January 14, 2015

Skewed Left

Just Once Before I Die...

by Zachary Levine

The Milwaukee Brewers are asking you to guess when you’re going to die.

Not so explicitly, and this isn’t one of those carnival games where if you get it right within a year you walk away with the stuffed Scooter Gennett. But that’s the grim math behind what was a really fun promotion that was publicized yesterday after a relatively quiet October announcement.

The Brewers are offering, for the (perhaps) low, low price of $1,000, a Timeless Ticket, redeemable for any Brewers regular season or postseason game in 2015 or any year beyond. This was the original deal, which has since been sweetened, but more on that and a sweeter sweetener in a minute.

If this were the deal and the whole deal, is it worth it? One thousand dollars, paid at t=0 (right now) for the right to purchase something that might not be worth anything close to $1,000 in your lifetime or mine. It depends on so many things, mostly when the Brewers ever make the World Series, something they did for the first time in 1982 and have not repeated. But there’s also the question of inflation, both in the U.S. Dollar sense (easy-ish) and in the baseball ticket sense (extremely difficult).

So it requires a few assumptions right off the top:

Availability: This is a slight concern. The Brewers say the following about the availability of tickets in their FAQ page: Your Timeless Ticket may be redeemed for any single future Brewers home game, including Opening Day, Postseason and World Series. Ticket redemption is subject to availability at time of redemption. Early redemption is strongly recommended. We’ll assume that this means that you have a reasonable place in line and that even if it’s between season ticket holders and single-game sales, there are few enough ticket packages that qualify ahead of the Timeless Ticket that this isn’t a total scam that shuts you out of premium games.

And since you aren’t going to be first in line, let’s assume you’ll get a seat that would go for the average price on the secondary market, which is how you’d otherwise have to buy the ticket (or equivalently, how much you could sell it for).

Viability: Assumed that Major League Baseball under its current structure exists in perpetuity and that the Brewers do not go bankrupt. Those conditions are strictly positive assumptions for value; gift card holders are generally extremely low in the credit hierarchy.

Transfer: Photo ID is required, presumably to dissuade theft and perhaps present resale, but with the Brewers on a streak of more than half the adult portion of the average American lifespan without a World Series appearance, the ability to pass the ticket on to heirs is a reasonable question. Someone who appears to be a Brewers rep answered in the affirmative in the comments section.

Let’s assume though, no matter the rules, that the ticket is for you. I’m not buying my unborn children any $1,000 baseball tickets. I probably won’t even like them a bleacher-seat-against-the-Marlins’ worth.

World Series only: This is the toughest assumption to make. That nobody’s one away from breaking 56 or 762 (admit it; you didn’t know that second number) and you want a ticket for that game. And that you’re not going to cash in early because you just want to use it. There’s an argument to make that if the Brewers are hosting Games Three, Four, and Five in the World Series and have an NLCS Game Seven at home that the trigger finger would get awfully itchy. But let’s say you’re willing to wait—after all, NLCS tickets are much cheaper anyway. This is the biggest oversimplification: if you don’t get a World Series, you’ll just keep waiting and the value expires when you do, but let’s roll with it for now.

So then the questions become, when will the Brewers be in the World Series, and how much would it cost you to get the tickets then?

Just the ticket

The Brewers probably aren’t 1-in-15 to make every World Series from here out. For one thing, their chances this year, according to wagering odds when adjusted for house edge is 1-in-32. But the bigger long-term issue is structural. They exist in the smallest market in baseball, and while they draw exceptionally well for their city, they’ve rarely been spenders. So if rich teams ever figure out what to buy and we do get back onto a cycle where money correlates more strongly with wins, 1-in-15 might be overly optimistic.

Assuming each season is independent of the other, which is a simplification that slightly overestimates the chances of making a World Series, here are the chances of making the World Series and getting to use your voucher at least once in the next X years at various probabilities for individual years.

Years	1-in-15	1-in-20	1-in-25
5	29.2%	22.6%	18.5%
10	49.8%	40.1%	33.5%
15	64.5%	53.7%	45.8%
20	74.8%	64.2%	55.8%
25	82.2%	72.3%	64.0%
30	87.4%	78.5%	70.6%
40	93.7%	87.1%	80.5%
50	96.8%	92.3%	87.0%
75	99.4%	97.9%	95.3%
100	99.9%	99.4%	98.3%

So let’s say I’m looking at the middle column and giving myself 30 more years to enjoy this ticket-not that I’m going to die, just that I’ll probably lose it. I might only have a 72.3 (or so) percent chance of even seeing a World Series in Milwaukee, so assuming I don’t just settle for something less, that ticket better be worth $1,000/0.723 = $1,383 to me if they do make it just to equal $1,000 in expected value.

And that’s $1,383 in current dollars because we haven’t even gotten into the fact that you’re giving them the money now and getting something later. As money is inflating, ticket prices are inflating, and the difference between these two rates determines just how much (if at all) it hurts you that you have to wait.

Ticket price inflation is almost impossible to figure out because secondary market data isn’t all that available for all that long, and in a short sample, it’s hard to remove the obvious effect of which teams are playing. So we’ll devote less time to it than we should. A FiveThirtyEight article written in the middle of last year’s World Series put the figure at $930 apiece, which was subject to later fluctuation, but that’s up from $766, $634, $618 and $797 in previous years. Who knows what to do with that data? It’s more like 20 percent if taken year-over-year from the previous year and more like five percent if taken as an average over the period. As a general rule, nothing can grow at a rate that so far outpaces inflation for a sustained period of time, so it’s better to be conservative on a growth rate, but the starting point should be pretty high. Brewers demand is likely to be closely related to Royals demand, given the small markets with long waits since their last World Series, and Royals prices were sky-high.

If we start the average ticket at $1,000 and grow it at five percent, tickets would be over that break-even point in seven years, but we still haven’t adjusted for inflation. If we adjust for inflation of say three percent, for the first 18 years, we would have a loser on our hands, but after that, with ticket increases assumed to be still outpacing inflation, we’d get the benefits of buying early.

Or most simply, if tickets reach a point where they move just in line with inflation (or more accurately, the discount rate associated with the risk tolerance you’re willing to put up with), the current value of your ticket alone will be $1,000 if used, and in expectation, $1,000 times the probability that it gets used. We’ll use this assumption for simplicity going forward.

So the ticket that you bought for $1,000 is worth $723 if you have 30 years to use it. It’s worth $923 if you have 50 years. Or maybe it’s $537 if you have 15 years.

Might be time to substitute steamed vegetables for the fries.

The first sweetener: The extra tickets

The ticket isn’t really where the value lies, which is good, because it’s really hard to work the simplifications of the math to a point where the ticket would be worth the $1,000. What’s in the fine print appears to be where the money really is.

In addition, Timeless Ticket holders may purchase up to three additional companion tickets for the redeemed game at the single game box office price.

Since we’re talking World Series tickets here, you naturally buy them. And since you hate your kids—let’s try to keep the story consistent here—you bring only one other person and sell the other two for again, $1,000 plus inflation. But since you’re only buying these at face value, let’s say you’re paying only $300 plus inflation for them. (A decent Red Sox ticket in 2013 had a $250 face value, so we might be a little off, but this isn’t the first time and we’re in the ballpark.)

So now, what’s your value?

Present cost: $1,000

Future cost: 3 x $300 + inflation, or a present value of $900

Future revenue: 2 x $1,000 + inflation, or a present value of $2,000

Total: $1,000 paid now, $1,100 net present value of later transactions.

You and your partner have now gone to the game for free—actually better than free—if the game happens. And not only that, it changes the macabre math a lot.

If this were purely a business transaction, you’ll go to the game, but you could take the tickets or leave them, you’d need a 10/11 chance of the game happening, or in that middle column above, you’d need to still be here for about 45 more years.

But you’ll get some value out of those tickets. Like if you and your partner value them at face value each, $300 present dollars, you’d only need a 10/17 chance of the World Series coming to Milwaukee—18 Brewers seasons. If you get the $1,000 secondary market price worth of value from being at Miller Park for that game, you’d only need a 10/31 chance, which the Brewers theoretically have in the next eight years.

This all of a sudden seems like a much better deal.

The second sweetener: The regular season games

That was all before Tuesday’s additional promotion, which says you can get a ticket to any nine regular season games of your choosing, opening day excluded. This is cool. It’s something that wouldn’t help you much if you were just investing, but it pretty significantly improves this package if you’re just a regular fan.

The average Brewers ticket costs almost exactly $25 according to the 2014 Team Marketing Report (.pdf link) so these 9 tickets, assuming they’re used now or that ticket prices rise in line with present value discounts, are worth $225. So it’s almost as if you’re paying $775 for the same package as long as you were going to go to nine games anyway.

Thus instead of needing a 10/11, 10/17 and 10/31 chance of seeing the Brewers advance in your lifetime, it would only be 7.75/11, 7.75/17 and 7.75/31, as seen in this table below.

Value to you of seeing the game	Required % chance of Brewers making WS in your lifetime... Before regular season addition	Required % chance of Brewers making WS in your lifetime… With regular season addition
Nothing	90.1% (~chance in next 45 years)	70.5% (~chance in next 24 years)
Face value	58.8% (~chance in next 18 years)	45.6% (~chance in next 12 years)
Secondary market value	32.2% (~chance in next 8 years)	25.0% (~chance in next 6 years)

And this, especially if you add in any small consolation value of actually liking your heirs, is looking like a much better deal. It still relies on their making the World Series, but if they do, you should be able to get excellent resale value just from the chance to buy at face and sell on the secondary market.

Yes there were a lot of assumptions here, and even more of it comes down to the murky definition they’re using of availability. It’s vital to any positive value of doing this deal that you’ll be able to buy all three face value seats with it.

So I wouldn’t be too quick to dismiss the value of these, but if I were buying, I’d probably make calls to ask a lot more questions, both at the box office and the doctor’s office.

Zachary Levine is an author of Baseball Prospectus. Follow @zacharylevine
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