Price discrimination in the English premier league free essay sample

Many scholars have described football as a global game or as a global language. In my opinion, football is the easiest sport to be part of in the world. Every child from different class groups is eager to play football, whether it is on the streets or on a world-class field with amazing equipment. As a child you do not see the economic side of football. You just want to play the game and it becomes a part of your livelihood. As you grow older, things get clearer in your mind and you start analyzing the impact it has in the economy. For many years, the world cup has brought jewels of wealth to the economy due to mass participation. â€Å"It gives them an opportunity to offer foreigners a window into their world and stimulate the development of football domestically. † (Szymanski, S. 2002). There is always a hope that the World Cup would bring substantial economic growth to the host nation that has generally struggled for the past decade. The 2002 World Cup in South Korea is a very good example of how economic growth can occur during and after the World Cup. In various countries, the football clubs that exist have caused a significant change of economic structure. When Roman Abramovich, Russian billionaire and major shareholder of a private investment company Millhouse LLC, took over Chelsea football club, he transformed them into one of the top teams in the world. Even with all the considerable amounts of luxury football clubs have from private owners, there is still always two sides to a coin. Football player’s wages in the premier league are enormous, even after the economic gloom and inflation gripping Britain. There has been a disproportionate raise in ticket prices of various English premiership clubs that has lead to price discrimination to the loyal and passionate fans of football. Due to the popularity of the English premier league, there has been an increasing demand of spectators. The clubs are forming a monopoly by exploiting the loyal supporters. The burden of such financial responsibility has shifted from the club’s owner to the pocket of the helpless supporters by selling higher ticket prices and clothing merchandises. The regular supporters will do anything to watch their team play every weekend, even if they have to pay a higher amount on the tickets. â€Å"The various clubs outline the importance of maximizing potential revenues by avoiding, wherever possible, the prospect of the unsold seat. The consequent dilemma facing the Premier League clubs is to ensure that the nature of pricing match tickets equates to the clubs’ financial requirements and the supporters’ overall satisfaction. †(Clowes, J. And Clem, N. 2003). Figure 3 examines the contrasting season ticket prices depending on the location of the stand. It highlights that only four clubs have â€Å"significant† price discrimination while the rest of the clubs are reasonably high. Also, figure 5 audits the variation in the price on match day tickets for various locations in the â€Å"main stand. † The graph portrays the maximum price discrimination by differentiating between â€Å"the maximum premium charged by each club based on the lowest ticket price and highest match day ticket price within the main stand. † (Clowes, J. And Clem, N. 2003). For example, Chelsea FC charges the highest price discrimination of 37 pounds in comparison to other clubs in the English premier league. â€Å"They reported that a 1% increase generated on average an 11% profit increase among the 2000 companies they studied in the premier league. †(Clowes, J. And Clem, N. 2003). â€Å"Bird found a (real) price elasticity of demand of -0. 2 and an income elasticity of -0. 6 for the period 1948 to 1975, showing that football was price-inelastic and an inferior good. † (Simmons, R. 1996). Home and away fans tend to â€Å"dominate† attendances in a football game while neutral supporters tend to be the â€Å"minorities. † The price discrimination varies due to the popularity and the success of that particular club. Fans may simply not attend due to the poor performances in the league and other domestic tournaments (FA cup, carling cup, etc. ). One of the biggest reasons for price discrimination is the high wages paid to many English premier league players. Football is a spectator’s sport and therefore, the clubs main revenue comes from the supporters and the television rights. â€Å"Much of this price increase has, perhaps, been fuelled by the price media companies have been prepared to pay to secure television rights to ensure access to this highly popular entertainment vehicle. †(Clowes, J. And Clem, N. 2003). Price discrimination has been â€Å"manifested† from the grass roots of the organizational level in the English football industry. Various clubs are willing to pay millions of pounds to secure the playing talents from other clubs in the world. In addition, it is foreseeable that the wages of these players will have to increase in order to retain their services for a longer duration or to persuade them from changing clubs. English premier league clubs must find a solution to reduce price discrimination before the loyal supporters turn their back on their team. It is vital to split the season ticket holders and the supporters who pay at the gate. This suggests that the â€Å"casual† supporters have greater price elasticity than the season ticket holders. Clubs in the premier league have different price bands on the bases of the opposition’s ability to play attractive football and also the history of the club. â€Å"The optimal pricing strategy must then weigh up the likely prospects for success, or failure, including the probability of relegation. For some clubs there is evidence of price-elastic demand from adjusted attendances and hence real price increases would lower revenue, ceteris paribus. † (Simmons, R. 1996). Tactics used by the sports organizations in the United States could be implemented in the English premier league. â€Å"Differential pricing is the core of a marketing- oriented approach to pricing professional sports. †(Howard, D. And Crompton J. 2007). Differential pricing works affectively when a market is comprised of â€Å"segment that have different demand characteristics. † It operates by charging different prices for the same service where the price differences and the cost differences are disproportional. If the clubs in the premier league charge different prices for different opponents by evaluating the opposition’s quality of football, time and place, the English premier league tickets will reduce significantly and the loyal supporters would live happily ever after.