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How Much is That Ticket?

January 14, 2012

Today’s Note discusses a Forbes.com article titled “Dynamic Pricing: The Future of Ticket Pricing in Sports.” The author, Patrick Rishe, is an economist who seems to specialize in sports related aspects of economics. His Forbes biography is interesting, and points to several other interesting articles. Rishe can be followed on twitter at @PatrickRishePhD .

The article explores ticket pricing strategies by sports franchises. Fixed ticket prices challenge franchises to maximize revenue at less popular events, and cap revenue opportunities for sold-out events. The article synopsis is informative:

SYNOPSIS: Dynamic pricing will become much more prevalent in both professional and collegiate sports over the next few years.  This piece highlights some of the major players involved in the implementation and execution of such dynamic pricing strategies, as well as perspectives from sports industry executives that have embraced the dynamic ticket pricing model.

[above italics are preserved from the article. Later italics are added by me to emphasize quotes]

Rishe tells us that we should expect dynamic pricing of events to become the norm. His key paragraphs tell the story in a compelling fashion:

After all, in an industry where the demand across games tends to be dissimilar for a plethora of reasons – some predictable yet some spurious – it only makes sense that the pricing of sports tickets should allow teams the ability to price their inventory in the most efficient way possible.

During the holidays I had a chance to speak with several sources from the sports industry intimately involved with the dynamic pricing movement in sports.  My takeaways were as follows:

–        There is greater fan acceptance of real-time pricing in sports.

–        Ticket pricing technologies have advanced to the point where it has become logistically more efficient to implement dynamic pricing in sports.

–        Dynamic pricing boosts the revenue maximization goals of sports organizations.

–        Dynamic pricing incentivizes consumers to purchase season-tickets in order to secure a greater sense of price certainty in the face of real-time pricing.

–        Dynamic pricing allows consumers the flexibility to acquire significant savings on low demand games.

One major historical impediment to this kind of pricing has been concern that fans might become confused or disillusioned by the pricing policies. In fact, those concerns now appear to be largely unfounded. According to the article, franchises were  “initially concerned that fans might not understand the concept. They are familiar with this type of pricing in the airline and hotel industry, but this was a big leap for a sports team to implement the idea into the box office. As it turned out, our concerns were unfounded.  Sports ticketing has such a vibrant secondary market that I think fans had a better understanding of market value pricing then we realized.

Technical advances in ticketing systems were also major enablers of the movement toward dynamic pricing. The ability to rapidly reprice tickets was a key component of the capability. Too, an ability to analyze optimal pricing on an event-by-event basis was needed. With those abilities in hand, sports franchises can be prepared to explore their options. The results have been worth the effort for many organizations.

For example, one baseball franchise reports 7% ticket revenue increases for two consecutive years. That is impressive when you consider that it came without a product change.

Rishe sums up this way:

In short, the feedback from sports industry executives is that dynamic pricing allows them to more accurately price both high-demand and low-demand games, generating more revenue for the organization while creating savings opportunities for season-ticket holders and added purchasing flexibility for all consumers.

Rishe’s article is quite well-written and packed with facts and data. He seems authoritative on his subject, and paints an interesting and compelling picture of his topic. If you are interested in economics or sports this article is likely to appeal to you. I highly recommend it.

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From → Baseball, Business, Sports

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