Sunday, September 04, 2011

Building a Budget that Empowers via Flexibility

Each September, a great deal of my focus migrates to budgeting for the next fiscal year. Even while the current fiscal year is just getting its start, many senior managers at Arena Stage are focused on the following year, knowing that in just under four months, a new subscription campaign is set to launch. As summer comes to an end, and the new theater season begins, I find myself already thinking about how in many cases, budgets are created to restrict, rather than to provide, flexibility.

If there is one thing I have learned since 2008, it's that success is greatly dependent upon one's ability to adapt quickly to changing circumstances. I've always been fascinated by people who consistently make the choice to stick with a strategy that isn't working instead of leaping into the unknown. In doing so, many believe they are mitigating risk, however refusing to adapt when a strategy is clearing collapsing only ensures failure, and what could be riskier than that? Those that are change adverse often times use a rigid budget to fortify their position, but a good budget lives and breathes with an organization, thereby providing plenty of flexibility when needed.

When budgeting, common practice at many non-profit performing arts organizations allocates revenue and expense into two categories: contributed (development) and earned (marketing). In doing so, each department is assigned resources and given revenue goals with a simple charge--use the resources provided to generate the targeted revenues. In my career, I have observed that this system of allocating resources and establishing revenue goals for separate and distinct departments can lead to inefficiencies that reduce, rather than maximize, return on investment.

Let me give an example:
Organization X anticipates that a certain production will achieve a significant single ticket revenue target, and as such, budgets higher than average expenses for advertising. The production opens to less than stellar notices, and word of mouth isn't helping either. After several weeks of slow sales despite the considerable investment in advertising, management concludes that the additional expenses set aside for marketing aren't providing the necessary return on investment, and asks that you reconsider your strategy. Meanwhile, you've begun to hear from the development department that the first annual fund campaign of the season is substantially over-performing, although they don't have the additional funds needed to grow the campaign beyond what was initially budgeted for.

In these types of situations, many marketing directors would reallocate funds from the under-performing production to productions later in the season, even though those productions, if budgeted properly, should already have plenty of resources allocated to support them. Fearing that they won't receive adequate resources in future budgets if they "give back" money in their expense budget, marketing directors can feel like they are incentivized to ineffectively spend resources on a struggling production or to reallocate them to productions that are already resourced appropriately. Meanwhile, the development department has struck gold, and could desperately use an infusion of additional resources, but none will come.

To avoid situations like the above, I believe budgets should be created with minimal essential resources allocated to each revenue stream, ensuring that each is supported adequately. Resources traditionally budgeted above the minimal level for campaigns that are anticipated to do well, should instead be used to fund a reserve that is used to allocate additional resources to over-performing revenue streams based upon actual highest achieved return on investment. Why religiously stick to a budget that 10 months prior allocated additional resources to anticipated successful revenue streams when current reality indicates that the additional expenses aren't warranted? Wouldn't it be nice to be able to move resources across departments to invest in activities that are actually over-performing rather than those that we thought would over-perform?

In addition, chief development officers and chief marketing officers should share responsibility for the total revenue goal of the organization, thereby eliminating any territory related issues that may arise. Together, they should be charged with shifting resources on a regular basis to fund activities that reduce cost of sale, maximize return on investment and best position the organization to achieve the annual institutional revenue goal.

At the end of the day, performing arts organizations are having to use their limited resources much more wisely than in previous years, and that reality should force all senior managers to reexamine how resources are allocated and spent.

Monday, August 15, 2011

The Importance of Re-centering

A professor of mine while in graduate school at CalArts advised us that if we could envision ourselves doing anything else, we should get out now. He was very blunt. Life in the theater was hard. Long hours, low pay and full of personal sacrifice.

The past couple of years have been very difficult for the arts. State arts commissions are being eliminated, Tony Award-winning regional theaters are going out of business, corporate sponsorships are drying up and nationally renowned arts education programs are disappearing. If life in the theater was hard ten years ago when I was in school, it must be damn near impossible today in comparison, given the new realities of the "post-global economic crisis" world.

Being now a decade into the profession, I have found that most of my colleagues have seriously debated leaving the arts all together (and several have). And who could blame them? In fact, I find those that have never longed for a more stable livelihood a little suspect.

Last week was personally trying for me. Exhausted and spent after several weeks of very intense work, I found myself doubting whether or not I could sustain a lifelong career in the theater. Having recently received a couple of tempting phone calls from recruiters about chief marketing officer positions at various institutions outside of the arts (and one not so tempting inquiry from a construction company), the doubt continued to linger. However, at the end of several long days, I didn't rush out of my office and head for home, choosing instead to stay behind and take in a few performances at my theater. And as Robert Frost once remarked, "that made all the difference."

Sometimes it is easy when your nose is to the grindstone to get lost in the day-to-day, and forget why it is you chose theater as a career in the first place. Your day gets gobbled by sales reports, revenue forecasting, pricing models, customer service issues, copy writing and media buying, and the next thing you know, it is time to leave (and you're probably hungry because you forgot to eat lunch). Let too many of those days go by without returning to the art that attracted you in the first place, and you will find yourself in trouble. You can do all of the aforementioned tasks for any non-artistic venture in the world. The skills are transferrable, you'll have a more stable career and lord knows, you'll make more money. But you chose to work at a theater because you have the spirit of an artist. Take the art away from an artist, and you steal their soul.

So if you find yourself lacking motivation, or a sense of purpose, take a stroll into the rehearsal room, visit a class full of young artists or watch an audience react to a performance. Doing so will allow you to re-center, and remind yourself why it is you do what you do.

P.S. for those theaters that encourage closed rehearsals, I would encourage them to reconsider, especially if they want well-informed, inspired marketers promoting their shows

Sunday, July 24, 2011

The Effects of Social Media on Traditional Journalism

In my role as Director of Communications at Arena Stage, I supervise media relations in addition to marketing and a few other areas. As originally intended, this blog was developed to discuss arts marketing, however from time to time, I stray a little and write about topics that affect media relations, as will be the case today.

A couple of weeks ago, I found myself participating in a very interesting discussion via Twitter with Howard Sherman, Peter Marks, Trey Graham, Nella Vera, David Loehr and Kris Vire. This impromptu panel discussion was centered around the affects of social media on traditional practices in arts journalism. With both publicists and journalists recognizing that the traditional media landscape is changing, it made me think about what's next. Below are my thoughts that formed in the weeks since.

For a primer on the subject, may I suggest the following articles:
"Should Theater Critics be Allowed to Tweet an Opinion Before Writing a Review?" Washington City Paper, 10/20/2010
"Hey, Broadway-Based Spiderman Boosters: Twitter's Not a Supervillain" NPR, 12/1/10
"Will the Embargo Hold?" 2amt, 7/12/11
"Stop Telling Me What to Think About Your Show" The Craptacular, 7/12/11

From my point of view, the affects of social media on...

New Play Development
The days of developing new work under the watchful eyes of millions of New Yorkers may be over. And the Broadway tryout in major metropolitan areas could be as well. Why anyone would make the choice to develop new work directly on Broadway itself baffles me, as there is no room for error. I couldn't imagine a worse place to develop work. To be extraordinary, one must be able to take risks. With the rise of social media, every risk taken (and failure made) is a potential headline in the now influential blogosphere. In the past, producers and publicists had to concern themselves with crafting stories for professional journalists and preparing for traditional reviews, but in today's world, before the first review hits, public opinion can be persuaded by millions of tweets, Facebook posts and blogs. In some cases, by the time the impartial and professional critic walks through the doors of a theater, the verdict in the court of public opinion has already been rendered. As information travels at the speed of light to every corner of the world these days, it would not surprise me if the major development work for high profile, Broadway-bound productions starts to occur at smaller and smaller venues in more remote areas of the country. Even major regional theaters in large metropolitan areas may become too "exposed" to be able to shelter the development process of new work. My prediction: Places like Virginia Stage Company, a LORT D theater in Norfolk, VA which just recently produced a highly acclaimed pre-Broadway run of Bruce Hornsby's SCKBSTD, will become the new go-to places for development of high profile projects.

Preview Performances
A production is never fully complete until it is performed in front of an audience. Preview performances used to be a testing ground that allowed creatives the ability to make adjustments to a production and then try them out in front of an audience. Previews are handled differently depending on the company. I have worked for companies where previews were very rough, often times being obvious that the creatives and the cast were still in the process of creation. However, I have also worked for companies where in most cases, the first preview looked as polished as opening night. As marketers, we know the most powerful marketing tool is word-of-mouth, and social media allows for the development of instant word-of-mouth campaigns. These days, artists and administrators have to be prepared that the first preview will bring instant feedback, and that feedback will have a direct impact on sales. Some administrators, as mentioned in the aforementioned article entitled "Stop Telling Me What to Think About Your Show," try to appeal to audiences to halt or slow social media. However, as a paying member of the audience, patrons have every right to say what they think to whomever they want using whatever means they want to. Trying to control social media is a waste of energy, and asking audience members not to discuss the play is like telling a teenager not to do something. Even more ludicrous are the producers that are charging $150+ for previews, and then asking patrons not to share their experiences. Whoever advised them to do so obviously has very little understanding of the value of transparency which drives so many social media mavens. My prediction: Producers will forgo long preview periods, and will in turn rely more heavily upon the developmental runs as discussed in the previous paragraph.

Embargoes
In his excellent blog referenced above, Howard Sherman predicts that the embargo "has begun to crumble and that erosion will only accelerate as every single person who cares to becomes their own media mogul and true stars of the medium begin to achieve influence akin to that afforded by old media." I couldn't agree more. As of today, traditional journalists are expected to hold back on reviewing until a producer settles on an opening date and then invites the critic to see the production. In the meantime, "citizen reviewers" are blogging, tweeting, posting on Facebook and Yelping, thereby allowing everyone except the professional critic the opportunity to weigh-in. However, to pull a line from Spiderman, with "great power comes great responsibility." Professional critics are expected to act with journalistic integrity and to honor embargoes as they are the arbiters of culture for, in some cases, millions of readers. But there are grey areas. What happens when the same producer that requests an embargo from professional critics invites Oprah Winfrey to attend a preview, and then Oprah tweets her thoughts to her 6.7 million followers weeks before critics can? or when an advertising firm uses pull quotes from comments on Yelp or Twitter to promote a show in ad campaigns weeks before a show is officially open to review? My prediction: The use of embargoes between producers and the media will change in the next few years as social and traditional media will compete directly with each over for prominence.

Reviews
For some reason, when Washington City Paper theater critic Trey Graham tweeted a response to a show that he was reviewing from the theater, it caused a little bit of a brouhaha. To get the facts straight, he was an invited reviewer attending a production that was open to review at the request of the theater. I guess a couple of actors who normally like to avoid reading reviews encountered the tweet, and were upset because a review caught them by surprise as it was delivered via social media, thus leading to a complaint. From a publicist's perspective, Trey was well within his rights to tweet his thoughts. Theaters can (as of now) embargo reviews based on time (when shows are available for review), but it is amusing to think that any institution would expect to be able to embargo based on delivery method. Social media is just a delivery mechanism, just like a newspaper is. Critics have every right to deliver their criticism via whatever mechanism they like. Journalism is a very competitive field, and often times being able to weigh-in first, or before others, creates a competitive advantage. As such, I am not surprised at all that critics are now sending immediate, albeit 140 character, responses. Although I disagree, Howard Sherman developed a well reasoned argument as to perhaps why critics should not tweet responses in his previously mentioned blog. That being said, as a publicist, I would argue that whether we think critics should or shouldn't tweet their responses is a moot point, as it isn't up to us. The fact is, they are doing it and we don't have any logical reason to ask them not to. My prediction: Many more traditional critics will start tweeting immediate critical reactions so that their responses are competitive in the fast paced environment of social media.

Friday, July 08, 2011

The Nonprofit Variant of Dynamic Pricing

I think for most of us that work in the nonprofit theater, our dream is to create exceptional art that is accessible to everyone. Speaking for me specifically, this is the reason I decided to make a career in the nonprofit resident theater, rather than some of my peers who opted for the commercial theater. There are times when I am envious of the visual arts, particularly in Washington, DC, which due to their funding models, many of which can provide exceptional art free of charge to the public. The predominant model for visual arts institutions in DC is based on uninhibited access. Wouldn’t it be great if the performing arts were the same way? The nonprofit resident theater model developed in a completely different manner however. In fact, Arena Stage was founded in 1950 as a for-profit entity, and thrived for years as such. From the very birth of resident theaters, patrons were charged to access the art, and we have had to fight to keep funding models in place that support accessible fees. With the development of the nonprofit model, it allowed previously for-profit resident theaters the opportunity to raise contributed funds (private donors, government entities, foundations, etc) in an effort to keep ticket prices as accessible as possible. Most resident institutions took advantage of this new found opportunity to improve access for all and to provide educational programs, however there were some that did not. Still to this day, in our community (not to mention on Broadway itself), nonprofit theaters and for-profit companies compete all the time, which seems to be somewhat unique to the theater world (do you know of any for-profit symphonies?).

Prior to 2008, few companies had experimented with dynamic pricing, primarily because the technology wasn’t readily available to operationalize what had previously been a well thought out theory. The idea was relatively simple -- if your house was playing to less than 100% capacity, it was symptomatic of the failure to determine an optimum price. If an optimum price could be determined, which perfectly aligned demand and supply, every house would be at capacity. The first use of dynamic pricing by a nonprofit organization to my knowledge was at the Chicago Symphony Orchestra. In 2003, Deborah Rutter joined the symphony as their new president, and introduced the idea of dynamic pricing (resident theaters would experiment with dynamic pricing much later). Tessitura, an advanced new database system developed by the Metropolitan Opera, had entered the market in the early 2000s, but was so costly that only major symphonies, operas, presenters and commercial entities could afford it. However, Tessitura was robust enough to handle the operationalizing of dynamic pricing for those institutions that could afford it. From 2003-2008, most marketing directors at nonprofit resident theaters were aware of a new “dynamic” pricing model, but we didn’t have access to the technology to implement it. While very large nonprofits were experimenting with dynamic pricing, so were commercial entities. The Producers broke records in 2001 by establishing an unheard of top ticket price of $480 (which by the way, The Book of Mormon just surpassed on June 16 with a top ticket price of $487). I immediately began to notice a difference in how for-profit and nonprofit entities were applying the principles of dynamic pricing. From my observations, Broadway producers did not consider accessibility in the least when establishing ticket prices. They had responsibilities to their investors, and would charge the maximum price they could for every seat in the house. On the other hand, I noticed many nonprofit companies increased their top ticket price when demand warranted in order to keep a significant portion of their houses at very accessible prices. And even the top “dynamic” prices at nonprofits didn’t get anywhere near $480 (I wonder if this is what Diane Ragsdale meant when she said that "nonprofits are expected to leave money on the table?"). Whereas both nonprofits and for-profits were using the same pricing theory, it has been applied and operationalized very differently.

A tipping point for nonprofits occurred in 2008. By that time, Tessitura had been on the market for almost a decade. Competing database products were being developed and tested, and the pricing for Tessitura had decreased to a level that most nonprofit resident theaters could now afford it. In addition, the world experienced the beginnings of the global economic crisis during September of 2008. That fall, I gave a couple of speeches at national conferences, and the predominant question on the minds of arts administrators was how a crisis at such an enormous scale would impact organizations. We had models from 1987 and the 1970s, but all indications were that this crisis would far exceed anything we had ever weathered.

Some organizations cut back programming and reduced expenses in a hope to ride out the storm. Others recognized the crisis as an opportunity to reexamine business models. Most correctly identified that contributed revenue sources would be heavily impacted. As nonprofits operate on two revenue streams (contributed and earned), in order to maintain the same level of artistic excellence, maintain living wages for artists and offer extensive educational programs, many organizations looked for ways to bolster earned revenues. Nonprofit resident theaters became very good at maximizing revenues from non-ticket sources in order to maintain accessible ticket prices. New sources of revenue were popping up everywhere from real estate ventures, event rentals, restaurants, parking, corporate visibility opportunities, summer camps, bars, consulting services, and partnerships with for-profit ventures. However, new earned revenue streams took time to develop and decreases in contributed revenue were coming quickly. In order to maintain accessible ticket prices for a significant portion of the house, many nonprofits had to seriously consider a dynamic pricing model that allowed for an increase at the top pricing levels when demand warranted it. With a decrease in contributed revenue, organizations had a choice to make:

1. They could reduce expenses, cut programming and lay off staff in an attempt to resize themselves to match the new levels of contributed revenue available.
2. They could increase ticket prices at all price levels to make up for lost contributed revenue, however in doing so, making themselves less accessible across the board.
3. They could increase top ticket prices according to demand, and keep a significant portion of their inventory at accessible prices.

Not surprising to me, many nonprofit resident theaters went for option #3. To my knowledge, almost all the nonprofit resident theaters in the DC metropolitan area now utilizing dynamic pricing, and none so far have seen the negative ramifications as forecasted by some experts.

In today’s debates concerning for-profit vs. nonprofit incorporation, I am mindful of something Arena Stage Founder Zelda Fichandler said in a speech she gave in the 1960s: “while we are gathered here in the name of the nonprofit corporation (and, indeed, without the nonprofit income tax code, our American theater would simply not exist), being nonprofit does not really define us—our goals, our aims, our aesthetic, our achievements. What defines us, measures us, is our capacity to produce art.”

Ultimately nonprofit resident theaters should be measured by their capacity to produce art, and to make that art as accessible as possible without sacrificing excellence or their ability to compensate artists at reasonable levels. Given today’s new realities of reduced contributed revenue sources for many nonprofit resident theaters, the development of new revenue streams and the implementation of dynamic pricing allows institutions to make up for lost revenue without sacrificing their ability to be accessible to their communities.

Monday, June 27, 2011

Untapped Talent

Over the course of the year, I have been fortunate enough to attend several gatherings of artists and marketers, from the National Arts Marketing Project Conference to the #Newplay Convening at Arena Stage to most recently the Theatre Communications Group's National Conference. From these gatherings, a clear theme has emerged. Many artists feel that institutions do not use them to the best of their abilities, and they question why they are not approached to help with planning, budgeting, marketing or other traditionally "administrative" functions. In fact, as it relates to marketing, many artists went a step further by saying that they feel unwelcome by marketing departments.

At the TCG conference during a session entitled "The State of the Artist," sound designer Cricket Myers questioned why she isn't utilized more to promote productions she is working on. This echoed cries from playwrights that I have heard throughout the year asking why marketers don't seek out a playwright's assistance in the promotion of their work.

I think in some cases there is a serious disconnect between the marketer and the artist, which leads to situations of untapped talent on both sides. Why are artists not sought out during the marketing process, and why are marketers not sought out during the creation process? From the stories I have heard from playwrights, it sounds to me like several of them have legitimate reasons to feel like they are unwelcome when it comes to designing and implementing marketing campaigns. Those of us that spend a significant amount of time marketing new work might not understand the exclusion of artists in the marketing process, as outlined recently by Alli Houseworth's comments in "A Theater Marketer's Rant." Marketers that reject any collaborative environment with artists make it difficult for those that invite collaboration. I fear that some marketers are considered guilty by association.

If involving artists in the marketing process is beneficial (as I believe most of us agree it is), I question if involving marketers in the creation process could be as well? Theater is a collaborative art form, and it seems to me that the highway of collaboration should feature two way traffic. In my career, I have seen marketers locked out of rehearsal halls, denied access to draft scripts, and be uninvited to workshops and readings, yet they were expected to understand and promote the work. To those playwrights who question why marketers never seek their opinion, I would like to ask them if they have ever sought the opinion of a marketer?

Marketers and playwrights are both specialists, highly trained and very experienced in their perspective trades, but they are both creative beings as well. Good ideas come from a variety of sources. To assume that a marketer has no value in an artistic decision, or that playwrights have nothing to contribute to a marketing plan is foolish. Both sides lose, and when paired, they lose together.

Saturday, May 21, 2011

What if...We Cast Off our Non-Profit Status?

In honor of Theater Communications Group's 50th Anniversary, the performing arts service organization solicited "what if" manifestos for their upcoming annual conference. In that spirit, I decided to point the "what if" in the direction of the the non-profit business model by asking what would happen if resident theaters abandoned up their non-profit status.

I am by no means the first to address this topic. On Tuesday, May 17, Thomas Cott featured the three great articles addressing this issue in his "You've Cott Mail" that day:

L3C Cha, Cha, Cha by Diane Ragsdale
Questioning Old Dogmas by Colin Tweedy
Revenue Means More Than Business Models by James Undercofler

The Assumed Argument: Mitigating Financial Risk by Relying Less Upon Volatile Funding Sources
I assume that the proponents of reexamining the reliance upon the non-profit business model by our resident theaters comes from those who feel that theaters could mitigate their operating risk by relying less upon volatile funding sources. In a previous post entitled The Funding Conundrum: A Marketer's Response, I discussed tactics an arts marketer could take in light of major government funding cuts. Coming from an advocacy background, my first instinct was to look at ways marketers could become better advocates. In doing so, I was trying to find ways to maintain status quo in a time of dwindling support. However, I now find myself asking what would happen if we found a way to develop an artistically valid and sustainable model that didn't rely upon any government funding? Would that allow us to create our own destiny? Would it eliminate our reliance upon a funding source that at best is dubious these days. We wouldn't have to consult the tea leaves to see if we were going to get our rationing of government funds or face the devastation that comes when those funds are cut at the eleventh hour. I hear many organizations discuss risk management these days. I wonder if eliminating a volatile revenue source and replacing it with revenue that is more dependable could become a very attractive option to companies that want to mitigate financial risk.

The idea of leaving behind the only thing most resident theater administrators have known their entire lives is daunting. In briefly contemplating this issue, a few questions immediately came to mind:

Would we jeopardize the artistic product?
As Ms. Ragsdale pointed out in her well written article on this topic, Arena Stage covered all of its expenses for its first fifteen years from box office revenue. In reading Zelda Fichandler's personal speeches to the original investors of Arena Stage, they don't reveal a particular concern about needing to sacrifice artistic integrity due to the financial pressures of having to meet expenses solely from the box office. However, I do not believe that resident theaters can depend solely on box office revenue if they eliminated their non-profit status, and doing so, would in my belief, inevitably lead to artistic sacrifices. That being said, as contributed revenue sources have declined, many organizations have had to look for new revenue streams so that the box office didn't become the sole method of revenue generation. New sources of revenue are popping up everywhere from real estate ventures, event rentals, restaurants, parking, corporate visibility opportunities, summer camps, bars, consulting services and partnerships with for-profit ventures. As long as there are other substantial revenue streams that prevent the box office from becoming an organization's sole source of revenue, the artistic product should be protected. Check out these articles about popular sources of new earned revenue:

Arts Centers and Real Estate: Sustainable Business Model? Createquity
New Jersey Arts Center Sets Real Estate Venture The New York Times
Lincoln Center to Consult on New Arts Center in China Forbes
Atlanta Symphony Orchestra Purchases Telemarketing Firm Artful Manager

Would we have to sacrifice the revenue currently generated by contributed sources?
Most annual fund campaigns track revenue from individuals, board giving, corporations, special events, foundations and government support. This isn't my particular area of expertise so my thoughts might be naive or worse yet, impossible, however below are my guesses at what might happen to these sources if theaters were to drop their non-profit status:


  • Individuals: Perhaps the largest loss of contributed revenue could be from major donors, who benefit significantly from the tax breaks received from philanthropic giving, although politicians are debating reducing the tax deductibility of charitable gifts. However, I don't believe that revenue from lower level donors would be significantly impacted. Research indicates that lower level donors primarily give to receive benefits designed to improve their experience while attending the theater, and not due to a value-based philanthropic reason. If theaters were to continue to offer experiential benefits in exchange for an additional fee, regardless if they were a non-profit or not, I believe they could maintain the revenue they receive currently from lower level donors.


  • Board Giving: I wonder if non-profit board members could be transitioned into investors in a for-profit model, serving in a similar capacity to a limited partner. That could allow an organization to maintain partial revenues from board members, while offering them an opportunity for investment returns.


  • Corporations: Corporate giving via truly philanthropic avenues has steadily decreased in the past decade. Most corporations now have moved their sponsorship dollars out from under philanthropic officers and into the hands of their marketing departments. Corporate sponsorships are primarily about visibility and client entertainment. I would guess that marketing officers aren't going to care if a theater is a non-profit institution or not when deciding where to spend their sponsorship dollars. They care about the value of the opportunities the theater can provide.


  • Special Events: Why not look at special events as one night, for-profit productions? By programming in-demand talent, pricing tickets at fair market value and controlling expenses, special events should be able to still generate significant revenue.


  • Foundations: Many foundations only give to non-profits because the IRS provides certain tax benefits to those that give 5% of their assets each year to organizations with 501(c)3 tax exempt status. For several theaters, this would be a substantial loss in revenue. I wonder if this could be resolved if the IRS offered to count grants given to LC3s in the same manner as those given to 501(c)3s.


  • Government Support: For many organizations, government funding is either non-existent or so volatile that it cannot be included in operating budgets by prudent organizations. Arts organizations close regularly because they lose municipal or federal support. Many well-governed organizations have already learned to treat government support as icing on the cake, and nothing more. Those that haven't, risk total insolvency if the political climate shifts.
So, What's Next?
For now, it seems there is a lot of talk. These days, there is very little certainty in or agreement on anything, including the best business model for a resident theater. I am mindful though that Arena Stage was founded in 1950 as a for-profit entity, and thrived as such for several years. Could it be that to go forward, the field [5/31: replaced the word "we" with "the field"] must go back? It seems fitting to end with a quote featured from Zelda Fichandler in Ms. Ragdale's article: "I bring this up simply to point out that, while we are gathered here in the name of the nonprofit corporation (and, indeed, without the nonprofit income tax code, our American theater would simply not exist), being nonprofit does not really define us—our goals, our aims, our aesthetic, our achievements. What defines us, measures us, is our capacity to produce art.”

Sunday, May 08, 2011

It's Time to Pay Your Age

The predominant method of pricing to attract young audiences involves the last minute discounting of available inventory, usually resulting in what is commonly referred to as a "student rush." At Arena Stage, we had a similar system called our "30 and Under Program," which allowed patrons 30 years old and younger to access $15 tickets beginning at 10:00am on Monday for that week's performances. The $15 ticket price represented a 75% off discount from our typical average ticket price, so these tickets were in high demand. With such a popular program, you might be asking why are we trying to fix something that is "working" by launching a "Pay Your Age" program specifically designed to replace the previously popular "30 and Under" program?

Well, if you dig a little deeper, you'd find that it wasn't working because...

We were losing them at 31. Imagine if you had spent ten years paying $15 for a good seat to the theater, and on the day you turned 31, you received a birthday card saying "congratulations, in order to attend your favorite theater from now on, you must now pay 75% more than you have been." As an organization, in some cases, we had spent more than a decade teaching young adults that a ticket to the theater was only worth $15, when in fact we should have been reminding them that they were receiving a $60 ticket on a substantial discount because we recognized they were in school or were just starting their careers. The jump from $15 to $60 overnight was just too steep, and after paying such a substantial discount for so long, the value proposition was completely distorted.

We were encouraging late buying behavior. I have been to countless conferences where experts have blamed decreases in subscriber bases on younger patrons who are not willing to commit in advance. Well why should they? For years, we have been giving them great seats at the best prices at the absolute last minute. If you eventually would like younger patrons to become subscribers, you must develop pricing systems which encourage earlier buying behaviors. They need to be taught early on that in order to get the best deal on the best seats, they need to commit early. I always found it funny that the same theaters that forced younger patrons to purchase via last minute rush systems where the ones that complained they couldn't attract younger subscribers to offset the attrition of their older subscriber base.

We could not fulfill demand. In many ways, our inaugural season at the Mead Center for American Theater has been a banner year for Arena Stage. Performances sold out weeks and months in advance, and when that happened, requests for access to any held inventory and house seats for sold out performances flooded into our Artistic Director's office. By requiring 30 and under patrons to wait until Monday to purchase tickets for that week's performances, we found that in many cases, we had very limited, if any, inventory available for such an important program. That being said, I know how hard it is to tell a major donor or VIP that we can't sell them a seat because the seat in question was being held for our 30 and Under Program. Imagine--"I'm sorry Mr. Ambassador, the performance you would like to attend has been sold out for weeks, except for the tickets we have held for the 30 and Under Program. You aren't by any chance under 30 are you?"

The Fix
So we developed a new system called "Pay Your Age (PYA)." The premise: for our patrons who are 30 years old and younger, they can purchase PYA tickets starting two months in advance of the first public performance by calling the box office and simply paying their age for their ticket. Tickets will be held at will call for pickup, and box office associates will verify age upon check-in. We have guaranteed that 3% of the inventory for each performance will be held specifically for this program. In the case of our upcoming summer revival of Oklahoma!, this means that on Monday, May 9, 1,800 PYA tickets will go on sale in a first come, first served format.

I anticipate that demand for these tickets will be very high, and they will sell out quickly. This in turn will underscore the importance of buying in advance if a 30 and under patron wants to get the available discount. Wait too long, and we'll be sold out. In addition, by paying just $1 more per ticket per year, we hope to gradually adjust each patron year by year, so that when the time comes, there isn't tremendous sticker shock.