It has become a widely accepted tenet of modern economics that markets are flawed and need fixing by experts to engineer desired outcomes. At the Winter Games in Pyeongchang, which just concluded, the International Olympic Committee appeared to take this conviction to extremes, trying to fill stands through highly restricted, targeted and convoluted ticket sales. The process arguably produced more empty seats than the bitter cold, lack of interest or fear of North Korea did. Organizers of the 2020 Olympics in Tokyo should take heed.
Ticket markets are defined by the ability of buyers to purchase tickets from sellers at a mutually agreed-upon price. The internet has made this process of finding, purchasing, verifying and delivering tickets easier than ever. Even for concerts and sporting events that are in high demand, consumers have access to a wide range of resale-market tickets that they can download directly to their smartphones.
The Olympics are different. For well-intentioned reasons, as well as poor organization and pressure from sponsors, the IOC has effectively strangled the ticket market for the Games.
First, the IOC allocates a specific number of tickets to each nation, and citizens of those countries can purchase only from that allocation. So, for instance, a Norwegian hoping to cheer her nation’s dominant cross-country skiers couldn’t buy tickets from even an authorized U.S. reseller. In these Winter Olympics, nearly 80 percent of tickets were allocated to South Koreans, severely limiting the number of tickets available to fans from other countries.
Second, the IOC goes to great lengths to limit ticket resales. For an event with more than 1 million tickets, surprisingly few are available on widely used resale ticket websites such as StubHub. That is not an accident. Olympic tickets are tied to the identification of the original purchaser; any secondary buyer may be denied entry if he or she purchases a ticket from an unauthorized secondary market.
Though Pyeongchang had an official ticket resale site, only South Korean ticket buyers were allowed to resell their tickets there. International ticket holders who saw their events delayed due to weather but couldn’t attend the rescheduled event were out of luck. Their seats remained empty.
Third, the IOC has a global partnership with Visa that closes off a variety of payment channels that modern global citizens take for granted. Mastercard and UnionPay, among others, are strictly forbidden as payment providers for anything Olympic. (Cash machines near Olympic venues, as I discovered when attending the Pyeongchang Games, were very sparse and frequently drained of all cash due to demand.) Preventing consumers from spending money obviously reduces revenue and ticket sales.
Fourth, the IOC appears to have devoted precious little energy to thinking about the consumer experience and how to separate fans from their dollars, euro, yen, rubles and yuan. At what should have been one of the largest consumer events in the world, shops carrying Olympic souvenirs or tickets in Seoul, where many people stayed, were strangely hard to find. Even shops inside the Olympic parks were closed at key times. Events were marked online as sold out even when a large number of walk-up tickets remained available. National resellers couldn’t deliver tickets electronically, only by courier.
I’m guessing that the IOC doesn’t focus more on fans because we don’t drive revenue for the committee or for local organizers. While Olympic organizers in South Korea hoped for revenue to top $2 billion, NBC expected its revenue alone to come in around $1 billion. The IOC made nearly $3 billion from selling broadcast rights for the Summer Olympics in Rio in 2016; other revenue channels were almost insignificant by comparison.
If Olympic organizers want to create a great consumer experience, there are some simple steps they could take. First, they could make buying and selling tickets easier. Offering multiple payment options and, most important, increasing market liquidity by allowing buyers to purchase resale tickets from anywhere would quickly fill stands with cheering supporters.
Second, the IOC should focus more on the nuts and bolts of the customer experience — everything from merchandising to transportation. My family found some great sponsor booths at Pyeongchang offering virtual-reality ski jumping and bobsledding. But transportation to morning and evening events was limited, as were, strangely for such a global event, food options. As the Disney Institute warns, it’s dangerous for organizers to ignore such issues even when they seem minor: “Small details that are often ‘undermanaged’ or ignored ‘chip away’ at the customer experience.” Let’s hope Tokyo and the IOC are learning lessons for 2020.
Christopher Balding is an associate professor of business and economics at the HSBC Business School in Shenzhen and author of “Sovereign Wealth Funds: The New Intersection of Money and Power.”