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Box-Office Smash

How Dynamic Ticket Pricing Will Change the Game

Sports teams and concert promoters believe that airline-style dynamic pricing will allow them to increase their revenues. But it might be tricky to make this approach to setting prices for tickets stick without alienating consumers and destroying the perceived value of a seat.

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Keith Reicher

Picture this scenario: It’s near the end of the baseball season and the San Francisco Giants are home at AT&T Park against the Arizona Diamondbacks. Both teams are out of the playoff race. There won’t be any Cy Young candidates throwing 95-mph fastballs. Both managers plan to play some youngsters to see whether they can make it in the big leagues. And the weather forecast calls for chilly temperatures.

Ordinarily, the Giants might be looking at patches of empty seats all over the ballpark, but that might change this year. The team is the first Major League Baseball franchise to experiment with dynamic pricing—charging more or less for a ticket depending on the desirability of the event itself. A few other industries—most notably airlines—embrace dynamic pricing as a way to maximize their revenues, but the concept is new to entertainment options, such as sporting events, where a last-second impulse “buy” is typical. Imagine heading out to the park and thinking that a seat will cost you, say, $15, only to get there and find that it’s $30, or $10. That could be what you find at sporting events someday. Many teams are tuning in to see the results—and we’re not talking about those that take place on the field.
 
GIANT GAMBLE? At Giants games this year, the walk-up price for 2,000 seats in the upper deck and outfield bleachers is set on the morning of the game. The team considers the weather, the pitching matchup, the opponent and any other variable that could affect demand before it sets the price. On opening day, seats went for as much as $40, but on other days they sold for as little as $7. Normally, the bleacher seats sell for $17 and the upper deck spots go for $10. There is no ceiling, which means that the price could soar well over $40.

“We are seeing more prices at the lower end than the upper end,” says Russ Stanley, who is the Giants’ managing vice president of ticket services.

Of course, he said that in April as the Giants slogged through a typically inclement Bay Area spring with a 10-10 record against the weak National League West, which includes the rival Los Angeles Dodgers. But suppose that the Giants were in first place or that it were 75 degrees or that the New York Yankees were in town. It stands to reason that tickets would be priced closer to $40 or more.

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“Think if (the Giants) had done this two years ago when Barry Bonds was chasing the all-time home run record,” says Vince Gennaro, who is a sports economist and a consultant to several MLB teams. At that time, even the bargain seats at AT&T Park sold for well over $100 in the secondary market.

Gennaro estimates that each team in MLB can increase ticket revenues by $10 million to $50 million annually if it adopts dynamic ticket pricing and takes back some of the price margin that the secondary market is grabbing. Plus, selling a ticket for a lower price is better than not selling the ticket at all. Getting more people in the park means that a team can sell more concessions, catering, memorabilia and parking, says sports economist Andrew Zimbalist. Gennaro says “all of MLB” is watching the Giants’ experiment.

FINDING THE SWEET SPOT. Airlines long have embraced dynamic pricing. Every departure and every seat is priced differently. Hotels change their price-per-room depending on the time of the year and the number of travelers in town. And any retailer will change the price of its goods from day to day depending on expected demand.

Matt Marolda of StratBridge, which is a software company that works with sports teams, says any business that has expiring inventory—for example, tickets that are good for only a particular game—should embrace a dynamic pricing model.

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