The NFL’s Most Benevolent Owners: Atlanta Football Fans Get the Best Value, while Dallas and New England Fans Pay a Steep Price

We spend a lot of time thinking and writing about the consumer behavior of fans.  For example, our fan equity rankings provide a measure of fan loyalty that controls for factors such as team performance.  Today we take a look at the other side of the equation, by asking which NFL teams show loyalty to their fans. Specifically, our goal is to understand which teams provide the best value to fans.

Our analysis is built around a statistical model of team prices*.  The first step is to model team prices as a function of team winning percentages, stadium capacity, metropolitan area population and metropolitan area median income.  The model also includes quadratic terms and interactions between several of the variables.  We estimate the model using the last 11 seasons of data.  The second step is to compare each teams reported prices with the predicted prices from the model.  If teams price above the prediction, the implication is that the team is extracting more revenue from fans than would be expected based solely on team quality and market characteristics.  Of course, the alternative explanation is that the teams have additional knowledge of their markets that is not observable to the analyst.  But, in the course of previous analyses the point has been raised by several teams that they often price below the market in order to build fan equity.  Perhaps, a better way to describe the rankings on the left is that the teams on the top are providing the most value (bang for the buck) to fans.

The Atlanta Falcons are number one on our list.  Over the last decade, the Falcons have won 57% of their games while pricing at about 10% less than the league average.  This pricing is even more remarkable given that Atlanta is fairly large, and above average in terms of median income.  Other good values include Arizona, Carolina, Seattle and Jacksonville.

Perhaps the more interesting part of the list is at the other extreme.  This portion of the list identifies the teams that extract every last penny from fans.  At the very bottom of the list are the New England Patriots.  The Patriots have delivered a great product but they have also charged prices that are about 40% higher than average.  Second from the bottom are the Dallas Cowboys.  Over the last decade, Dallas fans have had the privilege of paying large price premiums for a very average product.  In fourth and fifth positions from the bottom, we have Tampa Bay and St Louis.  In both cases, these are relatively small market teams that have struggled on the field while charging fairly steep prices.

*Team Marketing Report’s Fan Cost Index Data

Mike Lewis & Manish Tripathi, Emory University 2013.

 

 

 

NFL Fan Equity: Method Limitations and Focus on the Falcons

Our analyses frequently generate criticism.  Our work has been described as “garbage,” “silly” and “annoying” (and this is just from Mike’s wife).  To us, one of the most interesting things about this project is that we are often surprised by whom we offend.  In the case of last week’s analysis, we were humored by the fact that Saints fans seemed equally interested in their 4th place ranking and the Falcons’ 31st place ranking.  Given that we are based in Atlanta, we thought it would be a good idea to discuss why the Falcons finished so low and, more importantly, how these results should be interpreted.

Our starting point in these analyses is that we are evaluating fandom from a marketing perspective.   This means that we are trying to identify which customer base is the most loyal in terms of their willingness to support their team through buying tickets.  This may seem like a crass measure to some, but it is at least an objective and observable metric.  Most critics seem to want us to somehow read the minds of the fans, and make ratings based on “passion.”  This is a fine notion but the implementation is somewhere between difficult and impossible.  Difficult, because a large scale survey would be needed to ask fans questions about how passionate they are, and nearly impossible because the survey would need to be repeated year after year to control for variation in team quality.

Our method, like all methods, has some limitations.  In our case, two limitations are most notable.  First, we rely on publicly available data (FCI pricing data, ESPN attendance estimates, Forbes’ team value estimates, US Census data, Title IX reporting data, etc.).  Publicly available data (and private data) will always contain inaccuracies.  The real question is whether the publicly available data is inherently biased against certain teams or types of teams.  We are happy to listen to debate about this issue.

The second limitation relates to a team’s marketing objectives.  One issue in sports marketing is that we do not get to observe true demand due to the constraints imposed by stadiums with finite capacities.  For this reason, we primarily rely on estimates of revenue.  This is an important distinction because it means that we implicitly make an assumption about how teams price.  The implicit assumption is that teams are attempting to maximize revenues.

You can definitely criticize this assumption.  This assumption comes into play when evaluating teams that regularly sellout (e.g. Green Bay).  How can these fans be any more loyal?  This leads to the question of why don’t teams like the Packers price higher.  I can think of a couple of potential answers.  One, perhaps they don’t have enough information or expertise to maximize revenues.  Demand forecasting for an NFL stadium is a non-trivial task.  Historical data is of limited use because demand for certain types of seats is censored.  The variation in the quality of tickets is also a problem as revenue maximizing teams would also need to understand the cross-elasticities across ticket types.

But the salient question is: if not a revenue maximizing assumption then what?  The best answer, we believe, is that some teams may systematically underprice in order to build or invest in their customer base.  The logic is that because the team lacks an extended tradition of success or that the team competes locally with other sports offerings, it makes sense to charge below market rates to get people into an exciting, sold-out stadium.  Of course, as more astute readers may have noticed, this explanation is also consistent with the story that the team lacks brand equity.  We could also make arguments that some team price too high and may therefore be “harvesting” brand equity.

This brings us back to the case of the Atlanta Falcons.  The explanation for why the Falcons finished low despite recent success on the field and in terms of sellout attendance is because they price lower than would be expected.  According to the Team Market Report’s fan cost index, over the last decade the Falcons have tended to price below the league average.  But it isn’t sufficient to just consider relative prices.  We also need to consider the “quality” of the market.  The Atlanta metro area has population and median income levels that are well above the league averages.

The other issue that was mentioned locally is: what does this mean for the Falcons’ quest for a new stadium?  A case can be made that our findings support the need for a new stadium. If we believe the assumption that professional sports are an important civic asset (because they draw attention, create economic value, enhance the culture, etc.) then it makes sense for the city to invest in the team.  The Falcons’ have a relatively short history, and play in a city full of transplants.  Just as the Falcons may be underpricing in order to develop their fan equity, it may make sense for the local community to also invest back into the team.

Click here for an alternative methodology for ranking fan bases that relies on social media data.

Mike Lewis & Manish Tripathi, Emory University 2013.