Between a discus and a hard place

How can the Head of Ticketing for the 2012 London Olympics reconcile the diverging needs? His boss expects him to sell $650 million worth of tickets, yet the stadia need to be filled and any decision has to be accepted as fair by the public…

The Olympic games seem an unstoppable train. The modern Olympics have grown from a fourteen-nation clique in 1896 in Athens with only 241 athletes to a 205-nation melee with about 12,500 athletes projected for the 2012 London event. As if the nation and athlete inflation were not enough, the number of sports also ballooned, from the six traditional disciplines to a whopping 26 at London, including exotics such as Taekwondo or BMX bicycling.

As a business, the growth of the Olympics is no less respectable. The Beijing event was a roughly $3 billion business, and the London games are anticipated to bring in about $6 billion. Not bad for a 17-day extravaganza. Baron Pierre de Coubertin, the reviver/founder of the modern Olympics, probably wishes he had been as suave as Bernie Ecclestone in cornering Formula One riches.

In this case study, professors James Gourville of Harvard Business School and Marco Bertini of London Business School provide the general backdrop to the Olympic evolution, but then focus on the issue of ticketing revenues. Ticketing is not the biggest revenue generator by any means, but it is a delicate area since ticketing Snafus can create big public relations problems.

At the center of this lively case is Paul Williamson, the Head of Ticketing for the London 2012 Olympic Games. Williamson handles the tickets (the case does not provide his particulars, in case you are seeking tickets already!), yet the Olympics live not by the virtue of the entrance tickets, but by virtue of the broadcast rights. These rights brought in $1.7 billion for the Beijing games, and are expected to bring in even more for London.

In the grand scheme of things, there is not much that the London Organizing Committee of the Olympic games (LOCOG) can control in that arena, since broadcast rights are negotiated by the International Olympic Committee, based in Lausanne. The IOC also controls international sponsorships.

On the other hand, the LOCOG has control over the ticketing revenues, the domestic sponsorships, and the licensing (merchandising) rights.

Thankfully for LOCOG, revenue distribution from the IOC is strongly in the host city’s favor. The IOC keeps only a small fraction of the revenues (still almost $200 million in 2000 for the Sydney Games; so no small peanuts), whereas the host city took 75% that year.

Ticketing revenues fluctuate in a well-defined bandwidth, with price being highly variable, whereas the inventory of available seats is mostly fixed. After all each venue – from the 80,000-seat main stadium to the 1,000-seat sailing pavilion – has to live with the size constraints of its designated facility.

But maybe there are some innovations to be eked out. Beijing was cursed with short attention-span spectators, who would leave their seats after a couple of hours or a couple of events. The sight of empty rows of seats made hard-core Olympians cringe, and quickly made Beijing authorities bus in ‘artificial’ spectators – some of them not even knowing when to clap and when to groan! Perhaps this signals room for “standby” or “used” ticket sales? Or what about the budgeted ‘Other Events’, set to amount to 365,000 seats? Maybe some creative events could boost that number? Or maybe even extend the closing ceremony to two days?

Although Beijing was far from ticket revenue maximization, it did manage to sell out the entire 6.8 million stock of tickets, something no other Olympic game has done since the 1984 Los Angeles. For London, the balancing act is to reach the $650 million target without making tickets inaccessible to the common Joe sports fan. Overall, Paul Williamson is budgeting an average sales level of 80%.

For the Olympics – as for other popular spectator sports such as soccer or baseball – ticket revenue is a complex equation with several tiers. At the top are corporate tickets, typically accompanied by special facilities and access. At the bottom are simple limited-event tickets. In terms of events, the opening and closing ceremonies are the blockbusters: held in the biggest venues, fetching the fattest prices, and certain to sell out.

Historically, prices vary from just below $1000 (Sydney 2000 opening ceremony) to less than $5 (for example for preliminary rounds of less popular sports such as handball or ping pong).

So, all in all, Paul will have to juggle with the vagaries of dynamic pricing, keeping one further parameter in account: blocks of tickets have to be set aside for foreign visitors and for IOC needs. Maybe he should propose some out of the box thinking and suggest a double closing ceremony after all?

Reference:
Harvard Business School, 9-510-039
"London 2012 Olympic Games"
Profs John Gourville (Harvard) and Marco Bertini (London Business School)