Pricing, Staffing and the Value Proposition of a Ticket

Ah, the way a conversation develops in today’s online media world. To track the current conversation happening within the theater blogosphere about the ethical ramifications of dynamic pricing on the missions and non-profit status of arts organizations, you’d have to start with a #2amt Twitter conversation from over a year ago (now largely lost to the internet thanks to Twitter’s lack of long term storage), then you might check out a series of posts I did in response to that conversation about different pricing strategies on this site.

You’d probably then want to check out a post on Parabasis calling Arena Stage to task for their use of dynamic pricing on a recent show that ended up spiking prices up above $100/ticket. That sparked a fresh #2amt Twitter conversation and this post from Gwydion Suilebahn about discussing prices in a civilized way. Which led to a lengthy (and highly readable) comment stream, which led to another post from Gwydion and then to a fresh post by Isaac Butler at Parabasis responding in kind.

For the purposes of brevity I will assume you’ve been following the conversation to date.
As one of the originators of this whole conversation who was name-checked in Isaac’s post, I started to respond with my two cents in the comments of his post… but evidently I had an unwieldy tin cup on the dresser full of change to contribute,  so here goes:

As Isaac points out, I am indeed the one that argued that an artificially set limit on all ticket prices in the theater industry would have the inevitable consequence of lowering the ability of theaters to provide artists a living wage. I should perhaps have said, all of the professionals who are employed by an arts organization.

And yes, I am a staff member at an organization (Portland Center Stage) that had to lay off its literary department (in addition to dozens of other staff positions from every department in the organization) a while back. Isaac and I both know the members of PCS’ former literary department personally and well, and I have a deep and abiding respect for their past work and endless hope for the success of their future endeavors. I bring this up because Isaac mentions in a couple of different places during his conversation about the ethics of ticket prices that certain large organizations have laid off whole literary departments. It  seems to be a bit of an elephant in the room of this conversation, I’d like to address it briefly.

Isaac, I  would suspect that we would both strongly prefer that the talented, fiercely dedicated staff members you are referring to currently had staff positions at an arts organization that would allow them to use their incredible skill sets towards the good of the larger theater world. You will get no argument from me on that. We would both agree that they should be well paid for that effort, as their skill sets merit a living wage. I can’t speak for every member of my organization, but I suspect that I wouldn’t find too many people who would disagree with that statement.

In fact, I suspect everyone reading this blog could name a dozen incredibly talented, fiercely dedicated, amazing artists and administrators whose livelihoods (and careers) have been threatened or eliminated by theater companies who found themselves having to suddenly shrink their budgets and lay off staff in the face of BOTH shrinking earned and contributed revenue in the last 3 years.

But I don’t understand how artificially limiting ticket prices at my institution (Portland Center Stage) or at any institution, would have protected those jobs, made it easier to create “mission pure” work or made it more likely that we would have received increased contributed income that would have protected those jobs or the high-risk work we would both like to see more large arts organizations undertake.

Trust me, if a magic bullet grant existed that said “keep your ticket prices below X dollar value and we’ll make up the difference in your budget, with some extra to increase the pay of your contract actors and designers,” every arts organization I know of would be doing backflips to try to secure it.

In fact, that’s part of what puzzles me about the implication that non-profit arts organizations should quit trying to increase earned revenue or else give up on claiming non-profit status entirely. You state yourself that the most obvious outcome of giving up non-profit status would be that “theater would largely disappear from many metro areas.”

Of course this is not quite accurate: most metro areas have a thriving sub-culture of fringe companies who make very minimal contributed revenue, whose actors work for free (often as both actor and administrator) and whose sole means of support is via their members’ personal income and a small amount generated through low price ticket sales. This model already exists, and for the artists who are willing to work at that (non-existent) pay scale, it seems to work well.

It would continue to work  well (or, at least as well as it does now) in a world where theater does not qualify as a non-profit… many of them are not large or organized enough to be 501(c)s as it is. These companies would continue to form, create work, grow, merge into other companies, fail and/or carry on, just because their artists would like them to.

But none of these companies are in a position to support people like our mutual friend or to pay actors and designers a wage worthy of the name.

In the hypothetical “stop calling yourself a nonprofit” scenario, the organizations that actually have a high likelihood of failing are the mid-size and larger non-profit organizations who have the means to have on staff literary departments (or staff at all). And yes, if run as a for-profit entity those organizations would either go under or become highly rarified boutique offerings available only to the few who are able and willing to pay the real cost per audience member of a theatrical performance.

Its important to point out here that opposite example is also true: drastically limit the earned revenue potential of arts organizations and force heavier reliance on contributed revenue sources and you would see a similarly dramatic elimination of arts organizations across the country, for the simple reason that the pool of contributed revenue available is finite and currently shrinking.

Neither scenario would restore the positions that we all lament have been lost by the dramatic economic downshifts of the last couple years, and neither scenario would increase artist opportunity or compensation.

So don’t think Isaac is actually arguing for a world in which all arts organizations subsist entirely on contributed income or live or die entirely by the whim of the market.

His point, if I am understanding him correctly, is that increasing reliance on (or employing strategies that allow for a greater possibility of) earned revenue carries the substantial risk that arts organizations will move towards the money and away from their missions.

Honestly this is a concern that every arts organization I know is fighting to address, day by day. How do we stay alive (even if bruised and smaller) so that we can continue to create social good for our communities (and, within that, create opportunities for the artists and staff members we value to make a living where they can do the most social good?) How do we avoid losing sight of our mission in the difficult drive to make ends meet?

And all of us are scared that increased reliance on earned revenue could ultimately hamper our ability to to take the big creative risks that move the art form forward (although most of us hope (and work) towards an increase in total revenue that allows us more cushion to do BOTH- increase artistic risk and minimize financial risk).

Yes, this situation would ABSOLUTELY be eliminated by a sudden increase in foundation, corporate and individual giving to the arts. And I don’t know an arts organization, large or small, who wouldn’t leap at the chance to secure the future of their organizations (and increase the accessibility of their performances) through a dramatic increase in contributed revenue.

That’s not the environment we’re currently in, however. Even internationally, government support for the arts is rapidly going out of favor (even in countries like England and Vietnam with long traditions of nearly full government subsidy of the arts). We must make hay, as someone pointed out in an earlier post “when [and where] the sun is shining.” And this problem is not confined to arts non-profits either. The entire non-profit community is looking for ways to balance the shrinking pool of contributed revenue available to them by finding new and increased earned revenue options that are consistent with their mission. Here’s one example.

So as much as I can agree that it may be an exaggeration to say it’s impossible to pay artists well without healthy earned revenue (because in a hypothetical perfect world contributed income and/or “the right priorities for who to pay” could balance out that shortfall),  I need to point out that even social service non-profits are seeking to balance their contributed revenue with increased earned revenue right now, because they realize that earned revenue allows them greater flexibility and long term stability with which to fulfill their mission. In fact, as the Freedom Trail Executive director points out in the above article, it is entirely possible, and indeed preferable to:

” earn revenue not only to support our educational mission but to fulfill it as well.”

One last point:

It is also a false dichotomy, unsupported by the actual research, that a dynamic pricing (or “right price for the right person at the right time” philosophy) automatically excludes “younger, hipper” audience members or requires an organization to only produce shows that are engineered to maximize that high end price point by targeting older, whiter, more affluent patrons to the exclusion of diverse audiences.

In fact, my own organization’s use of dynamic pricing has coincided with a dramatic increase in the number of under-40 patrons who have become regular attendees and donors. I don’t think the pricing caused that- I think other strategic efforts to communicate with, and be accessible to, a different generation are largely responsible. So I wouldn’t claim a corellation. Dynamic pricing did not equal younger audience.

But dynamic pricing has in no way suppressed the attendance of this new demographic either. The two (high prices and depressed Generation X/Y attendance) are only arguably correlated in situations where, as you point out, people “haven’t even heard of the show until the ticket prices are sky high.”

I can absolutely agree with Isaac that a communication strategy that allows new audiences to only discover the show when “ticket prices are sky high,” is a poor one indeed.

But I completely disagree that younger audiences stay away solely because of high ticket prices. I know too much about what friends and neighbors of my generation spend on nights seeing local music or tickets to Lady Gaga to think that price is the only (or even primary) barrier to younger arts attendance. I would instead say that younger audiences stay away because of poor perceived value- ie, will this performance be worth the money they are asking me to spend on it?

The perceived value of a $100 concert ticket is obvious to a rabid Lady Gaga fan. The perceived value of an unfamiliar theatrical performance, with performers I’ve never heard and a story line that doesn’t sound familiar is much harder for the uninitiated and unconverted potential young arts patron to feel confident in.

And yes, organizations that would like to try dynamic pricing need to work very hard to make sure the value proposition holds as the price increases on a popular show- is this going to be “worth it?”

But then, the point of the dynamic pricing system is that a theater wouldn’t raise the price until demand (created by other communications about the relevance, quality and “worthiness” of the production) had shown that people (of all ages) did find it “worth” what you were charging.

So unless we are trying to say that younger, hipper audiences are by definition financially incapable of paying for an evening’s entertainment (which is statistically untrue- being young does not equal being broke, nor does it equal only being willing to pay $10 for night out), then what we are actually saying is that younger audiences start out less sold on the “value proposition” that theater offers vs. other ways to spend the same amount of money.

And yes, if we want to grow a younger audience, we have a huge responsibility to prove that what we offer is as valuable as the latest rom-com on Netflix or a favorite band (and the accompanying beer tab). And it’s very easy to increase the “perceived value” of our work by lowering the price across the board, essentially lessening how “amazing” our experience has to be in order to be “worth it.”

To me, this tactic feels like side-stepping the question of what the performances we create are “worth” to a given audience member by refusing to even ask the question.

Having said that, there are companies whose work I respect who choose to keep their ticket prices set as low as they possibly think they can afford as part of their organizational philosophy, and that’s certainly a choice they can make. It’s not a choice that has lead, as far as I know, to a dramatic counterbalancing influx of contributed revenue for them. Nor has it lead to better pay for the artists and staff that they employ, as far as I’m aware.

So although I am completely supportive of organizations like this as one part of the overall theatrical ecosystem, I can see no way to be supportive of this as a blanket model constraining all people wishing to produce theater. My colleagues deserve to be paid better than this. And they deserve to be seen by audiences who feel their work was worth more than $10 a ticket (even if $10 is the price point that particular audience member paid that day).

And finally, I have seen no evidence that dynamic pricing has led funders to question the “value proposition” of funding theater… or that an increase in earned revenue streams has caused a decrease in funding for non-profits in general. The decrease in non-profit funding has been caused by the shrinking earned revenue of the funders themselves, due to the economy, and every funder I’ve spoken to understands that.

In fact, granting organizations seem to be more comfortable funding organizations who have proven they have a healthy (and growing) earned revenue balance sheet.

Why? Because granting organizations do not want to be in the position of covering your artists’ paychecks year in and year out. They want to help you get to the starting gate (or in some cases the finish line) on a certain goal or project, and along the way they want assurances that your organization has the resources and wherewithal to continue the good work they helped to start.

And nothing says that an organization is valued by a community like a large and healthy pool of patrons willing to pay (and donate) top dollar to participate in the work that you are creating. What constitutes “top dollar” might be different for each participant, based on their means and preferences. But it’s still a vote of confidence and a key measure that contributors (be they government, foundation, or individual donors) have learned to respect as a measure of the overall health of an organization.

Dynamic pricing is one way to help an organization reach a balanced budget. Cutting administrative and artistic staff is another. Pushing a shrinking donor pool to contribute more is another. Cutting the art you see on stage is another.

I know which choice I feel the most ethically comfortable with. What about you?