Group 3 - The London 2012 Olympic Games

Q1. If Williamson could choose between 2 outcomes: exceeding his ticket revenue targets
by $50 million with 70% attendance or coming up short by $50 million with 90% attendance,
which should he take?
First, we using the predicted ticket available for sale for London 2012 by the case around
7.9 million tickets and predict the ticket sold by 70% attendance and 90% attendance.

Second, we calculate the ticket pricing for London 2012 using Sydney 2000 Olympic
Games ticket price as the inspiration and the price range for ticket to various sporting events in UK
and EU. We using Big Four Sport as the initial calculation because the data only provided the
complete price for them and using the case desired ticket revenue proportion. Big Four are the
sports where the tickets demand far exceed supply and the tickets itself likely will be sold out at
any price. Local appeal, medals won sports, and sports with existing venue are the sports where
the Londoners and UK/EU residents mostly enthusiasm toward. And being favored to watch.
Others (27 sports remaining of 37 sports in London 2012 Olympic Games) are the sports where
the tickets supply exceed demand and need a really hard work to maximize the sales.

Group 3 - The London 2012 Olympic Games

Third, we use the weighted attendance in each tier of each sport. If there are 4 tiers, tier 1
will have 10% of attendance, tier 2 will have 20% of attendance, tier 3 will have 30% of attendance,
and tier 1 will have 10% of attendance. If there are 3 tiers, tier 1 will have 20% of attendance, tier 2
will have 30% of attendance, and tier 3 will have 50% of attendance. If there are 2 tiers, tier 1 will
have 30% of attendance and tier 2 will have 70% of attendance. We also use the weighted stages
in each sport of Big Four. If there are 2 stages, the Preliminaries stage will have 40% important
value for attendance and the Prelim/Finals stage will have 60% important value for attendance. If
there are 3 stages, the Preliminaries stage will have 20% important value for attendance, the
Prelim/Finals stage will have 30% important value for attendance, and the Finals stage will have
50% important value for attendance.

(Ticket Available and Expected Attendance are stated in millions units.)

Group 3 - The London 2012 Olympic Games

Fourth, we calculate the ticket revenue ($) using ticket price ($) times the expected
attendance of 70% and 90% for each sport in Big Four (after being weighted). However, the ticket
price ($) of Sydney 2000 Olympic Games is being inflated for London 2012 Olympic Games using
inflation rate 2000-2012 around 32.5% (Statista, 2016). Then, the inflated ticket price ($) is being
increased 10% to maximize revenue purpose with 70% attendance (higher price, more revenue,
less attendance) and being decreased 10% to maximize attendance purpose with 90% attendance
(lower price, less revenue, more attendance).

Group 3 - The London 2012 Olympic Games

Fifth, we using the previous second step to calculate the ticket revenue for the whole
sports of London 2012 Olympic Games using the previous fourth step as initial calculation. Then,
we get the Total Revenue estimation for London 2012 Olympic Games using strategy of 70% and
90% attendance.

The 90% attendance still provided higher revenue than 70% attendance although the price
of 90% attendance is being decreased by 10% and the price of 70% attendance is being increased
by 10%. This explains that 10% increasing and decreasing price is not sensitive toward the case of
Ticket Pricing and Ticket Revenue for London 2012 Olympic Games. Maximizing revenue using
increased price strategy with less attendance is considered not a good strategy since the total
revenue still below the strategy of maximize attendance using decreased price. Therefore,
Williamson as Head of Ticketing would be pleasured using 90% attendance strategy since it
provided higher total revenue for ticket sales and would be a pleasure report for the investors who
give sponsorship for London 2012 Olympic Games to have more attendance who watch the games
on the spot directly rather than watching them on TV.
Moreover, in order to cover the budget about $3 billion, ticket sales contribute to cover
around 20% of the cost. There are many other attributes that will cover the cost such as
boradcasting rights, international sponsorship, domestic sponsorship, licensing rights and etc.
When London has been chosen to become the host of Olympic Games, automatically the host will
spend a lot of money to invest such as by building an Olympic Park in East London and Olympic
village, improving the infrastructure for the transportation, etc. However, the country will get long
term positive effect of that such as stimulating the economic and social regeneration, recover the
land of East London with green environment. After the euphoria, they also can make new residents
from the games. By investing a lot of things to the Games, the revenue of selling ticket and other

Group 3 - The London 2012 Olympic Games

attributes of the Olympic Games will not able to cover the entire investment. There must be some
cost that will not be restored.

Hence, the decision to maximize the revenue will not give an effective result (P1 & Q1).
Meanwhile, the most important part is making the London olympics becoming lively, where not only
the audiences but also everyone in the world can feel the euphoria of the olympic. The committees
also has a goal to make this olympic games becoming Everybodys Games which mean majority
of the ticket prices is affordable. Filling seats with the right people also very important for the
games, by increasing the price to maximize the revenue, it will decrease the level of the
attendance, which will decrease the percentage of the right people to fill the seats.
Maximizing the attendance will be a better choice for the olympics, because they can light
up the ambiance of the Olympic and fill the right people as the audiences. However, there must be
a trade off for pursuing maximum attendance because in order to maximize the attendance, the
committees should decrease the price into certain amount (P2 & Q2).
Q2. Would it make any difference if he were wearing an IOC hat as opposed to an LOCOG
hat? Would it make any difference if he were the head of LOCOG as opposed to its Head of
Ticketing?
Regarding London Olympic Games pricing strategy formulation, wearing the hat of IOC and
LOCOG would surely bring some differences on the choices and trade-offs that one should make
in order to reach their goal / objective. It is definitely true that both IOC and LOCOG wish that
London Olympic games would be as successful as possible. However, the definition of successful
may vary between the two organizations due to the trade-offs that they need to take, their
differences in responsibility, and their focus on the goals / objectives. In order to analyze the
differences, it would be necessary to analyze those three aspects that make LOCOG and IOC
have different point of view.
1) Trade-offs in setting the London Olympic Game price
2) Responsibility differences
3) Focus on goals

Group 3 - The London 2012 Olympic Games

1. Trade-offs in setting the London Olympic Game price
The trade-offs are summarized in the below table :
No

Dilemma 1

VS

Dilemma 2

Maximizing revenue

vs

Maximizing attendance

Higher ticket price for BIG FOUR

vs

Risk to disrespect other sports

Allocating 25% for IOC guests

vs

Risk of IOC guests do not show up

Lower price for local citizens

vs

Obligation to apply same rule for EU

1.1 Maximizing revenue vs Maximizing attendance

The number of revenue and attendance would be highly influenced by how the
committee set up the prices for the game. Since London Olympic Games is a unique
event that will not be happening again in the future, many people would be enthusiastic
to come, see, and experience the London Olympic Games once in their lifetime. It is
true that another Olympic Games will be held once every 4 years. However, the
athletes who are going to compete might not be the same, the venue will not be the
same, and obviously the experience will not be the same. Therefore, we would assume
that the market demand will be somehow a little bit inelastic to the price change. There
will always be someone who are able to pay higher ticket price to experience the
London Olympic Games. Therefore, the rise in ticket price will maximize their revenue.
However, the committee has been devoted to create an Olympic game for Everyone.
However, they are also concerned if the venue is not fully occupied by people watching.
Since the venue will be broadcasted to all people in the world through TV and internet,
the committee wants to have full-occupied stadia so that the LOG will have good
reputation seen by people around the world as an Olympic Games for Everyone.
Therefore, the decision to choose whether they want to maximize revenue or
attendance is highly debatable.
1.2 Higher ticket price for BIG FOUR vs Risk to disrespect other sports
It is true that there are some differences between some worldwide favourite sports, like
swimming and athletics, to some less famous sports, like handball. Therefore, those
famous sports deserve to be priced higher than the lesser known one since more
people will be willing to pay in higher price to watch it. The committee can also gain
more revenue and the stadia for those famous sports will still be full with spectators
when they increase the price very highly. However, it will impact to the psychological
disrespect to other sports. It seems that despite of difference effort spent by the
athletes to train and compete in the game, they are priced lowly compare to the
well-known sports. There should be a certain degree in which committee can maximize
revenue while not disrespecting other sports. But, it will be a very blurry and subjective
degree.
1.3 Allocating 25% for IOC guests vs risk of IOC guests do not show up
IOC guests are often to be important persons like sponsors, politician, and other
well-known international people. They might need to be respected as VVIP to attend
the game. However, some of them might not be in the OG because they love to see the
sport, but they might come just because of their obligation or they want to create image.

Group 3 - The London 2012 Olympic Games

Therefore, they might not be familiar with the sports at all and not interested as well.
With 25% of the stadia filled with people unfamiliar with the sports, it will affect the
atmosphere in the stadia. The dilemma is should they allocate more tickets for the
die-hard fans of the sports who can engage the positive atmosphere in the game or
some VVIP people who have rights to be invited to the game but not really interested.
1.4 Lower price for local citizen vs obligation to apply the same rule for EU citizen
The committee would like to set the game to be affordable for majority of their local
citizen. Therefore, they would like to give special price for the local citizen to encourage
them to take part and be active in the LOG. However, if they do such action, they are
obligated to do the same for all EU citizen since UK is part of EU. Thus, it might hurt
their expected revenue since all UK and EU citizen would be estimated 55% of the total
spectators.
2. Differences in responsibility
Role

Responsibility

LOCOG

Prepare the city to be ready for the venue, manage the game to the local
people culture and best interest, generated revenue to cover the costs of
preparing the venue

IOC

Responsible to manage the image of OG in overall, manage the best

interest of international sponsors and accommodate the competitiveness
and growth of international athletes fairly, accommodate international
spectators fairly.

Ticketing

Highly focus on setting the price of every game and ensuring to manage
the dilemmas of meeting expected revenue and expected attendance

Through the differences in responsibility, thus, each role will have differences in setting the
focus on their goals. We agree that all roles will be happy to have maximum revenue and
maximum attendance at the same time. However, some may focus on different goal and trade-off
with other objectives.
3. Differences in focus of goals
Role

Focus of goal

LOCOG

Maximize revenue to cover the cost of preparation, high availability for local
people.

IOC

High availability for VVIP guests, fair chance for all international spectators,
high convenience for all athletes, full stadia to generate positive image of
OG.

Ticketing

Meeting the demand of LOCOG and IOC all together.

LOCOG vs IOC
Wearing the hat of LOCOG will be very much different than wearing the hat of IOC.
LOCOG is very much focused on the current OG and thus will have a shorter goal for the venue.
They need to prepare the venue, invest in infrastructure and satisfy the interest of their local
people. Thus, their goal will be to get the best revenue as possible to cover the cost of their

Group 3 - The London 2012 Olympic Games

investment and provide affordable ticket for their local people. However, IOC focus more on the
long term goals as they highly care about the image of OG in general, not only the specific London
Olympic Games. They are also dealing with international stakeholders and need to ensure that
they are treated equally convenient with the host. Therefore, they will focus on high attendance on
each venue and available tickets for their VVIP guests. They will probably sacrifice a few revenue
in order to attract more international spectators to come and enjoy the game.
Head of LOCOG vs Head of Ticketing
Being the head of LOCOG meaning that he will be responsible to every decision starting
from how much to invest to prepare the venue until how much can you generate money to cover
the costs. Therefore, it has a broader point of view and much more decision to make on every
department. For example, he can decrease the cost of building infrastructure to minimize the cost,
or he can push the sponsorship department to decrease the pressure of ticketing division to gather
revenue. However, being the head of ticketing is much more pressured by the given condition
other people made for you. Head of Ticketing need to satisfy the need of LOCOG as well as the
need of IOC. He needs to gather as much revenue as possible while also attracting as much
attendance as possible. He will be expected some amount of revenue to be generated from ticket
sales. He will also be expected to attract a certain percentage of attendance to be filled in every
game. Therefore, being the Head of LOCOG will have more responsibility but has many decision to
be played about while being the Head of Ticketing will have much less responsibility but also being
sandwiched by other people with different interests.
Will Williamson feel different during or after the Games than he would 18 months
before the Games?
Regardless of his role, Williamson should not think too much about the role he is into. The
pressure will increase more when the game is approaching. However, after the game, he will be
proud and feel honoured to be able to contribute in such big event. He might have some regrets
after the game, but he should look at the great decision he made to satisfy all dilemmas. One thing
that he should remember is that he will never be able to satisfy everyone equally. When the LOG is
finished, he should be able to look forward with satisfaction and be ready for the next big thing in
his life.
Group 3:
RA6057133 - Arieviana Ayu Laksmi
RA6057573 - Susan Chrestella Bahari
RA6057581 - Harman Warsono

(Question 1)
(Question 1)
(Question 2)