Monday, October 26, 2009

ARCHIVE: Welcome to airline pricing at the ballpark (YUCK!)

by Kellia Ramares

[Originally published on my baseball blog on January 5, 2009]

News Item from

The Giants ... will become the first Major League team to use a "dynamic" pricing structure, in which the team adjusts ticket prices up to the morning of a game based on market demand. [The Rockies do some price adjustment the day of the game but the Giants program is more full-out airline style pricing--KR]. By using a computer model created by Texas-based qcue, the Giants can shift ticket prices -- up or down -- based on the market demand for the game. Among the factors that could influence ticket prices are team performance, the starting pitcher, promotional giveaways or an opponent's team performance.
qcue's website says: "qcue exploits the synergies between the primary and secondary markets by integrating elements of airline pricing and NASDAQ trading into current selling platforms, providing primary sellers the ability to dynamically price-to-market while hosting a seamlessly integrated secondary market."
Does anyone out there really like airline pricing?

An article in Sports Business Journal showed how truly amazing, in a bad way, this idea is. The Giants are paying qcue for pricing help on "2,000 seats in AT&T Park’s outfield bleachers and upper deck, the last ones to sell for Giants games," according to Russ Stanley, the Giants' vice president of ticket services. Do the Giants really need to spend money on computer analysis of the obvious?

Those seats are most distant from the action, and in the case of the bleachers, are benches that are highly exposed to the elements. The people who buy them are generally the poorer members of the fan base. Even if they have season's tickets, they are out there because they don't have money for better season's tickets. So lower the prices and keep them down and you will have a better chance of filling those seats without doling out money to Texas Ph.D entrepreneurs. What you are paying them might be better invested in the contract of a third baseman! A better team on the field will bring in more fans. 

The Sports Business Journal also reported that qcue ran a test in late 2008 and said that the Giants could have lowered prices to the September series with the Diamondbacks to move more tickets. I could have told them that for a lot less than they are paying qcue. I was at that series. (Ask the fans! Now there's a revolutionary concept!) The first two games were at night, in the cold. The first game was competing with the Raiders (football) home opener. The Giants were out of contention and the D'Backs were swooning. Do you really need a computer to tell you that this is not an attractive situation and that lower prices might make it more inviting? Couldn't you see it coming, knowing the September nighttime weather, the football schedule, and the Giants likelihood of contending that late in the season well in advance? Didn't anyone in the Giants' ticket services department take Common Sense 101 in school? 

The MLB article also spelled out a number of ticket price decreases at AT&T Park in 2009, but one fan commenter said, "funny how all the seats being lowered are ones that are less likely to be sold on any given day." That can cut both ways. Making them cheaper might sell them. But if they likely won't sell anyway, then the price reduction is a sham. 

I have been watching this sort of "dynamic pricing" game evolving in baseball for years. I raised the issue of ticket prices with Eric Byrnes a couple of years ago on local sports talk radio and he spoke of the time when he broke in with the A's and they had $1 Wednesdays. You could sit in the third deck for a dollar and buy a hot dog for the same price and they would have 40,000 people in the stands. As a player and a fan of the game, Byrnes was excited to see and play for such a large crowd. 

A few years later, the Wednesday ticket prices were $8, and when the Red Sox came to town, the price went to $10. And there was a service charge for buying playoff tickets AT THE BALLPARK! (We see "Convenience Fees" when we buy tickets online, but for what convenience are we paying a service charge if we are standing in line at the box office? C'mon!) 

Then the A's tarped over the third deck entirely. What happened to the idea of bringing 40,000 people to the ballpark on a Wednesday afternoon? 

And, of course, "premium pricing" is now staple in MLB. Certain games against certain teams or on certain days cost more. Tickets for the weekend games between the Giants and Diamondbacks are pricier than the weekday games between the same two teams just because it is the weekend. (This seems counterintuitive because one would think you have many other entertainment options on the weekends). 

According to a San Jose Mercury News article on the "dynamic pricing" scheme, the Giants want to "protect" the season-ticket holders and group sales ticket buyers who bought at face value, so discounts will be small, even when qcue's computer model says the team should hold a "fire sale". (A night game against a bad team would be an obvious "fire sale" scenario. Heck, any night game in April or September should qualify). So you'd better believe that fans will see higher rather than lower prices most often under this model. 

The Mercury News article also said that Giants' ticket exec Stanley wasn't entirely convinced  when qcue's CEO originally pitched the plan but "[t]hen Bonds hit 756 on a Wednesday night against the Nationals, and I said now I know what he's talking about. This is probably the highest-demand game we've ever had at this ballpark, and it was our lowest-priced ticket." One cannot exactly predict when a record will be set. Dynamic pricing would have the bean counters salivating over such events as prices could be raised in anticipation of the record setting event for however long it takes to finally achieve the mark. 

I can see how this type of pricing can hurt the integrity of the game. Suppose late in the season, the Giants are out of contention but Tim Lincecum is going for his 20th win, and is scheduled in LA against the Dodgers, who are still contending for a playoff berth. Might the Giants ownership pressure manager Bruce Bochy to hold Lincecum out until the Giants get back home so that they can dynamically-price upward Lincecum's bid for 20? I would expect a baseball man like Bruce Bochy to say "no", but that "no" may cost him, and some other manager in the future might not be so scrupulous. 

(BTW, I am not suggesting that the Giants would be any better or worse morally on this issue than any other team. I am using them because they are going to use dynamic pricing. If you follow another team, picture how a similar scenario could crop up with them because I expect this program to catch on as premium pricing for certain games did). 

Call me cynical for thinking that way--you'd be right--but by qcue's own admission, they are putting elements of NASDAQ trading into their price analysis and how can anyone not be cynical about Wall Street these days? 

Dynamic pricing is actually a move further down the road to personal pricing that is being developed in the supermarket industry. Exactly 5 years ago, I interviewed Dr. Katherine Albrecht, Ed.D., executive director of C.A.S.P.I.A.N.- Consumers Against Supermarket Privacy Invasion and Numbering. She is a leading activist against RFID (radio frequency identification) chips. But her organization started with its campaigns against supermarket loyalty cards. In our interview, she described an experiment where shoppers carrying loyalty cards (which, thanks to RFID could be read through the wallet or purse of a shopper) that would relate the shopper's buying history to a "smart shelf" which would flash an item's price to the shopper as he or she passed by. The price would vary according to the shopper's history with the store. For example, a "good" customer who buys high-priced items would get a break on peanut butter. A "bottomfeeder," i.e. a single parent, fixed-income senior, or impoverished student who always looks for a bargain would be charged a premium on the same peanut butter. The store doesn't want that kind of customer anyway, so either "bottomfeeders" will pay through the nose or go away altogether; either result is desirable from the store's point of view. 

As our surveillance society grows, I can see that sort of thing happening at the ballpark. For example, if I tried to buy a ticket, either online or at the park, with a credit or debit card, the computer could glean my payment history from the card and say, in not so conversational terms, "Kellia Ramares. She only comes to the ballpark for Diamondbacks games, buys little or nothing to eat and never buys souvenirs. Raise the price of that left field bleacher seat so that what she pays more closely reflects the average amount that we want fans to spend at a game."

It's only a matter of time.