Tuesday, February 21, 2012

Dynamic Pricing has arrived

About a year and a half ago, I mentioned that a number of teams were beginning to institute a relatively new concept of "dynamic pricing".  Simply put, dynamic pricing is a way for teams to eat into secondary ticket market sales to their advantage.

In Crain's Chicago Business yesterday, Danny Ecker wrote that the Cubs intend to implement dynamic pricing on the bleacher seats for the 2012 season.  This likely will be extended to the rest of the seats at Wrigley at some later date.

What is dynamic pricing?  It's a way for a team to alter the price of currently available tickets over time based on demand for those tickets.  So let's say that you want tickets to the Cubs-Red Sox series, instead of having a flat price of say $75 a ticket, the price will go up (with a likely cap of say $150) based on how many tickets the Cubs still have available and how fast they sell.  For a game against the Astros in the middle of April that would have had a flat price of $20, the Cubs could drop the price of that ticket to as low at $5 a seat in efforts to try to sell it and to compete with tickets that are available on sites such as StubHub.

At the high end, the Cubs will be able to make more money off of ticket that are in high demand, and at the low end, the Cubs will be able to sell cheap ticket adding to the overall gate receipts.

The Giants, Cardinals and White Sox all have used dynamic pricing over the last few years and many other teams are starting to pick up on this.  It is a way of adding to the revenue stream (while taking away revenue from places like StubHub and ticket brokers).  For the Cubs not to do this is a mistake, leaving added revenue on the table that other teams may be able to pick up on.

If I were a still season ticket holder, I'd be a bit upset with this development as it would make it more difficult for me to sell tickets to games I couldn't go to.  In the past, owning season tickets, for me and many others, was a profit making opportunity.  I was able to usually make back the money I paid for the tickets just by selling about 1/2 of my package during the year.

However, that wasn't the case over the last 2 seasons.  The number of no-shows at Wrigley has skyrocketed due to a combination of performance and a bad economy, and people have been able to get tickets to some of the less desirable games for just a few dollars on StubHub while the Cubs end up with tickets unsold at $40 a piece.  This will now make those unsold tickets competitive with the tickets available on StubHub.

MLB has partnered with a company called QCue to offer this service to any team that wants to use it.

If you want a more detailed description of dynamic pricing, see the post I made on the subject last year.