In Britain, dynamic ticket pricing is revolutionizing the British box office

Simon Usborne, The Independent [UK], 10/18/12

Dynamic pricing, used widely by airlines, is revolutionizing the British box office. The system, being touted in Britain this week by one of the biggest players in a booming US market, promises to transform ticketing in music and Theatreland. "Dynamic pricing in real time is the Holy Grail," says [Howard Panter, chief executive of The Ambassador Theatre Group, Britain's largest theatre owner]. Jan Alan Eglen is an American psychologist enjoying a second career as a professor of dynamic pricing. [His company] Digonex is now one of the world's biggest names in dynamic pricing. If the future is dynamic, as all signs suggest, why now, when it's old hat in the travel industry? "I think 2008 changed everything," Eglen says. "On top of a challenging marketplace, there are also so many more ways to spend a dollar." Eglen also concedes trust and expectation are an issue; music fans are more inclined to feel short-changed because their ticket represents something they care about. Witness the outrage this week among Rolling Stones fans about the price of tickets to their 50-anniversary gig (up to 375). Dynamic pricing wouldn't work here -- the biggest gigs sell out faster than any algorithm could respond -- but in theatre, for example, where empty seats are challenging, box offices must tread carefully. Eglen says transparency is key. John Pinchbeck, a tickets-industry veteran, points to cultural differences between US and UK audiences. "It's accepted more readily there and even secondary-market scalpers are tolerated, yet frowned upon here." Pinchbeck sees "dynamic price breaks" as a possible solution, rather than [an] infinitely flexible model. Sections or rows of seats within traditionally priced areas could be held back from sale initially, and their price adjusted later if necessary. "It would be less noticeable, less apparent," he says. Whatever the model, he adds, pricing will become more scientific, and could help venue owners to claw back some of the control over ticket prices from online touts, economic vagaries, or sporting chance.

 

Commentary: Should nonprofit arts orgs be using dynamic pricing?

Theater critic Chris Jones, The Chicago Tribune, 10/22/12

When the Goodman Theatre announced prices for its current production, Sweet Bird of Youth, it listed $89 as the top price. On Wednesday, there still were tickets available for Saturday evening. But the top price? $120. And we're not just talking premium tickets, common on Broadway and for Broadway in Chicago productions. A far-side seat in the mezzanine would have cost you $98. Dynamic pricing has arrived with a vengeance in the nonprofit world. Is [this] the way a mission-oriented, nonprofit arts group should be operating? Absolutely, says Roche Schulfer, the Goodman's executive director. "When a show has strong demand, that allows us to raise additional revenue that allows us to lower prices at other times." Dynamic pricing, he noted, applies only to single tickets, when the vast bulk of the audience buys lower-cost subscriptions. He also said the Goodman has a variety of programs offering concessions to certain groups and those willing to take their chances at the last minute. And Schulfer insisted that dynamic pricing should be seen in the context of "broader technological change," meaning that audiences benefit from instant ticketing, the chance to pick seat locations on their computers and other goodies that didn't exist in the days of ordering by snail mail and phone. The Goodman is by no means the only arts institution where prices vary: Lookingglass, Northlight, Writers' and other theaters all raise prices slightly when capacity becomes limited, as does the Chicago Symphony Orchestra. But not everybody does it. David Hawkanson, executive director of Steppenwolf Theatre, said his organization does not, and will not, use dynamic pricing. Nor does the Art Institute of Chicago. "There are some real concerns with dynamic pricing," says consultant Joanne Bernstein, who argues pricing must be seen in the context of giving the audience what they perceive as good value. "Our audiences understand," said Tim Evans, executive director of Northlight. After all, the prices are only going up five bucks or so. Many people appreciate that arts groups must maximize their revenue when they can, and dynamic pricing helps them do so. Still, you could also argue that dynamic pricing has contributed to the oft-discussed squeeze on the middle class.

 

Related: Don't let media outcry determine your pricing strategy

Jill Robinson, TRG Arts blog, 10/24/11

Museums aren't getting useful direction from the recent public dialog about the prices they are charging or want to charge for admission. Admission price increases at some of America's highest profile museums made news, and that touched off discussion that appears more emotional than productive. It seems like the further away from free or low-cost admission a museum gets, the more the institution is vulnerable to criticism on grounds of not making their collections accessible or affordable. It's as if admission price is the only way to express accessibility and that accessibility is the only reason for a museum's being. Of course, accessibility is important. But, it's not -- and should not be -- the sole basis for a museum's admission price decisions. As Clare Ruud points out, pricing is a mission-based decision. There are diverse missions upon which museums are built...but all museums have some need to maximize revenue on whatever they charge or earn from admissions -- be it ticket price, suggested donation, or annual gift. That's why demand must be a baseline consideration for museum pricing strategy -- not just admission price setting but also the foundation for membership levels, "always available" discounts, and loyalty programs.  If there is no public demand, then not even a free or cheap ticket will get a visitor through a museum's doors. On the other hand, when demand is high, admissions increase. Many museums resist raising prices because they fear or assume there will be negative public or media outcry. We know from implementing hundreds of pricing strategies for clients over the past two decades that price increases are rarely noticed. Do complaints arise? Of course, but generally the public intuitively understands the fact that operating costs increase and price increases follow. This is particularly true for very popular exhibits; they require museums to charge more because it takes more to pay for the care and maintenance associated with large attendance. Done right...such a strategy suits the institution and the marketplace. 

 

Commentary: Is dynamic pricing hurting Major League Baseball attendance?

Lee Igel, Forbes magazine, 6/8/12

Perhaps to the delight of other teams' fans, average attendance for New York Yankees home games this season is down more than 3.5% year-over-year. That the Yankees misread the market is an entirely reasonable explanation. It also doesn't seem to help matters that the Yankees do not use dynamic ticket pricing. Most every other MLB franchise currently employs some form of this pricing system. But if Yankees ticket sales are a result of misreading the market and not using dynamic ticket pricing, then what explains the numbers across MLB? The Yankees are not alone in having trouble filling the ballpark for home games. [Dynamic pricing] strategies may have two key design flaws, both of which can be fixed:

1) The first flaw is there may be too many choices. Conventional wisdom is that human beings prefer to have as many options as possible because its gives us the freedom to choose. And that may be the problem. As the psychologist Barry Schwartz has explained, choosing between 175 types of salad dressing tends to paralyze a person's decision-making and leave that person dissatisfied. Can the same be said for ticket sales, especially when they include a daily (sometimes hourly) fluctuation in price?

2) The second flaw is that the pricing schemes ultimately shift the burden of pricing decision and activity from the franchise (the producer) to the fan (the customer). With variable/dynamic ticket pricing, fans are in a way tasked with trying to determine what is the right price for a ticket and, therefore, are effectively being put to work. Or may be this way of getting tickets is now fully integrated into "the experience."

Also, in the long-run, variable/dynamic ticket pricing may tax franchise personnel more than establishing ticket prices in the off-season and sticking with them for the 162-game slate. The traditional way requires relatively long-range planning, and is grounded in knowing what customers consider value and organizing to anticipate how they might react throughout a season. Now, with dynamic pricing, planning has switched to the short-term. How many successful businesses focused on "making numbers" today while sacrificing the needs of tomorrow -- and existed long enough to tell about it? The general point: stop making ticket sales so confusing.

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