This story was updated at 9:15 a.m. EDT on Monday, September 27, 2010, to properly reflect the relationship between the Cleveland Cavaliers and Digonex.
The advent of the Miami Heat “super team” is not the only shake-up happening in the NBA this year. In the realm of ticket sales, dynamic pricing has become the popular choice among NBA teams, as a growing number is embracing such plans. Just this week, three teams have announced that single game tickets to their 2010-11 home seasons will be offered on a tiered or variable system.
A dynamic or variable system allows for teams to let consumer demand for a particular game drive that game’s pricing. The system factors in various variables, including the popularity of the opponent, the location of the seat, the day of the week, key injuries or even weather conditions (for outdoor sports), to determine the ultimate price of the game’s tickets. The use of market pricing to drive ticket prices lets the teams capitalize on their most popular games – such as games against the stacked Miami Heat.
Dynamic pricing borrows a business philosophy from ticket brokers and the secondary market by raising and lowering ticket prices based on demand. In addition, the initiative also can help teams move hard-to-sell tickets by making them more attractive to buyers by lowering the price.
Not all teams structure their new pricing systems the same. The Cleveland Cavaliers announced this week that they will be implementing a new system of tiered tickets to their upcoming 2010-2011 home games. The Cavaliers previously worked with dynamic pricing specialists Digonex, to create a dynamic ticket pricing pilot program. Both the Orlando Magic and the Sacramento Kings announced that they will introduce “variable” pricing schemes, which will vary the prices to individual games based on the list of elements mentioned in the preceding paragraph. However, a particular emphasis will be placed on the caliber of their opponent.
In addition, the Phoenix Suns this month also announced the team was introducing a similar, five-tier dynamic pricing initiative.
Prior to this week’s three announcements, several NBA teams spent the summer securing and structuring dynamic ticketing systems for the upcoming season. In August, the Atlanta Hawks, Utah Jazz and Houston Rockets all announced they would be working with Qcue, another of the ticketing industry’s leaders in the art of dynamic pricing, to restructure their ticketing set-up for the 2010-11 season. Qcue CEO Barry Kahn sees the rise in the use of dynamic pricing to be a combination of strong support from the NBA league offices as well as the realization that dynamic pricing often offers the best pricing option for professional sports teams.
“What you are seeing is really a perfect storm of proven success, league interest and available tools. NBA teams have seen how well dynamic pricing has worked for teams like the San Francisco Giants who have realized significant revenue upside,” Kahn said in a statement to TicketNews. “At the same time, Chris Granger and the NBA’s Team Marketing & Business Operations (TMBO) group have done a great job promoting dynamic pricing as an innovative approach to drive revenue. And finally, the tools are there. Dynamic pricing solutions now offer incredible functionality that integrates directly with ticketing systems, making it easier than ever to get started.”
Rex Fisher, Vice President of Business Development for Digonex, believes that the wider variety of ticket providers has allowed for NBA teams to expand at a faster rate than other professional sports teams. In addition to Ticketmaster, rapidly growing digital ticketing company Veritix also is a ticketing solutions partner for some NBA teams. As each provider advances their capabilities to allow for the use of dynamic pricing, it creates an opportunity for teams to try out a new way of ticket sales.
“One reason for the success among NBA teams is that the NBA’s tickets are more spread across different service providers, which allows the teams to be able to ‘dip their toe’ into the realm of dynamic pricing. Once they initially try it out, and find that it was extremely beneficial and they continued,” Fisher told TicketNews.
Both Kahn and Fisher see dynamic pricing as the way of the future among professional sports teams, anticipating that the push for dynamic tickets will expand to an even greater degree into the NHL and Major League Baseball in the near future. “You’re hearing a lot about NBA teams making the move, but the reality is teams across most leagues are considering similar initiatives right now. You’ll see MLB teams doing this in even larger numbers next season,” predicted Kahn. It appears Kahn’s words were rather prophetic, as just yesterday, September 23, the Chicago White Sox announced they would be teaming up with Qcue to begin a trial run of dynamic ticket prices for select games in 2011.
But the real drive of dynamic pricing’s recent and increasing popularity appears to be the current success among teams who have implemented the system. “I haven’t heard of one team that found it to be a ‘miserable failure.’ I only see the infrastructure catching up with dynamic pricing and lowering the barrier for allowing professional sports teams across the board to jump into dynamic pricing,” Fisher said.