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Balancing the Pricing Equation

10.04.10 | 35 Comments


CATEGORIES conversation starter, funding and support, ideas, marketing, non-profit theatre

My last 2AMT post – on civil discourse around the subject of pricing – generated a great deal of lively commentary.  While some of what was said flirted with the gray area between “passionate” and “heated” – the former I consider intense and devoted, the latter inflammatory and aggressive – there were a great many compelling questions asked.  Late in the discussion, Mike Daisey asked me to share my thoughts about one matter in particular, and initially I demurred.  After some consideration and consultation, I’ve decided to share my thoughts.

The issue he asked me to respond to was whether it’s a false dichotomy to say that theaters have to choose between keeping ticket prices low and paying artists well.  Isn’t it possible, it was argued — not by Mike, but by another commenter — to raise funds from other sources instead?

The short answer is that yes, it is a false dichotomy, and yes, it is possible raise funds from other sources in order to keep ticket prices low and still pay artists well. It’s been done: that’s how we know it can be. But I’m not sure it’s the best possible route for theaters to take.

To explain the reasoning behind this speculation, I want to introduce a hopefully simple formula. (I know – you didn’t expect to have to do math.) The variables in the formula include all the possible sources of funding for non-profit theaters:

A — Corporate
B — Government
C — Individual donors
D — Ticket sales
E — Other non-profits
F — Revenue from other activities (concessions, souvenir sales, etc.)

Those six sources need to provide the resources necessary to make theater, which brings us to the formula:

A + B + C + D + E + F = X, where X stands for a non-profit theater’s budget.

For the sake of this discussion, we can immediately simplify this formula further in two ways.  First, we can eliminate F – revenue from other theater activities – from our consideration, since the number is typically so small as to amount to a rounding error in a theater’s budget.  (Surely there are ways to increase F, but we can discuss those – and perhaps should – in another 2AMT post.)

Next, we can turn our attention to E – other non-profits, a category that includes everything from foundations to advocacy organizations.  The money that comes to theaters from E was itself originally raised from other sources – typically, corporations, government entities, and individual donors.  In other words, E = A + B + C, just one step removed.  So we can also eliminate E from our equation as well, at least mathematically.  There may be room to quibble here, but again, let’s save the quibbling for another discussion.

The resulting equation is the one I’m going to consider:

A + B + C + D = X, where X stands for a non-profit theater’s budget

Naturally, for any given theater, A, B, C, and D aren’t equivalent in how much they contribute to X. For the theater I sit on the board of, for example, the mix looks something like this: A = 0%, B = 0%, C = 35%, and D = 20%; the other 45% comes from E, which (for our purposes here) is composed of some measure of A, B, and C.  I expect the mix is quite different for, say, Arena Stage.  I’ve seen data that suggest the percentage for category D (ticket sales) is often as high as 40%.

There are also variations, I understand, from country to country.  In Europe, for example, X contains a far higher percentage of B (government funding) than it does in America.  Many of us – and by us, I mean my fellow big-time lefty liberals (I might as well admit my biases) – wish we had what they have.  I’ve come to think it’s not so simple.

The criticism of too much government funding of theater, for example, is that we’d end up having, well, government-approved theater: nothing that threatens the state, nothing very adventurous, etc. After all, they’d have some sense of ownership, wouldn’t they? The same might be said of corporate donations. Personally, the thought of big businesses “owning” theater frightens me even worse.  I have a similar concern about individual donations; I don’t want America’s owning class “owning” the stories we tell, either.  (If donations were always – or even very often – small and from large numbers of diverse donors, I’d have less concern).

On the other hand, I don’t want to do without A, B, and C either.  I want X to be bigger, after all, not smaller. I also think there are positive reasons to want support from all three of those sources.  I want my tax dollars to support the arts; I want corporate profit to be funneled toward social good; I want America’s well-to-do to put their resources toward theater. The best way, then, to make sure that no one of those sources has too great a stake in any one theater’s budget? Let them all contribute as equally as possible.

So that leaves D – ticket sales.  And at this point, I’m going to turn the conversation back to values, because that was the premise of my previous post: that the most civil and rational way to discuss pricing models is to begin with an ethical discussion.

One of the values I hold – that I think many of us hold – is that no one should be turned out of a theater for lack of enough money.  Another value I believe most of us share is fair compensation for artists. Finally, a third value: I believe we all agree that audiences should be engaged by and with the theaters they visit.  (Again, I’m willing to debate and discuss those values… in another 2AMT post.)

The first of these values explains why some of us advocate so strongly for low ticket prices. If ticket prices are low, however, that comes with quite a cost.  To return to the equation above, if D is lower, then X has to be lower as well. If X is lower, however, then we run counter to the second value: fair compensation.  Thus we arrive at the seeming false dichotomy with which I began this post: that lowering ticket prices means lowering artist salaries.

The solution seems clear, then, given my equation: to keep X the same while lowering D, you simply have to raise A, B, and C, as some have suggested. But I believe that comes with a significant cost.

Assume for the moment that we could lower D to $0 – that we could make all tickets free. If we did, wouldn’t theater become inherently one-way? Wouldn’t any given show become, in essence, a gift given by A, B, and C – corporations, the government, and individual donors – to audiences?  How much would audiences value theater if it was just given to them? I don’t think that’s a recipe for long-term engagement, and I believe there are significant volumes of economics research to substantiate that claim.

When audiences pay for their tickets, they invest in the theater.  Language fails me here – it’s inevitably capitalistic; perhaps it would be better to say they’re active participants in the creation of theater, given that their resources are directly supporting it. They have a share. And the more that their share is balanced in comparison to the shares contributed by corporations, the government, and individuals, the more empowered those audiences will be. And that speaks to the third value: audience engagement.

So there’s an argument to be made for keeping D (revenue from ticket sales) low in order to live up to the first value, accessibility.   There’s also an argument to be made to keep D high in order to live up to our second and third values, fair compensation and audience engagement. So, how do we reconcile the two positions?

The only way I believe we can reconcile them is to increase the money that theaters make from ticket sales, in total, while still keeping most ticket prices low enough to allow people without resources to come through the door.  Practically speaking, however: how do we do that?

First, we could tie ticket prices magically to each audience member’s wherewithal: if you can pay more, you pay more, and if you can’t, you don’t.  Since we don’t have real-time access to balance sheets and bank accounts at every ticket point-of-purchase, it just isn’t practical.

Second, we could allow audience members to choose their own ticket prices, either before or after the show. I love that idea, in theory. It would make us, as theater practitioners, even more responsible than we already are to tell stories that people value.  If I ran a theater, I would love to hitch my wagon to this star.  It does, however, subvert capitalism – and while I honestly believe that if anyone can do that, it’s creative people like us, I also think it’s a long, hard mountain to climb. (There’s also probably very complex psychology involved in the resulting payment behaviors – psychology I’m not prepared, at this moment, to parse.)

Third, there’s that often-vilified two-word phrase: dynamic pricing. While dynamic pricing can be implemented in many different ways – and is often implemented in what amount to very greedy ways by corporations – I don’t believe it’s inherently evil… at least, not any more than a shovel is evil. Like any tool, it can be used poorly or constructively; to ignore that fact is to view it in a rather shallow way. I’d like to focus on the more positive possibilities.

The way dynamic pricing gets used by non-profit theaters, as I understand it, is to offer lower ticket prices to those who buy their tickets early, penalizing those who buy later in a run.  Given that procrastination knows (I believe) no class preference, and given that dynamic pricing doesn’t preclude discounts for other reasons (student tickets, rush tickets, and so on), that seems rather fair to me.  (Heck, those who don’t procrastinate and get their tickets at the early prices can put the savings toward babysitters or dinner before the show.)

One complaint about dynamic pricing seems to be that it means people sitting side-by-side in a theater will have paid different prices for their tickets… but given the different price points for single tickets, group tickets, subscription packages, student rates, senior discounts, and more – not to mention the varying costs of seats in different sections of the house – isn’t that the case already?

A second concern about dynamic pricing is that it seems to be motivated by greed: that it’s really a profit-driven exercise in disguise. I don’t even think this is true for corporations, frankly. I think the last available seat for the last performance of the play you want to see (or the flight you want to be on) is a lot more valuable to you – and thus worth paying a higher price for – than the many seats that were open during the first week of the run (or the plane tickets you could have purchased months in advance). Scarcity always increases desirability.

Aha, you say! Only the well-off can afford those last few seats, so we’ve run counter to our first value of accessibility. Not true, however – not if other discounts remain available even for those last few seats, just as airlines will offer bereavement fares even on last-minute airline tickets.

A third concern seems to be that dynamic pricing is somehow sneaky… but must it be? Couldn’t a theater be entirely up front in telling audiences what it’s doing? Transparency would give patrons control over their ticket-buying fates – and, in fact, might help remove some of the obfuscation surrounding subscription rates, package deals, and group plans. After all, the goal in selling tickets for a non-profit theater isn’t, obviously, profit, which is the only reason that businesses confuse consumers about prices.

Finally, one last comment about D – the revenue from ticket sales. In the end, isn’t it true that we’d all really like theater to be so essential to people’s lives that they’d be willing to spend more and more money for it? For a subscription to a theater to mean as much as, say, a cable subscription? For my money – pun intended – I don’t consider it a useful goal to keep ticket prices low, in and of themselves. My goal is to make theater so essential that everyone “has” to have it the way they have to have, say, HBO, then make sure they can afford it. That might, in the end, make ticket prices even higher than they are now, if you think about it.

Before I consider the equation balanced, however, I have to look not only at the left side, but the right side: that great big X that stands for a theater’s budget. One objection raised in the conversation about my other post was that theaters should be reducing non-artist expenditures to help keep ticket prices low. To this exception I can only say: perhaps. I’ve written before about my belief that theaters may be devoting too much attention to putting polish on their work – that a few rough edges and a bit more simplicity would make theater more accessible for audiences. Would a change like that reduce budgets? Perhaps a bit. Am I prepared to go further than that? In an age in which people are losing jobs all over the country and work in the country’s creative economy is hard to come by, no, I’m not.

So, I believe that addresses the question Mike wanted me to answer, but let me make my response crystal clear: yes, it’s a false dichotomy to suggest that we either raise ticket prices or fail to pay artists properly; we can, in fact, raise other funds to offset the costs.  Ultimately, however, I just don’t think it’s the right idea. We can, and should, do better.

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  • Interesting post, Gwydion. I have so much to say in comment that I may need to write a whole post on my own. To start off, though, here are some of my initial thoughts.

    Mike Daisey has tried a version of the “pay what you will” after the show thing by handing over his own money to patrons during a show and asking them to return it if they felt the show was worth it. Ask him about his stint in Atlanta …

    At the American Shakespeare Center we do a mix of much of what you mention. We have approximately 36 “pay what you will” performances a year. But, the only way we can afford to do that is by performing approximately 330 other times at our regular prices. During the regular performances, we still have student rush and other specifically tailored discounts to promote accessibility. Until we are selling out all 36 PWYW performances, I will continue to say that price is not the only (nor, I believe, the biggest) barrier to attendance.

    Next, I think the transparency part is vital to the dynamic pricing model. If you aren’t communicating with your patrons about what will happen to the ticket prices as the run goes on and the show grows in popularity, you just end up with angry folks. There is no obfuscation involved in the airline industry’s rate changes as the date of the flight nears, if you wait you will pay more. How can we help our patrons to take advantage of getting the lower pricing and fill our houses earlier if we aren’t transparent?

    Also, in terms of your overall equation, I would have actually more quickly done away with the A and the B than the foundations in E. We are all seeing cuts to government funding and, at least in my experience, corporate has either gone the route of competitions (Chase) or all in-kind. Individual donors and ticket buyers are really the growth area we have right now.

    OK, I’ll stop for now. Thanks for the post.

    • Thank you for the smart real-world perspective, Amy.

      I’m very interested in the transparency question; I’d also like to make it 360 (i.e. not only pertaining to ticket pricing, but to expenditures). Tony Adams posed a question on Twitter that I’d like to see someone take up: why do so few organizations honestly tell people where their money goes?

      My favorite comment in what you wrote: “Until we are selling out all 36 PWYW performances, I will continue to say that price is not the only (nor, I believe, the biggest) barrier to attendance.” I couldn’t agree more. I think there are important questions about the kind of theater we make and how it attracts different audiences, as well as the ways in which we market to those audiences. Sometimes, in other words, if the product isn’t selling, it’s the product’s problem, not the pricing. (Not that the product is bad, mind you, just that it doesn’t appeal to those for whom a discounted price would be necessary.)

      Again, thanks.

  • Tony Adams

    How can you have a coherent discussion about balancing pricing without discussing costs?

    • I’ve done my best with A-F. I sincerely don’t imagine what I’ve written to be the final word — merely another movement in the conversation. I’d be very happy to engage in a conversation about X — why don’t you start one?

    • As I’ve mentioned above, your question about transparency vis a vis costs is a compelling one to me. Thanks for asking it. I’ love to see someone respond.

  • Mike Daisey

    “Mike Daisey has tried a version of the “pay what you will” after the show thing by handing over his own money to patrons during a show and asking them to return it if they felt the show was worth it. Ask him about his stint in Atlanta …”

    Please note that this element in THE LAST CARGO CULT has absolutely nothing to do with “pay what you will” pricing, nor did I ask people to return money if they thought the show was “worth” it.

    Instead the money ritual is an integral part of the monologue, and it’s too complex to get into in this space, but I just wanted to be clear that while the show’s economic choices may be of interest to people studying how we value things, it is not any sort of experiment in disruptive pricing.

    For what it is worth, with the exception of Atlanta, the show has always recouped its “investment”. While I don’t think TLCC is proof of anything by itself, the lifetime history of the show in more than 20 wildly different cities across the world doesn’t constitute a data point against alternative pricing models.

    • Mike, I didn’t mean it as a data point against alternative pricing models. I just think we need to consider the communities in which we engage before declaring one pricing model an easy fix for accessibility. I think anytime we talk about pricing we are also talking about value, but we often try to have the pricing discussion without outwardly bringing value into the equation. I found it a fascinating testament to what we, as a community, value(d) in Atlanta that the TLCC equation did not play out in the same way as the other communities in which you performed. I also think it is an excellent opportunity to talk about how we as theatre artists talk to our community and how their values play into the conversation (about pricing, the work we produce, the way we market, everything).

      • Mike Daisey

        “I found it a fascinating testament to what we, as a community, value(d) in Atlanta that the TLCC equation did not play out in the same way as the other communities in which you performed.”

        To be clear, I’m just saying it’s not much of a testament without the other data points…and philosophically I needed to respond because how you phrased the money ritual, though it may be how you perceived it, is not what was presented–I never ask people to pay what they think the show is “worth”.

        I must also say that the “Atlanta” conclusions are much too broad–it would be much more accurate to say that one could come to some behavioral profiling of the Alliance Theater’s subscriber base by evaluating their behavior, as the show was overwhelmingly attended by subscribers.

        • For my money — pun intended, if lame — I regret that I didn’t see TLCC when it came to Woolly. I have a feeling that the ritual, which I’ve only read about, would have felt very inspired/inspiring to me.

  • Good work, Gwydion. As a budget manager at an arts organization, and as an MBA with an econ concentration, I agree with you. I would be interested in engaging the costs side of the equation more, myself, but am constrained this week by time and every week by figuring out what info is confidential and what I can discuss.

    • Thanks, Aaron — and please do write when you get the chance. I would love to learn more about that side of the equation.

  • Keith Beck

    http://www.investmentnews.com/article/20100926/REG/309269980
    a 1000 Broadway ticket.

    What is needed is a different business model – would something like the above work only knock off a couple of zeros? Make the investment / donation deductible and commit to setting up the funds in a separate checking account (escrow) to fund the production – the funding target is not met the money is returned.

  • Yes, I think a blog post on “F” is the most important discussion to have as all creative routes need to be explored, shared and talked about.

    “But I’m not sure it’s the best possible route for theaters to take.”

    When one person cares deeply for another, all routes are taken to make sure that person is cared for and treated well. It is also said, that when one wants to know how some one values something, look how they spend their money. Theaters say they care of their artists, and while they might in theory, the spending shows otherwise. And I read theaters want to show we care for the artists finically and that is why we need ticket prices to be X amount of dollars. And while that conversation needs to be had, where are the blog posts about the other ways theaters are finding creative ways to keep tickets low and give artists a livable income. I hear the ways to keep tickets low, but less ideas in how to do so in relation to giving artists a livable income that equals that of staff members. (pause for laughter, or groans, from staff members who are not getting a livable income)

    And this way, the actor (or playwright or director) has a full time salary doing a one to two shows a year and also working in the marketing department, facilities, carpentry, etc. But then that means, we would have to promote a show with a local actor verses that actor flown in from New York, with the latest Broadway credit, where a $120 ticket can be justified. (my one smarmy remark).

    Sure, not all artists would want this, but with only 14% of AEA actors working in a given week and their annual income averaging $7000, to be able to have a full time income working at a theater in multiple capacities would sound ideal to many. More artists should be okay with this. In this day and age, to think one can live on a theater artists income alone, is probably absurd, but where are the opportunities to be a part of a theater family in multiple capacities?

    I agree, “We can, and should, do better” and it starts with using our best creativity to take care of all staff people and audience members, using all the ways possible.

    • The blog posts you ask for — about the other ways theaters are keeping tickets low and giving artists a livable income — I would very much like to read, too. I believe there’s a great deal of wisdom in looking at what works and modeling behavior after those successes.

      Here’s to creative solutions.

  • Keith Beck

    It seems like the discussion seeks a way to take the risk out of the art or the endeavor of theater. Why? Whether we like it or not USA domestic theater for profit or 501c3 is capitalistic – It lives or dies based on who is willing to pay to see the art that is theater. If our art becomes more government supported or donor supported it runs the risk of loosing its ability to speak freely. Our theater has at its core is a unique balance of a free speech product, driven in more than anyone is willing to admit by the opportunity to create a tax deduction that is only unique to out continent – both the donation (with the experience the donation provides ) and the loss of the money/investment to create the theater can be written off and in the process of losing the money the funds are reclaimed by the donor! What a powerful asset to our artistic and entrepreneurial cause. Why must we seek to avoid this risk? – How much more powerful would our work be if for one year we all agreed to….take a chance… and run at the idea of putting as much of our creative selves into the business and money side of theater with the same energy and drive that we use to create a character, a set, a lighting effect or a blocking plot, or a tech week schedule, and if and when some aspect of it alls fails (which it will – its has to) – you pick your ass up after having drowned your tears in a beverage of your choice – grab your family and friends. Get the loving hug and words of concerns that fuels the fire of getting back on that horse and recreating the opportunity that failed. Only know the collective experience has made you that much stronger and smarter – we learn from all the mistakes that were made and do it all again only this time we move the experience that much further along the path. Its risk, its fear, its the struggle to rationalize it all but much like the work that we all pride our selves on being able to create when it happens and we are a part of it we all carry a power a glow – What a phoenix!

  • Of course, it should be noted that “cheap tickets” aren’t the only way in which we serve our respective communities. (Nor should they be.) There’s also educational outreach, supplementing arts programs in schools. Whether that comes in the form of partially or wholly subsidized performances for school groups or practical workshops and events either at the theatre or on-site at schools, it’s another way in which we serve. In places where schools’ arts education budgets have been slashed to next-to-nothing, it’s more vital than ever to provide that service.

  • 99seats

    David, I’m having some problems wrapping my brain around that argument: the actual art is only for the adults who can afford it, but it subsidizes the theatre’s work with youth? We don’t serve with our art, but with education programming? It just reinforces that art is for people who can afford it.

    • That’s not what I said. Educational outreach is only one form of service. You’re also ignoring performances of the actual art for school groups, which uses the actual art as part of that outreach.

      That also assumes only one expensive price for the art itself, which, as we’ve pointed out repeatedly, is not the case.

      • 99seats

        But David, with dynamic pricing, as we’re seeing, a fair number of people will get shut out of shows, unless they’re willing to pay a high premium for it. Giving away (or maybe not, since you haven’t said that the educational programming would be free of charge) educational programming and shows for school groups is indeed a form of service, but is that the mission of your theatre? And again, is that the message that your theatre wants to put across? The art is for adults who can afford it. It’s not what you said, but that’s where it goes.

        • Dynamic pricing can lead to a high premium for a last second ticket, assuming you don’t cap the pricing. And yes, a theatre could set a cap on the pricing. Either way, when the tickets go on sale, with this option they’re all affordable. And a smart theatre will keep blocks of tickets for a daily “day of show” rush ticket at the original base price. Right now, a fair number of people get shut out of shows already; done properly, this levels the field for everyone, providing a price closer to a subscription-ticket price per show without having to buy a subscription package.

          As for educational programming, it depends on what kind of programming, how much support and sponsorship it has, etc. That’s going to be different from place to place. Should educational programming be free? Ideally. Is it the mission of our theatre? Not all by itself, but it’s definitely part of my theatre’s mission.

          But again, “the art is for adults who can afford it” is not what I said and it’s not where it goes at all.

        • Keith Beck

          What is wrong with having people get shut out of shows?

        • It only goes there if you have the attitude that the educational theater would not be of the same quality as the adult theater. I can see why you might assume that, since we have so many examples of arts orgs putting lower-grade product in front of children.

          However, those examples are not destiny, unless a theater has the attitude that I’m hearing in your comment. Why would it be outside of a theater’s mission to provide high quality theater that can be seen and enjoyed by children and teens? That’s the assumption in your question, and I think it’s a strange one. We aren’t all producing cabaret burlesque, are we? Most theaters will want to do some shows that are probably appropriate for adults, only. But not all.

  • 99seats

    KB – It’s not that people get shut out of shows as a bug, or a happy result, but as a feature. That’s the point of dynamic pricing: charging a premium for being late to the party. Or not knowing about the party to begin with.

    DL – Just saying that’s not where something goes doesn’t actually mean that’s not where it goes. Sure, you can tweak the formula to make less regressive, but it’s still a regressive policy. And saying that educational outreach and programming makes it less regressive isn’t even an answer. Individual missions vary and can be quite flexible, but as a matter of bedrock principle, what ideas like dynamic pricing do not level the playing field any more than papering during previews levels the playing field. In practice, it rewards insiders and cuts off people who find out late and can’t afford a ticket. But we’re also talking about what it tells people about your theatre, who your theatre is serving and who is welcome. And if your theatre’s mission is serving people through art, through the production of plays, it creates a barrier to that. You can fold your arms all you want and say that it’s not true, but that’s not really an answer.

    • Keith Beck

      99 – I get how the sizzle of dynamic pricing works – but what do you do when the audience gets board with the game?

  • You say the point of dynamic pricing is to reward insiders.

    I’m saying the point is to give everyone the chance to be a so-called insider.

    What this tells people about a theatre is that it’s trying to make all of their tickets affordable right out of the gate. It says, hey, you know how subscription tickets wind up being cheaper per play than full price? Now they’re all that price if you act now. (And if the bulk of your audience doesn’t know about your show until the last second, you have deeper problems than pricing to worry about.)

    It’s saying that we know your time is valuable, we know you want to plan ahead for the babysitter, maybe you’d like to save some money on the theatre ticket to use for the babysitter or parking or dinner.

    As I said, a smart theatre would also have that bank of “day of” tickets at the base price for the last second audience. Said smart theatre might even bank a few tickets for the next performance for “day of” folks who just miss the cutoff for that performance. That would tell the audience there’s always a chance to get in to see the show.

    That smart theatre might also hold “release party” events for each production, free to the public, with music and maybe a preview of the show, where the tickets first go on sale. Everyone at the event gets to buy a ticket if they want. Seems like a good way to draw attention to the production immediately, maybe bring in some money from concessions as well. That tells the audience that we want you to think of our theatre as a social space, a community space, a fun space. (That’s just a good idea for any theatre, dynamic pricing or not.)

    For theatres that wind up selling unsold seats at a discount through a service that charges heavy commissions on those tickets, it says, hey, support your local theatre instead of the ticketing service.

    For theatres willing to be transparent and explain what the ticket price pays for, it tells the audience what they’re supporting, whether the artists themselves, educational outreach, new play development, what have you.

    For theatres willing to put a cap on the pricing–which I also suggested above–it tells the audience that we’re starting low, but this is the highest possible price you’d wind up paying. Most latecomers expect to pay the full ticket price as it is; this gives them an option to avoid that by planning ahead.

    If a theatre extends the run of a show due to demand, they could reset the tickets back to the base price and still hold back “day of” tickets. That says, we hear you, we want to give you as many chances as possible to see this show, or chances to see it again.

    For theatres regularly presenting the work of local actors, playwrights, designers, musicians, it tells the audience that this is homegrown art you can only see here–or see here first. It tells the community–theatre and patrons alike–that they’re supporting their own.

    A theatre might also support other smaller, local groups, highlighting work both inside and outside of their own building, introducing audiences to a wider variety of theatre artists and work in their community. That tells the audience, hey, look, there’s all kinds of options for all kinds of tastes in live theatre here.

    Those are all messages I’d want to send to my audience.

    You might want to check out Trisha Mead’s latest post for even more examples:

    http://www.2amtheatre.com/2010/10/04/pricing-staffing-and-the-value-proposition-of-a-ticket/

    Dynamic pricing isn’t a one-size-fits-all solution, and we’ve never said it is. But ignoring the possibilities of using it wisely, assuming it can only work in one direction, that’s not an answer either. A non-profit still has to run like a business to survive, especially if it wants to draw more foundational support. We’ve tried to illustrate how to use dynamic pricing responsibly. It can be regressive or progressive, it’s all in how you implement it.

  • 99seats

    I think we hit the underlying philosophical difference there: whether or not a theatre has to run like a business and what kind of business it needs to run like.

    All of those other messages are carried by things other than the dynamic pricing and I think, in practice, dynamic pricing undermines those messages and confuses and frustrates people. But the larger message is what I’m talking about: what it says about how your theatre operates and what it prioritizes. Sure, it makes it possible for people to see the show at a reduced rate, but it prioritizes making money from ticket sales. If that wasn’t a priority, then there would be one price, priced at a reasonable rate for the audience and a realistic rate for the theatre. When the ticket price is rising with the perceived “value” of the seat, you’re entering into a negotiation with your audience about its worth. Especially if you’re giving them ways to get that same seat for cheaper. You’re sending them the message that we want your money more than we want to sell this seat. Sure, that’s acting like a business…but what kind of business?

    Responsible is not the same as progressive. While there may be ways around it, but the policy is still regressive. Without those ways in, the dynamic pricing policy reduces the access to your seats to people who can afford the inflated price.

    • I think you are attributing to me (here and in your post on Parabasis today) the notion that theater has to run like a business. I’ve never said that, nor do I believe it.

      What I have said, and what I do believe, is that we can learn from the ways in which business operate, and that I see no problem in adapting certain strategies to meet our needs. The tools of marketing, for example, are innovated primarily in the corporate world, then imitated in the non-profit sector, on a regular basis. Why should we do any different when making pricing decisions?

      Furthermore, you suggest here that by implementing dynamic pricing, a theater is prioritizing making money. This seems to be in error. No one anywhere on 2amt has suggested that implementing dynamic pricing should be the only strategy employed by a non-profit theater to balance the equation. I applaud and am eager to think and talk about all of the other questions you’ve asked: developing revenue from other theater activities, for example. Dynamic pricing certainly isn’t a cure-all — never said it was. It’s just one tool in the shed… a shed that has many other tools as well.

      You talk at length about how the model is broken: I agree. I also agree that the right response is not, clearly, to make theaters into “capitalistic, rapacious businesses” — it might surprise you to learn that I find that idea as loathsome as you do. (Believe me, really, when I say that I think we have more in common here than is clear in all this back-and-forth.) So what do you think is the right thing to do, then? What’s your proposal for a fix for the model, or an alternate model? I’m honestly very interested to know.

      Posting on Parabasis as well.

      • keith beck

        How can you provide a product or service to the general public – charge them to enjoy or use the product and not call it a business? Confused.

    • I’m a little bit surprised (and this betrays my own biases) how quickly people get upset and offended by the mere thought that art can learn anything from business.

    • keith beck

      I don’t think I will ever understand why the word theater and business have to always be at odds.

  • David, have the number of comments on Gwydion’s posts about pricing eclipsed the number of comments about theatre vs. theater?

  • Anonymous

    I’m not David, but I was curious. So I checked. That post had 31 comments. So with this comment, this particular post equals the theater – theatre argument. That is of course not counting the other related posts and comments therein.

  • Karim

    This is a really interesting conversation, and one that transcends theater. I happen to write math content, and find myself struggling with this exact question all the time. On one hand, Jonas Salk declines to patent the polio vaccine, noting “How do you patent the sun?” On the other, we have to pay for a new website, etc., and face the same dilemmas as do most artists: how to serve the universal ethic, while also affording the daily bread.

    I’m a little late, so perhaps the ship has sailed, but we would do well to explore a bit more deeply Gwydion’s mention of choose-your-own-pricing. I believe it was Craig Newmark, founder of Craigslist, who said that the NPR membership model would likely characterize the coming decades. If so, this has the potential to make moot any discussions of dynamic pricing, at least vis a vis artistic-type endeavors (though probably not for American Airlines). As pointed out, dynamic pricing is effectively a way of rewarding/penalizing people for certain behaviors, which requires a certain amount of prediction.

    Of course, this is inaccurate at best, and still results in a fair amount of what economists would call deadweight loss: basically, an inefficiency in allocation. This is a question that economists have been asking for years: how to “capture” the maximum amount possible from as many people as possible. If a TV is worth $1000 to person A, he should pay $1000. If it’s worth $200 to person B, she should pay $200. Setting the price at $500, though, will result in an effective loss of $700. So how to do this?

    As I see it, the only way to do it is to encourage/allow people to pay what they think is fair. (I’d also suggest paying before the show, since a “worth” related to someone’s emotional state ceases to mean much, and is easily manipulable). This may seem Pollyanna-ish, and wouldn’t work in every case. For large purchases, or for those that have become routine, this is certainly a bad idea; I’m sure I could figure out a way to justify paying $2 for a BMW, while someone who goes to Starbucks each morning no longer values the coffee, but expects it.

    But for something experiential like the theater, it might work. I’ve actually thought about how to implement this on our site, should we start to charge. With us, the implicit conversation might sound something like:

    We’d love to give you this for free, but we can’t, and we’re sure you understand why. At the same time, you’re here because you value the service, and are willing to pay something. But how much? So how about this: pay what you think is fair. To help orient your decision, we suggest $50 per year for every class that you teach: if you teach 8th grade math and Algebra II, we suggest a payment of $100. If this is too much for you, pay less. If you can afford more, you’ll be helping someone else. Hopefully this is a saner way of doing things, and as long as we can afford to keep doing it, we will. This way, nobody’s taking advantage, and we’re all working together to make this work.

    From my perspective, it’s important that people realize that it’s NOT a donation but a payment for a service. Also, I don’t think $0 should be an option, since everyone can afford something, and paying for something forces you to take it more seriously. Still, there will be people who game the system, but 1) that’s probably more the exception than the rule, and 2) the current system is potentially a lot worse in terms of exclusion. Ultimately, it’s a question of how you view humanity: as consumers to manipulate; or as peers likewise eager to help build the world they want to live in.

    Just after retiring from PBS, Bill Moyers was discussing the difference between being a journalist in a private vs. a public news organization. “When you stop viewing the audience as a customer, and instead as a citizen, everything changes.”

  • This is cool! And so interested! Are u have more posts like this? Plese tell me, thanks


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