FanPost

Promoted Fan Post: Hawks Attendance As Expected

Kevin C. Cox

Editors note - This is a fanpost by hawksfanatic that is being promoted to the front page. Lots of good info here and it takes into account ticket price data along with Tom Ziller's SB Nation piece. Have a good idea for a story? Post it as a fanshot and it could end up on the main page of the site.

By now, you have seen the SBNation piece on NBA Attendance by Tom Ziller. The article displays a graphic the changes in percentage of capacity for NBA Arenas thus far this season as compared to last. For teams at or above max capacity last year, they can either have 0 change in capacity or a negative change in capacity. So at first glance, this chart will be biased against teams at max capacity (i.e. teams that consistently sellout). Being biased is not a problem, but one should be aware of the bias so not to draw spurious conclusions.

Attendance_medium

via cdn3.sbnation.com

But one critical piece of information is omitted in the SBNation piece that one needs to be aware of. Prices. This is a big problem that should be addressed anytime one wants to discuss attendance, the performance of a franchise, or "fandom".

In a simplified example of addressing the performance of Apple, one would not look at the number of iPads that Apple has sold in order to determine the health of the company. Rather, actual revenues with respect to expected revenues is used to determine the performance of Apple from the sales of iPads. Last I checked, not all iPads are the same just like how not all the seats in an NBA Arena are the same. And Apple’s expectation of sales for different models of iPads is determined by market characteristics, much like how one would expect different levels of sales across NBA cities.

However, since the NBA does not release revenues per game we cannot easily determine the performance of a franchise. Instead, we should at least gather some more information like average ticket price. At least with this information we can determine if we should have expected attendance to be higher or lower[1].

NBA Attendance and Prices

The Fan Cost Index (FCI) is a metric developed by Team Marketing Report (TMR) which attempts to estimate the average cost of attending a basketball game for a family of four[2]. Within this metric,TMR estimates the average price of a ticket which is a tall task as one needs to adjust for the differing prices across an arena. For a rigorous analysis, one would want to gather finer data than what TMR does as there are some issues with the data[3]. But this is not meant to be a rigorous analysis and the FCI along with its average ticket price estimates are fine for looking at this issue more closely.

If we reproduce the data used in the original SBNation piece and add in prices, we start to see a better picture of why attendance has changed:

Team

Pct. Capacity Change

2012-13 Pct. Capacity

Avg. Ticket

% Change in Ticket Price

FCI

% Change in FCI

SAC

13.1

79.4

$43.32

0.00%

$268.28

0%

NOH

11.6

80.3

$26.87

-10.00%

$208.48

-5.4%

IND

9.2

84.1

$31.62

0.00%

$227.36

6.8%

CLE

8.6

78.7

$43.31

-8.10%

$271.74

-5.5%

HOU

7.7

92.4

$57.15

25.20%

$336.06

12.3%

NYK

3.7

96.3

$129.38

5.00%

$659.92

3.9%

WSH

1.2

80.6

$30.31

-6.00%

$249.22

0.9%

GSW

1.1

98.9

$44.27

24.00%

$324.08

24.3%

NJN

0.6

94.9

$60.50

12.30%

$382

4.6%

OKC

0

100

$51.35

8.90%

$295.4

6%

SAS

0

99.2

$57.25

-2.10%

$339

2.5%

LAC

-0.2

100.9

$65.55

3.90%

$395.2

7%

LAL

-0.2

99.7

$102.25

2.00%

$542

4.6%

CHI

-0.7

104.6

$77.65

8.00%

$456.6

7%

DAL

-1

104.4

$51.80

-4.00%

$321.18

0%

TOR

-1

91.6

$48.70

9.30%

$321.63

0.1%

MIA

-1.4

102

$78.30

8.00%

$472.2

6.1%

POR

-1.7

95.4

$51.30

6.00%

$308.18

-3.9%

DET

-2.1

67

$40.10

0.00%

$262.4

3.1%

CHA

-2.2

80.3

$29.27

0.00%

$203.06

0%

MEM

-3.2

91.8

$30.04

1.90%

$212.16

-0.8%

DEN

-3.5

93

$53.15

-2.00%

$319.1

-2.2%

MIN

-4.4

84.4

$35.50

2.00%

$273.98

4.9%

MIL

-4.5

80.3

$47.70

-2.10%

$309.3

-1.4%

UTH

-4.6

93.8

$44.50

2.30%

$280.98

1.4%

BOS

-4.8

100

$72.64

-0.40%

$434.96

3.4%

PHO

-6

83.8

$57.23

-0.10%

$344.92

3.5%

ATL

-8

80.8

$35.26

1.50%

$240.04

3%

ORL

-9.5

93.4

$39.40

-4.30%

$263.1

-0.8%

PHI

-16.9

82.2

$39.25

0.00%

$266.4

2.3%

As a general rule of thumb here, teams with high increases in attendance had low levels of attendance in the previous year. The effect of prices is ambiguous because it is hard to determine causality. Did the 25% increase in FCI cause attendance to increase in Houston? Not likely, a sensible person would likely realize that Dwight Howard affected demand for Rocket tickets which then allowed Houston to increase prices. But at least here we can see that a place like New Orleans may not have an increase in attendance just because they changed their name and made some splashy moves. The 10% decrease in average ticket prices (and 5.4% decrease in FCI) likely had a large effect on demand.

Now as you examine each team/market individually, one may start to see different phenomena in effect. For example, Orlando decreased their cost of attendance but also saw a sharp drop in attendance. What gives? Well, they had high attendance last year and also have a relatively new arena. I might suggest the Novelty Effect is wearing off on Amway Arena.

Who knows and who cares, let’s talk about the Hawks.

Hawks Attendance and Prices

We see that the Hawks had below league average attendance last year and continued to fall even further down. Now clearly part of this is due to the increase in cost of attendance for the Hawks[4]. Can this really explain the entire attendance drop? I won’t argue that it tells us everything, but it is certainly more than you would like to believe. How about some data on year-to-year attendance and prices for the Hawks:

Season

Avg. Ticket

Avg. Ticket Change

FCI

FCI Change

Attendance Per Game

2010-11

$36.13

1.1%

$235.02

1.8%

15648

2011-12

$36.13

0%

$238.52

1.5%

15199

2012-13

$34.75

-3.8%

$233

-2.3%

15125

2013-14

$35.26

1.50%

$240.04

3%

13633

For reference, the 2009-10 season averaged 16,545 fans per game and note the 2011-12 season was a lock-out season. The lock-out reduced the number of games to 33 home games instead of 41. Think of the lock-out as a supply shock that the Hawks knew about, when supply decreases we should expect an increase in price. As you can see, from a year-to-year perspective, as the Hawks increase their average ticket price we see per game attendance dip with the exception of the lock-out year. The 2013-14 attendance numbers are from December 31, 2013. For the NBA as a whole:

Season

Avg. Ticket

Avg. Ticket Change

FCI

FCI Change

Attendance Per Game

2010-11

$47.66

-2.3%

$287.85

1.1%

17290

2011-12

$48.48

1.7%

$301.06

4.5%

18230

2012-13

$50.99

3.5%

$315.66

4.4%

18395

2013-14

$52.50

3.20%

$326.6

3.5%

17106

For reference, the 2009-10 season averaged 17,146 fans per game. Of note, the Magic began play in a new arena for the 2009-10 season and the Nets played in 3 different arenas during this time (2009-10 Izod Center, 2010-12 Prudential Center, 2012-present Barclays Center). Also note that Attendance per game is pretty low right now, that is because of NBA seasonality. Attendance typically increases around the New Year when it does not compete with the NFL or College Football.

As a whole, it appears that Atlanta is more sensitive to price changes than the NBA. An economic interpretation is that the Atlanta fan’s demand for Hawks tickets are more elastic than the average NBA team. Why is that? Continuing with the economic theme, demand becomes more elastic when there is more competition. Basketball is an entertainment good and so it competes with other entertainment venues in Atlanta. When you increase the price of a good that is highly elastic, then you receive a larger response in quantities. In this scenario, the increase of 3% in FCI for the Hawks game will have a larger effect on attendance than your average NBA team because Atlanta fans are more sensitive to prices. This is a claim I give to you without evidence of entertainment options across NBA markets. Does Atlanta have more entertainment options than other places? I imagine one would make the claim that New York has more entertainment options than Atlanta and yet they still have higher priced tickets. True, but this is leaving out cost of living. Things in New York cost more than things in Atlanta, and this could be driving up the difference in prices. To see this, we can adjust our FCI and average ticket prices by Cost of Living Index to view the average cost of attendance across the NBA:

Team

Adjusted FCI

Adjusted Ticket Price

Cost of Living Index

Avg. Ticket

FCI

WSH

$ 177.89

$ 21.63

140.1

$ 30.31

$ 249.22

GSW

$ 197.61

$ 26.99

164

$ 44.27

$ 324.08

NJN

$ 210.24

$ 33.30

181.7

$ 60.50

$ 382.00

PHI

$ 210.59

$ 31.03

126.5

$ 39.25

$ 266.40

NOH

$ 216.94

$ 27.96

96.1

$ 26.87

$ 208.48

CHA

$ 217.88

$ 31.41

93.2

$ 29.27

$ 203.06

SAC

$ 230.88

$ 37.28

116.2

$ 43.32

$ 268.28

MEM

$ 240.54

$ 34.06

88.2

$ 30.04

$ 212.16

MIN

$ 246.83

$ 31.98

111

$ 35.50

$ 273.98

ATL

$ 251.09

$ 36.88

95.6

$ 35.26

$ 240.04

IND

$ 260.73

$ 36.26

87.2

$ 31.62

$ 227.36

DET

$ 263.98

$ 40.34

99.4

$ 40.10

$ 262.40

ORL

$ 269.02

$ 40.29

97.8

$ 39.40

$ 263.10

CLE

$ 269.05

$ 42.88

101

$ 43.31

$ 271.74

POR

$ 276.89

$ 46.09

111.3

$ 51.30

$ 308.18

UTH

$ 279.30

$ 44.23

100.6

$ 44.50

$ 280.98

LAC

$ 289.74

$ 48.06

136.4

$ 65.55

$ 395.20

MIL

$ 303.53

$ 46.81

101.9

$ 47.70

$ 309.30

NYK

$ 304.53

$ 59.70

216.7

$ 129.38

$ 659.92

DEN

$ 309.21

$ 51.50

103.2

$ 53.15

$ 319.10

OKC

$ 322.14

$ 56.00

91.7

$ 51.35

$ 295.40

BOS

$ 328.27

$ 54.82

132.5

$ 72.64

$ 434.96

PHO

$ 342.52

$ 56.83

100.7

$ 57.23

$ 344.92

DAL

$ 349.49

$ 56.37

91.9

$ 51.80

$ 321.18

SAS

$ 354.23

$ 59.82

95.7

$ 57.25

$ 339.00

HOU

$ 364.49

$ 61.98

92.2

$ 57.15

$ 336.06

CHI

$ 390.59

$ 66.42

116.9

$ 77.65

$ 456.60

LAL

$ 397.36

$ 74.96

136.4

$ 102.25

$ 542.00

MIA

$ 445.47

$ 73.87

106

$ 78.30

$ 472.20

Sorted by lowest FCI to highest with Toronto omitted because I am American, dammit (or because Cost of Living Index for Toronto wasn’t in the referenced chart).

This begins to paint a clearer picture of where the Hawks stand in relation to the rest of the NBA. Adjusted for Cost of Living, the Hawks have the 10th (5th w/o adjustment) least expensive venue. If we wanted to be more rigorous, we would also add in average level of income across these markets.

But back to Atlanta’s decision to increase ticket prices. If you go back up to the first chart, then you can see that 18 teams increased the cost of attendance for a game as measured by FCI. Some of these are obviously tied to previous season’s success that parlayed into high expectations for this year (Indy, New York, Golden State, LAC). Others performed well and were "capacity constrained" in relation to high attendance last year (OKC, SAS, LAL, Miami, Chicago). Others had an offseason acquisition that increased expectations for this year (Houston, Brooklyn, Detroit). And by my count, that makes for a few markets that are truly puzzling as to why they increased prices (Toronto, Utah, Boston, Phoenix, Philadelphia, and Atlanta). These markets did not make splashy moves in the offseason or have high expectations for this upcoming year. These teams have seen large changes in attendance in the negative direction, regardless of how their team has actually performed.

By Vegas’ projections this year, Atlanta was pegged to be a 39.5 win team. This is a lower projection than the year before in terms of actual wins (44) and projected wins (43.5). Atlanta does not fall within a category of a team that is capacity constrained form last year or a team that improved its expectations.

Conclusion

Since I need to make this a catchy piece, I am going to conclude that the reason for the Atlanta attendance drop is because the price is too damn high right now for this market. I have not even factored in the traffic issues in Atlanta to attend a game, the transplant issue with Atlanta, the lack of superstars, the team’s winning percentage, that Atlanta typically increases per game attendance after the New Year, that the Hawks have adopted Dynamic Ticket Pricing by QCue which muddies the water of revenue maximization or attendance maximization, and other factors that could be important. I have not touched those, so feel free to address that in the comments.

I want to point out that I have only addressed price since I feel that is the most important factor. Even then, if you put a gun to my head and asked me to give you a number of how important this is to attendance I would say it explains maybe 25%. I do not know the exact number. I do know that there is much left to be explained outside of price. But at least we are getting a discussion of attendance going that does not leave out a massive part of this equation.

(oh and I don’t blame the Hawks for raising ticket prices as I bet that also increased their revenues which is what they should care about)

[1]We would also need to delve into a large research project to determine the expected revenues per game for each NBA market, maybe next time.

[2]The Fan Cost Index® comprises the prices of four (4) average-price season tickets, two (2) cheapest draft beers, four (4) cheapest soft drinks, four (4) regular-size hot dogs, parking for one (1) car, two (2) game programs and two (2) least-expensive, adult-size adjustable caps. Costs were determined by telephone calls with representatives of the teams, venues and concessionaires, along with information provided on the teams’ official Web site, or through outside sources. Identical questions were asked in all interviews.

[3]For example, TMR uses "non-premium" season ticket pricing for its survey, which excludes club seats, suites, and floor seats. Depending on your market, these may drastically sway a team’s average ticket price.

[4] FCI tells that the *average* cost of attending a game increased by 3%. This does not mean that all seats were increased by 3%. This is a problem of aggregation and without further inspection of the data one cannot conclude how we got to a 3% increase. We could see that the majority of tickets remained the same (or even decreased in price) while a subset saw a massive increase in price. The point is we don’t know what it is so we should not try and interpret the price effect literally.

A FanPost expresses the opinion of the community member who wrote it and not that of the blog management.

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