In San Francisco, a ticketing experiment is underway with the hometown Giants baseball team that could mark the future of how teams and artists begin to approach pricing. The Giants have rolled out a dynamic pricing program – day by day ticket-pricing adjustments, up and down – for a select number of harder to sell seats at AT&T Park. And although it’s still early in the season, the Giants like what they’re seeing.
“We’re very happy with how it’s been working. We think having the ability to be nimble on a daily basis is going to prove to be a very good thing,” Russ Stanley, the team’s vice president of ticket services, told TicketNews.
In essence, dynamic pricing is a much finer-tuned version of the variable pricing that teams have used for years, or charging more or less for tickets depending on which opponent is in town and when. Variable prices are decided way ahead of time, once each season’s schedule is finalized. Dynamic pricing, on the other hand, not only accounts for the who-and-when, but can incorporate constantly changing factors such as the weather, budding marquee players, post-season implications and statistical milestones.
Dynamic ticket pricing in sports and entertainment has been compared to how airlines modify their prices based on changing demand.
Two years ago, Stanley was pitched on the benefits of dynamic pricing by Barry Kahn, one of the founders of Austin, TX-based software company QCue. The firm had come up with an algorithm that adjusts ticket prices to, as its Web site declares, “ensure that [the ticket costs] accurately reflect the value of attending a specific event at all times.”
Kahn, the CEO, has a Ph.D. in economics. He told TicketNews that the inspiration for the company was recognizing that “box office ticket pricing – sports, concerts, most any event – is grossly inefficient. This is a way to fix that, to really maximize the efficiency.”
In major league baseball, for example, let’s say a player from a team with a poor record the year before goes on long hitting streak, maybe even approaching Joe DiMaggio’s 56-gamer. There’s no way that variable pricing could have predicted that; the ticket price for that game would have been set low. With dynamic pricing, the cost of the ticket directly reflects the value based on demand.
Stanley said he was not fully convinced by QCue’s pitch until Barry Bonds’s pursuit of Hank Aaron’s home run record led to secondary market tickets being sold for roughly five times the face value. The record breaking homer was hit on a Tuesday night against the Washington Nationals. “It was our softest opponent, the softest day of the week, and tickets were only $10. We could have been charging $50,” Stanley said. “That’s what made the light bulb finally go on.”
Kahn told TicketNews, “Russ has been awesome to work with, invaluable. This is a guy who’s known as an innovator. What we’ve been able to do is, well, strap a supercomputer on his back, to go with all his knowledge! We can empower box offices – take the handcuffs off.”
This year, the Giants are using QCue’s system for 2,000 of the last to go and hardest to sell seats – the upper deck beyond the outfield – with regular values of $10 to $25. For two of the home games, the team was able to add $5 to $10 to those prices. In the other six games, they were lower, by roughly the same range. The Giants have had two sell-outs, and one that was “very close,” Stanley said.
Here’s what happens when you do the math… If the Giants sell an incremental 2,000 seats for its 81 games at $5 each, that’s $810,000 in extra revenue.
But Stanley admits it is hard to quantify the results for the non-sellouts. “For instance, we’ve had tremendously good weather so far. April in San Francisco is usually cold and damp. It’s been warm and sunny, so how much of the revenue is due to which factor? That is, are we selling more seats because the dynamic pricing got you in for $5? We’ll have to see.”
Stanley made clear that at this point, the team is utilizing the system with a manual override. “I’m on the phone every day with QCue. We take a look at what the system is suggesting, then we make our own adjustments to that based on our feel and knowledge.
‘‘Both the Giants and QCue understand that we’re like the beta test. We’re both learning a heck of a lot and feel there will be a point in the future where we can incorporate a nearly fully automatic system.’’
He acknowledged that the Giants have to be careful about how they use the system in order to not rile season ticket holders. “We will always ensure that those folks are aware that they have the best value.”
Stanley also said no decisions have yet been made regarding when, and how much further, they will expand their use of QCue.