Dynamic Ticket Pricing: Coming Soon to a Stadium Near You

Authority Tickets: Secondary Ticket News
Kelly

San Francisco is always a little bit ahead of the curve, in everything from haute cuisine to public policy. Now, according to Tickets.com, the hometown Giants are setting a trend when it comes to ticket pricing by employing a dynamic system that moves up and down depending on a variety of criteria such as dates, times, and opponents.

It’s a practice commonly found in the secondary ticket market that is making headway in the primary arena thanks to the Giants and other early adopters. And it’s only going to gain more traction in the coming years as consumers get more accustomed to a model that is also standard fare for hotels and airlines.

As Russ Stanley, managing vice president of ticketing sales and services for the Giants, sees it, “This is coming on very, very quickly. Within five years, I think everybody’s going to be doing this. Everybody in the industry is looking at it closely and evaluating it. I’m getting at least a call a week about this [from other teams], probably two.”

The Giants teamed up with Texas-based startup Qcue Inc. to begin testing the dynamic model last season and chalked up an additional $500,000 in revenues earned on a limited number of games. This season, they are looking to bring in seven figures worth as they expand the program to every game at AT&T Park.

The Houston Astros, Dallas Stars, Florida Panthers, and Cleveland Cavaliers are all testing the waters for themselves either this year or next.

What remains to be seen is how fans will react. For many, their hometown teams are their lifeblood and have been for generations. Getting a calendar and buying tickets ahead of time is part of the annual ritual. If prices can’t be determined in advance or fluctuate too much, some fans may push back against their favorite franchises.

The highest risk demographic is that of season ticket holders. If a dynamic system drives the face value of tickets to a price point below what they paid, then the incentive for buying a package up front is eliminated. So far, that problem has been avoided by keep a watchful eye not to let prices drift that low and by offering additional value to the packages such as access to the team.

“I simply wouldn’t be doing this if it meant putting our season-ticket holders at risk,” Stanley said. “At least half of what we’ll sell all year will be through season tickets, so we absolutely have to protect that.”

Chris Hutson, co-chief executive for Turnstyles Ticketing, has his doubts: “I don’t begrudge anybody trying this, but not at the expense of traditional, blood-and-guts ticket selling. I’ve seen every gimmick in this business and we, as an industry, tend to rely on things like this too much instead of good old-fashioned elbow grease. There are so many variables in [dynamic pricing], and I’m not sure we’ve thought through them all. What happens, for example, if [Tim] Lincecum doesn’t pitch in a particular game after somebody’s paid an accelerated price to see that game?”

Filling the stadium and filling the coffers are two goals that can sometimes be at odds. Teams are now looking to dynamic pricing as an answer to both.

As technology – particularly computer modeling – has advanced over the years, some teams have used it to determine audience analysis by inputting factors like when the game will be played, who will be playing, and what the weather will likely be. A true dynamic system takes that another step further by implementing the system season-wide, year-on-year.

The Qcue algorithm uses similar criteria, while also taking the secondary ticket market’s prices into account, to recommend price shifts. The client team can go with that recommendation or consider other factors and set their own price. The Qcue system feeds into the team’s existing ticketing system, as it does for the Stars and Giants through Tickets.com.

Qcue’s chief executive Barry Kahn boasts,“What we’ve done is create a software platform that performs very high-end demand and sales forecasting. Obviously, we’re huge believers in dynamic pricing, but with or without that, that information is still very valuable. That’s the foundation, and from there, we’re proving value and revenue upside.”

Their main rival, Digonex Technologies Inc., is working with the Cavaliers and will soon announce another NBA partnership. The company sees a bright future for the dynamic model.

“Consumer acceptance of dynamic pricing has definitely changed,” said Rex Fisher, Digonex vice president of business development. “We all have greater access to information, and we’ve simply been conditioned that many products are priced subject to change.”

The Cavaliers added six figures to their revenue line last season, too.

Mike Tomon, the Cavs’ vice president of sales, believes that there’s more to it than just money: “Even more than the additional revenue, dynamic pricing has helped us engage the fan and be relevant by offering them the right product at the right price at the right time. That helps with building fan engagement and loyalty.”

Consumer education is one part of the two-pronged approach to respectability for the new model. Surveys and explanations are being offered, along with the tried-and-true ideal of locking in your price now so you save money.

As more fans latch on to the idea, so will more teams. Tomon continued, “It simply makes all the sense in the world to have a true value-based offering that’s derived from fan behavior. This is coming to a head in sports, and with good reason.”