Revenue from major intercollegiate sports is an important source of funds for many colleges. Most of the costs of putting on a football or basketball game may be fixed and may increase very little as the size of the crowd increases. Thus, the revenue from every extra ticket sold may be almost pure profit.
Choose a sport played at your college or university, such as football or basketball, that generates significant revenue. Talk with the business manager of your college's sports programs before answering the following questions:
Required:
1. What is the maximum seating capacity of the stadium or arena in which the sport is played? During the past year, what was the average attendance at the games? On average, what percentage of the stadium or arena capacity was filled?
2. The number of seats sold often depends on the opponent. The attendance for a game with a traditional rival (e.g., Nebraska vs. Colorado, University of Washington vs. Washington State, or Texas vs. Texas A&M) is usually substantially above the average. Also, games against conference foes may draw larger crowds than other games. As a consequence, the number of tickets sold for a game is somewhat predictable. What implications does this have for the nature of the costs of putting on a game? Are most of the costs really fixed with respect to the number of tickets sold?
3. Estimate the variable cost per ticket sold.
4. Estimate the total additional revenue that would be generated in an average game if all of the tickets were sold at their normal prices. Estimate how much profit is lost because these tickets are not sold.
5. Estimate the ancillary revenue (parking and concessions) per ticket sold. Estimate how much profit is lost in an average game from these sources of revenue as a consequence of not having a sold-out game.
6. Estimate how much additional profit would be generated for your college if every game were sold out for the entire season.