With all of the recent talk of dynamic pricing, we’ve decided to repost a 2006 article. Maybe we were just too far ahead of the curve.
Pollstar wrote about dynamic pricing here. It’s still a good read. For those who are tired of clicking, we’ll post below.
Ed Neiss, the longtime general manager of the Fox Theatre in Atlanta, made a prediction at the Concert Industry Consortium in February.
He was a few months away from retirement and, while participating in on the Small Hall Managers panel, he speculated where the industry was heading.
“Yield management is on its way,” he said. “It’s the old story of supply and demand.”
The price of a ticket would be determined by the consumer, not by a promoter’s estimation of what the market can bear. Yield management is a paradigm that is familiar to airlines – the price of seat is determined by the demand for the flight, the season, gas prices and practically every other factor imaginable. Could there be a day when concert tickets are determined by similar forces?
“Well, considering it’s happening today, I don’t think [Neiss is] very far off,” Ticketmaster executive VP David Goldberg told Pollstar. “Frankly, the auctioning of tickets is just that: the user places the value on that particular row or that particular section.”
Less than 20 years ago, multiple price points at a concert was a space-age concept. Everyone thought the “gold circle” – the name of the first section to have a higher price than the rest of the room – would go empty, Goldberg recalled.
“Everybody thought the sky was going to fall in,” he said. “Lo and behold, those were the seats that sold immediately.”
Recently, an artist sold out an arena in California in 20 minutes with a healthy resale on eBay, but rumors had it that the same artist had a slow sale at a U.K. arena because patrons thought the tickets were overpriced. Every market is different and even the best promoters have to use a little mojo to gauge the right pricing.
Yield management would go a long way to solving the variables, but could there really be a groundswell toward a new protocol where every seat in the room has its own price point?
“I don’t necessarily believe we’re going to get to, for all shows, a truly dynamic marketplace where people bid on every seat,” Goldberg said. “But I think there’ll be a lot more sophistication applied by the pricing of tickets and price levels.”
StubHub – the secondary market ticket broker that garners a spectrum of opinion – recently featured its service at an INXS show in Santa Barbara. The company put every seat of the 700-capacity Lobero Theatre up for auction. Each had a starting price of $1. Fifty VIP tickets that included a meet and greet sold for an average of $300. The back of the room went for about $20 and the average ticket price was around $50.
There have been concerts that have been on the auction block, but this was the first one not for charity. The experiment might be modest in comparison to what could be on the horizon, but it can now be recorded that a concert was 100 percent auction.
“This is absolutely a milestone,” StubHub CEO and founder Jeff Fluhr told Pollstar. “Not only is it the first time the entire venue has been auctioned, but it’s the first time the auction started at a dollar price, where the fans set the price by the amount of supply and demand. You’ll continue to see things like that from StubHub and probably other players.”
Since 2002, artists including Britney Spears, Justin Timberlake, and Clay Aiken have sometimes given their 10 percent ticket allotment to StubHub, Fluhr said – sometimes providing the tickets with the understanding that they would be resold for charity. More and more often, though, artists are reselling them to reap some extra coin from the secondary market buyers.
It’s a part of life that, soon after a show goes on sale, many of the choice seats appear on StubHub, eBay or other sources. The markup could be modest or extravagant, but artists, managers, promoters and building operators would certainly like a piece of the pie.
Dynamic ticketing would give them some of that income, although some people believe there are already deals between the primary and secondary markets that don’t show up on the books.
Industry insiders say brokers come in many guises: some are “season ticket holders.” Others are “fan club members.” Many tickets that are allotted to sponsors and other business associates wind up on the secondary market, sources say.
Tim Leiweke, CEO of Anschutz Entertainment Group, says there will be further merger of ticket auctioning with face value purchases, but he doesn’t foresee a day when the seats of Los Angeles’ Staples Center would be 100 percent auctioned.
“You might be able to do it in a small hall but when you’re doing a 16,000-seat show at an arena, that is a lot of time and energy somebody is going to have to spend before they ultimately get to a point where they know what it’s going to cost to win the bid,” he told Pollstar.
“In our industry, we probably have too many people that have found a way to get in the middle of this who have no vested interest. I believe people are paying money to go see an artist, that promoters are ultimately putting up large sums of money to guarantee that artist, and facilities are ultimately spending huge amounts of money to create world-class environments for that concert.
“To have a fourth piece added here, where you have ticket brokers, brokerage companies, etcetera, that are beginning to take a large chunk of money off the table and not share it with the artist, not share it with the promoter, not share it with the building – I think that’s what’s going to have to change.”
Jim Guerinot, manager of Nine Inch Nails, Gwen Stefani, The Offspring and Social Distortion among others, is cautious of auctions. He said his clients are more apt to keep their prices affordable to attract core fans. NIN realized that its fan club was a “velvet rope for brokers,” which meant that a lot of fair-weathered concertgoers ended up attending the shows rather than the true fan base.
Trent Reznor preferred seeing the extra money going to charity than to brokerages or non-fans, Guerinot said. The model was changed and fan club members got a special entrance and received tickets after they entered the venue.
“There’s no time for any resale and no opportunity to put it into a different name,” Guerinot said. “And because of that, we have eliminated the secondary market. The only people who have a problem with it are those participating in the secondary market who are not our core fans and we don’t care if they get the tickets anyway.”
He has been contacted several times by artist reps interested in the model, Guerinot said.
Although TM’s Goldberg could not see a day when dynamic ticketing would be the end all, be all, he is a strong advocate. It’s not as “rock ‘n’ roll” as set pricing, he admitted, but said it’s the answer to many ills.
“I’m passionate about this subject and I believe I feel passionately for the right reasons,” he said. “I’d like to see this money get returned to the artists, the promoters and the venues – all the people who actually participate and make this industry great.
“Hopefully, more money staying in the industry means more bands get developed and all the good things that we all need to have happen. And I really believe that maximizing proper yield management will help our industry overall.”