Last Update:
07/03/2009 - 4:29pm EST
Qcue
September 29th, 2008
I just came across a company called Qcue (www.qcue.net) that is developing software with the intent to cut out the secondary ticket market by combining primary and secondary markets to price tickets in real-time based on demand. They are basically trying to replicate the airline ticket model where seat prices constantly fluctuate based on demand.
Although they are a start-up that's just getting off the ground, the theory behind their system creates some concern for me. Does anyone feel that this application and/or this airline type pricing model will work? If so, how do you see it affecting the brokers living in the secondary market?
Thanks,
Concerned Broker
I too recently stumbled upon the QCue company website. The product they offer is quite interesting and certainly the future of ticketing. That being said, I do not see how QCue itself will become a viable company and obtain the necessary scale to become a successful business.
Companies like Ticketmaster and Live Nation are already working on creating dynamic pricing. Some things that puzzle me about QCue are as follows: (1) where do they get the historical pricing data? (2) management's understanding of the ticket market.
First, I am puzzled as to where QCue will get historical pricing data to drive its pricing algorithms. One would assume that Ticketmaster would be reluctant to share its historical pricing data with QCue. Such data seems to be proprietary and releasing it could be detrimental to their business.
Lets say that the ticketing companies and clients work with QCue. QCue would have a large enough database to drive a statistically accurate and relevant pricing tool. The problem lies in the actual algorithm, and management's understanding of the ticketing industry.
QCue identifies numerous variables that are key to pricing a ticket. For most teams pricing is based on economy of the region, previous year's success, and yearly payroll. This begs the question does their algorithm use the correct variables.
My biggest problem is management's lack of understanding of the ticket industry. They argue that scalpers / brokers unfairly take profits from promoters and teams who take on the financial risk. The last time I checked reality, whenever a broker / scalper / fan purchases a ticket to an event, the financial risk is transferred to the purchaser. Teams spend 50% of their marketing dollars to sell season tickets before the season starts. Teams and promoters operate on a shortened cash conversion cycle because they do not want to bear the loss of unsold tickets. The earlier tickets sell the better.
Using dynamic pricing could backfire on professional sports franchises. Most leagues are heavily reliant on season ticket packages for revenue. Teams spend a majority of marketing dollars to sell season ticket packages. Using dynamic pricing could dilute the value of a season ticket holder's package. Teams would not be able to justify charging $5 for a ticket on the game day if a season ticket holder paid $15 for it as part of a package.
I think that airline pricing could actually increase the financial risk of unsold tickets for teams and promoters.