Rafi Mohammed

The Federal Reserve Tries to Solve the Hannah Montana Ticket Pricing Challenge

Posted on October 31st, 2007 (1 Comments)

Taking a respite from worrying about the economy, housing market, and keeping Wall Street happy with low interest rates, the Richmond Federal Reserve recently opined on the market for Hannah Montana concert tickets.

Revealing my age, I had to learn exactly who Hannah Montana is. Hannah Montana is a television series about a teenage girl, Miley Stewart, who leads a double life as a famous pop singer – Hannah Montana. As it turns out, tickets to see a Hannah Montana concert are hot! While the face value of her tickets run between $26 to $56, Hannah Montana tickets sold on ticket reseller StubHub’s website average $237 – beating the resale ticket price for popular concerts like Bruce Springsteen, Van Halen, The Police, and Genesis.

As I’ve discussed in previous blogs, there are many reasons why rock stars may want to keep prices low. Performers may set low prices because they want to come back next year for another concert and to promote new material – they don’t want a high price today to dampen ticket sales tomorrow. Prices are often low due to demand uncertainty. It’s better to set prices on the low end to avoid the embarrassment of poor attendance. And finally, many stars want to keep their prices affordable to reward loyal fans.

The Federal Reserve’s solution to Hannah’s pricing challenges is to auction tickets. Some tickets would be auctioned off to the highest bidders and the remainder sold at fixed prices. While some performers auction off a handful of the best seats in the house today, implementing an auction for 10,000 tickets could be tedious.

Why not use yield management to sell concert tickets? Much like car rentals, hotels, and airlines, the price is set by demand at that moment. These yield management prices fluctuate until the concert starts. What would result is that much like on an airplane, fans sitting next to each other will have paid a variety of prices. Prices can be increased if the show is unexpectedly hot and lowered if sales are slower than expected.

In addition to yield management prices, if an artist wants to offer some below market priced tickets - they can do so at a set time. For example, an artist may allocate 50% of their tickets to be sold at a low price - these tickets will be available on a first come, first serve basis at 10 AM at Internet, phone, and store outlets.

This system also helps to better scale the house. Concerts often offer 2 different prices (high and low). Within the high ticket price bracket, there’s a big difference between first row center and the last row before the cheap seats. Yield management can help scale the house by making pricing distinctions between different seats within a section.

This is a “working idea” I have for a big pricing issue in today’s market. I welcome and will appreciate your feedback on this idea.

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Readers' Comments on This Blog Entry

From Bill Taylor on November 4th, 2007
The Hannah Montana concert in Columbus, OH was the fastest selling concert for this area. It sold out in something like 7 minutes.