Wednesday, December 22, 2010

Dynamic Pricing...coming soon to Wrigley Field?

As a season ticket holder who lives considerably further away than the average STH, I watch very carefully how baseball, and more specifically the Cubs, handle the sales of their tickets as I tend to have an inventory that I try to sell every year. If I could, I’d go to almost every game I had tickets for, but living 3 hours away from the ballpark, I have to be somewhat selective in the games I choose to go to.

In years past I have had considerable success selling tickets to friends as well as on secondary market sites. Last year that changed. Ticket prices had risen so much that even people that I normally could rely on to buy tickets shied away. On top of that, the team played poorly and there was very little on the individual achievement end of things to draw anyone to the park as well. As a result, the Cubs didn’t sell out many games in the second half of the season and the secondary market dried up for people like me who were trying to sell tickets for games they couldn’t attend.

As many of you know, I was very torn this fall as to whether or not I would renew my season ticket package. In the end, as you know, I chose to renew this year. Many of you that are close to me probably thought this was the inevitable decision…but, believe it or not, I was really damn close to not doing it. I’ve had a number of debates with my wife, after the fact, as to whether or not I should have done it (she was probably the one that talked me into renewing). There are many days I have regretted it.

With a second child on the way in another month or so, I believe in this coming season, I’ll be able to go to a smaller percentage of the games for which I have tickets than I ever have before.

With all that in mind, I’m watching for whatever signals I can see as far as hard or easy it will be for me to sell the extra tickets I’ll have this year.

I’ve used sites like StubHub for a number of years, and in recent years, the Cubs (and Major League Baseball) have partnered up with StubHub to make selling tickets on that site even simpler. Unfortunately, as the no shows increased at Wrigley and the team dropped in the standings, StubHub became almost a ghost town as ticket prices for games plummeted 75% of list price or more for games. Even at that reduced rate, the likelihood that you could sell tickets at that price was probably only around 50% last year.

This is a risk I take as a Cubs Season Ticket hold who can’t attend every game. In previous years, this wasn’t a money losing deal for me. Last year I took a hit, obviously. It appears I’m setting myself up for a similar (if not worse) situation this year.

Now to get to the true reason for this post…

A new ticket pricing scheme has been experimented with by a few teams in baseball called Dynamic Pricing. The Giants are where the first time to fully implement this scheme last season with a couple other teams, including the White Sox, having tinkered with it. The Cardinals have also announced that they are going to implement it for the 2011 season.

Dynamic pricing is a variable ticket pricing scheme that adjusts the price of tickets continuously based on a wide number of variables including opponents and weather. An example of a similar technique that has been used for years is the pricing of airline tickets.

Now most of the teams that have talked about doing this are teams that, for the most part, don’t sell out a majority of their games. It’s a way to make the tickets for less popular games much more reasonable in cost.

But what does that do to season ticket holders that buy their tickets for a fix price before the season is even close to beginning? Well, both the Giants and Cardinals have reassured their season ticket holders that their implementation of the dynamic pricing plan will not result in those ticket holders having purchased their package for more than the sum result purchasing individual games via the dynamic pricing plan.

That is a bit easier for teams like the Cardinals and Giant to do as they, like most other major league teams, give price discounts to their season ticket holders. The Cubs don’t give a discount like this to their season ticket holders. Why? They don’t have to. For most teams, season tickets are often life-lines for ticket revenues for teams as they are guaranteed gate receipts and are not affected by team performance in the middle of the season as well as weather. Not offending season ticket holders is of the utmost importance to most other Major League teams. This isn’t exactly true for the Cubs.

A lot of people have expressed anxiety over this trend as it slowed expands in baseball. In the end, tickets for a number of games will become much more expensive and tickets for a number of games will become significantly cheaper. For baseball, it’s a way to try to milk out as much revenue as possible out of tickets sales on top of increasing attendance. (I’m looking forward to dynamic pricing of Bud Lite at the games as well…higher prices on sunny and hot afternoons and lower prices on cold evenings.)

But back to the Cubs, with the Ricketts family desperately trying to milk out every possible penny of revenue and their research into how to set ticket prices appropriately (with the continuous addition of new pricing tiers for tickets), you have to wonder if some sort of system like this will be implemented in the near future. For the Cubs, the reasons for implementing a system like this would be 2-fold…first to increase the sales of single game tickets, something the plummeted last season…and second to maximize value for high demand games like when the Cardinals come to town.

Unlike other teams who have implemented some form of dynamic pricing (White Sox, Cardinals, Giants), the Cubs have sold out all of their season tickets, which is something which will probably remain true through our lifetime. As I stated before, the Cubs season ticket holders do not receive a discount on their tickets (and haven’t for the last 8 years) unlike most other major league teams. With the possibility of PSL’s happening to pay for renovations to Wrigley (which the Ricketts family continues to deny, but you still have to wonder…) and a season ticket waiting list that was at 116,000, could the Cubs just stick it to the season ticket holders and still implement a Dynamic Pricing system? It would appear to me, with the continued manipulation of the pricing tiers, the next logical step would be to implement a dynamic pricing system. The question was posed on the fan survey the Cubs sent out 2 months ago, so we know they are considering it.

A new company called ScoreBig is looking to create a new centralized dynamic pricing system for tickets…and it may very well get teams from major sports league, not just baseball, to buy into their system. With its website now in beta testing, it is possible that it could become live before the end of the 2011 season and a number of baseball teams could look to use it in a limit fashion late next year to test out a dynamic pricing system similar to what the White Sox did late last year with a much larger rollout in 2012. No talk about this has been made public yet, but people interested in this should keep an eye on to see what progress is being made in this area and see if Major League Baseball would partner up with them.

MLB Advance Media has already partnered with a company Qcue which is a software company that provides solutions for dynamic pricing. This is the software that the Giants and the Cardinals are using and Major League Baseball has made the service available to all the teams. With Qcue has the means of determining the price and the possibility of using ScoreBig as a distribution network, the trend toward dynamic pricing appears to be picking up steam.

So, how could the Cubs implement a dynamic pricing system that would be fair to the season ticket holders? Or is the benefit of getting first dibs on playoff tickets (once every 5 years) worth the potential added price? One thing for sure, dynamic pricing will pretty much destroy the traditional secondary market for games which are not sold out.

In the end, with dynamic pricing as a possibility, it could affect my decision on renewing my tickets in future seasons. With a dynamic pricing system in place, I might find is more effective to just purchase individual game tickets in the future.