This article is cross-posted on Ticket News and Americans for the Arts' ARTSblog.
Photo: Marja van Bochove
Harry Truman famously expressed a desire to consult only with “one-armed economists”. Our 33rd President wasn’t fond of counsel that began "On the one hand, this..." and was followed by "On the other hand, that..." Truman wanted straight talk without equivocation.
So, here is a bit of economic straight talk from the data vaults of TRG Arts. Forget everything you learned in that Econ 101 class you took in undergraduate school. You can also forget what you learned at Business School. It doesn’t apply to tickets.
Competitive Freedom
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| Conventional wisdom: A higher price (P1) results in a lower quantity sold (Q1), whereas a lower price(P2) results in a more sales (Q2). |
But, supply and demand curves do not apply to the world of selling tickets. Those curves depend upon an “open market” of goods and prices. Corn, wheat and hamburgers are sold in huge open markets. There are vast numbers of buyers and sellers who are free to compete for the exchange of goods and services.
Price subject to desire.
This condition of competitive freedom does not exist when selling tickets.
For example, nonprofit organizations are run by volunteer boards who set, approve or use their clout to influence prices – prices that these same board members pay when they attend the performances presented by their organization. That’s just one reason why the best seats are frequently undervalued.
Another is arts managers’ false sense of what the market will bear. Their gut tells them to keep prices down even when their own sales histories demonstrate that prices could go higher.
Then there’s commercial ticket pricing. Invariably, price is based on the top price a producer or presenter wants to get regardless of who or what is onstage or when and where the performance takes place.
The box office monopoly is dead. Until recently, tickets were exclusively sold through a primary ticket office controlled by the venue or the producer/presenter. This single portal created a near monopoly.
Today, too many arts organizations, especially in the commercial world, have ceded management of their seat inventory to outsiders. That’s why it’s so easy to get a cheap ticket from discounters online or a hot ticket online from resellers. Organizations that rely on ticket brokers may be “moving seats” but without regard to the loss of value – both in revenue and patron relationships.
Where can I get another Madama Butterfly tonight?
In conventional economics, the issue of “substitute products” impacts price and demand. You can bet that when McDonald’s runs a $1 burger promotion, every other fast food chain down the road is going to scramble to match or respond to the price change. That’s what competitive freedom promotes: the ability to gain a share of the increased demand.
In our industry, if you want to see Madama Butterfly this weekend, the only substitute in town is likely to be a baseball game or DVD from Redbox. It is the rare community that offers dueling operas every night of the week.
Most arts organizations exist in a world of few if any product “substitutes”. Choices simply aren’t readily available and therefore have no impact on price.
Arts consumers don’t buy a price.
Simply put, price seldom impacts demand in the arts.
If price were a significant deterrent to attendance, this fact would come screaming out of the data. In fact, decades of study have shown that price may affect choice of seat, not whether or not a patron will buy a ticket.
Most organizations perform in scaled houses. There are a wide range of price points offered for every performance, typically ranging from very expensive to downright cheap. Without exception, the most popular seat locations are the most expensive. There are, of course, arts consumers who gravitate to less expensive seats, but demand always is hotter at the top. Waiting lists for the best seats grow proportionally with price increases.
The hardest seats to sell? Those priced at a moderate price point. It’s not about price – it’s about the emotion that surrounds the perceived quality of the seat location.
Programming always matters.
It’s programming, not price, that most impacts arts consumer demand. A performance of Beethoven's Symphony No. 9 will always outsell an All-Scriabin Festival. That’s not to say an all-warhorse season is the answer. Every program finds an audience. Large or small, that audience will pay the asking price to occupy seats for the programs they want.
The art of pricing right is correctly anticipating (and exploiting) when customers perceive a scarcity of seat supply or anticipated increase in ticket price. Then, the demand curve moves in presenters’ favor. The belief that a ticket is hard to get or unavailable will always drive up both demand – and prices.
If you want to test the theory, try to buy a ticket for tonight’s performance of The Book of Mormon on Broadway.
Posts
This post needs to be required reading for everyone in a box office.
ReplyDeleteThanks, Tim! Glad you liked it.
DeleteI think arts patrons may have more catholic tastes than you give them credit for. I'm a huge Leonard Cohen fan, but a good seat to his upcoming concert here in Portland costs close to $200. At that price, I'll shed a tear and go to a ball game or rent a DVD from RedBox instead. Point is that, with a few exceptions (thoise being the obsessive fanatics), arts exhibitors are competing across genres. Unlike McDonalds, which couldn't care less what Le Fanci Cuisines is charging for its filet mignon tonight.
ReplyDeleteWhile I agree that the approach to pricing the arts cannot be the same as pricing fast food, I am more inclined to agree with the "unknown" commenter above - arts consumers may have multiple choices for their time and dollars when the arts scene in the area is more vibrant. Sure, maybe there isn't a competing production of Madama Butterfly in town, but there might be another theatrical or music production whose cost is lower and is valued as highly. We learned from focus groups with single ticket buyers that even though they would have loved to see our production, they could see 5 movies for the cost of one ticket to our show. Arts experiences tend to be categorized as discretionary spending in many people's budgets, and so if someone commits to spending a generous $200/month on arts/entertainment, the choices in a vibrant market can vary wildly. Someone might reason that they'll enjoy the free blues concert in the park as much as the night at the opera - and as a matter of fact, I had a few people share that the free concert sponsored by our local municipality (with nationally known performers on stage) was a much more desirable bet for people looking for something to do on a weekend - and so our $50/ticket price point on the average budget does have serious competition. Certainly, the uniqueness of the art experience, the desire for one kind of experience over another, may help motivate buying decisions to help fill houses - and yet at any given time, patrons in our market may have a range of theatrical (or other performing art) opportunities each week to choose from in a wide range of prices. Art consumers MAY buy on price when they have lots of choices and limits on what they can spend.
ReplyDeleteAdditionally, availability of seats can also significantly impact price and urgency to buy: if you program an edgier, lesser known work but your venue's seating capacity is the same as ever, how do you confront the reality that seats are always going to be available because 450 people are not going to come to every performance, even though in your estimation, 200 is a great crowd? Our local baseball stadium was deemed by some to be "overbuilt" as there were very few sellout games in this market. (Football here is a different story.) But the point is: pricing the arts is a challenge.