Friday, February 7, 2014

How to Price a Ticket in Two Easy Steps: Educate and Mislead

(I’ve never done a two part blog before, but here goes…)


Step One: Educate

Of all the concerts I have produced or in which I have performed, I am aware of one that has paid for itself (and that’s because no one got paid and we snagged a unique, unreplicated deal on the space). When I first entered the arts management world, I always assumed a concert would at least break even. Shouldn’t ticket prices cover the cost of renting a theatre, hiring artists, licensing the work, and paying union stagehands? Sometimes, just sometimes the ticket prices will cover the production costs. 

But what about the non-production costs? Someone must design the ads and place them. Someone must negotiate theatre lease contracts. Someone must answer the phone when patrons call to order tickets. Someone must fix the photocopy machine when it breaks. Someone must collect rent on office and rehearsal space. And clearly someone must plan and direct the show. 

When you look at the actual cost of running an arts org - everything from postage costs to guest artist fees - the ticket prices don’t cover it. It’s simply a fact that many audience members (like me at one point) don’t know. 

The fact that ticket revenue doesn’t keep the stage open isn’t the only piece of education that I hope to hammer home. There is another much more personal fact that is often missed. Live performance has calculable value. Here’s how:

I have many friends with Master’s Degrees in music. They all went to world class, private, conservatories. Tuition at Juilliard is $57,000 per year. With four years of undergrad and two years in a Master’s program, we’re talking about $342,000 of education. That doesn’t include the $125/hour of private lessons that we all had from ages 6-18. Now we’re at $402,000.  

What about that instrument itself that plays the epic violin melody in Dvorak’s American Quartet? If you want to hear that beautiful melody on a mid-level professional instrument, you’re listening to $25,000 worth of wood and glue. Just for fun, let’s add another $10,000 for the bow (no…really).

We are now at nearly half a million dollars just to walk on stage. We haven’t even gotten to costs for designing websites, selling tickets, travel, music license fees, space rental…the list goes on. Have I not convinced you yet that live performance has value? Then let’s look at this another way:

It costs less than $25,000 to become a licensed plumber. If you ask that plumber to perform a service on a weekend for one hour, you can probably kiss $200 goodbye.  You will pay more than 4 times the amount of a typical concert ticket for an hour of service from someone who’s educational expenses are less than the cost of that violin on which you just heard Bach’s most brilliant masterpiece (I’m talking about the Chaconne, duh). I sure hope that plumber is cute!

Don’t get me wrong. I’m not saying that a plumber doesn’t have value (we've all been there). The point here is that the economics of music are highly misunderstood by even regular concert goers. Musicians, who expel blood sweat and tears, and tens of thousands of hours rehearsing, are valuable. The shows they put on, and the equipment they use to make those shows brilliant, have actual value.

Now...the sensation you get hearing or seeing a performance that transports you to a new place altogether? You decide the value.

How to Price a Ticket in Two Easy Steps: Educate and Mislead


Step Two: Mislead

Now don’t jump to conclusions…I’m not the kind of person who lies. My mom would kill me.

A 1987 New York Times Article feared the idea that prices for orchestra seating at a Broadway musical could hit $50. Adjusted for inflation, that would be $99 today. 

The idea that you can pay less than $100 for a full priced ticket to a Broadway show today is laughable. A top ticket for After Midnight will run you $197, and that’s not even in the top 10 of ticket prices. A premium ticket for Book of Mormon goes for $477. Now, we all know that most people are not going to pay $200-$400 for a theatre ticket. So how do these tickets sell?


A recent conversation with a Broadway producer friend helps shed some light. TKTS is a “discount” ticket outlet where you can get deals on Broadway shows. They offer up to 50% off your favorite shows, bringing the price back down to $100 for After Midnight. As it happens, that value is right in line with the inflation-adjusted value of a Broadway ticket in 1987. So, when you get your “sale,” you are really paying what Broadway tickets have always cost. 

TKTS is a built-in marketing engine for nearly every show. When the patron thinks they’re getting a discount, they will wait in line for an hour in the middle of a snowstorm (I’ve done it), just to snag the deal. It’s not rational, but instinctual customer behavior. When setting prices, producers aren’t counting on all patrons to pay the face value (of course, when it happens, they won’t complain).

As a producer, it’s troublesome to think that the only way to sell my product is by discounting its value. I’m lucky to work on things that I’m really proud of, so each discount chips away at my ego a bit.
But like I said, I have stood in the snow for an hour to get that discount. I understand the marketing philosophy – even if I don’t like it.