Dynamic Ticket Pricing in Pro Sports Leagues: What it Means and Why it’s Important to Performing Arts Organizations

As a follow-up to our previous article about the Fan Freedom Project, we’ve decided to discuss a somewhat new and controversial ticket pricing strategy to the sports and entertainment industry: dynamic pricing. FFP recently published an article via Sonic Rising regarding the use of dynamic pricing in the NBA, so we’ve decided to do a little more investigative research on the topic.

What’s Dynamic Pricing?

The term “dynamic pricing”, also known as real-time pricing, is a pricing practice that allows companies the flexibility to adjust the pricing of online products and services on the fly in response to the customer’s interest and demand.

Dynamic ticket pricing has been widely accepted in some industries (such as travel, tourism and energy) and is now making its way into the sports and entertainment industry. Patrick Rishe, Director of Sportsimpacts and contributor to Forbes, said that “dynamic pricing boosts the revenue maximization goals of sports organizations” and this proves equally true in the entertainment industry. Dynamic pricing is all about boosting and maximizing revenue through the customer’s perceived value of an item or event.

How’s Dynamic Pricing Affecting Pro Sports Leagues?

Dynamic pricing is increasingly becoming more popular among professional sports leagues; in fact, the NBA, NHL, MLB and NFL are all at various stages of implementing and testing this pricing strategy. And of course, the perceived value of tickets to a game for almost any team in any sports league can be determined by a team’s ability to win.

The Toronto Raptors provide a perfect example of this, as ticket sales have taken off since reaching playoffs last season. According

to Tom Pistore, Vice President of Ticket Sales at Maple Leaf Sports and Entertainment, they’ve already sold an extra 3000 season tickets and boosted their sales in every other category for the 2014-2015 season. As Anthony Lipschitz, StubHub’s manager for Canada, said, “if a team performs well, demand and interest is higher. We see this in all sports, and playoff runs help.”

However, the Toronto Maple Leafs are an interesting exception to this general rule. According to Tiq IQ, a New York-based ticket resale aggregator, the median price for a Leafs ticket is $373.50 USD. This is more than double the NHL league average of $162.89 USD. Their tickets are easily the NHL’s most expensive team in the resale market, even though the team hasn’t won a championship since 1967 and has only qualified for playoffs once in the last five seasons.

Why is Dynamic Pricing Important to Performing Arts Organizations?

Well, for starters, we are already seeing dynamic ticket pricing make its way into the entertainment industry for live theatre and music events. The more in-demand the artist, theatre troupe or musical act is, they more revenue their event tickets can generate. And, although it is not real-time variable, this change in strategy can be seen in performing arts organizations through the more mainstream use in tiered pricing (link to previous article). Better seats can easily bring in more revenue because they are perceived as more valuable and in-demand than less desirable seats (such as those with poor sight-lines or are further away from the main-stage).

Whether it’s professional sports leagues or community theatre, the perceived value and demand for tickets can do absolute wonders for the bottom line!