Revenue / 08.27.18
How Dynamic Pricing Is Changing Sports Ticketing
Dynamic pricing, the ability to set prices based on real-time demand, has been embraced by professional sports, most notably Major League Baseball (MLB). Pro baseball teams have been adjusting ticket prices on a day-to-day basis based on such variables as demand, weather, team performance and even pitching match-ups. It’s a model that has been adopted in other walks of life from airline tickets and theme parks to toll roads and zoos.
Indianapolis-based Digonex Technologies Inc., founded in 2000, has emerged as a leading tech provider in the dynamic pricing niche. Its software and services appeal to professional sports teams and college athletic departments looking to eke out more revenue from single-game ticket sales. Consequently, ticket pricing is now a business strategy for many teams and organizations. In the past, it was a veritable afterthought.
The Houston Astros have been using variable rates for ticket sales since 2013, as have many other MLB teams. According to the San Antonio Express-News, though, Astros fans have been noticing the pricing system more and more this season as the team's World Series victory in 2017 have sent both demand and prices skyward. Greg Loewen, CEO of Digonex, has said that MLB is keeping its fans in mind.
Loewen told the San Antonio Express-News that most teams with dynamic pricing set rules so that, no matter what the algorithm says, prices generally won't rise above or fall below certain cutoffs. If prices fall, these cutoff rules protect season ticket holders from losing value: Those ticket holders will never see prices for their seats dip below face value on the secondary market. At the same time, it leaves some seats open at reasonable prices even in high-demand situations. Teams can recover some revenue that would otherwise get into the hands of scalpers or third-party vendors.
Reid Ryan, the Astros' president for business operations, makes no apologies.
"We have a fiscal responsibility to our fans to field the best team and a fiscal responsibility to the business to price appropriately," Ryan said in an interview with the Houston Chronicle. "So, there will be seven to 10 games a year that will be most expensive. But we have all kinds of value pricing, as well."
As the Chronicle says, utilizing dynamic pricing does not necessarily damage resellers who don't have deals in place with teams or leagues — even as teams recoup secondary market revenue. This is especially true for baseball, for which there is ample supply. Jesse Lawrence, the founder of TicketIQ, an aggregator that offers tickets through verified sellers, sees this logic.
"If teams are pricing up, that benefits anyone who owns the ticket. On the flip side, [when prices fall], it can hurt the secondary market," Lawrence told the Chronicle.
It’s safe to say dynamic pricing isn’t going to go away. Crain's Detroit Business reports that, overall, teams using Digonex pricing software typically see between a 5 to 20 percent increase in single-seat ticket revenue. In addition to MLB franchises, Digonex used to provide dynamic pricing for Derby County, a professional soccer club in England owned by a consortium headed by sports entrepreneur Andy Appleby. According to the team, it saw more than US$300,000 in new revenue when it became the first soccer team in Britain to use dynamic pricing in 2012.
Digonex, however, isn’t alone. Its main competitor is QCue, which was the first company to introduce dynamic pricing to sports, working initially with the San Francisco Giants. One year later, the Utah Jazz and two other NBA teams launched dynamic pricing using QCue. The Austin, Texas-based company has since had success appealing to major college sports programs. Among its clientele is University of Michigan football, which moved to a dynamic ticketing model in 2013, and Georgetown University basketball.
Corrections: The original article claimed that Digonex, Inc., was founded in 2009, but was in fact founded in 2000. The article also incorrectly claimed that the Houston Astros and Detroit Tigers utilize Digonex. While those teams do utilize dynamic pricing, they do not utilize Digonex, nor does Derby County. Derby County originally utilized Digonex, but now does not.
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Tags: Sports , Reselling , Stadium , Secondary Ticketing