Analysis of pricing methods.

Analysis for tournament pricing structure
There are three main structures to paying for tournaments. They are, individual fees, percentage, and guaranteed.

Individual Fees: This is probably the most used from local to larger tournaments. Basically what happens is there a fee for venue and a fee for tournament entry. It is used because it is an easy, fair, and profitable system.

Pros:

1. Good Flexibility
2. Low risk
3. Allows you to manage risk
4. Player approval
5. Simple

The system allows you to change price easily if you come to find that breaking even or your profit goals aren’t being met or if the players wish to make more at the event. The risk is low because you have a set goal and know how many people at what price you need to reach this goal. Players are very accepting of this method. For obvious reasons it is simple.

Cons:

1. Low to medium profitability
2. Incentives lower profitability
3. Players can get away without paying
4. New players can be overwhelmed by “hidden cost”
5. Venue fee gets “shortened” the more events you have.

Unless you are having trouble paying for the venue, the first two aren’t much of an issue. However the third is pretty rough. Most players are honest but there are some that aren’t or they just don’t know how a tournament works. The best way to handle this would be to stop players at the door and not let them in without paying, but I have found even then players have been able to sneak their way in without paying. Also newer players may contest you on this because it seems like a lot to pay a ton of separate fees. Then there is the last issue if you have tons of games there and are doing the event for an extended period of time the venue fee that you got per player seems to mean less and less two you. No matter how many events you have the venue doesn’t get anymore.

Venue cost tends to go from 0-10. 10 is usually reserved for better venues and larger events. 5 seems to slowly becoming the standard.
If venue is 100 dollars to rent then it only takes 20 people to break even with five dollar entry.

Percentage is the next form, basically the system works by one fee per game with the venue getting a percentage also know as house cut. It used by some gamestore, LAN center venues. In my personal opinion this isn’t one of the better systems to use. However it does have its good points.

Pros:

1. Players can’t get in without giving there due to the venue
2. New players to the scene don’t care where the money goes so they won’t fight you on it
3. Once again there is low risk
4. More control over profitability
5. More events more money

If you are regularly finding that players are cheating the venue fee then you might just want to try this method. If you are running 5 events a day then you might want to try this method. The majority of players will never see their entry fee again so that might allow you to justify this. This method really works best when you run a lot of different events.

Cons:

1. Per person profitability is low
2. Regular players don’t like this method because you are “******” the pot.
3. Complex because you are dealing with percents (not that complex but still harder than a simple whole number)

Its efficiency and reliability may be nice but its cons are certainly major ones. The more you try to increase profitability the more players accuse you of ****** the pot. If players don’t like the structure enough to not come, then that can really hurt profits. Optimally you will want to take 10-20 percent out per event. At a regular ten dollar entry you are making 1 dollar or slightly more per person per event. That doesn’t seem that great. So what do you do? Increase entry since you are not charging entry. Your profitability only slightly increases but players’ view of the event decreases quite a bit.

You charge 20 dollars an event and take 10% for the “House.” With three events you would be making 6 dollars a person if everyone plays each game. The cost to the winners is much greater. If you get 20 people you end up taking 40 dollars away from the prize pot. So although you are only taking 2 from each individual player you are taking 40 from the winner.

Finally we come to the last main structure that is guaranteed. Guaranteed is pretty straight forward. At announcement of the event or finalization of the event, the host announce that there is X number of dollars in the prize pot. What this means is that the host can make flat rates. This structure is generally used for large tournaments generally ones that are sponsored.

Pros:

1. Prize not determined by entrants
2. Profitably can be huge.
3. It draws people in.

Not too many pros but as you can see they are quite big pros. A guaranteed prize is really good for players. This means that the less people that show the better for them because the prize is the same but the competition is not. Even if the event gets huge something about a guaranteed pot just drives people in especially if it is large enough. The next pro is that profitability can be huge. The main issue with the others is that profitability is low and any attempt to increase profitability will be met with resistance. However with guaranteed pot you can increase profitability without the resistance. It also brings people in top players love the idea of a couple thousand dollars on the line.

Cons

1. Huge risk
2. A lot of pressure

The financial risk is great if you are doing a guaranteed pot out of your own pocket. This can be alleviated by having sponsors, just make sure you deliver on any promises. Also there is a lot of pressure for the host. If the event isn’t run well then things could end up disastrous.
Venue cost for such events will be larger than usual events. Let’s say 300 dollars for venue and you are offering 1000 in prizes. That is 1300. You charge 30 dollars per person that means you need 44 people to show up to break even and that is just out of your pocket. If you had sponsors provide the chances of profit are much higher.

The goal of this topic is to give information to the TOs so that they can make improved decisions on how to price events and what structure to use.

Yeah exactly what AZ said, "guaranteed" is a big word, and nowadays in the smash community many don't even take it seriously it seems. But this is really a cool concept, great for regionals but too much of a headache for nationals.

Going over the numbers it seems that the best method would be a mix of guarantee and individual. You guarantee a certain amount that you can afford out of pocket or by sponsors then add to the pot size for each person that comes. That way you have the hype and a true guarantee but room for more.

Individually though guarantee has the potential to make the most money for a company or organization. If you run a profitable tournament company then that is what I would suggest. It is a shame "guaranteed" is getting a bad name due to false advertisement and promises.

If you are individual or group then I would suggest the individual fee. Since you aren't interested in money individual fee allows you to simply break even most often and allows room for incentives.

If you are holding your event in a public place in which you cannot control entrants then I would suggest using the percentage method but try to keep the "house cut" reasonable.

I think transparency is the key when dealing with a community's money. Tell people what you need the money for, how much it cost, and how much you are making from their contributions. If its too much and people get upset, then they probably have a right to. TO's should not be trying to maximize profit rather they should be looking for a humble fee for their services.