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ORIOLES vs. Yankees ALDS

  • JJBittenbinder said...

    I'm having trouble understanding what you're arguing myself. Do you think it's automatically cheaper to handle ticketing in house because there isn't a goal to be profitable?

    no

    ravensnterps

  • ravensnterps said...

    I'm having a hard time understanding what you aren't getting here.

    Business 101:

    The final price extended to the end consumer, for simplicity sake, consists of:

    1. Cost to ticketmaster 2. Profit to ticketmaster 3. Cost to orioles 4. Profit to orioles

    If you cut out ticket master then you cut out a layer of cost by essentially combining 1 and 3.

    Huh? 1 and 3 aren't redundant. Ticketmaster's costs are costs that are not currently being borne by the Orioles. If the Orioles bring ticketing in-house, they will incur additional costs they weren't previously seeing.

    MisterNiceGuy

  • MisterNiceGuy said...

    Huh? 1 and 3 aren't redundant. Ticketmaster's costs are costs that are not currently being borne by the Orioles. If the Orioles bring ticketing in-house, they will incur additional costs they weren't previously seeing.

    Yes, I know that. That is my point. They would be replacing ticketmaster's costs with their own. I'm not so sure that they wouldn't be equal; this is not a typical outsourcing gig. I'm sure there was a time where the cost of processing tickets in house was way higher than it is now.

    And the Orioles still have costs, by the way.

    Think of it like any other business model. Just because ticketmaster is bearing the direct cost of the tickets, doesn't mean the Orioles don't have overhead costs associated. I.e. staffing the willcall window, etc.

    This post was edited by ravensnterps on 10/16/2012 at 2:45 PM

    ravensnterps

  • ravensnterps said...

    Yes, I know that. That is my point. They would be replacing ticketmaster's costs with their own. I'm not so sure that they wouldn't be equal; this is not a typical outsourcing gig. I'm sure there was a time where the cost of processing tickets in house was way higher than it is now.

    Well then why did you say you're cutting out a layer of cost? Did you really mean you're cutting out a layer of profit?

    MisterNiceGuy

  • MisterNiceGuy said...

    Well then why did you say you're cutting out a layer of cost? Did you really mean you're cutting out a layer of profit?

    No, cost to the end user (us). Currently the customer is paying to cover 4 things, if managed in house the customer would be paying to cover 3 things.

    ravensnterps

  • ravensnterps said...

    No, cost to the end user (us). Currently the customer is paying to cover 4 things, if managed in house the customer would be paying to cover 3 things.

    Which makes it automatically cheaper?

    Im ready for aa 5th of vodica to end my feels.

    JJBittenbinder

  • JJBittenbinder said...

    Which makes it automatically cheaper?

    Do you understand why things cost cheaper at wholesale prices than retail prices?

    ravensnterps

  • ravensnterps said...

    Do you understand why things cost cheaper at wholesale prices than retail prices?

    I'm just amazed a franchise hasn't run with your business model.

    Im ready for aa 5th of vodica to end my feels.

    JJBittenbinder

  • Is it not assumed that (Ticketmaster cost)+(TicketmasterProfit)<(Orioles Cost)? Do people think that the Orioles are a charity? Ticketmaster has infrastructure in place which leads to incredible economies of scale. If the Orioles took on all ticket sales I would guess that the final price would increase.

    Titanterp

  • ravensnterps said...

    No, cost to the end user (us). Currently the customer is paying to cover 4 things, if managed in house the customer would be paying to cover 3 things.

    Right, what I'm trying to figure out is which thing goes away. You seem to concede that no real costs on the supply side are going away since it's just a question of who's incurring them. So if cost to the consumer is going down then somebody's profit (out of your original 4 things) is going away, right?

    MisterNiceGuy

  • Titanterp said...

    Do people think that the Orioles are a charity?

    Only ravensnterps.

    Im ready for aa 5th of vodica to end my feels.

    JJBittenbinder

  • Titanterp said...

    Is it not assumed that (Ticketmaster cost)+(TicketmasterProfit)<(Orioles Cost)? Do people think that the Orioles are a charity? Ticketmaster has infrastructure in place which leads to incredible economies of scale. If the Orioles took on all ticket sales I would guess that the final price would increase.

    I think the real issue is that Ticketmaster's interests are not aligned with the Orioles, and I'm focused here on elasticity of demand (not to get all techno-nerdy on Econ stuff). Ticketmaster has an interest in charging as much as it can on fees, even if that means decreasing the demand for the tickets, if that's how it can maximize its profit. The Orioles might have an interest in decreasing the fee component if that increases demand enough for the underlying tickets - they have that incentive because they capture the extra revenue and profit from that, whereas Ticketmaster doesn't.

    MisterNiceGuy

  • There'd be considerable start up costs for the Orioles to be able to sell tickets on their own. The entire ticketing operation runs on TM's software.

    jsh

  • jsh said...

    There'd be considerable start up costs for the Orioles to be able to sell tickets on their own. The entire ticketing operation runs on TM's software.

    Right but again I think that in this day in age the cost of processing tickets is far cheaper than it was 3 decades ago.

    ravensnterps

  • MisterNiceGuy said...

    Right, what I'm trying to figure out is which thing goes away. You seem to concede that no real costs on the supply side are going away since it's just a question of who's incurring them. So if cost to the consumer is going down then somebody's profit (out of your original 4 things) is going away, right?

    Yes.

    ravensnterps

  • Titanterp said...

    Is it not assumed that (Ticketmaster cost)+(TicketmasterProfit)<(Orioles Cost)? Do people think that the Orioles are a charity? Ticketmaster has infrastructure in place which leads to incredible economies of scale. If the Orioles took on all ticket sales I would guess that the final price would increase.

    See my earlier post. I think at one point that was absolutely true, which is how ticketmaster came into business. At this point I think that ticketmaster survives mainly on network effects and legacy.

    ravensnterps

  • jsh said...

    There'd be considerable start up costs for the Orioles to be able to sell tickets on their own. The entire ticketing operation runs on TM's software.

    There's no way they would develop an entirely new software solution just for themselves. They'd likely try to partner with someone that can provide the back-end capabilities and customize it to the Orioles' needs. If anybody's interested in learning more about the industry there's a good overview in the Justice Department materials from when they challenged the Ticketmaster-Live Nation merger (there was a settlement).

    MisterNiceGuy

  • ravensnterps said...

    Right but again I think that in this day in age the cost of processing tickets is far cheaper than it was 3 decades ago.

    How much do you think it would cost for the Orioles to create their own software system as well as maintain/upgrade it through the years? I think it'd be several years before the Orioles ever recouped their costs, and to recoup those costs they'd have to pass the fees onto the customer.

    jsh

  • MisterNiceGuy said...

    There's no way they would develop an entirely new software solution just for themselves. They'd likely try to partner with someone that can provide the back-end capabilities and customize it to the Orioles' needs. If anybody's interested in learning more about the industry there's a good overview in the Justice Department materials from when they challenged the Ticketmaster-Live Nation merger (there was a settlement).

    I'd imagine it would be MLB, which is the one that has the deal with TM, not the Orioles.

    jsh

  • I recommend the Best & Brightest from the 24/7 Network tackle this endeavor for the Orioles franchise.

    Im ready for aa 5th of vodica to end my feels.

    JJBittenbinder

  • jsh said...

    I'd imagine it would be MLB, which is the one that has the deal with TM, not the Orioles.

    Correct.

    ravensnterps

  • ravensnterps said...

    See my earlier post. I think at one point that was absolutely true, which is how ticketmaster came into business. At this point I think that ticketmaster survives mainly on network effects and legacy.

    Network effects aren't that strong in ticketing. What you may be referring to, and this point doesn't support your argument, is that a new competitor needs a significant volume of business because the fixed costs of developing an entirely new solution are high, and it's hard to gain big chunks of market share quickly. That's different from network effects, though, which is that the product or service actually gains more value the more other people are using it.

    MisterNiceGuy

  • JJBittenbinder said...

    I recommend the Best & Brightest from the 24/7 Network tackle this endeavor for the Orioles franchise.

    How come I can only get tickets in section 404???

    terpemada

  • MisterNiceGuy said...

    I think the real issue is that Ticketmaster's interests are not aligned with the Orioles, and I'm focused here on elasticity of demand (not to get all techno-nerdy on Econ stuff). Ticketmaster has an interest in charging as much as it can on fees, even if that means decreasing the demand for the tickets, if that's how it can maximize its profit. The Orioles might have an interest in decreasing the fee component if that increases demand enough for the underlying tickets - they have that incentive because they capture the extra revenue and profit from that, whereas Ticketmaster doesn't.

    I'm the super econ nerd, so don't worry about that. The problem is simple game theory. Ticketmaster and MLB clubs have their own profit models. When they no longer clear, changes are made. Ticketmaster's goal is to maximize profit by increasing fees to the point where demand falls just enough to not cause MLB clubs to find other options.

    I tried to do this in Profit models, but something is giving me the oops-html error.

    Titanterp

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