ticket pricing revenue yield management | pay per view price discrimination | research and development

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Op-tix™ Optimization Pricing for Entertainment Inc., is a research company focused on developing econometric methods that will rationalize the pricing of both perisable and imperishable entertainment products.
 
For example, tickets for The Rolling Stones tour sold for $350 through the primary ticket outlets, yet ticket brokers charged $2,000 per ticket in secondary markets, such as eBay.com.
 
Our ticket pricing research team collected data and analyzed prices for Eric Clapton’s sold out concert 2007 in Oklahoma City, OK. where tickets were sold at a face value of $65 and $85 through Ticketmaster.
 
Secondary markets found demand could yield as much as $700 per ticket.
 
We determined that over $250,000 in surplus revenue was not captured by Clapton. See attached white paper: A Case Study: How To Rationalize Concert Ticket Pricing, Journal of Revenue and Pricing, Palgrave MacMillan, 2008

 

The primary data we collected has generated, statistical links between prices and demand for tickets.

 

Previous ticket pricing strategies which consider fixed costs and apply them across a certain base of customers to calculate ticket prices lead to sub-optimal pricing as demonstrated by the presence of brokers and empty seats.

 

Specifically, we have found that tickets must be sold for a wider array of prices, and we are developing an exponentially priced schematic to estimate an optimal set of prices to reduce the differential between primary and secondary ticket prices, capturing more revenue for concert artists.

Our research in the pay-per-view market: An Analysis of Pricing Pay Per View Events, revealed that  PPV events are haphazardly priced, naively presuming that cost determines the price.
 
Traditionally, a single-part price is set such that the revenue collected from that universe of customers known to PPV events, at least covers average cost.
 
Indeed, once many of these events are produced, the production costs have been incurred (sunk), leaving distribution costs, which are often trivial.  For example, the cost of selling another unit is approximately zero, being largely a billing cost.               
 
Such pricing strategies are sub-optimal for several reasons.  First, this presumes the goal is zero profit, as pricing is set so that revenue equals cost.  Second, it ignores factors affecting willingness to pay.  Third, it erroneously treats incurred and to-be-incurred costs symmetrically. 
 
Theoretically, prices should reflect intensity of customer demand: the more fully variation in demand can be exploited, the more profit will be generated.
 
A more effective strategy ignores these sunk costs and allows for market-sensitive pricing, based on demand and yet-to-be-incurred costs.

 Op-Tix™ uses a technical pricing model that employs econometric techniques to determine what variables influence a customer’s willingness to pay, and determines those price/quantity combinations to rationalize pricing to eliminate price differentials between the primary and secondary markets, or determine the profit-maximizing-price to more effectivel price-discriminate in each market, to capture more revenue for the performing artist.