KJ Gould's recent post:
... and it's ensuing comments inspired me to do some rough analysis on the impact of PPV price on sales volume.
I have done this in a very rough form because there really isn't much data to work with.
1) (Price = Free) UFC on FOX 2: 4.7m viewers:
2) Estimate of sales volume at normal PPV prices (est. average of $47.50 assuming 75% SD and 25% HD) for this card which was:
I estimated about 300,000. It doesn't matter too much what you estimate. I guess most people will estimate between 250,000 and 400,000 for this line-up.
A straight line of best fit between these two points probably doesn't make sense.
y = Volume, x = Price
Equation: y = 4.7mil - 92,631x
Volume drops to zero at a price of $51. I think we can all agree that the UFC would certainly sell more than zero, at a price of $51.
I tried an exponential line of best fit:
y = 4.7mil * e^(-0.06x)
This looks more reasonable to me. But it probably isn't perfect. For example, under this scenario sales never will drop to zero regardless of how high the price is.
If you are willing to accept this line, then if Price (x) is reduced by 10%, i.e. x = 47.5 * 0.9 = 42.75,
then Sales Volume y = 361,520. That's about 20% increase in volume.
If this line is correct, then the UFC should reduce its price significantly, because up to a certain point, the increase in sales volume exceeds the decrease in price. What that means is that revenue will increase as price decreases (up to a point).
In reality, there is a conceptual barrier between paying for something (i.e. going to the effort to buy) and getting it on network TV for free. A lot depends on what the viewership numbers would be if the price was $1. How many people would, essentially for free, book the PPV at a price of $1?
I leave that question for the reader - and if we get some consensus on what that number is, I'll run the model again and see what that implies about estimated PPV buys when prices are reduced (and I'll post the results in the comments).
Notes: I thought about doing it for FX and Fuel but not everyone has access so it's that comparable to FOX. Correct me if I'm wrong - is FX in less homes than FOX? And - can everyone access PPV if they have Cable? Is the accessibility of FOX and PPV equal?