It’s been almost three weeks since pitchers and catchers reported so it’s time to talk a little baseball. Specifically, it’s time for an update on how Major League teams are trying to separate fans from their dollars. The trend this year is dynamic pricing. This has been going on for a while. The Giants were the first franchise to try it and a few other teams joined the bandwagon last year. This year 17 of 30 big league teams are deploying dynamic pricing (Baseball Teams Are Acting Like Airlines, Planet Money, Mar 6) — that means that there are more teams using dynamic pricing than there are teams using a designated hitter. One of those teams is the Chicago Cubs (Moneyball: Cubs team up with Sox in offering ‘dynamic’ ticket prices, Chicago Business, Feb 20).
Note that this goes beyond just pricing differently by day of week or opponent. As we have written about in the past, teams have been more aggressive along these lines and the Cubs are no exception. I bought a six game pack of tickets. Over six games, the tickets have five different face values ranging from $24 for an April game against the Brewers (go ahead, make me an offer) to $72 for a June game against the Red Sox (sorry, I’ve got a Little Leaguer who thinks these are worth way more than seventy-two of dad’s dollars).
What we are talking about here is changing the price of a seat depending on how well they are selling (which presumably reflects everything from the standings to the weather). For the Cubs, this will apply to 5,000 bleachers but may eventually expand to the rest of Wrigley. Supposedly (according to the Chicago Business article), that could be worth $11 million in extra revenue. That money is coming, presumably, out of scalpers’ pockets.
“Teams are looking at (dynamic pricing) to capture some of that secondary market that they’re not capturing,” says Colin Faulkner, the Cubs’ vice president of ticket sales and service, who implemented the new system when he worked for the NHL’s Dallas Stars before moving to Wrigley Field in 2010. Mr. Faulkner says the dynamic pricing will supplement a tiered system in the bleachers, where initial costs range from $17 to $78 apiece.
To put the secondary market numbers in perspective, a quick check of StubHub for my June game against the Red Sox shows that three sets of tickets are up for grabs just in my section. They are priced from $132.50 to $400.
Ticket News has an interesting take on why dynamic pricing could be particularly effective for baseball teams (Dynamic pricing trend sweeps across Major League Baseball, Feb 22).
[Dan] Meehan [of Qcue] also said that baseball, with 81 home games spread over six months, lends itself better to dynamic pricing than any other sport.
“There’s bigger stadiums than almost any other sport,” Meehan said. “There’s a bigger percentage of seats not held by season ticket holders. Then there’s all kinds of factors that go into determining price. The weather, the day of the week, who the opponent is, the starting pitcher.”
Qcue is a technology provider that is working many of the big league teams moving to dynamic pricing. They claim that part of the magic is less about getting more people out to the game as opposed to getting those who were going to go anyway to trade up to better seats (from Planet Money):
The real secret sauce comes from figuring out how to price tickets for people who have already decided to come to the game. “There’s much more movement within seating areas, within a game, then there is on the attend-don’t-attend decision,” Kahn said.
Sometimes that may mean charging even more than usual for the best seats. Other times, though, it may mean selling the good seats at a discount, because it’s a bummer to have lots of empty, field-level seats.
“If you have a 20,000-seat venue and you’re only going to sell 10,000 seats, you want everyone sitting downstairs,” Kahn says.
So what do these pricing schemes look like. Here is what the Atlanta Braves say (Braves join new trend in ticketing: dynamic pricing, Atlanta Journal Constitution, Feb 15).
According to Braves executive vice president of sales and marketing Derek Schiller, the team’s goal is for the price on those seats to start at its likely low point for a particular game, thus encouraging early purchases, and possibly increase as the game draws nearer. However, the price could decrease if demand is unusually soft. In no case, the Braves said, will the price dip below what is charged in season-ticket packages, which are discounted vs. single-game prices.
The same article also has some information from Qcue about what pricing has looked liked for teams that are already doing this.
Among the MLB teams that worked with Qcue last season, the average price change per ticket was an increase of $1.55, according to the company. Of tickets that went up in price, the average increase was $3.27. Of those going down, the average decrease was $13.63.
The most aggressive teams tend to adjust prices three or four times a week, Meehan said. Increases are much more common than decreases, and Meehan suggested that is in part because teams initially set prices “more conservatively” if they have the flexibility to raise them.
So I am not sure just how these numbers work out. It seems that price increases are modest but discounts are steep. (That’s the only way that you can have an average decrease that is four times the average price hike.) Deep discounts are consistent with trying to get the third deck crowd to buy better seats for unpopular games. The modest increases are consistent with tweaking week-to-week prices for the same seats by four or five bucks. That may be enough to encourage people to buy when they first think of going to a game as opposed to risking paying an extra $25 to take the whole family out.
Still prices changes at these levels are not going to take all the profits out of the secondary market. If, say, something historic might happen (e.g., a player getting near 3,000 hits), the secondary market is going to move up more than a few bucks. Teams would need to raise prices by $20 or $30 a piece to really capture that value. Also, I am not sure how this is going to work for games like my Cubs-Red Sox game. Cubs single game tickets go on sale today and I gotta think that this will sell out tout suite. Someone may well get $400 for that pair of seats two rows in front of me. The Cubs are never going to capture all of that value unless they are willing to auction every seat in the park.