How Did Dynamic Ticket Pricing Become a Subject of Investigation?
Entertainment destinations, theme parks, music festivals, and sporting events, attract millions of visitors yearly. The entertainment industry is a major contributor to the global economy, generating billions of dollars in revenue annually. According to Statista, the media and entertainment market value reached 2.32 trillion U.S. dollars in 2022. Except for the year 2020 due to the consequences of the COVID-19 pandemic, rigorous quarantines, and lockdowns worldwide, the live events industry was shut, ticketing slowed down for a minute and revenue massively dropped.
This dramatic recession in the live entertainment industry has not affected the overall revenue of the entertainment industry. The continuous increase that has been happening for years is only a percentage-wise lower than predicted. Industrial wizards have found ways to entertain people worldwide in the most possible humane way but still ensure profit, by shifting the focus to streaming and virtual concerts.
To this day, certain sectors of the entertainment industry still struggle, as well as not as famous and successful individuals and companies from live music sectors. Yet, live events bounced back fully. Even more, the ongoing year has been announced as another blockbuster year for the industry, following the magnificent Beyoncé’s world and Taylor Swift’s US stadium tours in 2023. The live event industry has not only recovered but even surpassed its pre-pandemic economic peak, largely due to excessive demand.
How Much Would You Pay To See Your Favorite Artist Live?
According to an Economics Observatory article, surveys and interviews conducted among young adults show a strong necessity for social interaction, enjoyment, and cultural enrichment that live events offer among this particular group.
According to the wishes, possibilities caused by the current world economic situation, and consequences caused by the pandemic, many are saving for big live events and being ready to give ridiculously large sums of money for a ticket.
Demand for big live events has been hard to be met lately. The cheapest tickets are sold in a matter of seconds after the release, mostly to be resold afterward for astonishing sums of money. We can take the mentioned Taylor Swift’s tour as an example. The cheapest resale tickets costs were 700% more expensive than originally sold.
The consumers of live entertainment events in the US, aged 16 to 69, would open a credit card for an event, or purchase a ticket on a payment plan, according to the Variety Vip + Live Music survey conducted in August 2023.
Yet, many concertgoers worldwide are audibly outraged by rising ticket prices and blame Ticketmaster’s pricing strategy.
Ticketmaster Dynamic Pricing
Dynamic pricing is a pricing strategy that adjusts ticket prices in real time based on various factors. Ticketmaster has revolutionized the way tickets are priced and sold, offering a more dynamic approach to ticketing by applying its dynamic pricing algorithms. Pricing is influenced by historical sales data, current demand trends, venue capacity, and even external factors like weather forecasts or performer popularity.
Is Dynamic Pricing Legal?
While dynamic pricing can sometimes lead to price fluctuations that may seem unfair or surprising to consumers, it is generally considered a legitimate business practice. As long as companies follow laws and regulations related to pricing transparency, consumer protection, and fair competition, dynamic pricing is permissible.
However, there are instances where dynamic pricing practices may be disputed. For example, if pricing strategies are estimated to be deceptive, discriminatory, or anti-competitive, they may face legal or regulatory challenges. Additionally, companies must ensure compliance with antitrust laws and regulations to prevent collusion or price-fixing practices that harm consumers or suppress competition.
Is Dynamic Pricing Ethical?
The ethics of dynamic pricing can be debated and often depend on the specific context and implementation. On one hand, dynamic pricing can be seen as a fair way to allocate resources, optimize revenue, and respond to fluctuations in supply and demand. However, certain ethical issues often arise regarding dynamic pricing strategy:
- Price Discrimination – dynamic pricing can result in different customers paying different prices for the same product or service based on income, location, or purchasing history. While some forms of price discrimination may be justified (e.g., discounts for students or seniors), others may be considered unfair or discriminatory.
- Transparency – lack of transparency in dynamic pricing practices disturbs consumer trust and leads to frustration. Consumers may feel manipulated and fooled if prices change often without a clear explanation or justification.
- Exploitation – dynamic pricing can benefit from consumer urgency or desperation, especially if demand exceeds supply (e.g., during natural disasters or emergencies). In such cases, consumers may feel forced into paying inflated prices for essential goods or services.
How Did Dynamic Ticket Pricing Become a Subject of Investigation?
The Ticketmaster affair surrounding Taylor Swift’s Eras Tour raised questions about the legal and ethics of dynamic pricing practices. Economists and the artist’s fun base joined in criticizing Ticketmaster’s dynamic pricing accusing them of boosting exclusivity, failing to adequately prepare for expected extreme demand by optimizing customer buying experience, and therefore abusing its market power.
Another controversial fact is that Ticketmaster controls about 70% of the ticketing and live events market and over 80% of major concert primary ticketing. This implies that this company has no objective competition and certainly did not base its price strategy on matching competitors’ prices but purely on surge pricing. These days all this escalated to the lawsuit by the Department of Justice for alleged monopoly in the live ticketing industry.
Dynamic Ticket Pricing Takeaway
Correctly implementing dynamic pricing strategies drives revenue growth while ensuring customer satisfaction. The main takeaways for businesses regarding dynamic pricing in any industry, not just ticketing, are listed below.
- Understand your audience and tailor pricing strategies to meet the needs and preferences of different customer segments.
- Utilize dynamic pricing to adapt to changing market conditions and optimize revenue.
- Balance fairness and profitability to ensure customers perceive pricing practices as fair and equitable.
- Incorporate value-based pricing strategies to offer different tiers of service and benefits to customers based on their willingness to pay.
- Leverage data and analytics and gather insights into customer behavior, market trends, and competitor pricing.
- Communicate pricing changes clearly and proactively to customers to build trust and minimize backlash as transparency is key.
- Align pricing strategies with customer expectations and deliver value beyond just the price of the product or service.
After all is covered, the famous assertion often used by economists that demand dictates has been confirmed. However, as ticket prices continuously rise and economic conditions force us on discretionary spending, a million-dollar question is can the live music business maintain its momentum for years to come?
