Reading some of the comments here, there seem to be some widespread misunderstandings with regard to the Penn State football ticket sales and revenue situation.
Just to streamline the conversation and clear up a couple of the more widely unknown or misunderstood issues, I will address some of those issues and share the following information.
Someone asked how many season tickets are available. An interesting question, and one that is easy to answer. Beaver Stadium capacity is 106,500. Of that capacity, just over 21,000 are allocated as student tickets, and 4,500 are allocated as Visiting Team tickets. All of the rest are available to potential season ticket customers, so the number of season tickets available is approximately 81,000 – or 102,000 if you want to consider student tickets as “season tickets”.
With regard to season tickets sold this year, first, it should be made clear that Penn State saw improvement this year, but certainly did not sell out its season ticket packages. As of last week, the number of season ticket sold out of the 81,000 available was just over 75,000, and limited out at a maximum of somewhere under 77,000. So this year, season tickets fell somewhere near 4,000 short of the maximum. I no longer have the exact number of unsold packages from recent years, but I am fairly certain that the 4,000 figure is the lowest number of unsold since STEP was implemented. It is possible they will sell a small number of additional season tickets between now and opening day, but not many. Obviously, once you sell all of the tickets for any one game, you can no longer sell any more season tickets. But that is certainly not the same as “selling out season tickets”, even if the press release uses that terminology.
Someone also mentioned the large blocks of unsold seats in the higher regions of the seats near midfield. That has been a huge problem, and obviously the Athletic Department would like to see all of those seats sold as season tickets. That vacancy problem, as of last week, remains, but not quite as dire as it has been in previous years under STEP. The Athletic Department has tried to remedy the problem by adjusting annual fees for some of those sections, but thus far with limited success.
The unsold season tickets are located as follows, approximately 1200 unsold in the East Upper levels (many of them in the upper level seats near midfield), approximately 900 unsold in the West Upper levels (most of them in the midfield sections). Those ratios are in-line with the fact that there are approximately 30% more total seats in the East Upper deck than the West Upper deck. Approximately 400 unsold in the North Upper deck, and approximately 700 unsold in the South Upper deck. Throughout the lower bowl there are only a few scattered unsold seats, many of them “singles”, along with a limited number of unsold premium section seats.
Failure to sell out the available season tickets, which has occurred every year under STEP, presented an unfamiliar quandary for Penn State Athletics. If you have 5,000 unsold season tickets at what point do you give up hope of selling those season tickets, and move forward with selling tickets in those seats on a single game basis for the higher demand games?
The downside is that once you sell a single game ticket for the Pitt or Michigan game, you can no longer sell that seat as a season ticket package – so that seat likely remains empty for the lesser games with no demand, like the Akron and Georgia State games. You may want to hold on to that seat as long as possible, in the hopes that some additional customers may come forward willing to buy season tickets.
On the other hand, you don’t want to risk a situation occurring where you don’t even sell the seat for the premium games. If, for example, the team comes into the Michigan game with a 3-3 record, and the demand is no longer there for that game.
The timing of when you give up hope of selling more season tickets, and go ahead and sell the tickets remaining for the premium games on a single game basis, is a tough call. I am not sure how well Penn State has timed that out in the past. Maybe pretty well, maybe not. I expect that Penn State's Ticketmaster Rep, Lowell Berg, has some input to that process. Certainly, the ideal situation, and the one that eliminates such tricky questions, is to actually sell all of your available season ticket packages. For the better part of 30 years before STEP, that is essentially what Penn State Athletics did, so this post-STEP world was uncharted territory for Penn State.
Some have commented that Penn State had to go to a STEP program in order to compete with the so-called Big Boys. That may have been the mindset of the decision makers at the time, I couldn’t say for sure, but I expect it was. But if that was the intended result it certainly is not what transpired. As evidenced by the lower revenue per ticket figures yielded by STEP, both in terms of real money and as compared to the Big Boys. In actuality, STEP has significantly impeded Penn State’s ability to surpass, or even now to compete with, the Big Boys in generating football ticket revenue.
The idea espoused by some commenters that STEP allowed for the removal of lower-paying legacies, and replaced them with higher-paying new ticket holders has simply not happened, whether or not that was the intent of STEP. The results have been just the opposite.
Tim Curley has been receiving a significant amount of criticism for the implementation of STEP. While STEP was conceived when Tim Curley was the AD, I expect that it was others who actually evaluated the process, and made significant miscalculations, though that is only my informed opinion and I was not privy to who those individuals were, nor how much influence each had on the process. Those miscalculations were clearly evident from season one of STEP, before any of the November 2011 fallout occurred.
That is simply the way things worked, completely independent of whether or not the transition to STEP was viewed as an act of disloyalty on the part of Penn State Athletics towards its fan base.
The pre-2011 administrative group – Tim Curley and possibly a few others - certainly receives full credit for missing the mark, dramatically, with regard to STEP. Whether the pre-2011 Athletics Administration team would have adapted more efficiently, and remained more financially competitive than the two groups that have followed the pre-2011 group, we will never know.
What is documented fact is that the year before STEP, Penn State Athletics not only paid all of its bills, but also used about $17 Million of additional revenue to pay down existing debt, and placed an additional $15 Million of cash aside into the fund used to accumulate cash for capital projects. Again, you can simply look up the information from the required Federal Reports.
Since then, the succeeding administrations, even with much higher conference revenue sharing funds, have not only been unable to generate any surpluses of operating revenue, they have also blown through the entire capital spending account that had been accumulated in prior years – using it to pay operating expenses - and had to borrow funds from the University’s general budget to simply pay their operating expenses year-to-year. Currently there are zero dollars of available capital spending funds. Each and every capital project dollar spent, aside from any lump sum gifts from donors – like the Lacrosse upgrade money - adds 100% to the debt of the University and/or the Athletic Department.
How much of the blame can or should be placed on the side effects of the November 2011 events?
The idea has also been raised that there is a lingering downward effect on revenue as a result of the Sandusky situation. If one believes the market surveys commissioned by Penn State’s own athletic department, that is not the case. That issue is a non-factor in the ticket sales market.
Based on the market research there is a negative effect still in play with regard to the loss of Joe Paterno, and the manner in which his termination was handled, but that effect is very small, certainly much less of an effect than many folks have claimed, and it is expected to wane further over time.
Empirical evidence would suggest that the research results were accurate. This year, when news about the on-field performance was good, and the news about the Sandusky related issues was bad (including the convictions of the three Penn State administrators) the ticket demand increased, responding in tandem to the on-field news, and not to the Sandusky related news. As someone mentioned, "Just Win Baby".
The larger concern moving forward is trying to determine how volatile season ticket demand will be based upon the level of success on the field. When STEP was first contemplated, it was assumed that the level of revenue volatility based on the success of the football team would increase. Prior to STEP, ticket revenue was almost completely immune to variations in on-field success, and renewal rates were incredibly high, even when subjected to a year or two of disappointing on-field performance. Since STEP was designed as an easy-in, easy-out system, rather than a Loyalty system, the expectation was that volatility would probably increase, but no one had a solid picture as to how volatile the revenue streams would be.
The fact that there was a 5% drop rate this year is disconcerting to those folks looking at the revenue streams. While the 5% drop rate was lower than recent years, it was larger than pre-STEP, despite the fact that on-field results were surprisingly good, and fan enthusiasm should be at a high point.
What will happen when the on-field results are disappointing? No one knows for certain, and no one is in any hurry to find out, but with the results seen this year, the concerns are high that a poor year on the field could be very damaging to subsequent revenue streams.
As of earlier this week, without including any possible returns of Visiting team allotments as we move forward, and without considering any possible unsold “premium” seats, Penn State had an inventory of approximately 30,000 unsold tickets, including a small allocation of Pitt and Michigan tickets that they are continuing to hold on to, in the hopes that a smattering of season ticket buyers may still come forward. If that doesn’t happen, they will of course release those tickets for single game sales as we get closer to game week.
Fortunately, some of the unsold inventory is in the lower value sections of the stadium, and the unrealized revenue from the unsold tickets, as it stands this week, adds up to approximately $3.5 Million of unrealized ticket revenue, plus whatever ancillary sales, parking and concessions, are missed out on (I do not have reliable figures on the typical amounts of ancillary income associated with the sale of a football ticket).
Another misconception someone raised was the issue of other programs, like Ohio State, using variable pricing, charging more money for tickets to more attractive games, and was thankful that Penn State did not do that.
In actuality, since STEP Penn State has used and continues to use variable pricing. If you buy tickets for the Akron game the prices vary from $30 to $135, depending on the section. For the Pitt game, the prices vary from $110 to $225. I am not aware of any major programs, aside from a few that do sell out their season ticket packages, that do not use scaled pricing.
One of the most positive changes this year relates to discounted tickets. In past years, Penn State Athletics discounted or gave away large blocks of tickets, often times to individuals or organizations that were unlikely to even use the tickets, or to become regular customers in the future. Last year, the total number of discounted or free tickets for the season was just shy of 100,000. There will still be some discounted revenue tickets this year, including some for the Military Appreciation Day game. But that number is likely to be significantly less than last year, and that will push net revenue per ticket up by a small amount.
One of the reasons for the large number of steep discount tickets over the last few years was the expressed desire of the Football Program – James Franklin – to have as many butts in the seats, regardless of revenue, as possible. And to market the concept of “107,000 Strong” for every game. In retrospect, that was probably a wise long-term suggestion from Franklin.
Someone also posted that Staff and Faculty at Penn State receive half-price tickets. That is not entirely true. Among the discounted ticket plans currently in operation are the New Alumni plan and the Faculty/Staff plan. The New Alumni plan offers discounts of about 1/3 for relatively new alumni. Those tickets are all in the North Upper deck. The Faculty/Staff plan does not discount the ticket price, but does take ½ off of the donation fee, so depending on the section of the stadium, the total discount is between 10% and 30%
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Hopefully, this information clears up some of the unknowns and the misconceptions regarding the current football revenue situation, and the concerns and opportunities for the future.
