No, tickets for the 2024 Olympics are not a privilege for the rich

Published on 21 February 2024
Jeux Olympiques
Millions of tickets priced at €24 and €50 have been or will be put on sale – something that would not have been possible if the best seats had not been overpriced. François Lévêque, Professor of Economics at Mines Paris PSL, analyses the situation.

The reactions to the first tickets for Paris 2024 going on sale could lead one to believe that the Olympic Games ticketing scheme is a gimmick, a machine for excluding the people. “They’re taking us for fools with their slogan of popular games, the seats are reserved for the rich”. To avoid making sweeping judgements, it might be useful to have a few facts and figures about the economics of ticketing. So let’s talk seat, cost and price. We will then see that those who pay a lot for their seats finance the small ticket amounts.

We must never forget that behind prices lie costs. The Organising Committee for the Olympic and Paralympic Games (Cojop) is spending around €4 billion. Infrastructure projects, large and small, entrusted to an ad hoc structure, Solideo, require slightly less. But for the sake of simplicity, let’s assume that it has a use outside the Olympics. So let’s forget about these expenses, which don’t need to be covered by ticket sales, sponsors and television rights, the three sources of revenue for Cojop to balance its expenditure.

Let’s also assume for the moment that each of these sources contributes to Cojop’s expenditure to the extent of their contribution to its total revenue, i.e. 31.8% or 1265 million euros for ticket sales alone. With this distribution key, and bearing in mind that 13.4 million tickets will go on sale, the average cost per seat for a sports event is therefore around 100 euros. By a sports event, we mean the one to which a ticket entitles the holder, i.e. to attend one or more simultaneous events, for a given date and time slot.

Reasoning by seat makes it possible to recall a particularity of shows in a hall or a stadium: the cost of a seat is more or less the same throughout the venue. The fact that they are wider or less wide and comfortable doesn’t make much difference. The same applies to the fact that they are further or further away from the stage and offer a more or less panoramic view.

Note that for the Olympics the cost is also more or less the same whatever the stage of the competition: it doesn’t really cost Cojop more to organise the 100 metres final than a qualifying event. As the athletes are not paid, the presence of international stars does not result in significant additional expenditure. The heterogeneity of the venues where the events take place is ultimately the main cause of variations in the cost per seat, as they have different capacities and give rise to different operating costs.

Different budgets and preferences

On the other hand, the value of a seat varies greatly depending on its location within the stadium and the attractiveness of the show. Hence the wide range of prices offered for seats. They range from €25 to €980, a difference of 1 to 40. This has nothing to do with cost differentials, even if they were 1 to 2 between good and bad seats, or 1 to 10 between different venues.

The comparison between the fares charged and an average cost per seat of €100 suggests that tickets can only be sold at low prices if buyers pay full price.

Put more precisely, a surcharge is levied on tickets costing more than €100 to offset the negative margins on the sale of tickets costing less than €100. In practical terms, so-and-so can get a seat for €25 because €75 is recouped by the Cojop ticket office from wealthier buyers.

Wealthier or simply more eager to attend the events. We too often forget that the amount a consumer is prepared to pay for a good, in this case a show, also depends on their preferences. A person with limited means may be prepared to break their piggy bank to attend an Olympic competition, while another with the means may not wish to spend a penny, or at least more than €25, on a ticket. The heterogeneity of consumers can be seen in their preferences as well as their budgets.

This virtue of a ticketing system that combines low prices with high prices is not generally perceived as such. Sitting in the top rows at the ends of the stadium, it’s hard not to envy the privileged people in the front rows in the middle of the stadium. However, it is not certain that uniform, strictly egalitarian pricing would remedy the problem.

Imagine if all the seats were put on sale at a single price of 100 euros after a draw among all the fans of the Olympic spectacle. The less well placed could only claim bad luck, but they might still look at the seats of the lucky ones. In any case, this pricing system would eliminate fans with small pockets, those who would have been prepared to buy a ticket for €24 or even €99. It also entails the risk of rows of empty seats for the least popular events, and could therefore result in insufficient revenue for Cojop to cover its costs.

We could also imagine a lower uniform price, or even none at all, but then we would have to call on the public purse to balance the books. This amounts to making taxpayers (or future generations through debt) pay for part of the organisation of the Games. Yet it has been said time and time again – and finally seems to be widely accepted – that the Paris 2024 Games must not be subsidised by public money.

Two out of three spectators subsidised

The precise figures for the fare structure, in particular the number of seats offered in each price category, are not known. However, some figures have been made public: 10% of tickets at €24 and 50% of tickets at under €50; 70% of tickets at under €100; 10% of tickets at over €200; and 0.5% of tickets at over €950.

It is not always clear whether these percentages are based on the same total, in particular whether or not they include tickets for Paralympic events, or which inequalities are broad (i.e. smaller or equal) or strict. We can nevertheless try to draw some observations.

Let’s look at the middle first: the median (half the tickets below and half above) is much lower than the average, at 50 euros and 100 euros respectively. Put another way, at least half of all spectators pay less than the average cost of a seat and therefore benefit from the fact that others pay more. If the 70% mentioned above corresponds to strict inequality and to the total number of seats for Olympic events, around two spectators out of three benefit from such a transfer, or implicit subsidy.

Let’s look at the extremes next. Fifty thousand spectators (on the assumption that the total corresponding to the 0.5% relates only to the Olympic events) contribute 4% of total expenditure, while 10% (the million spectators who pay €25 for their seats) contribute 2%.

A few empty seats are better than a few empty cases

Yes, but couldn’t we reverse the direction of the transfer by saying that purchasers of low-price tickets are implicitly subsidising purchasers who pay full price for their seats? Don’t the former contribute, albeit modestly, to covering Cojop’s expenses? Do those who have the means need buyers who don’t have much? No, because it’s very likely that with a ticket office offering only seats ranging from €100 to €950, the risk of unsold tickets due to a possible lack of buyers for certain competitions would be more than offset by the extra revenue. Empty chairs, perhaps, but fuller coffers.

A criticism sometimes made of the inequality of ticketing is that wealthy fans can squeeze out less wealthy fans from the low-price seats. It is true that there is no rule preventing a high-income earner from buying a ticket for €24, for example. However, a lower budgetary constraint logically pushes people to buy seats that offer better visibility, and therefore command a higher price. What’s more, the initial wave of ticket sales was so enthusiastic that the €24 and €50 tickets were quickly sold out, snapped up by those who had been called first in the draw. Most of those who would have been prepared to buy tickets for more than 100 euros quickly had no other choice.

It should be noted, however, that the forced sale of 3 shows in this first wave may have led fans with high purchasing power to switch to the cheapest tickets for a second or third competition of no interest to them, perhaps even planning not to attend at all.

In addition, Cojop has set up a solidarity ticketing scheme through the local authorities associated with the Games. They will have priority access to cheap tickets. Half a million tickets at €24 are reserved for them (Les Echos, 1 March 2023), i.e. a third of the total amount for this price category. Local authorities are expected to redistribute these tickets to local residents, “particularly children and young people, local sports clubs and priority groups”.

Many local authorities have started to get organised. In Lyon, for example, a call for expressions of interest from the town hall has been circulated to social and educational centres. Their managers will be able to obtain and allocate places as part of their projects and activities. In this case, price discrimination is akin to positive discrimination.

The televisual pleasure of a full stadium

Finally, let’s talk about the expected 4 billion television viewers. Up to this point, we had assumed that there was no implicit transfer between spectators and viewers, since we had assumed that the ticket sales would cover Cojop’s expenses in proportion to its income. In other words, 1265 million euros; no more and no less.

You might be surprised that there could be a cross-subsidy since viewers pay nothing. Yes, but since we’re talking about implicit transfer and economic analysis – a discipline in which nothing is ever free – we can argue that viewers, through their pair of consumer eyes exposed to ads and brands, are ultimately paying the TV rights holders and sponsors. Dividing the number of viewers by the amount of Cojop revenue obtained from broadcasters and sponsors, this equates to an average of around €1 per viewer.

So could it be that viewers are contributing less to the total cost of Cojop than their share of the revenue? Or the reverse, i.e. that the cross-subsidy goes from spectators to viewers? Both are possible. It’s difficult for me to answer because I don’t know how Cojop decided on the amount of revenue to be sought from ticket sales, sponsors and television rights.

There is, however, one element that might suggest that spectators are favoured. It is generally accepted that the attractiveness of a sporting event to television viewers decreases when it is played in front of a sparse audience. This would appear to be what economists call an indirect network effect: viewer satisfaction depends on the number of spectators and increases as the number of spectators increases.

This seems to have been confirmed during the SARS-CoV-2 epidemic. Didn’t we see cardboard spectators appearing in stadiums, particularly football stadiums, shouting out recorded messages to make it look as if…? The fuller the stadium, the higher the willingness of broadcasters and sponsors to pay. This should logically lead to a reduction in the spectators’ contribution to the costs of organising the Games.

To sum up, organising the Olympic and Paralympic Games involves billions in expenditure, most of which is recovered from viewer-consumers who will be exposed to the broadcasters’ ads and the sponsors’ brands. The remainder is recovered from spectators via ticket sales, with prices ranging from €24 to €980, and with half of the tickets on sale priced at €50 or less.

If we estimate the average cost per seat for the organiser to recover through ticket sales at €100, it would appear that around two-thirds of spectators pay a price below this. They simply benefit from a transfer from the remaining third of spectators who pay above cost.

Put another way, a mark-up is applied to tickets priced at over €100 to offset the negative mark-up on tickets sold at less. It is thanks to this implicit subsidy that Cojop is able to offer millions of tickets at €24 and €50. Is it fair to say that Cojop’s desire to organise popular Games would be undermined by ticket sales reserved for the rich?

François Lévêque, Professor of Economics, Mines Paris

This article is republished from The Conversation under a Creative Commons licence. Read the original article.