Certain Habits

If you think about it, setting the right price for a professional sports ticket is a difficult problem. Right now, teams price tickets based on where you sit. A seat in the upper deck behind a pole is going to be less expensive, every game, than a first row seat behind home plate.

The trouble is that not every game is equally desirable. It might be more difficult to attend an afternoon or week night baseball game in early spring than to go to a game on a muggy August Saturday. Monday Night Football, Denver versus San Diego for control of the division is a more desirable ticket than a game against the hapless Lions.

A Texas start-up, Qcue, is using technology to rationalize sports ticket pricing. Specifically, they analyze prices and then use software to dynamically adjust ticket prices as the situation—the team’s record, opponent, even the weather forecast—changes :

Pricing for plane tickets, car rentals and hotels is constantly changing. Why not for sporting events, too? …

Today, teams typically set the next season’s pricing during the offseason.

“They might say, ‘Well, we had a winning season, so I think we can go up 3 or 5 percent,’ ” Kahn said. “Or because the economy’s rough, they might decide to go flat. There’s not a lot of science behind it.”

Qcue (pronounced “cue-cue”) said its software helps teams better price their tickets by analyzing variables that affect demand, such as the date of the game, the weather, the opponent, gate giveaways and whether the team is on a winning or a losing streak.

The software adjusts prices accordingly, meaning if your team is in a slump and the forecast calls for rain, you could be in for a deal on the ticket price. On the flip side, teams can ratchet up prices for seats that are in high demand.

Kahn said Qcue also minimizes the impact of scalpers, who buy tickets early when they’re cheaper and sell them later when the price goes up.

“Pricing is critical, but it has always been a guessing game,” Kahn said. “We’re providing the capability to do something about it, and we think it’s going to change the whole way that tickets are sold.”

Last spring, Qcue signed its first customer. Baseball’s San Francisco Giants hired the company to handle pricing of 2,000 seats at its ballpark. The team has said the program was so successful that it is considering expanding it to the entire park for 2010.

So, how inefficient is ticket pricing, anyway? If the Giant’s results are any indication, the answer is: very inefficient. In the test sections, dynamic ticket pricing increased sales 20%.

The most striking aspect of this story? This isn’t revolutionary technology. Yes, time and development went into designing the algorithm and analyzing ticket sales data. But people have been using software on the internet to change prices in response to demand for the last fifteen years. This isn’t a new invention.

So, what other areas of the economy can be made more efficient?