Pricing Popular Races

Yesterday I was looking up a few races I thought I could maybe fit into my calendar this year and was looking at the New York City Marathon, which is a great excuse to go back to NYC and re-run that event. I checked on their website to see if entries were still available and was gobsmacked to see the entry price (entries are still available, btw). A non-refundable $11 to enter the lottery (all other race lotteries I'm aware of are free if you lose out) plus the entry cost of $216 (NYRR members), $255 (other US residents) and a whopping $347 for non-residents. That means entry for a 26.2 mile race for someone outside the country is $358!

In comparison, the London Marathon, which is the nearest comparator in terms of size and scale, costs just a fraction (the last time I entered in 2009, I think I paid the equivalent of under $50 as a resident and I understand this hasn't changed significantly). Admittedly, the London marathon charges more for foreigners with the ballot for them costing the equivalent of about $158, but that's still a big difference of $200 with NYC.

In single-stage ultras (multi-days are a different breed with accommodation and other costs coming into the entry fee) there's less discrepancy between race costs bewteen the US and Europe, but the most popular still cost a lot in the US, with Western States 100 costing $370. UTMB is biggest 100-miler in Europe and costs the equivalent of about $203. Both have lotteries that cost you nothing if you lose out.

Every race has specific costs, but I'm an economist and I wondered how much of the price differences were based on cost differences and how much was supply and demand. All of these races mentioned above are hugely oversubscribed and could charge a lot more and still fill their entry spots due to high demand, so I'd argue that the price must come down to costs and potentially milking people for a profit.

Yet the organizers of NYC (NYRR) are a charity, London's profits all go to charity, WS does the same (including towards trail work and maintenance) and I can't find information on whether UTMB is run for private profit or not (anybody know?).

So does this mean that the only difference is costs if they aren't making money for shareholders? Well, even within the scope of a charity, the costs can be subjective (such as wages for the staff) and the profit that goes to charity can still be maximized (especially if the charity is the race itself). For the ultras, most people who know about WS are aware that a significant portion of the costs is for the belt buckles, especially the silver ones. The organizers of virtually every ultra I know aren't grabbing every penny they can and do it largely for the love of the sport, wanting to cover their costs and make a living providing a great product to people.

But marathons are certainly much more corporate, even if they're a charity. Competitor Group organizes the Rock 'n' Roll series of marathons for profit and charges fees that seem excessive to many I've spoken to (including myself) but if you enter for really early bird discounts they are often not much more than $100 - well shy of the NYC costs. The major city marathons have huge prize purses and much of the entry fee goes on that, but sponsors also contribute heavily and TV coverage provides more revenue.

So it comes down to one question that's still not answered for me. Why does NYC cost so much more than London? They both offer a lot of prize money and try to attract the best marathon field in the world, which London arguably manages to do better, possibly due to the course being faster. NYC also had an increase in policing costs for 2012 which resulted in them charging $60 more than the previous year for an entry. But London and NYC should surely be at least a similar price unless there's some bad management of the budgets or a lot more money going to the NYRR charity. Does anyone know if this is their cash cow that then subsidizes their other races and events? I'm not suggesting there's anything sinister, just that there's a significant price differential between US and European marathons which is highlighted most between London and NYC.

I'd appreciate any more information that people can provide as this has caught my interest. Are insurance costs for races a lot higher in the US? Is there something significant I missed? I'm not a race director but I am a certified accountant as well as an economist so I'd like to find out more about the numbers. I couldn't find any financials for any of these races online - let me know if you have any links. [update - here are some numbers on the NYRR. In 2010 they made $8.5m in profit (tax exempt); revenues and costs aren't all split out for just the marathon but it looks like most of the revenue of $50.1m was NYC marathon related but only $22.2m was for marathon costs].

Also, for clarification, I don't mean to imply that organizing races for profit is wrong in any way - people deserve to get a return for creating something others want. It's just the discrepancy in pricing that I'm wondering about. If people want to pay huge entry fees then they can and there are races at all ends of the pricing spectrum. Also, the entry fee is often only a small part of the cost of doing a race, especially if it's far from home.