Dynamic Pricing: The PEDs of Ticket Selling
I’ve been told by several sports executives off-hand that dynamic ticket pricing elevates what each ticket is charged for on the primary market can be over 89 percent of the time.
Don’t kid yourself if you believe otherwise, the variable ticket game is not about getting the right price. It’s about inflating the price to get as much money as possible from the consumer.
That’s fine, typically games were cheaper than they should have been in most cases.
Consumer demand on the marketplace equals the price asked for on the primary market by the business.
Except when that threshold is reached, the market becomes elastic and snaps, and people stop paying for a Saturday game match-up of the Giants and Dodgers.
There’s already been a pricing backlash, yet no one seems to remember the 2008 Yankees Stadium Opening, where a large portion of premium seats weren’t filled because every ticket was priced at four times its old Yankee Stadium value.
These pricing affects are a tidal wave of future results too. Especially when younger fans are shut out from attending games.
Sports teams are built on the affiliation of youth being indoctrinated from birth to follow their team, then raised up attending games, until they have families of their own to bring to the game. Thus the cycle begins again.
But that scenario gets changed with dynamic pricing once the cost is too high.
Dad may end up still going, but he’s taking a business client or best friend, both of whom can afford the price of the ticket. That means the next generation gets ignored and may choose not to follow the games entirely as a result.
If this scenario sounds a little heavy-handed, there is another industry which can serve as an example: Terrestrial radio.
During the 1990s, terrestrial radio made a decision to focus on the immediately higher profits rather than the greater long-term result. Radio retained its focus on the Baby Boomer set that had grown up with FM during the 1960s-80s, pushing a classic rock format on most FM stations because the advertising revenue was higher. Baby Boomers were spending more than Generation X, which was still growing up.
Here’s the issue with that methodology: The Baby Boomers spent more in the 1990s, but by the early 2000s, were spending less due to economy and future retirement.
Generation X, which was not served by terrestrial radio during their youth, did not convert over to new listenership, which is why ratings have fallen across the board. Generation X found themselves ignored by terrestrial radio as children, so they became the Napster & IPod Generation. All of their music selections were ripped, recorded onto CDs and IPods.
Ask someone under 30 if they listen to terrestrial radio for the music. Doubtful.
This may all seem like hyperbole, but it is a scenario that dynamic pricing may help cause for live entertainment, especially sports. While owners are reaping immediate benefits at charging double the price for what they would normally receive for a ticket, they aren’t concerning themselves with the long-term ramifications.
Today’s children may end up watching all of their team’s games on their IPad or not at all. Thus breaking the cyclical chain of children growing up to bring their families to the ballpark, thus creating more fans.
It may also have the affect not only one the pocketbook of the consumer, but exactly which consumers are coming to the ballpark. Could dynamic pricing simply allow those affluent to attend, sit on their hands, and reduce the long-term relationship between fan and team?
Much like PEDs, none of the owners see an issue right now with dynamic pricing. They see the inflated profit margins.
Then, one day, everyone looks at Barry Bonds’ larger head and knows immediately that what’s been going on is completely wrong.
I’m not against dynamic pricing myself. But there is a cost to all of this.
Much like PEDs, there may be a backlash against those who go absurd with their dynamic pricing structures: Concessions, merchandise and parking are supposedly the next down the line to be pulled into the dynamic pricing sphere.
In that, what are those shut out supposed to do? Watch the games at home?
If so, that reduces the in-game experience and the need to attend even further.
And teams may face a time when the costs of dynamic pricing may out-weight any benefit.