More Teams Taking Dynamic Approach to Primary Ticket Market
Airlines, hotels and sportsbooks have long taken a dynamic approach to pricing, but the sports industry has been slower to adopt the practice. While “everybody is using [a dynamic pricing] tool on the secondary market and has been forever,” Lou DePaoli (managing director, General Sports Worldwide) says many organizations still do not hyper-dynamically price primary market inventory. In fact, Stuart Halberg (CEO, Logitix) said his company “just talked to one big four sports team, who [manually] changes the prices of their individual games once per week.”
Both DePaoli and Halberg said sports organizations are starting to recognize that approach is ineffective. “Sometimes by the time the team catches up to the fact a game is trending, they have already missed the curve [and the revenue opportunity],” DePaoli explained. Qcue, Event Dynamic and Logitix are among the SaaS companies helping teams to price primary market inventory based on real-time demand.
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JWS’ Take: It is important to distinguish between variable pricing and dynamic pricing in the context of ticket sales. Most professional sports teams employ a variable pricing model that, unlike the static models of the past, assigns a different price level to primary ticketing inventory for each game based on its anticipated demand (accounting for opponent, day of week, holidays, etc…).
Dynamic pricing is different. The approach allows a team to account for real-time changes in demand and alter prices accordingly. “It gives you a chance to capture upside [if the demand is better than expected], and if the game is softer, it gives fans a chance to have prices go down a little bit,” DePaoli explained. “In the past teams would set ticket pricing over a year before the game was played. A lot can happen in that time, good and bad, that impacts demand and pricing.” The home team’s recent performance, weather and injuries are among the variables that can influence market conditions.
The concept of dynamically pricing tickets on the primary market is not new. But it was only once Qcue emerged about a decade-and-a-half ago that it became operationally feasible. “To change 1,000 price codes manually would take a staff days,” DePaoli said. “You can’t keep up with the volume on a real-time basis.” Qcue provided an integration with a team’s ticketing system that made managing ticket price changes easy.
While it has been more than a decade since Qcue rolled out its first sports partnership (see: San Francisco Giants, 2009), hyper-dynamic pricing has yet to become omnipresent on the primary market the way it has on the secondary market, for several reasons. For starters, teams have been worried about how season-ticket holders, group buyers, premium members and other stakeholders will react (a concern that does not exist among secondary market brokers). The logic has been that they might be upset if the individual sitting next to them at a game paid less for the seat. Of course, owners had the same fears when first introducing variable pricing models.
Architectural limitations within teams’ robust primary ticketing systems and Ticketmaster’s hesitancy to permit third party dynamic pricing integrations have also been factors (the company has its own pricing tool, Pricemaster).
But times are changing. Several of the ticketing systems—including Tickets.com and SeatGeek—have made technological advancements in recent years that enable software plugins like Qcue, Event Dynamic and Logitix to thrive. And Halberg explained that teams are realizing “the individual buyer market, which had previously been made up of primary and secondary, is really the same buyer. So, why create two different [sales strategies]?”
COVID-19 helped to spur a shift in philosophy, too. Halberg pointed out teams have fewer people “working in ticket ops [now] and because of that, [they are wanting] to outsource individual game strategies, which includes dynamic pricing.”
Several competitors have emerged since Qcue first introduced a dynamic pricing tool for the primary market (there are also teams that have built tools internally). Event Dynamic “came along with [the idea to] use AI and machine learning to change prices like it is the [stock] market in real time. If market demand increases by $1, the ticket price goes up $1,” said DePaoli. The General Sports executive was EVP of the New York Mets when the franchise pivoted to a dynamic pricing model, powered by Event Dynamic, in 2019. FWIW, he said there was “no pushback from fans.”
To be clear, dynamic pricing does not necessarily mean the fan is going to pay more—at least not for their seat. Event Dynamic CEO Robert Smith said clubs are increasingly optimizing for attendance over revenue. “They are finding that if they hit that point of diminishing returns and don’t go past it, with the additional revenue they get from per caps they are actually making more money.” Sports organizations also recognize that a crowded stadium makes for a better TV-viewing and in-stadium experience.
Event Dynamic technology manages pricing for teams, in real time, using artificial intelligence, without the need for any human interaction. Smith explained that being fully automated allows clubs to be sure pricing moves with the market. Otherwise, “if something really incredible happens and prices [should] spike, somebody physically has to go through and approve those changes.” The time it takes to do that is revenue lost.
While Event Dynamic sees its automated approach and constant price changes as a differentiator, Logitix has built its platform for clients who “don’t want to just flip the switch and forget about it. Our [solution] is meant to be more of a user-automated platform,” Halberg said. The CEO added, “We [also] think that absence of a price change is just as good of a data point as a price change.”
Qcue believes its pricing philosophy is what sets the company apart from the competition. CEO Barry Kahn said his company thinks of primary market pricing as “standard revenue management.” Like an airline or hotel, teams should be “pricing based on [their] own availability, inventory and demand—not necessarily getting into this competitive market that looks more like the stock market,” he explained. Helping teams to manage secondary market pricing, to ensure it is competitive while still consistent with the primary market, is part of their secret sauce. It is worth noting that less than 5% of the primary market pricing changes initiated using Qcue’s solution are automated. Customers tend to prefer to maintain a greater degree of direct control over primary pricing than they do in the secondary market.
It is hard to say how much of a sell-through or revenue increase a team using dynamic pricing technology can expect to achieve. The lift is largely dependent on the organization’s baseline. But Halberg said a recent A/B test with one arena client indicated the organization sold 2% fewer tickets when using a dynamic pricing approach, but that its “ATP was 14% higher, leading to ~11% [increase in] total revenue on primary.”
Teams marketing seats on the secondary market seems odd when they could sell them directly to fans on the club website. But teams want to fish where the fish are. StubHub, SeatGeek and GameTime are marketing in an effort to drive fans to their respective sites. Teams that do not list with them (and others) are missing the chance to sell to a portion of the potential audience.
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