Tickets too much? Try again later
SPORTING teams and organisations should be a brand manager’s dream; how many brands are adored by their consumers with a near-cultish, lifelong passion?
There are downsides, too of course. ‘Normal’ brands don’t have to deal with constant fluctuations in their relationship with consumers, whose sense of ownership makes them incredibly sensitive. For sporting brands, everything from team selection, design of a new kit, player transfers and tactics impact on the fans’ relationship with the team.
Having their loyalty pushed to the limit is nothing new for fans, but few issues can push a fan’s emotional and economic buttons than that of ticket pricing. Just ask the IRFU, the GAA or the FAI, who have all committed in some fashion to slashing ticket prices in 2011.
Austere times have been pinpointed as the primary reason for such moves, which have come in response to falling demand. This is especially true of the IRFU, who were forced into a humiliating climb-down after sky-high prices and bundling of games saw fans vote with their feet, leaving swathes of empty seating during the four autumn internationals at the Aviva Stadium.
A primary complaint from supporters was that handing over the bones of €100 for some matches didn’t even guarantee a top-notch seat; whether you ended up in a covered stand overlooking the halfway line, or at ground level behind the corner flag at the mercy of the elements, essentially came down to pot luck.
The IRFU have moved to remedy this by introducing variable pricing for the Six Nations games. Nothing too revolutionary here: the best seats in the house will cost more, based upon existing knowledge of the composition of the stadium.
What the IRFU cannot predict, however, are a number of external factors, including weather, form of both teams, availability of star players and permutations for overall success.
There was clear evidence of these factors at play in the final autumn internationals. 46,302 turned up to see the mercurial All Blacks on a dry track, but almost 16,000 less braved hazardous weather conditions to watch Ireland slog it out against an uninspiring Argentina side — despite the games being bundled, meaning the majority of the missing supporters would have already paid to go to the Pumas encounter.
So why don’t the prices adjust accordingly, the same way they do for purchasing concert tickets, hotel rooms and flights? An increasing number of American sporting sides are experimenting with this notion, defined as “dynamic pricing”.
Baseball outfit — and 2010 World Series Champions — San Francisco Giants are at the forefront of this movement, re-pricing tickets on a daily basis to meet changes in demand.
An initial experiment with 2,000 seats at the furthest corners of their AT&T Park ground saw them sell an extra 25,000 tickets and accrue an extra $500,000 (€381,000) in revenue in the 2009 season.
This time around, every single-game ticket was dynamically priced, and the Giants say revenue has jumped by six per cent as a result. The practice has also spread into basketball and ice hockey, with officials speculating that the practice will soon become industry standard.
Marty Teller, manager of corporate partnerships for minor league baseball side Trenton Thunder, explains that the model has benefits for teams wishing to fill their stadiums as well as those hoping to maximise revenue.
“The dynamic pricing model provides teams with a way to ensure a sell-out, or close to it, when their performance isn’t up to par,” he told CNBC.
“For the rare teams whose affinity and performance quotient is high, it allows them to raise ticket prices accordingly to better match supply and demand. In this dynamic pricing model, season tickets become a hedge fund of sorts, protecting buyers from the volatile new ticket marketplace.
“The idea for teams would be to actually sell less season tickets but increase show-up rates and overall tickets sold, eventually growing the bottom line as items like parking, concessions, and merchandise all increase and teams capture most, if not all, of the lost revenue on the secondary market.”
A Texas-based software firm, Qcue, is the leader in the field for applying the variables and presenting its recommendations to teams on a daily basis; it’s then up to the team’s powerbrokers to decide whether to apply them or not.
The economics behind dynamic pricing suggests that there will generally be enough people willing to pay top dollar for the premium seats, to offset the loss of revenue from selling off the cheap seats, well, cheaply.
The Giants have found that dynamic pricing typically sees ticket prices rise rather than fall, so they have lowered season ticket prices as well as single-seat tickets bought far enough in advance — as well as ensuring that a dynamically-priced ticket is never cheaper than what a season ticket holder has paid.
However, what works in America may not necessarily be the answer here. UCC economics lecturer and Cork minor hurling manager John Considine argues that the absence of a league structure in championship GAA and international rugby and soccer would mitigate against implementing a dynamic pricing system in Ireland.
“The problem with the GAA is it’s a knockout competition. How many seats you’ll sell will depend on who is playing, what round it is, day of the week and so forth. There are so many variables that you’d have huge variation in ticket prices,” he says.
“In the USA, when you have a lot of this data (available), it’s easier to calculate what premium people will pay. One of the key factors is competitive balance; so, if you were to have an All-Ireland final, semi-final or quarter-final between Tipperary and Kilkenny next year, it would attract an awful lot more fans than other teams — it’s a recent rivalry, in addition to a longer rivalry.
“In terms of rugby and soccer, there would be some element of variation needed. It’s more intuitive than just saying ‘we’ll calculate what premium you’d get for having the All Blacks here’. It’s about how often they are here, and how Ireland are doing — are they Six Nations champions or not?
“In an Irish context, it’s a small market, you’re drawing on a population of four million; the question then is how much variability will you get? Not a whole lot.”
While Considine sees no reason why sporting organisations wouldn’t want to do everything possible to fill their stadiums, he points out that a packed ground doesn’t always result in a better balance sheet.
“You could price the tickets such that you will just fill the grounds; or you could price them so that you’ll maximise profit,” he explains.
“And there’s no guarantee that the two are the same. It might be more worth your while getting 35,000 people into the Aviva at €100 each, rather than filling it at €40 a head.
“The idea of dynamic ticket pricing, plus profit maximisation, is to ask if you can segment the market. The GAA do it to an extent. People ask why don’t the GAA seat Hill 16? Well, there’s the argument of tradition, and some people like standing at matches, and it allows them sell tickets at different prices to someone who will pay to get into Hill 16, but won’t pay for a stand ticket.”
Considine adds that further obstacles abound in terms of the traditional methods of acquiring match tickets, particularly in rugby.
“Imagine the uproar at club level if you changed the ticketing system now. If a (rugby) club’s allocation is, say, cut by half, the members won’t be too pleased.
“Those tickets are, in part, payment to the club member for looking after the kids, for running the club; it wouldn’t pay for your time or petrol, but it’s recognition. So where do you cut from?”
Slashing prices, increasing variability and giving fans more freedom to choose their seats — when buying online in particular — and rewarding those who buy tickets early are among the measures Considine recommends, but he has a more novel idea to hand too.
“It’s hard to know if the IRFU would have made more money (on the autumn internationals) if they hadn’t bundled the tickets. They definitely wouldn’t have had the public relations disaster, but they missed the opportunity to experiment.
“Could they have re-sold the tickets, for example? You scan tickets on the way in, you can tell who’s filling the ground. So you could operate a standby list, like they do with flights. How about if you’re not in the ground by a certain time, your ticket is null and void, and is sold on to those on a standby list?”
Overall, dynamic pricing appears to work across different sports in the USA due to the uniformity of long league seasons, which will throw up the requisite variations. In Ireland, the GAA has too many of these, while soccer and rugby don’t have enough, at least not in an international context.
Considine nonetheless believes that the lessons will be learned from the lack of full houses in 2010.
“The idea of dynamic pricing could work (here), but I wouldn’t think there’s enough information to do it statistically (in Ireland). But I think it could be done on an ad-hoc basis.
“Take the ideas — what do they price differently for in the US — and then say, given these, let’s change it slightly. You’ll always be constrained by certain things, but I think they are starting to experiment. The fact they’re talking about cutting prices means they know what’s going on out there.”
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