Sports leagues and franchises turn to CRA for analytical support when they need to answer tough questions, determine the best strategic direction, resolve contentious legal disputes, and succeed in this highly competitive industry. Our professionals and academic experts have researched, published, and consulted on strategic business issues in the professional sports industry for more than 20 years. We have a reputation for rigorous and innovative analysis, cutting-edge economic expertise, attention to detail, and the ability to work effectively as part of a wider team of advisers.
Economic impact and franchise relocation studies
CRA helps clients evaluate the economic impact of complex business decisions such as moving a franchise, constructing a new stadium, or assessing whether proposed locations will be viable in the long-term based on factors such as economic conditions and expected growth in discretionary spending on sports and entertainment. We have evaluated the attractiveness of different metropolitan areas for locating or relocating a franchise as well as the economic rationale for determining which franchises were best suited to move to a particularly attractive market location.
Revenue optimization and benchmarking
Professional sports teams that want to enhance revenue must first understand what drives each of their revenue sources (e.g., general admission tickets, club tickets, suites, sponsorship, media, concessions, merchandise, and parking). For example, revenue from sales of suites may depend mainly on the number of large firms in the area or firms in specific industries that purchase suites to entertain clients. Similarly, ticket revenue may be driven by optimizing ticket prices based on location within the arena/stadium and amenities, fan interest in the opponent, importance of the game, and other factors.
Our experts analyze the demand for professional sports, determining the drivers of revenue and quantifying the impact of strategies and tactics at the league and team level. We then help teams identify strategies and initiate specific tactics to enhance their revenue.
Benchmarking the revenue performance of teams within a professional sports league can be challenging, due to the diversity in economic and environmental circumstances, and resources available to the teams. This diversity is due to factors such as varying levels of economic activity, income and population levels, affinity for sporting events and competition among the sports and entertainment options available, stadium location, age and amenities, industry and corporate presence, team performance, and star players. Developing accurate benchmarks for revenue performance involves determining how these factors affect different types of revenues, and adjusting for factors outside of the control of the teams’ management to put teams on a “level playing field”.
CRA experts have developed reliable approaches to benchmark the performance of teams across revenue categories while controlling for factors outside of the teams’ control. The benchmark outputs can highlight teams that exhibit “best practices” with regard to specific revenue components, and identify areas that may need attention under revenue sharing arrangements.
Ticket pricing strategy
A revolution is occurring with respect to ticket pricing for professional sports, as the traditional season/single-game ticket paradigm is being replaced by ticket bundles, variable pricing of tickets for different games/opponents, and dynamic pricing approaches in which prices for specific seats may change over time leading up to (and in some cases during) a game. Determining how to optimize pricing of season/single game tickets and ticket bundles prior to a season to reduce uncertainty in revenues, and how to select the ticket inventory to “hold back” for dynamic pricing, can require complex quantitative analysis.
CRA experts have assisted clients with rigorous quantitative analyses to address these questions for professional sports franchises. In addition, we have provided comparisons of ticket pricing approaches and benchmarked pricing performance for all teams within a league—identifying best practices and trends. For several teams, our consultants have examined the relationship between primary ticket prices and secondary ticket prices and developed reliable methods to estimate the true market value of tickets while avoiding the misuse of secondary market data that is common when developing ticket pricing strategies.
Lawsuits concerning sports leagues often place at least two key economic issues before the court. The first issue is whether, for the purposes of determining the legality of a particular sports league rule, the league should be viewed as a single entity, a joint venture, or as separate competing firms. The second issue is whether sports leagues have monopoly power in any relevant market.
CRA has worked on a growing number of legal disputes involving such sports as professional football, soccer, baseball, basketball, hockey, tennis, and golf. CRA has completed more than a dozen major sports litigation matters; our clients have included leagues, teams, telecommunications companies, and employees.
CRA has assisted professional sports leagues and franchises with
- Analysis and expert testimony related to the purchase or relocation of a professional sports franchise or the construction of a new facility
- Assessment of the economics of licensing and merchandising agreements, and expert testimony related to sports programming rights
- Assessment of rules for revenue sharing distributions and relocation policies
- Review and assessment of collective bargaining agreements
- Support in arbitration related to scheduling of conflicting sporting events