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Why hasn’t dynamic pricing taken off in music?

While dynamically priced tickets are the norm for many sporting events, they haven't yet achieved the same penetration in the concert sector. IQ asks why

By Jon Chapple on 15 Dec 2016

Justin Bieber, DeShaun Craddock, dynamic pricing

Justin Bieber's upcoming show Cardiff's Principality Stadium is dynamically priced on TM Platinum


image © DeShaun Craddock

If 2016 will be remembered in the live music business for any one thing, it will be as the 12 months in which the pitchforks well and truly came out against secondary ticketing.

It was the year of the Waterson report and the Bots and Boss Acts, of FanFair and #ResaleNO, and the year in which Italy surprised the world by announcing plans to outlaw ticket touting altogether.

Although most of the industry – with, of course, the exception of the secondary sites themselves – agree on the desirability of minimising touting, it remains divided on the best way to do so. Italian-style legislation is one possibility; as is blocking individual sites, as has happened in Belgium.

Another is the dynamic pricing of tickets, in which prices fluctuate based on market demand – already common for sporting events, as well as in the booking of airline tickets and hotel rooms. Despite market leader Ticketmaster throwing its hat in the dynamically priced ring for select tickets in 2007 – followed by then-CEO Irving Azoff calling for more dynamic pricing in music – the practice has yet to find widespread acceptance in the live music industry, despite its obvious potential for making the for-profit secondary market far riskier for touts, if not redundant altogether.

The reason for that, says Barry Kahn, the CEO of Qcue, a leading developer of dynamic pricing software, is primarily logistical: “From our side, it’s a challenge working with [concert] promoters because ticketing relationships run through venues: for example, Madison Square Garden with Ticketmaster,” he explains. “If you’re an artist coming through MSG you don’t touch the ticketing system.”

Kahn says the majority of his current clients are sports teams, with “not a lot of dynamic pricing on the concert side”. While he is clear he “[doesn’t] want to say it doesn’t justify the fees” – “I’ve never seen a client that didn’t have a large positive on ROI [return on investment],” he says – he admits “it is a more expensive proposition” to dynamically price tickets, and for that reason is more popular for long runs at a single venue.

“I’ve never seen a client that didn’t have a large positive on ROI”

Manager Adam Tudhope – co-founder of Everybody’s (Mumford & Sons, Laura Marling, Keane) and a prominent anti-touting campaigner – says he “doesn’t doubt that it [dynamic pricing] might be one of the tools that people use alongside other ones [to minimise touting] – and I say good luck to them”.

Tudhope says it’s important that artists and promoters are upfront with their audience – that if they do decide to dynamically price, they let fans know the reason ticket prices are fluctuating – and that the ‘demand’ determining prices isn’t fixed by the secondary market.

“The ethical stance when selling tickets to fans is to be as transparent as possible,” he says. “If an artist and their business advisors think the audience can afford to pay more – and they want to make more money out of the show – then as long as they’re straightforward with their audience about what their offering is, I don’t see a problem with dynamic pricing.

“Doing it via secondary is underhand and rips off the fan, because they don’t know what the whole market has to offer.”

Ticketmaster UK, which dynamically prices most of its high-profile shows under the Ticketmaster Platinum banner, tells IQ its Platinum tickets aren’t pegged to how well shows are telling on its secondary platforms (Seatwave, Get Me In!). “Platinum prices are based on the demand,” explains managing director Andrew Parsons. “We place a portion out for sale starting at what we estimate market price to be; this is based on previous experience and our data tools. We also gauge market price on how quickly the initial allocation sells – we change price as we release more seats.”

Parsons says dynamic pricing is suitable for multi-venue tours, as opposed to just residency-style shows, explaining that the company can easily “manage it across multiple promoters and venues”.

“There are often many decision-makers involved … It can sometimes be challenging to get everyone on the same page”

While Parsons says he’d “love to think” there will be a time when Ticketmaster’s general-admission (GA) tickets are also dynamically priced, he explains it’s much easier to implement with premium seats. “With Platinum there’s a clear differentiating element: you’re selling the best seat,” he says. “That’s understood by both consumers and artists. It’s harder to do when it’s GA.”

Greg Loewen, CEO of Qcue rival Digonex, says he believes take-up of dynamic pricing in live music is being affected by a false belief among many promoters that dynamic pricing is an unreliable or unproven technology.

“Pricing is really hard, especially for a tour,” Loewen tells IQ. “Every night is in a different market and a different venue. Optimising pricing under those conditions is extraordinarily time-consuming and challenging, and not many dynamic pricing tools are designed to handle that level of complexity, so promoters may assume there is no reliable way to dynamically price a tour.” He insists that isn’t the case: “We hope to talk to those folks!”

One of Digonex’s live-entertainment partners is a well-known American comedian, who has seen significantly increased ticket revenues as a result of adopting dynamic pricing. “When we started out, his manager was concerned about the price going up too much,” explains Loewen. “But because of his popularity, we’re now seeing significant growth in ticket price – and we haven’t had a single complaint from any consumers.”

Despite the success stories in sports and live comedy, both Loewen and Kahn admit dynamically pricing live music is more difficult.

“There are often many decision-makers involved: promoters, agents, venue management, artists,” says Loewen. “It can sometimes be challenging to get everyone on the same page regarding a significant change like adopting dynamic pricing. It takes time.”

“As promoters we spend far too much time having to discuss ticketing and allocations – time that could be better spent on marketing and selling shows”

Former Metropolis Music director Conal Dodds – now running Crosstown Concerts with Paul Hutton and Fraser Duffin – says he can’t see it becoming commonplace in touring. “I think [it] works on theatre runs, and could work on festivals and residencies, for instance, but it would be incredibly complicated to strike a deal on the basis of one-off shows or tours where more than one promoter is involved,” he explains.

While Crosstown is committed to minimising touting for its shows – and has an exclusive ticketing partnership with Songkick to that end – Dodds says, as a promoter, he just isn’t interested in getting into the nitty-gritty of ticketing, gradually or otherwise: “As promoters we spend far too much time having to discuss ticketing and allocations – time that could be better spent on marketing and selling shows, which is where we all earn our monies.”

Kahn believes in order for dynamic pricing to see wide adoption in live music, “you need a restructuring in contracts”, with promoters “properly incentivised to take more risks” via a more generous share of the show’s revenue. At the moment, he says, there’s “too much risk and not much upside for the promoter”, leading to the temptation to “purposefully” pass tickets to secondary sellers.

There’s also the thorny issue of the potential for dynamic tickets to drop in price if the demand isn’t there. “Bands,” says Kahn, are simply “unwilling to drop prices… How often does that happen?”

Parsons says the eradication of ticket touting is “very much up there” in the considerations of those artists who do opt for at least partial dynamic pricing. “We’ve had discussions with artists who think it’s a problem,” he explains. “There’s a growing appreciation that you do need to take some steps [to minimise resale], and one of them is dynamic pricing.”

He adds there’s still “almost a stigma” about taking more money from fans, even in a “world where there’s no [income from] recorded”: “If you [artists and promoters] don’t take this money, other people will – you’re the ones with the creativity and who are taking the risk.”

“If you don’t take this money, other people will”

Loewen, too, is firmly in the Michael Rapino/Professor Waterson camp when it comes to the pricing of primary tickets, opining that “the level of activity in the secondary market suggests that many tickets are not priced efficiently”.

“Many view dynamic pricing as code for ‘price gouging’,” he says, “and are concerned about alienating their loyal fans with primary ticket prices that are perceived as too high.

“This is an understandable concern, although we all see that in instances of excess demand many fans will still pay the higher price – the only difference being that more of the profit is captured by the secondary market as opposed to the artists.”

He adds that dynamic pricing “isn’t only about increasing prices: sometimes it’s about lowering them too.  It’s about finding the ‘right’ price that more accurately reflects true market demand and is fair to consumers.”

Tudhope, however – who has spoken of his wish to see ticket touting criminalised in the UK – isn’t wholly convinced. “Dynamic pricing, ethically done, might be appropriate for some of my artists’ audiences, and not for others,” he concludes. “This is the main point, and an important argument to make against the secondary sites who say ‘put on more shows!’ and ‘make your ticket prices higher!’.

“If the artist and I decide that there should only be one show, and that it be priced reasonably, that should frankly be our choice – not down to a market that is completely skewed by the often-illegal practices of touts.”

 


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