A Tale Of Two Ticket Prices

Recently, two orchestras located on opposite coasts have shared some PR spotlight for the same reason: ticket prices…

On the East Coast, the Baltimore Symphony Orchestra has been drawing attention to a new subscription ticket program that offers discounted tickets thanks to a $1 million grant from the PNC Foundation. On the West Coast, the Seattle Symphony found itself in local newspapers thanks to a steep hike in subscription ticket prices for targeted seating areas.

Ticket price has been an ongoing issue here at Adaptistration and these two issues are representative of the discussion.

To begin with, kudos to Baltimore for seeing the light and actively seeking funds to subsidize ticket prices. However, I think some of the comments from BSO President and CEO, Paul Meecham, in the 02/27/2007 edition of the Baltimore Sun were a bit over the top, such as:

“The staff came up with a really radical approach to pricing to encourage more people [to come] into the hall,”

Henry Fogel, president and CEO of the American Symphony Orchestra League, got in on the act as well. The Sun quoted him as saying

“a number of orchestras, small and large, have begun to take seriously the whole issue of pricing.”

Radical approach? Orchestras taking the issues of ticket pricing seriously? I’m not certain how radical of an approach locating funding to subsidize ticket prices is; perhaps calling it obvious would be more accurate. Furthermore, I’m not the least bit surprised to hear that orchestras are just beginning to wake up to the fact that the average ticket price is just too high.

In fact, the idea of subsidizing ticket prices through capital level fundraising efforts has been examined in detail here as far back as 2004:

“The ‘Big Endowment’ idea…would serve to significantly reduce ticket prices, resulting in higher average attendance figures.”

Furthermore, there have been a handful of orchestras out there actively looking for sponsors to help subsidize ticket prices for targeted audiences for at least a few years:

 

As such, the idea isn’t as radical as folks in the BSO might want to believe. In fact, the idea has been scrutinized right here at Adaptistration (as well as being addressed in some of the other fine music blogs here at Arts Journal). Best of all, access to all of this terrific information is free of charge; no membership dues, no user fees, and no subscription fees:

“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.”

The Sun article reports that the BSO began to find funding for subsidized ticket costs in January, 2007. Fortunately, the old adage of “better late than never” is as applicable as ever:

“As such, orchestras should be initiating capital campaigns -right now- designed to subsidize ticket revenue with income revenue.”

In the end, it is good to see a group like Baltimore take the idea to heart. Apparently, initial reports from The Baltimore Sun indicate the program is working out as they had hoped.

At the same time, it would have been good to see Baltimore earmark some of those funds to help subsidize single ticket prices as opposed to just targeted subscriptions. Furthermore, it would have been better to offer subscribing patrons more flexibility instead of only offering pre-selected performances or a six concert minimum to create their own subscription. Hopefully, the BSO will continue to find a renewable funding resource to make those changes in future offerings.

Moving over to the other coast, the Seattle Symphony bore the brunt of negative press when the 03/01/2007 edition of the Seattle Post-Intelligencer reported that SSO subscribers were “up in arms over new ticket prices.” In particular, the article reports that some SSO subscribers saw extreme increases in subscription prices,

“…the third tier (fourth level) was hit, in some cases, with increases of more than 300 percent.”

The article goes on to report that the SSO asserts that “the pricing structure for the new season was done after careful thought and analysis.” However, the orchestra is offering some of the patrons who were targeted with the 300 percent price increase options for purchasing 2007-2008 subscriptions for “a reduced price.”

Unfortunately, the article doesn’t report what the “reduced price” actually is so I contacted the SSO for some clarification (after all, a 299 percent increase is a reduced price compared to a 300 percent increase). According to Rosalie Contreras, SSO Assistant Director of Public Relations, the reduced price 2007-2008 season subscription seats mentioned in the article “are equal in cost to third tier subscription price for 2006-2007 season.”

Whether or not these seats on the orchestra floor will be suitable to displaced subscribers will be a matter of preference. Personally, I like to sit in different seats for each concert, a habit some box office managers refer to as a PITA. Fortunately for them I don’t buy subscriptions.

Back in the 2004-2005 season the Boston Symphony (the other East Coast BSO) encountered a similar backlash from ticket buyers when they instituted sharp increases in ticket prices. Undoubtedly, Seattle won’t be the last ensemble to get caught in the backlash of a patron revolt over steep price hikes unless the business begins to approach the concept of subsidizing lowered ticket prices as compulsory step toward survival.

In this respect, each professional orchestra needs to begin crafting plans to locate and acquire funding sources to help indefinitely lower ticket prices. In fact, the ASOL could be instrumental by using their authority and clout to launch a business wide awareness program. Additionally, they can use connections with philanthropic and corporate donors to push ticket subsidy programs.

Seeing that the business is constantly looking for a silver bullet to help vanquish the evil of a steadily shrinking audience, subsidized ticket prices are as close as they’ll ever get (think of like a pewter bullet). At the very least, it will give them some breathing room to begin experimenting with other forms of long term audience building/retention: word of mouth. But that’s a topic for April when the 2007 Take A Friend To Orchestra program gets into high gear.

Regardless of what the rest of the business decides to do, the topic of subsidized ticket prices will remain in the limelight here at Adaptistration.

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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5 thoughts on “A Tale Of Two Ticket Prices

  1. Hi Drew,

    To what extent are concert ticket prices based on actual economic models and research?

    Obvioulsy one of the difficulties in classical music as compared to regular for-profit industries is the conflict between the desire to maximize revenue and to maximize attendance. Maximizing revenue is the primary concern for a for-profit firm, but orchestras typically feel that concerts are in part a public service which should be provided to as many people as possible.

    Having said that, there should be a point (or possibly multiple points) on the demand curve where the price-point maximizes profitability and a separate point where the price-point maximizes attendance. Chances are that the optimum attendance price is substantially lower than the optimal profitability price, so presumably the strategy would be to decide what the appropriate trade-off between the two should be.

    But I don’t have the sense that the industry has even a ballpark idea of where those two price-points are. For all we know, prices are higher than the optimal profitability price point and by lowering prices we could increase _both_ profitability and attendance. Am I wrong? If there’s actual research on this issue I’d love to see it.

    Second, it’s critically important to recognize that revenue from ticket sales is only one of the revenue streams that is effected by ticket pricing, and any model that only uses ticket revenue in calculating the optimal price-point is making a serious error. The concept of using fundraising to subsidize ticket prices needs to be factored into the model, since any such revenue is also directly dependant on ticket pricing and attendance — it should theoretically be possible to make revenue-neutral (or even revenue-increasing) changes to attendance through fundraising-driven subsidization of ticket prices.

    Furthermore, any analysis of the attendance/revenue tradeoff needs to account for the fact that todays audience is tomorrow’s donor pool, so it’s likely that today’s revenue sacrificed for increased attendance will be offset by future charitably contributions from people who would not have joined the audience if not for lower prices. This is probably the most difficut element to study and predict of everything I’ve mentioned, but it’s worth considering.

    -Galen

  2. Galen,

    Good points. I would suggest that in order to begin discovering where to set prices to attract maximum attendance is going to take experimentation. Another reader wrote in this morning with what I think is an excellent comment:

    “…it is the AUDIENCE that determines what the concert is worth, it is up to the management to optimize the income from that perception of value.”

    I would add to that,

    “…them go out and work with the board to raise any difference needed to maintain artistic standards and inspire artistic growth.”

    In the end, I think it all boils down to that. “Easier Said Than Done” and “The Devil Is In The Details” aside, the sooner everyone can locate capital level donors to help fund the initial stages, the better.

  3. These are two very interesting developments. As a longtime (but now former) Seattle resident and regular Symphony-goer, I take a certain interest in what is happening there.

    The Seattle development is both somewhat logical and a bit upsetting. >From an economic standpoint, it makes sense that the SSO would reprice areas of the hall to better reflect customer demand. But it ignores symphony culture, since the peanut gallery usually seems to attract the less well-heeled (because the seats are cheap) and the most interested and engaged listeners (both because of price and because sound/views are usually best there). I usually fit into both categories, so I would be very upset if I were in Seattle and had this change imposed; it’s not just the money, but in a sense the lack of respect for the denizens of this space. I think it would been better if the SSO had made more gradual changes over several years.

    I find the Baltimore experiment interesting in that it may make something patently obvious: symphony tickets are too expensive. I well understand orchestra economics, but I have a hard time seeing that two-hour symphony concert of the typical overture-concerto-symphony format is enough of an event to pay $50 or (sometimes much) more for a seat.

    The one problem I have with the Baltimore experiment is that it leaves money on the table. They’ll be selling $25 tickets to people able and willing to pay much more. Hopefully subscription forms will ask people to donate the difference between the special price and what they would normally pay. But I do hope that this will pull in a lot more people at lower income levels – and more frequently. Baltimore plays to a lot of empty seats, so if they fill the hall regularly, at least they’ll make up some revenue that way.

  4. Museums are subsidized, ditto libraries, zoos, schools, sports (the cities pay for the stadiums), religions (via tax breaks), et al. These subsidies enable institutions such as libraries to offer free services to the public.

    Orchestras should be subsidized to enable subscribers to attend concerts for reasonable amounts of money — far below what they are being charged now.

    During the Great Depression, the Federal Government subsidized WPA symphony orchestras to provide employment to musicians. The admission was free. I wouldn’t recommend that, because people who have not paid for tickets are less motivated to attend. What I would like is to see income from tickets not considered as a factor in orchestral budgets; let the endowments and current contributions pay expenses and use money from admissions for special projects. Unfortunately, I can’t see that happening.

    As for research on the matter, I side with Drew: Experimentation is the way to go. Keep fiddling with prices until we find a formula that works. The tricky part is doing it in a way that does not offend potential patrons. (Rule of Thumb: dropping prices too low and then hiking them back up is sure to enrage people; they remember the immediate raise and forget the preceeding drop.
    Second Rule of Thumb: If you buy something, take it home, then open the paper the next day to discover what you bought has subsequently been put on sale at a greatly reduced price, you are not happy. Don’t leave the people who bought at the old price standing out in the cold.)

  5. As an orchestra board member and financial geek, I’ve been interested in the issue of earned vs contributed revenue models for symphony orchestras for some time. Subsidizing operating expenses to offset our luxury-item pricing would, in my opinion, increase attendance, and if done effectively, deepen participation in the programs of orchestras.

    In questioning how ticket income figures were achieved in a proposed budget by our symphony’s executive, I received adequate explanation. She cited maintaining a stable, consistent ratio of earned vs. contributed income for a budget that had various small increases in cost. She further said the figure is determined so it is realistic, not ambitious; the budget is a guide for annual operations. Sales growth is a goal that will become budget reality if maintained with regularity. The bottom line was that the ticket prices were necessary to fund the orchestra’s budget, and the ratio was the current standard for the industry. But is the entire model at fault when we consider the dwindling number of people who choose to benefit themselves with the symphony? We face an issue of access, and price has to be the number one barrier to access.

    At every performance I attend, I stand up at intermission and look at the unfilled seats in the back and the holes of prime seats where people who paid hadn’t shown up or turned in their tickets. I see inventory being spoiled by the second and opportunity that is lost, and I’m sad that so many people missed what I just heard. Our mission is to keep classical music alive in our community. We cost four times more than a night at the movies for two, and the movies are raking in volumes of cash and churning vast profits from it. For young professionals and families with limited spending for leisure activities, a night at the symphony (in the cheap seats!) vs the cost of a bucket of popcorn and sexy special effects is a no brainer.

    Many museums provide access to their programs with very modest, if not free admissions. I know that my gift to the local museum helps pay for the art and the overhead. They tell me 70% of my gift goes to programs and 30% to operations. But because of my gift, I get invited to meet the curator, drink free wine at every opening, and get to socialize with friends who also pay to do the same, but after that opening night, my young neighbors can see the art for $2 admission, $7 including the $5 audio tour. My hypothesis is that seat value directly correlates to deeper participation. We know most patrons would pay dearly for the prime aisle seats they’ve owned for generations, and the chance to meet the composers, conductors, soloists and musicians at fancy wine parties, too. We already do! I joined the board to learn more about music and have some social fun. Would I get upset that my young neighbors could get in for only $5? No. I place value on the experience I choose, but I want everyone the hall can hold to hear the music, too.

    When we perform free concerts on occasion, we attract mobs of people, many whom have told me they really appreciated the chance to bring their 12-year old child, perhaps a violin student in school, to hear the orchestra play. They don’t have to tell me that the reason they don’t hear it more often is because it’s too expensive.

    Is classical music an entertainment that should compete against comparable for-profit entertainment? We get funding on the basis that classical music is high art, a vital artform of humanity that everyone should experience in their lives. Orchestras are the creators and curators of that art in every community where they play.

    I love my aisle seats and wine and cheese parties, and I’d pay reasonably more for those privileges, especially if some of my money and time helps to open the concert hall doors to more people. I have often wondered why orchestra fundraisers don’t pass a plate after a dynamite concerto, because at that moment of inspiration, I’d shell out more from sheer excitement. The orchestra is a source of community pride and cultural education, and we’re failing to expose enough people to the music because our financial model contains this addiction to ticket revenue. There are people in our community who could write a check to fund the entire season and not miss a dime. Perhaps Baltimore’s coup is a promising first step in the right direction.

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