C&B Notes

Dynamic Pricing Goes to College

Dynamic pricing models are common in the travel industry, and they are increasingly becoming pervasive for concerts and in professional sports as organizations use real-time supply and demand information to accomplish the dual goals of maximizing revenue (for the “content” provider) and reducing secondary market activity (i.e. scalpers).   The approach is bleeding into college sports, with Michigan being the most prominent  that has decided to diverge from a pre-set price model.  Stanford has also recently announced a slightly different approach: a ‘predictable’ dynamic model.

Michigan is likely to generate close to $5 million of additional ticketing revenue as a result of their move to dynamic pricing… This additional revenue calculation assumes that 80% of their tickets are sold to season subscribers, or students, who are not subject to this dynamic price increase.

If you take out that 80%, 21,700 seats remain to be priced dynamically for each game.  We’re also working under the assumption that all of the tickets for high-demand games — Notre Dame and Ohio State — will sell out the day they go on sale.  This means that the majority of the economic impact will be realized via the on-sale.  For second-tier games like Indiana and Minnesota, there could be additional economic benefit as the event approaches if tickets are not sold out.  Nebraska — number 25 in the AP pre-season poll — could provide additional upside as well.  In addition to the ability to move prices up, their use of dynamic pricing also gives the university the ability to move prices as low as a $65 floor.

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Fans who want to attend a Stanford home game this year and don’t have season tickets will pay more on the day single-game tickets go on sale than those will pay to buy the same tickets a week later, the school will announce Wednesday.  Dynamic pricing allows teams to capitalize on the demand for their seats, with the idea being to leave less money for the resale business.

While dynamic pricing has taken off in recent years and has slowly moved into the college game, with Michigan announcing its single-game football tickets would be driven by that model this season, Stanford says its idea is something new: predictable dynamic pricing.  Michigan’s ticket price could move drastically with the whims of the marketplace, but Stanford’s model is predictable because the school will tell fans in advance how ticket prices will change by the day.

When single-game tickets go on sale Aug. 1, games against Notre Dame, Cal and Oregon will be subject to this model devised by Dave Sertich, who manages the athletic department’s business strategy and has a background in the financial world.  From Aug. 1-4, Notre Dame tickets will cost $140 apiece; that ticket drops to $125 on Aug. 5, $110 on Aug. 8 and $95 on Aug. 12.  Should there be any tickets remaining by Aug. 15, Stanford will sell the seats for what it determines to be market price.  Oregon tickets are a bit cheaper.  From Aug. 1-4, tickets to that game will cost $115, while every three days after that, the price drops $10 until it hits $85 on Aug. 12 before it reverts to market price.