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Talkin' Broadway V.J.



Why Theatre Tickets Are So Expensive!

To explain why theatre tickets are so expensive and likely to get more so, we first need to understand how the people who set the prices - the producers and in some cases the theatre owners - think. To do this we've taken a few excerpts from the bible of theatrical production and management, Theatre Management and Production in America, by Stephen Langley, Drama Book Publishers, ISBN 0-89676-115-0, to see what it has to say.

To make sure we get everything right, I called up an old friend, a producer who has been involved with over a dozen Broadway shows in the last twenty years. He agreed to answer a few questions on condition that his identity not be revealed, so I'll call him Max Bialystock. Our comments will appear in italics.

Ticket Pricing

Capitalist thinking dictates that goods and services should be sold at the highest price the market will bear, and that when prices are set below this level, income is diminished and the producer is either a philanthropist or a fool! But, of course, the purely capitalist approach tends to exploit the moment and the ready resource. More conservative economic thought concerns itself with the future and with long-term exploitation - such as the danger of covering arable land with asphalt, or the danger of pricing young audiences out of the theatre. But whichever school of thought is applied, the piper in the pit must be paid.

In point of fact, ticket prices are often based more on intuition than on economic logic. A producer may simply "feel" that certain prices are right for a particular theatre and community. And, in truth, it is difficult to judge whether or not there will be price resistance until tickets are actually on sale. For many years it was believed that there was a psychological advantage in pricing a ticket at, say, $19.95 rather than $20.00; but today the round dollar amount is more common-and making change for cash sales is much easier.

Another somewhat unique aspect of the theatre ticket as a marketable commodity is that some states, including New York, make it difficult at best, and illegal at worst, to sell theatre tickets at any price except the advertised one that is printed on them. This puts the theatre producer at a severe disadvantage in comparison to most other retailers. After all, booksellers and furniture stores can run sales during slow periods and have specials on unpopular items. But theatre producers generally lack such pricing flexibility, although they may sell two tickets for the price of one (in the legal sense, this means giving one away, which is permissible) or allow charitable organizations and ticket agents to add a surcharge and keep the difference.

Yet, these exceptions merely serve to underscore the wide gulf in pricing flexibility that separates the theatre operator from the bookseller and the furniture retailer. For the purpose of investigating this disparity, the League of American Theatres and Producers once commissioned attorney John Wharton to investigate such regulations and come up with a few suggestions. His 1965 report to the Legitimate Theatre Industry Exploratory Commission still deserves attention. It recommends, at least for Broadway, a system of flexible ticket pricing based on supply and demand rather than upon laws concocted by the state's attorney general. If tickets for a particular production can bring a price of $500 each, that would be the established price. As the production becomes less popular, the price would go down. Also, customers would be offered low prices on tickets purchased before opening night, as well as sharp discounts on tickets that remain unsold at curtain time.

VJ This last suggestion has, of course, been implemented by the TKTS Booth in Times Square, a ticket outlet unforseen when the original report was written.

Such policies could greatly increase advance ticket sales, on the one hand, and last minute, walk-in business on the other. "Floated" ticket prices would be similar to the manner in which stock prices are determined on the stock exchange. The recommendation was designed to eliminate ticket scalpers, place all ticket revenues into the hands of the industry, and bring in more money sooner than is usually the case. Later in a successful run, of course, prices would be very low to encourage a younger and less affluent audience. Theatre tickets are a luxury that brings harm to no one, the report argues, and politicians have no business regulating their cost as if they were food or utility prices.

Unfortunately, the Commission's recommendations have never received a fair trial, but they remain a challenge to forward thinking managers in the performing arts - a challenge based on the simple, indisputable fact that few items are more worthless than a ticket to a past performance. While other retailers can list their unsold items as assets, unsold theatre tickets to past performances - like unrented motel rooms for nights past - aren't worth zip.

Decisions about ticket pricing generally boil down to an estimation of the elasticity of demand for tickets as opposed to the fixed demand. What is the top price the consumer market will pay? How many consumers will pay it? Assigning ticket prices which answer those questions correctly will result in optimum ticket sales for the production being priced.

Scaling the House

Differing theatrical seating arrangements suggest that ticket prices might reflect such differences: for example, one price for the orchestra, another for the mezzanine, and another for the balcony. Assigning different prices to different sections of the theatre is known as "scaling the house," and the result is the price scale that is usually posted next to the box office.

Some theatres have a long stretch of uninterrupted rows of seats, in which case it may be necessary to select an arbitrary point where the price changes. If rows of orchestra seats proceed from A to Z, for instance, the producer may decide to decrease ticket prices beginning at row N. To make such an arbitrary decision obvious to customers and ushers, different colored seat covers or some other indication might be used. No theatre, incidentally, should include a row "I" when designating its row and seat numbers; the letter "I" is too easily confused with the number "1." Many theatres label the first few rows of the orchestra by using double letters (row AA, row BB, etc.) and commence anew with row A further back in the orchestra. Or the first ten rows may proceed from A to K, and the next ten from AA to KK. The psychology of this system is that ticket buyers are less hesitant to purchase a seat in row KK than in row U; but, of course, there is an element of deceit involved here.

Pricing tickets for a theatre-in-the-round offers special problems. Since it is a comparatively unusual type of audience seating, the public is likely to be confused about which seats are the best ones. The answer given by producers and treasurers at such theatres is, invariably, "They're all good."

If there are less than five-hundred seats, perhaps there should be a single ticket price. Otherwise, prices should diminish as the rows of seats get further from the stage. However, when sightlines are poor in certain sections of the house (often the case in arena theatres that have an elliptical stage), ticket prices should be adjusted accordingly.

Because auditorium and ticket terminology varies from one theatre to another, it is not surprising that many customers are confused when it comes to ordering tickets. How, then, should the various sections of a theatre be labeled? Some terms are preferred because they may sound more elegant than others: "terrace" instead of "first balcony," "family circle" instead of "second balcony." While the fancy labels may be desirable for some theatres, more accurate terms are probably a better choice in most cases. Almost any box office treasurer will attest that a surprising number of ticket buyers don't even understand the term "orchestra." Suffice it to say that theatregoing should be made as easy as possible. The following are the most commonly used seating terms:

Front Auditorium: Orchestra or Stalls (England)

Middle Auditorium: Mezzanine, Dress Circle, Front Balcony, First Balcony, Boxes, Side Terrace, Side Balcony, Loge, Parterre, Galleries (England), and First Tier

Rear Auditorium: Balcony, Rear Orchestra, Family Circle, Second Balcony, Rear Balcony, The Gods (England), Second Tier, and Second Terrace

Estimating Potential Box Office Income

Once the seating arrangement has been determined, and the various sections have been labeled, a price is assigned to each seat and the potential gross determined as follows:

In the Orchestra - 500 available seats at $25 a seat equals a total of $12,500 In the Mezzanine - 200 available seats at $20 a seat equals a total of $4,000 In the Balcony - 100 available seats at $15 a seat equals a total of $1,500

Total Potential Gross for a Single Evening Performance: $18,000

VJ An Orchestra seat for $25! Where? Using a 1999 price scale of $60/50/35 for a straight play in the 805 seat John Golden Theatre, this example would give us a total potential gross for a single evening performance of $41,525.

When matinee or twilight performances are offered, ticket prices are traditionally lowered. (while there is great precedent for this practice, it is not altogether logical. Most theatregoers who attend matinees do so for reasons other than the lower price and would probably not resist paying evening prices). To simplify advertising and ticket sales, matinee prices should simply drop the top evening price category and continue the other prices downward:

In the Orchestra - 500 available seats at $20 a seat equals a total of $10,000 In the Mezzanine - 200 available seats at $15 a seat equals a total of $3,000 In the Balcony - 100 available seats at $10 a seat equals a total of $1,000

Total Potential Gross for a Single Matinee Performance: $14,000

Max Lower prices for a Matinee - or, for that matter, a Preview - performance are pretty much a thing of the past. We still do them occasionally as a special promotion, but you can't count on them.

VJ I'll ask you why that is later.

If the production is scheduled for a limited run of less than a week, the total potential gross for the entire run can he computed and then set aside for study, once the estimated production costs have been determined. But if the same or different productions are offered as an ongoing policy, then a weekly potential gross can he determined as follows:

6 evening performances at $18,000 a performance equals $108,000 2 matinee performances at $14,000 a performance equals $28,000

Total Potential Weekly Gross: $136,000

VJ Or, as per our 1999 example with eight performances all at the same price, we get a total potential weekly gross of $332,200.

Total Potential Season Gross ($136,000 a week for 20 weeks equals) $2,720,000

VJ In 1999, 20 weeks at $332,200 gives a total potential season gross of $6,644,000. Max, is a 20 week run common these days?

Max Not unless your show depends on a Star who will only commit for 20 weeks. A limited three-month run is what you see most often.

VJ Why three months?

Max If you keep your initial costs down, and get concessions because it's a limited run, you stand a reasonable chance of recouping.

As well as having different price scales for evening and matinee performances, a theatre may also elect to increase its ticket prices for weekend and holiday performances, for musical productions, or for those that feature an especially popular (and expensive) star.

Max Higher prices for musicals is standard procedure. It's a good bet even higher, "special" prices for weekend and holiday performances are just around the corner.

But before one imagines putting that total gross amount into the bank after each performance, it would he wise to remember that the potential gross will almost never be reached due to:

1. Complimentary tickets 2. Press seats 3. Discounted season or subscription tickets 4. Discounted group sales tickets 5. Commissions paid to ticket agents and other salespeople 6. Unclaimed and unpaid reservations 7. Difficulty in selling single, scattered seats 8. Service charges imposted by credit card companies

The only way to offset such revenue losses is to sell standing room or additional chairs that are not included in the potential gross estimations. And as if the above list isn't sufficiently discouraging, ticket sales can also be diminished by:

1. lousy reviews 2. Poor word of mouth 3. Adverse general publicity 4. Illness and/or nonappearance of leading performers 5. Interruptions in public transportation 6. Interruptions in media coverage 7. Severe weather conditions 8. National emergency

Max And add one more; the TKTS Booth. While the TKTS Booth was originally conceived to make half price tickets available to audiences who couldn't afford a full price ticket, thus providing a small but additional revenue to producers from otherwise empty seats, we now have a new phenomena. A growing number of audience members, long accustom to seeing half price tickets to virtually all Broadway shows available sooner or later at the TKTS Booth, are now simply refusing to pay full price for any show.

Is it any wonder that seasoned producers and theatre managers usually plan on taking in no more than 50 to 60 percent of the total potential box office gross?

VJ With our 1999 example with an eight performance week at the John Golden Theatre, we get a total potential weekly gross of $332,200. However, as producers, we know that on average we can only reasonably plan on taking in 50 to 60 percent of this, or at most $199,320.

Max And right there you have the reason why theatre tickets are only going to get more expensive! Now, let me tell you why.

TO BE CONTINUED SUNDAY . . .
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