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Guest Commentary: Understanding the nuances of NBA variable pricing

By Chad Burgess

Dynamic and variable ticket price structures are becoming very popular in the NBA, and while many teams are experimenting in this practice, an industry standard has yet to emerge. Teams are taking very different approaches and analyzing these varying strategies reveals some interesting opportunities for brokers. As the Marketing Manager for SeatGeek, I am always trying to analyze new ticket market data in hopes of identifying industry trends. Below, I analyze how the Heat, Lakers, Hornets, Timberwolves and Warriors have tiered prices for their 2010 single-game tickets.

Differences in Pricing Models

Fans and teams realize that the demand against an opponent like the Lakers and Heat will differ from when the Nets or Kings come to town. To maximize revenues, several NBA teams have developed "pricing tiers," allowing them to fluctuate single-game ticket pricing based on the matchup.

There are some interesting insights to be gleaned by examining the number of price tiers, the number of teams in the higher price tiers and the percent price increases between tiers. For example, the Heat have five tiers, the Hornets, Timberwolves and Lakers have four tiers, the Warriors have two tiers, and a growing number of teams are testing dynamic ticket pricing. Teams with dynamic pricing could have a multitude of tiers by matching demand for every particular game and section.

Importantly, full-on dynamic pricing and pre-set pricing tiers are not mutually exclusive concepts. For example, the Miami Heat have pricing tiers set at the beginning of the season for each matchup but allow themselves the right to price dynamically closer to the event. As their website states, "Ticket prices are subject to change. Fluctuations in ticket prices are based on market conditions..." The fine print here is of extreme importance to brokers. The Heat's ticketing office realizes the abundance of demand on the secondary ticket market and may cut into brokers' profits midway through the season by jacking up their ticket price. Brokers must spend much more time focused on obtaining the most up-to-date pricing data to optimize their own pricing strategies.

Not only do teams have varying numbers of tiers, but some are also more aggressive than others in which matchups they include in their top tiers. The Timberwolves and Hornets each have three teams in their highest tier while the Warriors, Bulls, Heat and Lakers each have two teams in their highest tier. Moving down the tiers these differences become more drastic, for example, the Hornets have five teams in their second highest tier while the Timberwolves have sixteen.

Lastly, the prices themselves vary greatly among the different teams' variable schemes. 100 level Lakers seats have an almost 300 percent markup from their lowest 'Value' tier to their highest 'Marquee' tier, while comparable 100 level seats for the Bulls increase only around 20 percent from their lowest to highest tier.

Opportunities for Brokers

There are some clever ways that brokers can use variable pricing data to their advantage. Looking at a team's variable pricing scheme is like getting an insider's look at which opponents have historically been the biggest drivers of tickets sales for a given team, and/or are projected to make the most money from ticket sales in the future. At the highest tiers, the results are fairly intuitive as the tier is usually made up of the Heat and the Lakers, with the Celtics occasionally entering the mix. As you move down the tiers, though, looking at where opponents are classified becomes much more informative and can be a great sanity check on one's own projections of demand by team and opponent.

Lastly, analysis of variable pricing schemes can be used by brokers to identify potential inefficiencies in teams' pricing strategies. For example, if you look at the Bulls center court 100 level seats, they increase just over 20 percent from their lowest to highest tier, while 300 level sections increase between roughly 30 percent – 200 percent. Are the 100 level sections underpriced in the higher tiers? Are the 300 level tickets overpriced for premium games? By attempting to answer these questions with their data and experience, brokers will in turn be creating their own pricing hypotheses and strategies for how to move their tickets in these sections.

Interested in the Data? Let Us Know.

I tried to keep the numbers to a minimum, but at SeatGeek we collectively have a lot of data and analyses surrounding not just NBA variable pricing, but ticket pricing for all major sports. Feel free to reach out to me with specific requests at chad@seatgeek.com or find me on Twitter (@chadburgess / @SeatGeek).

Chad Burgess is the Marketing Manager of SeatGeek, a ticket search engine founded in September 2009. Chad leads SeatGeek's online marketing and marketing analytics efforts.

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