Here’s a hypothetical: You are considering buying tickets to an A’s game in July (say, the Red Sox game on Friday, the 12th). You’re not a real high roller so you think the Plaza Level seats at $30 a pop would work. You log off the A’s website and round up your pals for the game. Two weeks later─the time it takes your lazy buddies to return your email and make a commitment for $30─you jump onto the A’s website, ready to buy, and...Holy Toledo! The price for plaza level is now $33! Did you misread the original price? Is the pricing wrong? Or, worse, are the A’s trying to pull a fast one and screw you out of an additional $3 bucks per ticket?
Nothing of the sort. You have just entered the world of dynamic ticket pricing, or DTP for those who prefer acronyms. In this life, we must deal with trade-offs and mixed blessings. Among the most mixed of mixed blessings for A’s ticket buyers is DTP. If you have priced airfares, or hotels, in the last decade, you know what that means: Somehow, some way, you’re going to pay more.
For a business like the Oakland A’s─drowning in excess capacity, beleaguered by smallish season ticket sales, and tormented by weak, variable demand for individual game tickets─DTP is an invaluable tool for optimizing desperately-needed revenue. Through sophisticated software and high-speed computing, the A’s can now monitor ticket supply-and-demand by the minute and make changes in prices. When a game is popular and available seats are scarce, prices can be adjusted upward to maximize revenue. When demand for a particular game is weak, prices can be discounted on the fly, so to speak.
From an organizational viewpoint, DTP is marvelous. (Indeed, if it had been available in the old days, I’d probably still be a theater producer.) But it does make life more complex for single-game ticket buyers. As I said, there are mixed blessings.
Tickets in the Olden Days
When I started in Show Biz, tickets were physical things, printed pieces of cardboard instead of bar-coded cyber signals, and ticket prices were static. I used to order an entire season’s tickets in advance. When the printed tickets arrived, our operations usually came to a dead stop while we counted, verified, and sorted the inventory by hand. Then we repacked most of the tickets in boxes and locked them away in the ticket office. (In fact, that’s why the ticket office became known as a “box” office; it was always piled high with boxes of unsold tickets.)
Though laborious, it was a relatively simple task, as was the setting of ticket prices. You started with last year’s prices and added a buck or two to each price level. You charged more for the main floor, less for the balcony; more for single performance buyers, less (per performance) for season ticket holders; more for musicals and ballets, less for jazz and magic shows. Then you’d throw in the standard student/senior discounts and, voila! You had your inventory and a basis for gross revenue projections which, of course, were never accurate.
A big, often fatal flaw in this process was an inability to adjust to changes in the market perceptions of your product. Every season, some of the shows turned out to be box office dogs but a few, a precious few, became hits. Ironically, the hits presented us with the most financial frustration.
Pricing of the dogs was almost irrelevant. You couldn’t sell them no matter how much you discounted tickets. It was similar to selling tickets to an A’s-KC matchup at the Coliseum on a cold Tuesday evening in May. No matter what you do, you’re going to end up with a lot of empty seats.
The Problem with Hit Shows
Hits were different, though, and not just for the obvious reasons. Revenue from the hits was absolutely crucial to the profitability of the season. The hits carried the organization through the financial doldrums of the dog shows. Indeed, the hits made it possible to present the dog shows in the first place. The fact of life in the real world of entertainment was, if you didn’t make lots of money on the hits, you were finished.
But you never had enough tickets available for the hits! You were limited by capacity and the fact that the ticket prices had been fixed, immutably, at the beginning of the season. Adding to the dilemma was single ticket buyers’ tendency to buy toward the end of a performance run. Even in hit runs, tickets for the early parts of the run often went unsold. Who knows why? Single ticket buyers were trying to make up their minds, or were lazy, or were just dedicated to torturing producers like me. No matter, at the end of a hit run, we often had to turn people away.
Mental picture: Cartoon bag of money, with wings, flies out the window!
This dual dilemma of lag time (between interest and actual purchase) and pricing inflexibility was often fatal for ticket-selling businesses. The A’s have similar problems. How do you make up revenue lost in the early season, when the team traditionally goes into an unmarketable slump? Last year, the A’s sold about 200,000 more tickets than they did in 2011. Most of that difference came late in the season when the misfits were making their epic run. In former times, the A’s would have been stuck waving bye-bye to that potential bag of money.
Fortunately, the A’s have access to dynamic ticket pricing. Airlines were first to develop it, out of a state of bankrupt desperation. Then hotels caught on. Then everybody who needs to sell tickets caught on. The accursed Giants were first in the Bay Area to utilize DTP in 2010. (Yeah, I know, it’s painful to credit the Giants for anything.) The A’s first utilized DTP on a limited basis in 2011, using it to price every non-season ticket in nine “premium” games.
“ We saw an overall increase in attendance compared to similar events in 2010,” Steve Fanelli, the A’s Executive Director of Ticket Sales, said in a January, 2012, Forbes magazine article. “We also saw that fans were buying tickets earlier in the cycle, and therefore, we were getting spillover from our sold out events into other games. In 2010, we did not sell out a single game in advance of day of event…in 2011, this happened four times.”
Nowadays, the revenue lost early in a season can be recaptured because of an ability to escalate single ticket prices based on increased demand in the market place. Of course, if the A’s stink throughout the entire season, there will be no increased demand and no ability to increase prices.
Message just in from the sales department: Go A’s!
Objections to DTP
There are two commonplace objections to dynamic ticket pricing. First is the egalitarian protest. Is it right to charge two people different amounts for the same attraction? Aren’t the A’s profiteering from scarcity? Of course! I want the A’s to live long and prosper. If they don’t “profiteer,” they won’t be around and no one will be able to buy tickets. Besides, the premise of “different amounts for the same attraction” is fundamentally flawed. You have to factor in the time value of the ticket. Tickets, and individual games, change in value as the season goes on. Rather, the perception of the game’s value changes.
Perception rules in a free marketplace. In April, 2012, who could have accurately assessed the true value of an A’s-Rangers ticket in the final series of the season? The Rangers were supposed to have been in a pitched battle with the fat-wallet Angels for supremacy in West. The pathetic A’s (and they were pathetic the first two months of the season) were supposed to be in a joint death-spiral with the Mariners.
Then the Misfits came to life! September took on a whole new value. In April, the A’s-Rangers games were perceived as low-value entertainment investments. By mid-September, the Misfits had dramatically changed the market perception. If the A’s were suddenly providing more entertainment value, why shouldn’t they charge more?
Another objection, with somewhat more validity, is potential buyer confusion. If DTP gives the A’s flexibility in ticket pricing (prices can go up and down), should a single-game ticket buyer buy early, in case prices go up, or wait, in case prices go down? Oh, the agony!
All I can say to single game buyers is, that’s the world we live in. And here’s a little secret of Show Biz I can reveal to you.
The A’s have a conflicted relationship with single-game ticket buyers. Single game buyers are like inconstant lovers, great when they show up but heartbreaking when they don’t. DTP makes it less painful to deal with them, but you simply can’t build a business based on single game ticket sales. You’ll go broke.
Dynamic ticket pricing is really all about season ticket sales. And that’s where we will pick up this discussion next week.