Mar
13

Dynamic ticket pricing inching into the baseball market

By

The concept of “face value” for a ticket to a baseball game is often an amorphous one. In our case, the Yankees price out their seats and sell tickets as part of a variety of packages at different place levels. Face value for one seat could be different for the face value of a seat in the same row or section by virtue of the associated season ticket package. By and large, though, face value as set by the Yanks is fairly constant.

Of course, as many fans recognize, face value isn’t the true value of the ticket. Baseball tickets are a finite resource, and only so many exist per game. If the tickets are priced at the right level and the team is good enough, the game will effectively sell out, and then the secondary market takes over. On the secondary market, people who buy tickets with an eye toward making a profit or those who can’t make it to the game are trying to find the true value of their seats.

Over the past few years, it’s been possible to buy many Yankee tickets at or even below face value on the secondary market. Demand isn’t high enough for all but the most sought-after games to warrant a high price, and discerning shoppers know that market value for a mid-week game against, say, the Royals or Orioles isn’t the same as a weekend affair against the Red Sox or Mets. Essentially, those of us who rely on the secondary market to feed our baseball needs have lived with dynamic pricing for years.

Despite innovation on the field, baseball teams have been slow to pick up on this dynamic pricing model. Some teams sell so-called premium games against good teams while others are content to price everything at the same level. That’s beginning to change though. As Kyle Stock wrote in The Daily this weekend, some baseball teams are set to embrace dynamic ticketing. The Brewers, for instance, will change prices on seats if it looks like Zack Greinke will face the Royals while the games in which he doesn’t pitch will see lower prices.

Stock reports on the way dynamic pricing came into being for baseball clubs:

In this case, the guy bucking the system was not a washed-up pro, but rather a 26-year-old fan finishing a Ph.D in economics at the University of Texas. In early 2009, Barry Kahn sneaked into a sports ticketing conference in Las Vegas. Armed with chutzpah and hand-cut business cards, he persuaded the San Francisco Giants to try dynamic pricing in about 2,000 of its worst bleacher seats.

“Basically, we saw that there was a huge price inefficiency here,” Kahn said. “Everyone was saying ‘StubHub is making all this money. How do I get a piece of that?’ My message was: ‘It’s your inventory. You have the ability to get the whole thing.’ ”

By the end of the 2009 season, San Francisco had a 20 percent attendance increase in its test seats and an extra $500,000 in ticket revenue. Three seasons later, Kahn is CEO of Qcue Inc., a profitable Texas-based company that will help 15 baseball teams set their prices this year.

As Stock notes, teams were hesitant to embrace this idea over fears of turning off fans. Some view it as institutional price gouging without realizing that it’s a lesson in Economics 101. Others are more willing to embrace it as it offers up a cheaper way to see more games at the expense of higher prices for the more generally desirable contests.

Here in New York, the Yankees haven’t yet embraced dynamic pricing. It may be slow in coming as the club would have to admit that their pricing models at the expensive new stadium haven’t been as rousing a success as they should have been. But they’ll get here. It’s unavoidable, and it’s a way for the team to tap into more revenue streams. After all, a cheaper ticket could lead to more people would should lead to more concession stands. The money somehow trickles up and into the Yanks’ pocket. For now, though, it’s the next great innovation in the business of baseball and one that should have made its debut years ago.

Categories : News
  • Plank

    In early 2009, Barry Kahn sneaked into a sports ticketing conference in Las Vegas. Armed with chutzpah…

    If they were trying to make this guy sound like the most Jewish person in the world, they succeeded. The editor took out the part where he describes Barry Kahn as “sounding the Shofar for all teams to see the promised land of dynamic ticketing.”

  • Rainbow connection

    Solution: stop going to games. Watching at home with a/c, hd big screen, cheap beer is much better. Not to mention commuting nightmare and being surrounded by dummies.

    • dc1874

      Amen brother…Amen!!!!

    • Monterowasdinero

      Go to ST and road games at stadiums that are less crowded with: nicer attendants, cheaper concessions and better parking. Get there early and you can get alot closer to the players. YS sucks for all of these items.

      Barry “Kahn” Artist.

      • Mike HC

        Agreed with Rainbow Connection and with Monterowasdinero.

        Watching on the couch at home with the big screen and all the amenities of home is tough to beat. I still make it to some games every year, but short of catching a special game, watching at home it just better.

        And agreed that seeing the Yanks on the road, in particular Camden Yards, is the way to go for me. I have seen the Yanks at Camden a couple of times, and the ballpark experience there is so great compared to the gestapo the Yanks have set up.

        • Zack D

          I live in CT and go to 3-5 games a year, and love every second of it. I rather watch from the worst seats at Yankee Stadium than on my couch in front of my 42″ LED. I actually enjoy going to the game and watching the live action.

          • http://riveraveblues.com Benjamin Kabak

            I’m right there with you on this one, Zack. I wouldn’t give up going to the stadium for the largest TV in the world.

          • Mike HC

            More tickets for you guys I guess, ha.

            • Havok9120

              And the oodles of people that feel likewise. I’m with you guys by and large, but most fans much prefer seeing it live. And then there are those (probably at least as many as would rather sit at home and watch every game) that would rather go to every game they possibly can.

              • Mike HC

                Most of my friends and family have come around to the thinking that staying home, or going to a friends house, or even going to a bar, is better than going to the game. And far, far, far cheaper.

                But I’m not against going to a couple games during the year, and if it were not for the people that still love seeing the games live, I’m sure the price to get them on TV would get even higher than it is today.

                • Urban

                  Why is it an either-or? There are 162 games, and 81 home games. I have plenty to watch at home, and I get to pick going to a select few games.

    • http://twitter.com/urbainshockcor Urban

      Surronded by dummies? You don’t know some of the people around my house!

    • Jesse

      Agree 100%.

  • Avif

    There are different forms of dynamic pricing, some of which have been happening for years at Yankee Stadium. Pricing for a particular starting pitcher is probably not worth the refund requirements when he does not end up pitching or what if he gets blown out in the second inning. The Yankees have been pushing discount packages all winter an have discounted midweek games for 30 years. Stubhub is also a market distortion due to its high fees on buyers and sellers, which I think is one of the reasons Yankee tickets no longer sell very well on Stubhub. Finally, the face value is still likely to be cheaper on game day than mos stibhub tickets after fees so why not give the box office a try. I is quite clear that the Yankees have plenty of tickets to sell, they are very desperately emailing daily.

    • Mike HC

      Scalping tickets at the game is still the most surefire way to get the best deal if you are willing to put in the effort.

    • Dave

      If it’s true supply and demand, you’re locking yourself into pricing at a certain time. So for example if you paid $20 for a ticket thinking you would see CC, and he got scratched, you wouldn’t get $10 back. That’s why it says “rosters subject to change” on the back of tickets. Same thing goes if you expected to see Nova, he was scratched and you got CC on short rest, they wouldn’t charge you an extra $10. True dynamic pricing is really just “the airline pricing model”.

  • LarryM.,Fl.

    I like the concept of buying according to the significance of the game and who’s playing. But for me located out of town my yearly trip includes at least one game at the stadium with the wife. Thus I schedule the tickets around flights etc. Its once or twice a year just do it and absorb the high price. For guys living in the metro area you can pick and choose, this system would afford you opportunities at reasonable pricing.

    Directv and Verizon are great fixes with the MLB package. Sit in the chair. Kitchen and restroom not far away better than this it will not happen.

    I get to watch the Yanks at the Trop. cheaper seats but bad views outside of infield cone. Fans are obnoxious with cow bells and up and down in the seats for food and bathroom runs. Oh well, this is why I stay at home to watch games.

    The answer is stay at home. The players are overpaid. The tickets are way too high in price. Most families can not afford to go to games. It was different when I was a kid.

  • Monterowasdinero

    Speaking of dynamic pricing, I heard on mlb radio that Damon wants at bats (300 to 3K) and money is not an issue. Is there a scenario that works for us since I have big doubts re: Ibanez….

    I know-money is always an issue..

    • Cris Pengiucci

      Dynamic pricing for players has been around for quite some time (since true free angency came about). I have to believe it will come to tickets at Yankee Stadium as well at some point in time. Perhaps the Yankees don’t want to “admit” that tickets aren’t seeling as well at the new stadium as they wanted, but it’s foolish to throw away potential revenue due to “pride”. If they are truley looking at this as a business (reduced payroll to maximize savings due to new luxury tax rates, etc.), they have to do this as well. As was pointed out, Economics 101: If people are willing to pay more, let them. If you want to sell out all games and maximize revenues, set appropriate prices for seats on a game by game basis.

      While it seems that Damon has realized that if he wants ABs, he’ll need to accept a lower salary, I don’t see it coming with the Yankees, unless Ibanez is released very early in the season (like before the end of April) and I think he’ll be given more time than that. He may be a slight upgrade as compared to Ibanez, but I don’t see a significant enought increase in performace to make the Yankees interested. Unless, of course, Ibanez clearly shows he’s completely done (see Winn, Randy)

    • Havok9120

      Is there a scenario? Sure, there is for everything. But it involves a lot of injuries and patchwork lineups, and I still think it would be too uncertain for Damon to accept

      He’s an Ibanez-like fill in for us and he knows it. No big numbers of ABs to be found here.

  • Ethan

    Man, when I read this I was shocked that baseball teams already didn’t use this model. It really is Econ 101. In terms of economics it’s known as price discrimination. Many industries already use it, the airlines, hotels are just a couple.

    The whole principle is to charge consumers a price that is as close to their maximimum willingness to pay and thus allowing the firm to capture some consumer surplus in the form of producer (seller) surplus. The charging a higher price for certain games, based upon time of week, team playing against, or even pitcher (which could be harder because people buy tickets far in advance and pitchers may not stay with one schedule) the team would be able to capture some of the fans willingness to pay. Granted, it would be difficult to implement this type of model but certainly possible.

    As consumers of products price discrimination can suck (although it can be beneficial if you can’t get a ticket but have a higher willingness to pay than those people who do get tickets) but for the firm, or organization it could drastically increase revenues.

  • A.D.

    I thought there were MLB restrictions where teams we’re only allowed a few “premium” games per year and had to be set in advance, is this no longer/never was the case?

  • Pinstripes in Cali

    i gotta tell ya, I’m a poor baseball-loving student in the Bay Area, and both of our teams (SF and A’s) have dynamic pricing. It’s frankly made it much more difficult to see cheap baseball. I understand pricing is better for the mid-range tickets on off-games, but in general the cheapest seats in the house start increasing in price immediately. it’s discriminating against the destitute!

    • http://twitter.com/urbainshockcor Urban

      Pricing out the next generation of fans is a concern.

      Back when I was in college in the 80s, I could get several friends together, just show up at Yankee Stadium on a Tuesday night, and have no problem buying good, affordable seats right at the Stadium window.

  • Chop It Up

    My mom used to go to games religiously during the mid to late 60’s and general admission was $3.50…absolutely mind blowing. (I realize that can’t happen now, just sharing)