways: teams that price under the market are pricing low either because they are not trying to maximize revenue or because they are mispricing.  For now, we will just say that teams that price below market (according to the model) are providing added-value value.

Over the last 3 years, the top 5 teams in terms of value are the Brooklyn Nets, LA Clippers, Atlanta Hawks, Memphis Grizzlies and Washington Bullets.  These teams provide the best product in terms of winning relative to their market positions.  At the other end of the spectrum are the Knicks, Celtics and Suns seem to be the most overpriced.

Obviously, we have an issue in that the value provided is negatively correlated with brand equity since the Knicks and Celtics are two of the league’s most prominent brands while the Clippers and Hawks are not.  As a further look into pricing we performed an additional analysis, which was similar to the first pricing model but we added social media data (Twitter Follows and Facebook Likes) to the model.  These measures are useful because they are largely independent of owner’s objective functions and observable fan interest is not constrained by prices or capacity.  We also included an interaction between social media success and market size.  We like this model a bit better because it accounts for fan interest and excitement in addition to team and market quality.

When we use this model to compare actual vs. predicted prices we see a few changes.  Now Memphis is the best value followed by Brooklyn, Indianapolis, Charlotte and New Orleans.  Including social media into the model makes the biggest difference in the results for the Bulls and the Lakers.  These teams appear to be underexploiting their brand equity when it comes to pricing.  According to ESPN, both teams have had attendance levels of over 99% of capacity for the past three seasons so it seems that price increases are doable.  Ticket pricing is tough in sports because observable demand is constrained, but it appears that these teams have more pricing power than they realize.  It is also difficult to reach conclusions based on average ticket prices.  As we all know there is considerable heterogeneity in prices based on seat quality.

As always, no analysis is perfect and there are factors that we don’t capture in the market.  For example, perhaps in the case of the Knicks the team has additional pricing power because fans are willing to buy during down cycles in order to insure tickets during winning years.

Mike Lewis & Manish Tripathi, Emory University 2013.