Discussion: To expand your audience, ditch subscriptions and try dynamic pricing

Playwright Theresa Rebeck & Center Theater Group's Michael Ritchie, Howlround.com, 6/12/11

Theresa: Do you vary your ticket prices?

Michael: Yup. It's across the board. We have subscription packages; we have early buys; we have $20 tickets at every single show; we have medium priced tickets that we change on different nights; we do dynamic pricing like the airlines where demand will change.

Theresa: Oh, that's cool. I've always wondered why people didn't do that. If you have a hot show with Captain Kirk in it, charge an extra ten bucks.

Michael: It's tricky to pull off though -- to suddenly start raising the price when you're selling out. But we're doing that now. The other thing that kills me about the subscription model is that you end up running your bombs and closing your hits because a year and a half in advance you've decided how long the run is going to be. So you've got a shitty show and it's going to run for 8 weeks when you can close it in four and you've got a huge hit that could run 14 weeks but you're closing it in eight.

Theresa: That's crazy.

Michael: It kills me.

Theresa: So there's still no solution to that yet?

Michael: What's hard is that there is a solution to it, and this is what Lincoln Center [Theater] does with their membership program. They don't plan a season. They go from show to show and depending upon demand will run it or close it. Going from a subscription model to a membership model is difficult to do in a seamless way. That's one of the things we're trying to do with Douglas Plus -- push our subscribers into a membership model so that we can do it at the other theaters too.

Theresa: ...I keep thinking, you have to bring the tickets down. They famously lowered prices at the National [in London] and they sell out all the time now. Is that model just impossible in America?

Michael: That I don't know. I know it was a big deal when the National went to the ten-pound ticket. It was completely underwritten by Travelex so finding a sponsor to do it was part of it. All that government underwriting of the arts skews the equation too.  When I arrived [at CTG] we had 19 different discount ticket programs -- senior citizens, pay what you can, rush tickets, student tickets...and most of them had restrictions -- bad seats, you couldn't return them, you couldn't exchange them. When I came in I said, we're going to put in $20 tickets, that's it. That's the only discount program. $20 is reasonable; it's twice the price of a movie. They have to be reasonably good seats. They have to be available online and you have to be able to exchange them. They're just lower priced tickets. We immediately started selling more tickets because of that.  The fear was that the people buying $80 tickets would start buying $20 tickets, but that didn't happen. The people who are buying $80 tickets are happy buying $80 tickets. So you're not cannibalizing your existing audience -- you're bringing in a newer audience and it's generally younger.

Point: Is dynamic ticket pricing the cure for waning subscriptions?

Mike Boehm, The Los Angeles Times, 7/6/11

More arts groups are adopting dynamic pricing, in which the cost of a ticket escalates for hot-selling shows, while slack demand brings bargains. Arts presenters have watched warily over the last decade or so as their customers have been less willing to buy subscriptions, and have waited longer to purchase tickets to individual shows.  Among other things, dynamic pricing is a way to re-train all but the least price-conscious arts-goers to start buying early again. If customers know that prices for the hottest shows will rise if they wait, they would be motivated to get in at the ground-floor price, or to buy a season's subscription before single tickets go on sale and the roller coaster ride begins.  Philippe Ravanas at Chicago's Columbia College said he's been preaching dynamic pricing to nonprofits since seeing the role it played in helping the Chicago Symphony dig out of a financial hole in the early 2000s. He notes a vast increase in receptivity since late 2008.  "Before the financial crisis, the idea was perceived as rather inappropriate for all sorts of reasons," Ravanas said, "from 'this would never work' to 'it's completely unethical' and 'we don't have the time.' I've seen a radical change in the willingness to experiment, to explore and adopt more sophisticated pricing policies since the economy collapsed." 

Counterpoint: Dynamic pricing can make subscribing more valuable

Rick Lester, TRG Arts blog, 6/7/11

After two years of our working together, Vancouver's Arts Club Theatre Company (ACTC) grew its subscription and single ticket revenues by nearly $3 million, an increase of nearly 70%.  Dynamic pricing delivered a six-figure chunk of the income contributing to this success. But dynamic pricing is NOT the story. The real news is how in just two seasons ACTC achieved:

·         33% increase in ACTC's full, renewable 5- and 6-play main series

·         $5 more revenue for every ticket sold through a theater re-scale

·         32% reduction in the number of comp tickets distributed

·         Earlier, faster sales of hot shows

In the process, ACTC debunked some myths and misconceptions that - sadly - have become part of the industry's conventional wisdom. ACTC's story tells us: Subscriptions are alive and well. Flexibility is no panacea. People don't automatically buy late. Done right and well, dynamic pricing can generate loyalty and incremental revenue. Ultimately, dynamic pricing became one tactic that made subscribing more valuable. ACTC stopped believing and acting on negative assumptions that had become self-fulfilling prophecies. When theystarted acting differently, so did their patrons.

Commentary: Dynamic pricing is a better alternative to offering discounts

L. Corwin Christie, Technology In The Arts blog, 6/13/11

Unlike regular discounting or promotional pricing, the dynamic ticket model would enable organizations to price each production -- and even each performance -- strategically and, perhaps, more realistically. Instead of offering incentive discounts, both the organization and the audience would be able to gauge expectations for a show based on the ticket prices.  Last year, an article in Sports Business Journal did a great job outlining the way that dynamic pricing works at the San Francisco Giants' AT&T Park:

"Dynamic pricing structures can provide significant cost savings for fans over original list prices for lower-demand games, and for teams, provide another means to help fill seats, generate additional concession revenue and potentially upsell that fan into a larger, future purchase. And for higher-demand games, dynamic pricing provides teams a revenue maximization tool to capitalize better on that heightened fan interest."

So actually, dynamic pricing could give us in the performing arts a real understanding of how our work is valued. We make a lot of guesses, some educated, some not, to try and figure out what the "best" price is for the work that we produce. Could dynamic pricing remove some of the mystery, and help us maximize both the number of tickets sold and the revenue generated?  Some may balk at the idea, as Diane Ragsdale does in this article.  She likens dynamic pricing in the non-profit arts sector to soup kitchens charging for certain perks. What an unfortunate and offensive comparison. Non-profit arts organizations are businesses, regardless of their tax status or their primary sources of funding, and selling tickets is a fundamental component of what they do. As Lori Kleinerman of the Goodman Theatre remarks in her compelling talk, "We are aware of our civic responsibilities as a not-for-profit institution, so it's important that we are accessible while still optimizing our income."  As we lament the decline of ticket sales, the loss of revenue when we discount with programs like Groupon and LivingSocial, and the oh-so-onerous epidemic of last-minute-ticket-buyers, why not consider dynamic pricing as an alternative model for revenue generation? After all, we may be "non-profits," but that doesn't mean that we aren't subject to the supply and demand curves that drive for-profit business economics.