In 1841 the Scottish journalist Charles Mackay published his most famous work – an essay that today is the piece of work that every football club should religiously read each summer when talk around the boardroom table turns to ticket pricing. His paper, ‘The Extraordinary Popular Delusions and the Madness of Crowds’ not only focuses on price maximisation but also the effect of herd-mentality on the propensity to pay ever increasing prices for goods and services.
Mackay’s hypothesis was that crowds acting in a collective frenzy of speculation can cause the prices of commodities to rise far beyond any intrinsic value they should have. He looked at the example of the South Sea Bubble of 1720 as a classic example of how this theory worked, where a company was set up and stock was “sold” to politicians at the then current market price; however, rather than paying for the shares, these recipients simply held on to what shares they had been offered, with the option of selling them back to the company when and as they chose, receiving as “profit” the increase in market price. This method, while winning over the heads of government also had the advantage of binding their interests to the interests of the Company: in order to secure their own profits, they had to help drive up the stock. Meanwhile, by publicising the names of their elite stockholders, the Company managed to clothe itself in an aura of legitimacy, which attracted and kept other buyers motivated and they bought stock on the belief that it was good enough for the elite, then it was good enough for them. It was all a sham and when the profits were taken out by the politicians, the share price fell off a cliff as the company had no trading revenues or profit. The 2000’s Internet bubble had a similar impact.
But how does this relate to football? To see his theory in evidence we need to look at the eight step model he defined to demonstrate the impact of collective insanity and herd mentality:
- Extraordinary events occur in the footballing world more regularly than we realise such as a team getting promoted to the Premier League for the first team, a rank outsider winning the league (Leicester City), or qualify against the odds for European competitions.
- Success means ticket prices rise in tactical ways – match day walk up tickets for instance, whilst the loyal fans who invest in season tickets only see a modest rise.
- News of price rises is published to great dismay among supporters who take to social media or even worse, if a club has one, Fan TV, to say how unfair it is and the club are taking the piss.
- Mass discussion on forums/social media normally leads to comments like “well you don’t have to go”.
- Other clubs notice. They put their prices up too, thinking that despite not having any success, that it’s the trend in football, blaming agents fees or lack of TV money.
- Crowds breed collective insanity – the tipping point is reached.
- Football eats itself, the club gets knocked out of Europe in 1st round because the manager fields a weakened team to concentrate on the Premier League. Results are poor, manager is sacked and club goes into free-fall.
- Attendances fall, club realises they need to drop ticket prices but only does so for the games no one wants to see.
Most season (2020/21 COVID interrupted excepted), the BBC published its study of the cost of watching football in this country. Essentially, the research in the past has been a pile of rubbish. Instead of going to do the research themselves (type in club website into browser, find page that says “tickets”, note down prices) they sent a survey to each club. So when West Ham responded and said their cheapest ticket for a Premier League game was £20, people thought “wow, that’s good value”. However, that priced ticket was only available for 1 game this season, normally a pre-Christmas midweek match . It wasn’t the averaged priced one, which is over DOUBLE that. Ticket prices continue to outstrip inflation simply because of the theory above – at most Premier League clubs, where demand far outstrips supply (and were there are thousands on waiting lists for season tickets) there will be a pricing strategy which will see a steady above inflation price rise.
So there you go – the Theory of collective insanity in a nutshell. Next time your club puts its prices up blaming players wages you’ll know it’s really Charles Mackay to blame.