A Flood of Responses To Lowering Ticket Prices

Monday’s article on the reduced ticket price initiative at the St. Paul Chamber Orchestra has generated a great deal of private responses from professionals inside the business. More impressive than the number of responses was the sheer variety of opinions, I simply can’t think of another issue here at Adaptistration which generated such an assortment of opinions. Everything from absolute support to condemnation has come through my email…

However, after separating the responses into four basic categories (“great idea”, “cautiously optimistic”, “cautiously pessimistic”, and “terrible idea”) and plugging the numbers into a spreadsheet I came up with the following (unscientific) results, illustrated on the chart to your right. I was sincerely surprised at the number of negative responses and even more intrigued that the reasons behind the negativity were almost as varied as the number of respondents. By comparison, the majority of positive email was centered on very similar themes.

Nevertheless, based on the sheer number of responses, it seems that a number of folks inside the business are going to keep their ear to the ground to hear what happens in St. Paul by the end of the season.

Another interesting point was the number of similar questions most individuals presented regardless if they were pro, con, or somewhere in-between. The most popular question was whether or not the money the SPCO has developed to subsidize lost ticket revenue was enough to cover what they expected to lose through lowered prices.

I don’t have an answer for that question and I’m sure that the SPCO won’t have an absolute answer until the end of the season. Regardless, the inherent nature of the question demonstrates some of the thinking out there. Obviously, you can’t run a negative revenue stream for any prolonged period of time and expect to maintain business as usually without finding replacement funds.

At the SPCO, if they end up running a negative revenue stream for the series of concerts which featured lower ticket sales by the end of the season, they’ll have to make the same sort of decisions that every orchestras faces at one point or another, albeit for a variety of different reasons. Essentially, they’ll have to raise ticket prices for 2006-2007, develop higher contributed sources, or do something in-between.

Personally, I hope they find enough subsidies to continue the initiative indefinitely, thereby turning it into standard procedure. If you’re a betting sort of individual, then that’s where I would encourage you to put your money because every orchestra is going to have to cross this same bridge at one point or another, unless they discover a way to sustain full houses while simultaneously increasing ticket prices at the hyperactive levels many in the business have grown accustomed to.

It’s similar to the quagmire many orchestras currently deal regarding the loss of recording revenue. Most orchestras saw the revenue slowly bleeding away but never focused enough attention on replacing the revenue stream until it was too late. The result was to engage in “contentious” labor negotiations while cutting some artistic and administrative corners.

As the 2005-2006 season comes to a close, we’ll revisit the good folks at the SPCO to see where things stand.

Postscript: Although I always enjoy private email messages, I would like to encourage all of Adaptistration’s readers to use the comment feature at the bottom of every article. You don’t have to attach your name to a comment, which is convenient especially if you’re concerned about office blow-back (this business is way too collegial for its own good). Many of the points in the private email messages I received would have been positive contributions for continued discussion, it’s a shame they weren’t submitted as comments.

About Drew McManus

"I hear that every time you show up to work with an orchestra, people get fired." Those were the first words out of an executive's mouth after her board chair introduced us. That executive is now a dear colleague and friend but the day that consulting contract began with her orchestra, she was convinced I was a hatchet-man brought in by the board to clean house.

I understand where the trepidation comes from as a great deal of my consulting and technology provider work for arts organizations involves due diligence, separating fact from fiction, interpreting spin, as well as performance review and oversight. So yes, sometimes that work results in one or two individuals "aggressively embracing career change" but far more often than not, it reinforces and clarifies exactly what works and why.

In short, it doesn't matter if you know where all the bodies are buried if you can't keep your own clients out of the ground, and I'm fortunate enough to say that for more than 15 years, I've done exactly that for groups of all budget size from Qatar to Kathmandu.

For fun, I write a daily blog about the orchestra business, provide a platform for arts insiders to speak their mind, keep track of what people in this business get paid, help write a satirical cartoon about orchestra life, hack the arts, and love a good coffee drink.

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7 thoughts on “A Flood of Responses To Lowering Ticket Prices”

  1. It is sad we are all struggling with how to market and sell one of the greatest human accomplishments in history – classical music. People are scared of it, think they don’t care for it and are suprised when both of those statements are proved wrong in their lives. It is like saying, “I hate spinach”. As you get older you realize, “Hey this stuff is not so bad.” I know that is a simple analogy, but classical music has got to figure out how to make itself accessible to the masses and fast. If that means finding underwriting from companies or individuals that value music, something with depth and character in society to fund a ticket initiative, then so be it. We have got to introduce and educate people that classical music is not completely high-brow (something they should be intimidated by), but another form of beautiful entertainment.

    Another note, it is not hard for a majority of society to think they don’t like something when they are constantly bombarded with marketing telling them to buy another product. The digital music world is also ignoring them – for the most part. Cheaper tickets will at least allow people to discover the artform.

  2. Okay, Drew, you moved me to comment in addition to the private email I sent. I’m probably in the “cautiously optimistic” camp overall, but I’m commenting because there are a few ways to begin to test the hypothesis that lowering ticket prices is a good (or bad) idea.

    One way, of course, is to perform an experiment as the SPCO is doing, and they’ll have a much better idea in a year whether that was a great or an awful idea. The risk is that they’re wrong and that the experiment costs them serious money (or perhaps damages music in some other way).

    Another way comes from a field called system dynamics. It involves creating a simulation model of how, say, SPCO thinks this will work. Often we understand the various pieces of the system we’re working with, but we’re not so good at understanding how the pieces fit together and create the results we see. Simulating the model can give us that added insight.

    Of course, there are parts of the system we don’t understand so well, too. Doing a sensitivity analysis on the model can help us understand which pieces are critical to success and should thus be understood well and which have fairly little impact on the overall outcome and can be relatively ignored.

    System dynamics isn’t a predictor of absolute truth, but it can help us see what effect policies (e.g., cheaper seat prices) might reasonably be expected to have on results (e.g., lower revenue in the first few years, followed by increased funding thereafter).

    For those not familiar with system dynamics, there are a number of available resources. I’ve assembled some links at http://facilitatedsystems.com/links.html#sd, and I’ve got some articles at http://facilitatedsystems.com/pubs.html#st .

    You may have other ways, too.

  3. When I joined Ottawa’s National Arts Centre Orchestra as senior marketing officer last May, I found I was blessed with fine sales reporting systems already in place.

    These tended to report the total sales for an entire set of concerts — say a week’s classical pair in our 2,138 seat multi-purpose Southam Hall.

    These summary reports did not include a lot of the more detailed breakout information we need for critical marketing decisions like pricing. Luckily, the data is all there and, with the help of a plucky intern, we were able to do a complete seating capacity utilization study of sales for our last completed season (2004/05).

    We looked at sales for each day of each series, broken out by subscription and single tickets. This gave us the complete picture of which sections were selling well — sometimes up to 106% of capacity (with sale of turnbacks) to as low as 52%. The top selling sections were always the “best” seats, with the lowest price rear/higher up/under balcony seats doing OK, and the very large sea of mid-price main floor seats lagging in all circumstances.

    Our analysis was that we now have essentially two audiences, at least in regards to prices. There are those who will buy what they perceive to be the “best” seats at almost any price, and another group who will buy the least expensive seats or — and this is important — not buy at all.

    Like many groups selling live classical music, it is diffcult and expensive to build attendance from newcomers. We believe that we have a significant number of people who would like to attend regularly but who do not, primarily for reason of price. They either cut back on frequency — to shorter series or just single event purcases — or do not attend at all. We feel that we can recapture a substantial portion of these people if we offer “real world” ticket prices and promote those prices well. This last point is important — how many organizations offer afordable prices but do not effectively promote them?

    (Note: all prices below are in Canadian Dollars, currently worth about 85 cents US.)

    So next year our regular adult subscrptions for a six-concert classical series in the balcony will go down from $141 to $99. That’s a 30% decrease, from $23.50 a ticket to $16.50 a ticket. There will also be decreases of about 16% in the next lowest price section. We will have smilar decreases in the Pops and Great Performers recital series.

    This is partly offset by greater than usual increases in the high-priced box and front Orchestra seats.

    All told, across all series, this represents a decrease in gross potential of ca. $200,000 at the subscription rates, an about 1/3 million at the single ticket prices.

    But is this really a decrease? Our gross potential was around $7 million, and our sales to these events around $4 million. Doesn’t that indicate that we were pricing for a scenario that did not exist — charging everyone who came for the empty seats?

    Conductor James Depriest has famously noted that we have two bottom lines, the financial and the artistic. I would add that the financial bottom line extends well beyond ticket revenues, and includes full (or reasonably full) houses. With 50% or more of our total income coming from contributions, won’t bigger audiences result in more contributions, both from the customers and from the government, corporate and foundation donors who see a living, organization in touch with its community? We have actively engaged our development team in this process, both for seeking sponsorship (a new “Balcony Club” is being established), and to track our anticpated sales increases as a sign of a growing, engaged organization worthy of support.

    This does not, either at the high-priced or low-priced end of the scale, effect that great a portion of our seats. The biggest sales challenge remains the large number of seats in the middle of the range which, here at least, are typically the last to sell. We have been very cautious about changes to these prices, since so much of our revenue comes from them.

    There are many “bariers to attendance” issues we either cannot address or only attect minmally or slowly, including programming, concert presentation and scheduling. But we CAN address both the real and perceived issues of pricing.

    It will be interesting to see our results!

  4. Rob commented that “Conductor James Depriest has famously noted that we have two bottom lines, the financial and the artistic.” I just read Jim Collins’ “Good to Great and the Social Sectors” (http://facilitatedsystems.com/weblog/2005/12/im-bubblehead.html). He’s careful to distinguish between financial inputs and purpose-directed outputs for groups such as symphony orchestras and other non-profits. He gives an interesting example of what The Cleveland Orchestra has done.

  5. Drew – What I’m dying to know is why are 3/4 of your readers not optimistic about this idea?

    The fact of the matter is, 100% sold-out halls will NOT fix the financial problem facing ANY orchestra in America. Who has not figured this out yet? Expenses are increasing at a FAR greater rate than you can mark up tickets or decrease your marketing budget. Clearly the SPCO is grabbing the bull by the horns. Hoorah!

    Further, the current “best practice” classical business model WILL put orchestras out of business in the near future. That’s a fact. A F-A-C-T! (There are “hush-hush” studies that GUARANTEE this people! See the “white elephant” on the table. *hint*)

    So, the SPCO tries something new…and you HATE it?!? Geez!

    As Chad pointed out…”Cheaper tickets will at least allow people to discover the art form.” Price often keeps people from trying classical music. …and there are PLENTY of people NOT trying classical music (for a slew of reasons…price is at the top of the list.) What if we eliminate that obstacle and, over time, see if those people are willing to give $10, $50, $100 a year? Do you have a better idea? Let’s hear it…

    The arts ain’t Corporate America people. We can’t completely change our product lines to appeal a new younger customer. (Well, ANYTHING is possible…but not without sacrificing artistic integrity and that totally defeats the art we’re trying to preserve.) We have about 400 years of music to work with and the general public can name you about 2 composers from that period. There are plenty of business practices to learn from corporate america but the business model can’t be the same!

    So we must figure out a way to get accessible (within reason) and yet be authentic to what we really are; an art gallery filled with music. Many people desire to experience something cultural. But if they’ve never tried classical music, why would they spend $30 PER TICKET for something they’ve never heard about; let alone understand? So let’s bring the prices down so the risk is low. You believe people will love your favorite music if they just hear it, right? Well then, let’s see!

    Be brave, people! Don’t hate. Don’t fear. Since the comments don’t seem like people are afraid that the SPCO is doing something that will put them (America’s only full-time chamber orchestra) out of business, then I’ll assume it’s because they’re afraid that others will challenge or question THEIR strategies. Or, maybe they have no ideas and they’re afraid of that.

    Classical music is broken. Shouldn’t we do ANYTHING until we find the magic bullet?
    Yes, the industry MUST change.

    Maybe I’m not surprised that 3/4 of the people are pessimistic. Change is difficult and scary. Let’s embrace those organizations that can try something that may just save us all.

  6. Thank you for your comment Josh, although I’m sorry to say that I’m not at liberty to disclose the specific content from any of the email messages sent to me. I like to allow readers the ability to write in knowing that their letters of a personal nature will be kept confidential (I doubt anyone would want to write in if they feared I’d publish every least word they send to).

    Nevertheless, I did feel strongly enough that the overall sentiment from those notes should be conveyed (since they were so many in number and so strong of conviction) in order to continue a worthwhile discussion. Of all the hot-button issues within the business right now, ticket prices are certainly one of them and apparently, there’s no shortage of opinion.

  7. It is heartening that there has been so much reaction to the story on our pricing initiative. Our industry needs more debate and vigorous discussion about important issues related to audience development. It is important in considering this initiative to consider the context. Our Neighborhood series was in decline, maybe even dying. Not doing anything was as risky as the path we ultimately selected. Does this sound familiar? In some ways our industry faces this same issue.

    It is also important, in terms of understanding the context of our decision, to recognize two of our basic assumptions. First assumption: our future depends on our ability to make people fall in love. That’s right — our business model is based on people falling in love with our music. They fall in love and they make gifts, some quite large, and they also volunteer and get others to give. In order to thrive in the future we need to help more people fall in love. It will not be as easy to accomplish this as it once was because societal trends are not aiding and abetting our cause.

    Second assumption: the size of our audience matters, particularly whether it is increasing or decreasing. Why should institutional funders give the same amount, or more, if our audience is in decline? Why should donors make significant endowment gifts to an art form that is in decline as evidenced by declining audiences? Anyone who thinks that the size of the audience, and whether it is increasing or decreasing, does not matter to funders is engaging in the kind of wishful thinking that has felled many businesses and industries.

    In lowering the prices in our Neighborhood series we were attempting to knock down one barrier to people trying the music. You can’t fall in love without taking the first step. In lowering the prices we were also attempting to make it easier for people to come more often. Frequency is an important ingredient in developing a passion for what we do. Finally, in lowering the prices we were attempting to increase the size of our audience, which is critical to our ability to thrive in the future and conversely, will be our downfall if left uncorrected.

    Here is a summary of the results of this initiative to date:
    •1200 more subscribers in the Neighborhoods than in the previous season
    •When you combine contributed revenue in support of this initiative with ticket revenue, we have generated MORE revenue than in the previous season.
    •In the previous season, halls were 63% full in the Neighborhoods; this season we are projecting to be 80% full.

    In summary, this initiative has been a success to date. We recognize that we are only in the first year and that the long-term results remain to be seen. However, the initial results are promising and we hope that our learnings will benefit the entire industry. – Jon Limbacher, Vice President for Development and External Affairs, The Saint Paul Chamber Orchestra

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