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ODU Prof Studies First Use of Dynamic Ticket Pricing by a Major Professional Sports Team

Last season, for the first time, a major professional sports team fully implemented dynamic ticket pricing - a floating range for the price of tickets that changes by day, depending on factors such as weather, pitching matchups and how many tickets are left.

That team - the San Francisco Giants of Major League Baseball - incidentally, ended up winning the World Series after a stirring stretch run.

The team's use of dynamic ticket pricing during its championship season proved to be a near-ideal case study for two researchers who study ticket pricing, Old Dominion University's Stephen Shapiro and Joris Drayer of Temple University.

By looking at ticket sales for 12 home games in specific sections of AT&T Park, the Giants' home stadium, the researchers were able to gather information about how ticketing strategy affects baseball fans' buying habits. The researchers examined 1,316 different prices from the 12 games.

Shapiro and Drayer compared the prices charged by the Giants under dynamic ticketing to the price paid by season ticketholders, and the prices charged by secondary ticket market resellers like StubHub.

Their research suggests that, despite some negative stigma, dynamic ticketing offers professional sports teams a chance to make more revenue from ticket sales by maximizing revenue from popular games, while avoiding alienating too many fans who might view their favorite teams as being overly opportunistic.

This form of pricing has been used successfully in the hotel and airline industries for years, and is accepted as the industry standard. Now several other professional sports teams have followed the Giants' lead and are using the practice for their ticket supply for games.

In an opinion piece published May 23 in Sports Business Journal, Shapiro and Drayer wrote that dynamic pricing is one of two major shifts in ticketing strategy in the past decade, the first being the growth of a legitimate online secondary ticket market through resellers.

But while private companies reselling tickets at higher prices has been established as an industry norm, "dynamic pricing elicits polarizing opinions about regular price changes for sports tickets," Shapiro and Drayer wrote.

While some observers see dynamic ticket pricing as a logical strategy to increase a team's revenue, others claim it unfairly penalizes fans, particularly by making tickets for certain high-demand games unaffordable for some of the faithful.

Shapiro, assistant professor of sport management at ODU, said that, given the need for pro sports franchises to find innovative methods to generate sufficient revenue, it makes sense to try something like dynamic ticketing. The Giants "are the first to take advantage of a new pricing strategy that better reflects demand for their product," he said.

Drayer, assistant professor of sport and recreation management at Temple, said the Giants - who increased ticket revenues by 7 percent, according to Qcue, the company that provided the dynamic ticket pricing service - are likely to be followed by other professional teams.

"The Giants were really the guinea pigs in all of this and everyone was watching. Other teams wanted to see how profitable it was and how the fans responded," Drayer said.

Dynamic ticketing offers a few advantages for a professional sports team, Shapiro said. When a marquee opponent such as the Giants' archrivals, the Los Angeles Dodgers, comes to town, it allows the price of tickets to better reflect demand. (The researchers also discovered, however, that even with dynamic ticketing, the average price for a Giants' ticket still trailed secondary market prices by 42 percent.)

Conversely, when it's a midweek game with a less-popular opponent, "by having the ability to reduce prices for low-demand events, teams have an additional opportunity to maximize attendance and earn additional revenue from sales of concessions, merchandise, and parking," the researchers wrote in the Sports Business Journal.

Shapiro noted that the Giants set a "floor" for ticket prices, so they wouldn't fall below what was charged to season ticket holders, but also a ceiling lower than was being charged on the secondary ticket market, so as to not invite criticism for being overly opportunistic, and to ensure adequate attendance.

Dynamic pricing can help identify factors that affect the demand for tickets, and make adjustments on a daily basis to account for that. "For example, while team and player performance may be easy to measure, the impact of player popularity or potential record-breaking accomplishments are factors that may have significant impact on consumer demand but have no historical comparison on which to base price changes," the researchers wrote.

Shapiro predicts other teams will follow the Giants' model in the next few years to price tickets more efficiently, as the airline and hotel industries have done for many years. "I believe dynamic ticket pricing will be a common strategy used by most major professional sport organizations in the next few years," he said.

Drayer said this strategy is the next step in the "blurring of the distinction between primary and secondary markets. For fans, it matters little where a ticket comes from, and teams now understand this. I think there will soon be little distinction at all between primary and secondary markets."

This article was posted on: May 25, 2011

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