It’s an old story, but one which has become more relevant in recent years: someone in the administration has a plan for audience development but it would initially require losses and results aren’t expected for at least a few years; of course, that’s assuming there are any positive results at all. So how do you sell an idea which necessitates a year or two of red ink?
At the St. Paul Chamber Orchestra, they’ve embarked on an initiative to lower ticket prices for their Neighborhood Series. Although the SPCO performs 2/3 of their season at the Ordway Center for the Performing Arts, the ensemble has always performed at a variety of locations around the St. Paul and Minneapolis metropolitan areas. With eight concerts events over four locations, the Neighborhood Series comprises the remaining 1/3 of their season; consequentially, reducing ticket revenue in any direction is something their bottom line will immediately notice.
According to Jessica Etten, SPCO’s Director of Marketing, subscription and single ticket sales for the remote Neighborhood Series concerts had been in a steady decline over the past five years. In order to determine the cause for the drop off, Jessica said they conducted some market research.
“Although the [Neighborhood Series] prices have only gone up over the past five years around 1-3%, the big jump was in the late 80’s when we matched Ordway prices,” Jessica said. “[During the 2004-2005 season], the price structure between the Neighborhood Series and Ordway were nearly the same. Our research indicated that the price of tickets was a significant issue for the decline in sales.”
Jessica went on to say that in the 2004-2005 season the average attendance for Neighborhood Series concerts had dropped to 63%. However, instead of following the path most orchestras take and raise prices for the remaining audience to generate flat revenue, the SPCO decided to lower prices in the hopes of winning back non-renewing ticket buyers as well as bring in new listeners. According to Jessica,
“This dying series need something, but we didn’t approach this with a viewpoint that if we sold higher percentages at lower prices we would increase earned income. Instead, we decided that lowering ticket prices to attract a larger audience would be a calculated risk to help a sagging series we didn’t want to eliminate. The new goal was to simply expand the audience.”
In normal circumstances, taking a financial hit in earned income is a tough sell, but in the SPCO’s case it is a serious gamble. Two years ago, the organization teetered on the edge of bankruptcy but they avoided that outcome by reducing the size of their staff and persuading the musicians to accept a $10,680 (or 16%) cut in salary.
Now, barely a year past that traumatic event, the organization now sought to institute a program which promised to lower earned income. Fortunately, the administrators turned to their musicians in order to garner support for their plan.
“The musicians were part of a ticket price task force,” said Jessica. “Those individual players involved in this process were strong supporters of the plan.”
One of the musician members on that task fore was Thomas Kornacker, co-principal second violin.
“In addition to sitting on the ticket price task force I also serve on the orchestra’s finance committee and board of directors. Each of those departments dealt with the decision related to ticket prices at one level or another,” said Thomas. “When we discussed this program throughout each of those committees, we looked at it as a long term project. We put together financial projections and knew there was a substantial risk involved but we also knew there was no way to sell enough tickets to buy ourselves out of financial distress.”
Once the administrative committees came up with plan, Thomas said the ticket price task force members presented it to their fellow musicians during one of their monthly meetings.
“There wasn’t total unanimity for the initiative but the overall support was there for the decision.”
I asked Thomas if the taskforce took an official poll or allowed the musicians to vote on whether or not they should formally encourage the initiative in order to help demonstrate their overall support.
“As a rule, participation in discussions during our monthly meetings usually does not result in taking votes,” said Thomas. “We didn’t take a vote among musicians in order to gain a clear mandate on this issue but we do try to work by consensus.”
Fortunately, the initial results have been very positive. According to Jessica Etten, the 2005-2006 Neighborhood Series has started out with an average subscriber attendance of 76% and they expect that figure to end up over 80% after they factor in single ticket buyers. On the whole, they’ve had over 1,100 new Neighborhood Series subscribers, many of which are families.
“The underlying rationale is that we are starting to consider patron revenue not only ticket sales but also donations. The more regular patrons we have, the better opportunity there is to increase single gifts to the orchestra,” said Thomas. “And everyone on stage is noticing that there are quite a few families in the audience,”
According to SPCO assistant concertmaster and Orchestra Player’s Committee chairperson, Leslie Shank, that’s an accurate assessment,
“Many of the players really didn’t know what to think about the initiative, but everyone notices the increase in family members and playing for fuller houses is absolutely a boost for everyone’s morale.”
It’s good to see the SPCO move in a direction where strategic direction isn’t dominated by cumulative ticket revenue. Annual rescaling of the house may result in flat or slightly higher revenues from smaller overall audiences, but it will eventually lead to a slow death.
Considering the benefits of maintaining a higher average attendance through lower average ticket prices in a dynamic light will only result in long term positive outcomes. Fortunately, the administrators at the SPCO are attempting to lessen the impact of lower ticket revenues by following one of those dynamic paths often espoused here at Adaptistration: subsidize the loss of ticket revenue through dedicated sponsors.
Using their “Donate the Difference” campaign as a fundraising vehicle, the SPCO development department has secured $50,000 over two years from the McKnight Foundation and another unnamed foundation is giving the SPCO $50,000 over three years to help reduce the loss of ticket revenue. Although it’s unclear exactly how much of the ticket revenue difference those donations will subsidize, it’s decidedly a move in the right direction.
Unfortunately, the SPCO isn’t taking advantage of a few simple procedures their development department could use to help sell the campaign to additional contributors: they have no plans to conduct audience research to verify the impact of lowered ticket prices and the musicians neglected to take an official vote of support during their discussion about the initiative.
Donors like seeing tangible results of their support. Having quantifiable data along with direct quotes from ticket buyers not only satisfies current donors but it opens the door to potential donors who have reservations over a philosophically based audience development initiative. Likewise, being able to categorically demonstrate through an official poll and/or vote that a sizeable contingency of the entire musicianship support the idea enough to trust their managers during a time of financial stress would have been a gold mine in development and PR capital.
The good news is that the lack of follow-up research can easily be rectified before the end of the season and it’s never too late to allow the musicians an official opportunity to express their support through certified means.
In the end, almost every orchestra will need to cross this same bridge. The business can’t expect to grow audiences while ticket prices escalate out of control. The SPCO is moving in the right direction by dealing with the issues now instead of waiting until it’s too late. Furthermore, they are taking a much better approach to the problem (by deciding to actively seek donors to replace reduced revenue streams) as opposed to the Cologne New Philharmonic method of providing lower cost tickets by casting off sponsorship and consciously failing to pay their musicians a living wage.