So I got an email from Michigan Football

Submitted by BlueTuesday on May 10th, 2014 at 8:52 PM

It seems the wheels are coming off in Ann Arbor. For a limited time only(until May 16th) and because I'm a former football ticket pack purchaser I've been invited to "be (in) one of the most exclusive groups in all of sports". For $100 donation I could get season football tickets in the endzone AND they'll waive the PSD. 

Crappy schedule this year, I know. Nonetheless, I took the deal. I'm the very proud owner of 2 season tickets to Michigan football. I promise you, some of my greatest lifetime memories have come while I was inside Michigan Stadium. 

Sorry, I don't know how to copy and paste the email to the board. Shoot me.

Comments

MLaw06

May 10th, 2014 at 11:19 PM ^

Buy low; sell high.  It worked for me during the recession when the news kept on saying that everyone was cutting back on buying coffee and that everyone was going to make coffee at home to save money.  Well, I bought as much Starbucks stock that I could at $15 bucks a share.  Now, 5 years later, buying coffee hasn't gone away and everytime I walk past a Starbucks store, it just seems like it was such a sure bet in retrospect that I just wish I had more capital to invest in it at the time.

I'm not saying that the value of Michigan football tix will increase 6-fold in value like my Starbucks stock, but I guess I just can't imagine it going away and the stadiums sitting empty during the years when we're hosting OSU, MSU and other marquee games.

PurpleStuff

May 11th, 2014 at 12:15 AM ^

Your analogy would be appropriate if buying tickets now meant anything going forward.  It doesn't.  People "bought low" and attended Michigan basketball games for years.  When the team got better and demand increased, those people had to pay more, move to crappier seats, or give up their tickets. 

This athletic department has given every indication that they will extract as much money as they can for every ticket they have to sell.  Just because there isn't much value in those tickets now doesn't mean that you will get a better deal when there is.  If and when tickets increase in value, you will still have to pay for them.

MLaw06

May 11th, 2014 at 1:11 AM ^

By becoming a season ticket holder, you're buying the ROFO and the ROFO allows you to capture the upside.

If you're familiar with options trading or commercial contracts, you may recognize that the ROFO gives you the option to purchase (in this case, tickets to specific seats).  If you choose to exercise the ROFO, then you can capture the economic value.  In this case, the economic value lies in the spread of the "street value" minus the "face value".  Depending on the inputs, this spread may be negative, zero or positive.  The scenario that you are describing is one in which the "face value" increases, but you have not accounted for possible increases in the "street value".  The only number that really matters is the net number, i.e., the "spread", and so long as the "spread" is positive, then you will make money on this trade.

 

MLaw06

May 11th, 2014 at 1:28 AM ^

If my thesis is too abstract, perhaps another example would illustrate my point. 

I am a season ticket holder for the NY Jets (yes, my NY teams rhyme - Mets, Nets, Jets). 

My tickets are on the 7th row on the 25 yard line.  I have had them for close to a decade and I pay approximately $6,000 a year for them (about $1,500 a seat for 4 seats).  The way it used to work was that so long as I bought my season tickets each year, I had a ROFO to buy my same seats next year. 

A few years ago, this changed.  The Jets (and the Giants) instituted PSLs.  This meant that they were essentially going to charge me for the ROFO.  I had to purchase a PSL for the "right to purchase" my season tickets.  Therefore, I was forced to pay $60,000 ($15,000 for 4 seats) in order to purchase the PSLs, which are essentially just a "right to purchase" my season tickets (to be clear, I also have to pay a separate amount each year to purchase the actual season tickets)

Therefore, my point is that the "right to purchase" tickets does have economic value, and in fact, some organizations monetize them.  The Jets monetized this right by requiring a lump sum payment upfront in the form of a PSL.  Michigan indirectly monetizes this right by requiring a certain amount of donation (PSD) and continuous purchases of season tickets. 

In conclusion, if you are thinking about this economically, then the value of the season tickets equal the sum of (1) the value of the actual season tickets plus (2) the value of the ROFO to purchase current and future season tickets, which can provide you with an economic value equal to the net present value of the deltas between the street values and the face values that I noted in my prior post.

BobbyRizigliana

May 11th, 2014 at 8:11 AM ^

I don't thing you understand how the PSD works. It's not comparable to your jets example. What this offer from the AD is doing is removing the PSD for this year only. The OP will have to pay the PSD next year and all years moving forward. I'm not sure the amount of donation (right to purchase in your example) is normally needed but the AD is setting that at $100.

So in this situation the $100 is the only real number that matters. If michigan wins the NC and that donation to be able to get season tickets increases to $1000, the OP maybe made did ok by sneaking in this year for $100. But I guarantee the street value of his 2014 tix is still less that the $100 plus tickets costs. Further, this AD will never price season ticket costs below street value. That much is clear.

MLaw06

May 11th, 2014 at 11:00 AM ^

Yes, I think I know how the PSD works since I've been paying it since it was first instituted.  My point was merely that a PSL is a one-time lump sum in order to license the right to purchase, whereas a PSD is a continuous annual payment in order to obtain the right to purchase.  The PSD/PSL is still the payment necessary to obtain the "right to purchase."

The point that you are making is a limited one.  You are assuming that you can get season tickets any year.  For example, in future years, season tickets may no longer be available to be purchased.  Furthermore, a more relevant example is that the particular seats may not be available.  Therefore, if you were to gain the right to purchase tickets in Section 1, Row A this year, that would be your right ad infinitum until you discontinue being a season ticket holder or stop paying PSDs.  Therefore, this gives you a right to the economic value that I noted, which is essentially the net present value of current "and future" spreads between the street value and face value.

I think everyone knows that this year's schedule is sub-par, but the folks who are locking in prime seats or becoming season tickets this year are putting their faith in the fact that future teams and schedules will make it worth their while.   

bluebyyou

May 11th, 2014 at 2:58 PM ^

How does the 65 inch HDTV for 2-3K enter into the demand equation?  For the first time in like 13.8 billion years, barring some rare archaeological find, inexpensive TV's with great resolution have changed the viewing experience.  Even with the recovery from the recession, there is a common theme at a vast number of major programs where fans are forgetting to show up for games.

I believe some of what is happening at Michigan is W's and L's, but our lack of recent success doesn't tell the whole story..  In the past, when was student attendance so poor?  Why is NCAA football attendance dropping nationally?

BobbyRizigliana

May 11th, 2014 at 4:41 PM ^

I'm not sure who you are referring to "locking in prime seats". This post referenced the AD offer, which is for endzone seats. The OP is paying $100 plus $1000 ($1100 total) for endzone seats that he likely can stand outside the stadium and pay $300 for the season ($20 each game plus $180 for PSU). So right away the OP is $800 down. Assuming no cost of capital, the OP can skip this terrible season and have $799 next year which will likly cover any entry donation and pay a portion of the PSD and still be ahead.

This AD is very good at pricing down the demand curve and they have a specific strategy to align face value with street value. What they have actually found out is they can charge loyal customers more than street value - a great business to be in for sure. So maybe you are waiting for the day when season ticket holders are given money back from the AD, but I think you'll be waiting a while. Meanwhile the OP can invest that $800 today and be well prepared for when that day comes in 20 years or more.

ijohnb

May 10th, 2014 at 10:52 PM ^

simply is not true. This is not a program that has been legitimately competitive in the BCS era. It really defies belief that fan interest has maintained to even the extent that it has. And last year was UGLY. Hoke has this year, if the product does not meaningfully improve changes will be forthcoming. Last year Michigan went from a program fighting to stay relevant to a punchline. It is not a happy thought but it is reality.

MichiganTeacher

May 11th, 2014 at 10:35 AM ^

I agree with ijohnb. Although I wouldn't go so far as to say it defies belief that fan interest has maintained to the extent that it has. I can believe a lot, as Han Solo said, and this is a very, very popular tradition and brand we're talking about. And it was less than a decade ago that we were in the national title hunt until the last game of the year, so I guess I disagree with the idea that we haven't been legitimately competitive in the BCS era.

But none of that is the point. The point is that last year was UGLY, M football appears to be in bad shape - or horrible shape compared to 1969 - 2006, and that Hoke has at best a 50/50 shot to return if this year is as bad as last.

evenyoubrutus

May 11th, 2014 at 1:04 PM ^

Settle down.  The reason I even asked the question in the first place is this: if we go 8-4 this year, Hoke should be fired- I believe that completely.  But I don't think Brandon will actually fire him unleses there is an outright revolt by the fanbase (which would include many empty seats).  Obviously if I had it my way, the team will go 11-1 or 12-0 and Hoke goes on to a hall of fame career- another transition would suck ass and anyone who actually wishes the team would fail for that reason is a moron (or simply Phil in Scio Township).  So yes, if Michigan has a year that is a micro-improvement over last year but is still obviously not heading in the direction of "elite" (like 27 carries for 27 yards type games, for example) I would hope that fans would express their frustration in ways that will be heard by Brandon.  No I don't want this team to fail just to bring change for change's sake.

UMxWolverines

May 11th, 2014 at 12:59 AM ^

If I hear this one more time I'm going to shit. I'll give you this. We SHOULD put ALL of our faith in Hoke this year. Because if he doesn't deliver, it's over. And it's not because he didn't get support. 

There is literally zero chace Hoke will be back next year if we have a season like last year. Lack of renewals will be even higher than they are now. 

And this is not just because of a crappy product. It certainly helped, but if tickets were still $50 per game I guarantee less people would be getting rid of them. Brandon has pissed so many people off that shit is finally starting to hit the fan. Brandon didn't listen. You can bet your ass he's listening now. 

ThadMattasagoblin

May 11th, 2014 at 1:25 AM ^

You would be surprised at the amount of people who want us to fail this year. What Brandon has done was done at tons of other schools MSU bball, PSU, Ohio. We also have a massive south campus athletic upgrade coming, and Yost, and Crisler got renovated. We're # 2 in athletic departent revenue in the nation. I absolutely loathe uniformz and other stuff and I don't love him but he's not the antichrist to where I won't go to the games because of him.

UMxWolverines

May 11th, 2014 at 2:16 AM ^

We also don't win jack shit in football which OSU and MSU have done recently. It really is apples and oranges. 

Also Penn State has rows and rows of empty seats lately because of exactly the same things happening here. You cannot charge people out the ass for a shitty product WHILE treating loyal fans like shit and expect it to work because you have some dream of a campus wide renovation. 

You keep getting irritated when people say they're not renewing, but do you have any experience with owning season tickets or know someone with season tickets? Or have any idea how the victors club works? Or any inside knowledge of what goes on in the athletic department? 

ThadMattasagoblin

May 11th, 2014 at 2:28 AM ^

Yes I have two tickets. They're basically the same cost as last year. I'm pissed at the people not renewing because product shouldn't apply to Michigan. I was hoping we were one of the few sacred fanbases loyal as hell but we're just another Miami Hurricane or USC Trojan fanbase who scatters when the team is playing bad. Yes I want to win bad and renovating the campus is absolutely vital. We have some of the worst facilities in the league. You won't go to Michigan games because of David Brandon? Really? I would probably still go to Michigan games if Bin Laden was our AD. I love Michigan more then I'll ever hate one guy.

UMxWolverines

May 11th, 2014 at 2:33 AM ^

That might be true, but having the best volleyball arena or wrestling arena should be put on the back burner if the main cash cow isn't producing. 

I want all Michigan teams to win, but the reality is most people really don't give a crap besides the football, basketball, and hockey teams. 

And you can't compare us to Miami or USC when their fans don't get charged nearly the amount Michigan does. The argument doesn't work. Stop doing it. You realize we have some of the most expensive ticket prices in the country right? Only problem? We're the only team that is crappy that charges those kind of prices. 

I present to you, a blast from the past. When this stuff was only in the beginning stages:

http://mgoblog.com/mgoboard/2010-11-victors-club-football-parking-areas

karpodiem

May 11th, 2014 at 7:25 AM ^

this times one million. I know we pat ourselves on the back for underwriting all these non-revenue sports, but keep in mind that is underwritten by football's success, which in turn is underwritten by the school. If football falls off the tracks for an extended period of time, the school will need to step in.

Yes, while the AD manages its own budget, the school has acted as a backstop on numerous occassions. I believe the operating debt of the AD (short term financing for construction projects) has the school written in as a co-signer to lower interest rates, and I know during the 2010 season, many of the suites were 'occupied' by University organs.

like Brian said, DB is just a bro writing a check, nothing more. I will tip my cap to his fundraising ability, getting Stephen Ross to write a $100 million dollar check was impressive though.

ZB75

May 11th, 2014 at 8:44 AM ^

I agree, but I am one of the many that did not renew my tickets this year.  It was strictly a finacial decision, and has nothing to do with the team.  As much as I want Michigan to win, whether I go to games or not has nothing to do with on field performance.  I will go to support my team no matter what, and enjoy the experience of a Saturday in Ann Arbor. 

Doc Brown

May 11th, 2014 at 11:26 AM ^

I love Michigan more than Dave Brandon. However, I refuse to renew my season tickets with that douchnoggle in charge of our athletic program. Instead I am redirecting my donation to the school of education, where I feel my donation will be better used and not to glad hand Brandon's corporate  buddies. So yeah, I am taking a stand. I will still go to games, but I am purchasing through stub hub and my friends. 

Secondly, you will not convince me it is a better financial decision to obtain tickets through the AD and not the secondary market. Every study has shown a full season when combined with PSL's is a poor investment when compared to the secondary market. 

PM

May 11th, 2014 at 3:59 PM ^

offer that you can't get on the secondary market is an opportunity to get to know surrounding ticket holders, sit in the same spot and develop some comradery. Unfortunately, with the volume cranked up during any downtime it is becoming increasingly difficult to talk at games. This in turn makes it challenging to develop the comradery comparable to years past. Here's hoping they eventually develop some balance between piped in music, ads and just letting things be.

Doc Brown

May 11th, 2014 at 5:27 PM ^

Agree. There were some great people in the bottom 1/4 of sec 41. I will miss them. However, my checkbook won over this time. When it comes to saving up for a mortgage down payment and luxuries like michigan football, a house will always win. 

UMxWolverines

May 11th, 2014 at 5:06 PM ^

I also don't pay for my ticket directly. My uncle gives me one for helping him with stuff thoughout the year. But to see the way Brandon treats people that have been season ticket holders since the early 70s I wouldn't bother to buy them after this year either if we suck. I'd do what he said he might do and cancel them and just buy them for certain games on stubhub. 

It's really starting to feel not worth it anymore to go to games the way Brandon has changed the parking and everything else and made everything about money. Charging people out the ass is not worth all the upgrades he's promising. You can say people might be living in the past, but if you completely brush off the past you end up with what we have. I also find it funny that he likes to modernize everything we do EXCEPT the coaching staff. 

bighouse22

May 11th, 2014 at 10:29 AM ^

On field product will fix a lot of ills.  I am on Hoke's side, but it is not uncommon for there to be a transitional coach when a program is coming back up.  We saw it with the Pistons before Chuck Daly, and with MBB with Tommy Amaker before Belein.  This is the year to see whether there is enough progress to warrant sticking this out with Hoke or we need to transition to a Championship caliber coach.

It remains to be seen if Hoke is that guy or not, but the results on the field should make it clear one way or another.  

I would also argue that expecting the University of Michigan to identify Championship caliber coaches and put them in place IS supporting the team.  Anything less is a disservice to Michigan Football and the student athletes that are on the field each Saturday.  

 

TheNema

May 11th, 2014 at 12:23 PM ^

We don't know he was offered. He probably was, but it's certainly POSSIBLE that the political crap behind the scenes was so great that Carr and maybe even Coleman wielded enough influence to prevent it. If we didn't offer Jim Harbaugh, we are in serious trouble so obviously I hope that he did get that call.

TheNema

May 11th, 2014 at 12:21 PM ^

Very much so. Michigan very well may fudge the numbers and not report it, though. The Pistons did this for almost a year to protect the publicity they got for their sellout streak, claiming them long after crowds were clearly nowhere close to capacity.

bighouse22

May 11th, 2014 at 10:19 AM ^

I have heard that both student ticket sales and season ticket renewals are down somewhere around 8%.  I can't confirm the accuracy of that number, but I would be interested to hear from someone with more information on the topic.  This seems consistent with the effort to move season ticket packages.

 

pearlw

May 10th, 2014 at 9:08 PM ^

Wheels are coming off?? I cant see how you could make a conclusion like that from the email. The schedule isnt very good and results on the field havent been great so they have to get a bit more creative and go further down the list this year...for all we know, the AD probably expected a lower renewal rate and so had plans in place to make it up for this year as you are seeing.

And if i read the above correct, the deal worked just as intended for the first two posters on this thread so it looks successful to me. Not sure how wheels are coming off applies to this.