What Price Vertigo? 04/2008-5342 This case was written by Ioana Popescu, Associate Professor of Decision Sciences at INSEAD. It is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright © 2006 INSEAD N.B.: TO ORDER COPIES OF INSEAD CASES, SEE DETAILS ON BACK COVER. COPIES MAY NOT BE MADE WITHOUT PERMISSION. This document is authorised for use only in the following programme: FB5721 at City University of Hong Kong - 4th November 2023 - 30th March 2024 - by Prof Stephen SHUM. Any unauthorised use or reproduction of this document is a copyright infringement. Vertigo & U2 On March 28 2005 in San Diego, U2 kicked off Vertigo – its 2005 world tour named after the first single from their new album, ‘How To Dismantle an Atomic Bomb’. Source http://www.macphisto.net/ The Irish band collected three Grammy awards for Vertigo: best rock song, best performance by a group with vocal and best short form music video. U2 claimed their sixth UK Number One on February 13, 2005 with 'Sometimes You Can't Make It On Your Own', beating Elvis Presley’s 'Wooden Heart’ to the top of the singles chart. For the past two decades, U2 has charted success on its own terms, not just on the artistic, but also on the business side of the music industry. U2's world tour was the top-grossing trek of 2005, according to figures from Billboard Boxscore.1 Vertigo reported $260 million revenues and drew more than 3 million people to 90 concerts, all of which were sell-outs. U2’s price strategy was defined on a worldwide basis for their tour. Ticket prices averaged US$90 (and down to US$49.50) on the low end and US$165 on the high end. As usual with U2, lowest priced tickets were on the floor: "The best seats are the cheapest, and we want people to get excited," said longtime U2 manager McGuinness. The first North American leg of the concert ran for two months, visiting 13 cities, ending in Boston in late May. Vertigo 2005 arrived in Brussels on June 10th for the first of 24 scheduled European performances, finishing up in Lisbon. The band stayed in Europe through midAugust, and then returned to North America for another run of 30 arena dates. More details can be found on the official Vertigo site http://www.u2-vertigo-tour.com/ (see also Exhibit 2). U2 played at the Stade de France on July 9th and 10th, 2005. Presale for U2 subscribers (a US$40 annual membership) started on the official U2 website on February 1st 2005 for the first concert, and March 1st for the second. Sales via other distributors started a few days later. Stade de France www.stadefrance.fr Built to host the World Cup in 1998, Stade de France is the biggest sports arena in France, boasting over 80,000 seats. The Consortium Stade de France (CSdF), a consortium of leading building companies manages the facility based on a 15-year build-operate-transfer (BOT) contract. 1 Billboard Magazine, December 24, 2005. Copyright © 2006 INSEAD 1 This document is authorised for use only in the following programme: FB5721 at City University of Hong Kong - 4th November 2023 - 30th March 2024 - by Prof Stephen SHUM. Any unauthorised use or reproduction of this document is a copyright infringement. 04/2008-5342 Depending on the event, CSdF has different roles in the pricing and marketing of the venue. For football and rugby matches, ticketing is managed by the relevant federations, with CSdF playing an increasingly involved consulting role. CSdF also manages certain events, such as the mega-production Journey to the Center of the Earth, in celebration of the centenary of the death of Jules Verne. In productions like this, CSdF manages the entire event, which includes defining tariffs, promoting the event and distributing the tickets. In most cases, CSdF manages ticketing based on the constraints imposed by the producer, with CSdF’s pricing power depending largely upon the producer’s bargaining power. Some brands are so strong that they can practically command any price and fill any stadium. For other events, such as Trophée Andros or Turandot, CSdF proposes a pricing scheme and a promotion strategy to fill the stadium and maximize revenue. Distribution Stade de France distributes tickets through four relevant channels: • Loyalty schemes with France Billet (FNAC + Carrefour). France Billet is the leading French retailer, with 80% of the market, and gets about 35% of tickets discounted by 712%. • Company programs. About 25% of tickets are sold to companies (Comités d’entreprises – CE) that re-sell them to their employees at lower prices, as the CE picks up part of the cost. The company discount is typically 8 to 11%, depending on ticket categories. • Intermediaries. These are allocated 10-15% of the tickets and re-sell them to smaller collectivities. The selling price to these intermediaries is typically 9 to 15% below the full price. • Direct to consumers. The remaining tickets are sold at full price via various channels, such as the CSdF website, box offices, Ticketnet, etc. Seating Categories Stade de France has roughly 80,000 seats across several categories, including logia, VIP, gold (Carré Or) and up to four seating categories. The allocation of one particular seat to a category is done mainly based on physical attributes and location in the stadium, but it also depends on the nature of the show (see Exhibit 1). Logia and VIP seats are very comfortable arrangements, with access to a private bar and dining room, etc. They are typically sold to corporations as part of high-value hospitality packages. A further option, standing general admission (GA) tickets on the lawn, allows spectators to be very close to the scenes and have the opportunity to dance. Vertigo at Stade de France – Study Questions 1. What are the levels of differential pricing for Vertigo at Stade de France? What are the relevant market segments? What other segmentation strategies can you propose? What threats to these strategies do you identify? Copyright © 2006 INSEAD 2 This document is authorised for use only in the following programme: FB5721 at City University of Hong Kong - 4th November 2023 - 30th March 2024 - by Prof Stephen SHUM. Any unauthorised use or reproduction of this document is a copyright infringement. 04/2008-5342 2. U2 – Pricing for fans: the fans always go for the GA tickets (“the best seats, also the cheapest”). U2 is debating whether to offer discounts to U2.com members for GA tickets. There are 10,000 U2.com members in France, and U2 believes that they would all would show up if entrance was free. Members are mostly low-budget teenagers and students, so the most that any of them could afford to pay for a GA ticket is €80. Hence, demand for members can be estimated by the linear model DM=10,000–125P. For the general public, demand is estimated as DG=40,000–200P. For security reasons, no more than 20,000 standing tickets may be sold at the SdF. a) Is it a good idea to give discounts to members, and if so what discount is most profitable? In general, when is it a good idea to discount member tickets? b) If U2 were to charge a single price for GA tickets, what would it be? Which customer segments benefit from differential pricing? c) The band feels it would not be fair to give more than a €30 (or $40) discount to members (so as not to encourage people to buy U2 membership just for the concert discount). What prices should be charged then? 3. Market research identifies that some of the older U2 fans who buy GA tickets are willing to pay extra for a seated option in the lawn (GA) area. Fortunately, SdF can provide flexible configurations that combine a standing zone at the front with a seated zone at the back. They estimate that on average two seats displace 3 standing people. Demand for seated arrangements is estimated as Ds=22,000–100P, and for non-seated DN=20,000– 100P. How many seats should be added and at what prices? State and criticize the assumptions of this model, and propose potential improvements. Copyright © 2006 INSEAD 3 This document is authorised for use only in the following programme: FB5721 at City University of Hong Kong - 4th November 2023 - 30th March 2024 - by Prof Stephen SHUM. Any unauthorised use or reproduction of this document is a copyright infringement. 04/2008-5342 Exhibit 1 Stadium Configurations for Vertigo and Turandot (opera) Prices on Ticketnet: Carré (Parterre) Or €116.50 Category 1: €92.30 Category 2: €69.20 Category 3: €58.20 Category 4: €47.20 Source: http://www.u2achtung.com ________________________________________________________________________ Prices on Ticketnet: Carré (Parterre) Or: €110 Category 1 Tribune: €85 Category 1 Parterre: €85 Category 2 Tribune: €60 Category 2 Parterre: €60 Category 3: €35 Source: http://www.stadefrance.fr Copyright © 2006 INSEAD 4 This document is authorised for use only in the following programme: FB5721 at City University of Hong Kong - 4th November 2023 - 30th March 2024 - by Prof Stephen SHUM. Any unauthorised use or reproduction of this document is a copyright infringement. 04/2008-5342 Exhibit 2 Vertigo 2005 in Europe EUROPEAN DATES AND TICKETING INFORMATION June 10th Brussels – King Baudouin Stadium June 12th Gelsenkirchen – Schalke Stadium June 14th Manchester – City of Manchester Stadium June 15th Manchester – City of Manchester Stadium June 18th London – Twickenham Stadium June 19th London – Twickenham Stadium June 21st Glasgow – Hampden Park June 24th Dublin – Croke Park June 25th Dublin – Croke Park June 29th Cardiff – Millennium Stadium Buy U2 Vertigo Concert Tickets 2005 July 2nd Vienna – Ernst Happel Stadium July 5th Katowice – Slaski Stadium July 7th Berlin – Olympic Stadium July 9th Paris – Stade de France July 10th Paris – Stade de France July 13th Amsterdam – Arena July 15th Amsterdam Arena, Netherlands July 16th Amsterdam Arena, Netherlands July 18th Letzigrund Stadium, Zurich, Switzerland July 20th San Siro, Milan, Italy July 21st San Siro, Milan, Italy July 23rd Rome – Olympic Stadium July 27th Oslo – Vallehovin Stadium July 29th Gothenburg – Ullevi Stadium July 31st Copenhagen – Parken Buy U2 Vertigo Concert Tickets 2005 July 3rd Munchen – Olympic Stadium July 5th Nice – Parc de Sport Charles Ehrman July 7th Barcelona – Camp Nou July 9th San Sebastian – Anoeta Stadium July 11th Madrid – Estadio Vicente Calderon July 14th Lisbon – Alvalade Source: http://www.u2ticket.com/ Copyright © 2006 INSEAD 5 This document is authorised for use only in the following programme: FB5721 at City University of Hong Kong - 4th November 2023 - 30th March 2024 - by Prof Stephen SHUM. Any unauthorised use or reproduction of this document is a copyright infringement. 04/2008-5342 To order INSEAD case studies please contact one of the three distributors below: ecch, UK and USA ecch UK Registered Office: www.ecch.com Tel: +44 (0)1234 750903 Fax: +44 (0)1234 751125 E-mail: ecch@ecch.com ecch USA Registered Office: www.ecch.com Tel: +1 781 239 5884 Fax: +1 781 239 5885 E-mail: ecchusa@ecch.com Boulevard de Constance, 77305 Fontainebleau Cedex, France. Tel: 33 (0)1 60 72 40 00 Fax: 33 (0)1 60 74 55 00/01 www.insead.edu Centrale de Cas et de Médias Pédagogiques www.ccmp-publishing.com Tel: 33 (0) 1.49.23.57.25 Fax: 33 (0) 1.49.23.57.41 E-mail: ccmp@ccip.fr 1 Ayer Rajah Avenue, Singapore 138676 Tel: 65 6799 5388 Fax: 65 6799 5399 Printed by INSEAD This document is authorised for use only in the following programme: FB5721 at City University of Hong Kong - 4th November 2023 - 30th March 2024 - by Prof Stephen SHUM. Any unauthorised use or reproduction of this document is a copyright infringement.