CalgaryNEXT, Ticket Prices, and Scarcity Economics

We’ve discussed a lot of different aspects of the CalgaryNEXT development around these parts lately, and today I want to discuss something that’s been bothering me a little bit.

The Calgary Sports and Entertainment Corporation are asking for a fair amount of public money to build their arena. To actually get into the building to watch professional sporting event in the new building, such as a Calgary Flames game, people will have to pay again through buying a ticket.

Scarcity economics is what’s bothering me in regards to event costs.

Right now, the Scotiabank Saddledome seats roughly 19,289 paying customers. At that capacity, the Flames have an internal budget based upon how much it costs to operate the team and the building and all the associated amenities. Let’s use Forbes’ calculations from last year for the average ticket price, which they tabbed at $65.

Presuming the building’s at capacity every night, they’re looking at revenues of about $1.254 million per game. At 41 games a season, that’s about $51.405 million of revenues from the entire season. (Aside: with the ability to bump ticket prices up a bit, now you get why owners love playoff games.)

Now, the literature regarding the proposed Arena Event Centre in the CalgaryNEXT project says that the building will seat 18,000 for hockey. That’s obviously not set in stone, but that’s what they’re planning right now. If the building’s capacity is reduced, as it apparently will be, then ticket prices will need to go up in order to keep revenues the same – I’m presuming ownership will want revenues to be (at least) the same if they’re ponying up $200 million for the new digs.

To keep revenues the same, at the proposed reduction in capacity, the average ticket price would need to go up $5 – from $65 to $70. (This is probably an optimistic view, as most of Ken King’s public comments have involved a larger lower bowl and presumably a reduction in higher-up, and cheaper, seats.)

And that’s ignoring the fact that the proposed funding structure includes $250 million of revenue from a ticket tax. It’s unclear at this point (a) what the tax percentage would be or (b) at what point it’d be added on. For what it’s worth, in Edmonton, it’s a 7% tax right now.

A 7% tax would bump the average ticket price up about $4.50, while a 10% tax would bring it up about $6.50 (depending at what point it was calculated, before or after the capacity drop).

All-in-all, a 7% ticket tax and a price hike to maintain revenue levels would move the average ticket price up from $65 to around $74.50. That’s just looking at the primary market, and ignoring how much a potentially successful team would drive up demand and likely drive up prices on the secondary ticket market.

Would the average ticket price moving from $65 to $74.50 price people out of using the new facility? Yeah, probably. Would it price out a lot of people? I have no idea. But it’s something to consider given how much public money that the Calgary Sports and Entertainment Corporation are including in their proposal for new facilities for their teams.

  • The Fall

    Hi Ryan,

    You are missing one huge element of revenue that taking the average ticket price misses out. Luxury boxes, the new stadium will most likely have more, and more expensive, so even though you decrease the number of overall seats, the increased revenue from luxury boxes, could if they wanted to keep other ticket prices lower and maintain the same revenue. Although, likely they will increase prices because they can.

  • Colin.S

    Pretty sure King mentioned in this interview: http://www.sportsnet.ca/960/calgary-flames-radio/ken-king-live/ that the capacity isn’t going to change much from the saddledome (seating only, more luxury boxes might be added). I’m listening to the interview again and I’ll add a timestamp if I find where he talks about seats.

    One thing this site hasn’t talked about either though, is that in that same interview he confirms that the 200 million the Flames are putting up is going to be made up of an upfront payment but that a good chunk of it is going to be paid out as rent. That is absolute BS. You can’t come out and say you are contributing 200 million but its as rent, that’s something they have to pay anyways!!!

    Edit 1: changed the link, linked to the wrong interview initially.

    EDIT 2: Time stamp is 4:10, question from Stephanie, King says that +/- a few seats for sight lines, but roughly the same.

    • Truculence

      Yeah, ticket prices in Toronto, Montreal, and Vancouver are pretty ridiculous. I usually pay 125 dollars per ticket -which is face value – for upper bowl seats in Vancouver.

    • piscera.infada

      $75.00 was not secondary market, or even face value for a Flames game. That number is somewhere on average for price-per-game when buying season’s tickets or game-packs.

      From personal experience, a mid-tier match-up on a Friday or Saturday night, bought on the secondary-market (NHL ticket-exchange, or whatever), is usually in the $150.00 to $250.00 range for a second bowl seat. If I remember correctly a lower second-bowl seat (first four rows, between the blue lines), runs you about $200.00 face-value.

  • Derzie

    The whole ask is a joke. Hockey is already not affordable to most people. With a new rink, fans pay more, non-fans pay more through taxes and inconvenience and the owners get much much more. I think of the episodes where Homer Simpson or Peter Griffin are being sold something. The salesman (Ken King) says ‘C’mon…Come Onnn…You know you want it.. Sold!’. And they end up with a tank or a Canyonero when what they had was just fine.

    • RealMcHockeyReturns

      Canyonero! Love it! Overpriced overly massive, gass-guzzling SUV…hey you Cadillac Escalade drivers! Seriously once I called an ad with no price, but “very fair price offered” one time, then called and the guy tried to convince me that $75000 was a good deal for a used one! LOL

  • Lets change the CALGARYNEXT project name to read CALGARYNOW!

    Lets get this built. As a Calgarian I’m embarrassed to have City’s like Regina, Edmonton, Winnipeg and Regina have better facilities then what exist in Calgary.

    Good on Murray Edward’s team too have the fortitude that enabled the project kickoff! The City and Province have for years ignored their obligations too the Calgary tax payers given that a City engaged consultants study concluded that the West end is in dire need of upgrades and interchanges and have not kept up with population growth. The Province has ignored serious remediation issues that take away from future West End development and tax revenue.

    Development of this nature is critical for the downtown area given that the major customers of the Flames such as corporate executives, sponsors will be the ones that contribute most to future revenue gained from corporate boxes etc.

    Although a cost model has been proposed the sharing of costs and revenues can be done fairly to represent the interests of tax payers and private investors. Anything can be negotiated provided it has a fair return for all parties involved.

    • supra steve

      There is actually nothing wrong with the Saddledome in it’s current state.. 10 years down the road will be a different story.

      No one is opposed to the new arena, or even that some tax dollars would be involved… it’s just the break down of the numbers.

      • RedMan

        “There is actually nothing wrong with the Saddledome in it’s current state”….1) 1984 technology 2) Limited corporate boxes having an impact on potential revenue 3) Undersized bathrooms 4) Undersized concourse area 5) Poor acoustics 6) Big concert fly by 7) Let me know if you need a dozen more examples of what’s wrong with the Saddledome.

        The current cost model is a proposal, it is far from being final….let the negotiations begin !!

        • supra steve

          And 5 years after a new building, there will be others that are more state of the art. Bottom line is the Saddledome is still serviceable, and will do an adequate job for the next 10+ years. I have yet to pee my pants while waiting in a line for the bathroom. If the finances of the dome are really that dire, then the Flames can’t afford to not build their own building, on their own dime. If they want taxpayers to foot the bill so that more luxury boxes can be erected, then they can just forget it.

          • supra steve

            Here’s the thing that bugs me about this getting local and state/provincial governments to pay large amounts of these projects. If the people that own these enterprises can’t afford to build their own facilities then there is something wrong with the whole model of professional sports in general. If you have to lease a facility then so be it, but the facility owner in a privet enterprise isn’t going to be loosing money on the deal. In this instance the city does.

          • supra steve

            As a season ticket holder that attends 40+ games at the Saddledome I can tell you it’s gaudaweful! I have also experienced games at some of the newer arenas and stadiums and it’s enjoyable! I find the fans that think the Saddledome is adequate attend a handful of games and enjoy watching the Flames from their warm basements.

            This deal get’s done without public funding other than the field house, surrounding infrastructure and a portion of the remediation!

            I surely hope you and others don’t hold the Flames ownership group responsible for funding these public areas??

          • supra steve

            Your last sentence is…uninformed. The only reason any public areas are included in the proposed project, is so they stand a better chance of fleecing the taxpayer. Suggesting that anyone would expect the Flames to build a fieldhouse for the city is total fantasy.

            Over the last 5 seasons, I have had tickets for anywhere from 5 to 20+ games, and the dome does not offend me in any way. I have attended games in Edmonton, enjoyed that experience in an old barn. Also attended a game in Arizona, that was cool too. In that new stadium, I remember the game fondly, but could not tell you that the building added to the experience for me in any way, it just didn’t. Sure there was lots of room and short lineups, because only half the seats were filled.

            If your season tickets came with an additional invoice each year, for your 1/19000th share of the new arena’s principal and interest payment, how much longer would you continue to be a season ticket holder?

        • supra steve

          You are listing problems of the Saddledome from the Flames and fans perspective. Not one of those is a really good reason for pubic money. If the Flames want the city to put up the 1.5-2.5 billion dollars this project is going to cost they need to make a much better case and be much more on point with urban best practice than what they have proposed so far.

          The only really purpose for the government putting in public funding to a private arena is to ensure a central location and to tie it in to existing infrastructure. Even then it should really be a small minority of the total funds.

        • Big Ell

          1) The saddledome is not the same as it was in 1984.

          2) Who cares about ‘potential revenue’?

          3) We’ve all rolled our eyes at the line-ups to grab a beer or take a piss during the intermissions, but give me a break, do it before the period is over like most people.

          4) See three.

          5) Really? I saw Stevie Wonder, Bob Dylan, Oasis, and other world class acts play at the Dome.. not one time did I hear anyone complain about “acoustics”.

          6) I agree Calgary needs a better concert venue, but I’m sure U2 and the Stones have played worse places then the Dome.

          7) All your examples really have nothing to do with the fan base and everything to do with the Flames revenue. Having said that, I am excited about a new arena.. but more expensive ticket prices and bigger washrooms aren’t going to change the experience for me all that much.

        • CMG30

          1) How has arena technology changed from 1984? Have sight lines improved? No. Have the seats become digital? No. Can people no longer walk on the concourse? Of course not. Arena’s are not Iphones. This is a nonsense statement.

          2) Why are we concerned with the potential revenue of corporate boxes? Why should the city spend public money so the Flames can profit? They’re already in the top half of league revenue and teams like Carolina and Arizona won’t be passing them anytime soon.

          3) The bathrooms are fine. If you want an arena that can handle every seat hitting the loo at the same time you’re going to have a building with nothing but toilets.

          4) Poor acoustics. Really? Compared to what the Jack singer?

          5) Some concerts fly by: True. But Ken King himself admitted that this is not a reason to spend 800M of public money.

          6) The Flames signed a contract to play in the Saddledome till 2033. I would like at least one actual reason why they can’t build their own arena if they really want one.

    • supra steve

      Stated just like a 3 year old would have worded it. NOW!

      Can’t look second class in front of Edmonton and Regina! That’s more like a 13 year old.

      Hopefully cooler (and more mature) heads will prevail.

    • Train#97

      You’re comment about being embarrassed that Edmonton will have a better building……? You’re right !!! you will be embarrassed ! Even if Calgary builds this building, which looks unlikely , it will still only be about half as good as the nicest hockey arena in the world!!! Yes up highway 2 in Edmonton!!! If you don’t believe me do the research!!

  • supra steve

    I think we’re being modest in how much the Flames actually make in revenue.. how about merchandise, concession sales and corporate sponsorship?

    While they have the capacity of 19,289, why not add a slight increase in the price of a ticket now, while attendance is good to go towards the new arena project.

    If they project the arena to be built in say 5-8 years, I’m sure that would be enough time to make the $250 million.

  • piscera.infada

    To someone’s point the Dome is good for now nd for the next 5 to 7 years with Flames still making money in a 19,000 plus Dome. Flames want to increase the number of box seats and lower bowl seat capacity for additional money. I am fine with that because I don’t buy those seats today and the people that do will pay it. However, for the rest of us at the Dome how much more are we willing to spend on a nicer event centre ( not so crowded concourse,) and washrooms that are easier to access at intermission. Don’t forget there would be additional events here in Calgary too. I assume the Flames will be providing every year making additional money on these events.

  • The Fall

    I went to a couple games in North Carolina a while back:

    $100 for the entire night out: limo ride to and from, dinner, lots of beer, and third row seats.

    That said, the stadium had theatre students operating follow spots as the opening “show”. The high end rinks now have the entire ice surface video mapped. Frankly, I’m there to watch hockey, and have some beer: I’m fine with the Hurricanes model.

  • The Fall

    Ok so this “Event Centre”, call me old school but I call them Arenas, is something the Flames organization wants, they say need. You, I probably do want as well, but he City of Calgary doesn’t need this. The project is that of the CSEC and it is going to benefit them way more than the city. This is their project and they should be funding it to the tune of well over 50%.

  • RedMan

    Glad to see that in spite of it’s obsession with all things Flames this site isn’t taking the cheerleader tone practiced by some of Calgary’s so called “legitimate” “journalists” on this story. (Cough Francis, Cough)

  • supra steve

    For what the Flames are really asking for in terms of public money for the new arena, clean up, and infrastructure it would be cheaper for the city to just buy the team.

    According to Forbes the Flames are worth 451 million.
    http://www.forbes.com/teams/calgary-flames/

    They Flames want a 890 million project for them to profit from that doesn’t include either the clean up cost or the infrastructure cost in the new location.

  • supra steve

    Don’t do it Calgary. Be smarter than Edmonton. Be leaders and set a new precedent, No public funding of billionaires.

    It’s entertainment for the wealthy, and a license to print money for the super wealthy. Let them pay for it.

  • Train#97

    I don’t live in Calgary or Edmonton, and why the hell should my provincial tax dollars help pay for an arena in calgary?
    Edmonton never used a dime of provincial money!
    How will that building help any taxpayers outside of Calgary? You want the building Calgary ? Pay for it yourself!!

    • Big Ell

      Not yet. They are waiting. From the Edmonton Sun August 17: “Iveson said Edmonton is still waiting on whether its application for $25 million in funding from the province for the Ice District, with the city already planning to use funds from the Community Revitalization Levy should the province refuse to come up with any additional funding.”

  • Just wanted to speak to a few comments I keep reading on this posting.

    First up, I am a Oilers fan and have followed the arena situation very closely and there is lots of mis-information that people don’t understand. I grew up as a teenager and flames fan when the saddledome was originally built.

    1) The monies being given from outside Edmonton have not come in at all. And the request for the ‘Ice District’ is separate from the arena. It’s a entertainment area that is free to the public that the request is for. The money for the arena itself came through the ownership and the city. (As a taxpayer in Edmonton they , not the province shoulder the load). The taxes as being raised through ONLY ticket tax and a tax levy that only includes the immediate blocks around the Ice District. All NEW taxes from the new infrastructure are what is being used. The city needed to build so therefore was working on economic development. That pot of money is what is invested. Roads, heath care etc… money is not being spent (it’s already been margined in the budget.) Only infrastructure money is used. This project is so much more then just a arena

    2) This Calgary NEXT project is so much more then a new arena. The football stadium is NEEDED to be changed. My apologies to may feel offended to this but you can not continue to keep playing in professional sports with an outdated facility like McMahon. I have fond memories there but something new is needed for the fans and the team and for better revenue making. Like Edmonton, the infrastructure money is likely the only dollars going to be used. It takes money to make money. In 1984, Edmonton was a more dynamic and growing city then Calgary. Why? Because they were ‘building’ their city. Calgary changed that and Edmonton started working on ‘maintaining’ and angry with big business so lost much of the larger business to Calgary and the rest is history. Calgary is where it is because it’s thinking future. To continue to grow means spending (but at the right places). Right now it’s all posturing for dollars. Owners start high so when the pendulum swings they get as much support as possible. Happened in Edmonton and will happen in Calgary. All big business works that way. I say remember that these owners can take their business elsewhere as well. Yes they can make more money likely staying but that doesn’t mean we treat them like ‘they owe it to the citizens of the city’.

    3) the quote i read that few people don’t complain about restrooms or acoustics etc…AND you still get all the concerts? Actually because of the design of the Saddledome many bands can not set up their equipment for their shows cause the roof does not have the designed support needed. This has resulted in Edmonton picking up more concerts etc…they seldom got in the past. That results in more dollars for outside the city of Calgary then in Calgary. The arena needs replaced and even when it does get replaces it will be how many more years older?