Are discounts eroding our sales?

Ohhh, if I had a dollar for every time I heard this question, my shows would never have to discount ever again!

While discounting has always been used to launch new products as well as entice people to buy old products (remember when your Mom used to cut coupons?), it wasn’t until the internet exploded that discounting exploded right along with it, like an unsliced hot dog in a microwave.  The days of delivering discounts by direct mail alone quickly began to disappear . . .

The airline industry was the first industry I remember trying to get rid of their perishable inventory on the internet, with their last-minute-price-slashing email blasts.  And we followed suit.

Discounts to Broadway and Off-Broadway shows are now much more available than they ever were, thanks to sites like BroadwayBoxPlaybillTheatermaniaBestOfOffBroadway, and so on.

So, the question is . . . “Is all this discounting doing more damage than good?”

Let’s take a look at some numbers!

Here’s what I did:

I found out when the major email blasts and discount clubs started to appear on the scene and graphed  figures before and after, eight years in each direction (the first thing you’ll notice is that there is this cool discounting zeitgeist type thing that occurred right about the turn of the millennium), and differences in growth during each of those eight year periods.

Here are the figures we examined:

  • Gross sales
  • Number of Tickets Sold
    Average ticket price
  • Price of top price ticket to Phantom of the Opera (We used Phantom since it has been open the entire span of time of the data and since it seemed a pretty good archetype)

Here are the results:

GRAPH #1 – GROSS SALES

graph 1

  • In the years from 1992 – 2000, the total gross sales on Broadway grew 120.22%
  • In the years from 2000 – 2008, the total gross sales on Broadway grew 59.69%

GRAPH #2 – NUMBER OF TICKETS SOLD

graph 2

  • In the years from 1992 – 2000, the total # of tickets sold on Broadway grew 54.20%
  • In the years from 2000 – 2008, the total # of tickets sold on Broadway grew 7.82%

GRAPH #3 – AVERAGE PAID ADMISSION

graph 3

  • In the years from 1992 – 2000, the average paid admission to a Broadway show grew 33.37%
  • In the years from 2000 – 2008, the average paid admission to a Broadway show grew 44.32%

GRAPH #4 – PRICE OF A FULL PRICE TICKET TO PHANTOM OF THE OPERA

graph 4

  • In the years from 1992 – 2000, the top full price ticket to Phantom grew 30.77%
  • In the years from 2000 – 2008, the top full price ticket to Phantom grew 41.18%
  • Inflation rate 1992-2000: 22.23%
  • Inflation rate 2000-2008: 25.05%

Ok, so a quick recap:

  • During the eight years pre-discounting zeitgeist, the growth of the total overall gross, and the # of tickets sold were much higher than post-discounting zeitgeist.
  • Average paid admission seems consistent with the rise in price of the full price ticket, which also grew at a greater rate in the most previous eight year period than the earlier period.
  • Our increasing ticket prices are outpacing the rate of inflation (a different blog topic would be to compare our expenses with the rate of inflation with our ticket price.  10:1 that our expenses are increasing at the higher rate).

So what do you think?  Do the above graphs indicate that discounts are eroding our ticket sales?

Before we draw any conclusions, we must remember that there are other events during the past sixteen years that have impacted the above charts.  Broadway, as well as the world, shifted dramatically, on Sept. 11, 2001.  It just so happens
that the major discounting efforts started just prior to that date, and then even more (i.e. Seasons of Savings) were the direct result of it.  And let’s not forget the dot.com boom and bust in the late 90s.  Certainly that had an effect.

But back to the original questions!

Could the discount efforts have really slowed our growth?  How would the industry have grown without sites like BroadwayBox, etc.?  Would the growth rates have been even worse?  Was the discounting necessary in today’s Walmart
society?  And if discounting has slowed growth, what can we do to reverse the trend?  Or is the growth slower because we are getting closer to the ceiling for the Broadway audience?

Oh the questions, the questions!  One thing I know for sure is that the above charts are just a few clues in the mystery of whether or not discounts are actually eroding our sales, and we shouldn’t jump to too many conclusions in a brief blog.

I will say this . . . it’s obvious to me that discounts haven’t helped.

But I’ll also say . . . I don’t think we had a choice.

In today’s society, thanks to the internet, it’s much easier to competitive shop.  And that has made a lot of us feel more entitled to a discount (my nose would be growing if I didn’t admit that I google Staples Coupon or Avis Coupon before buying paper or renting a car).  Also, those discount sites are opportunities for shows to get free media.  Cut your price, they’ll put you up on the site.  What’s better for shows with limited budgets . . . paying to buy space to sell a full price ticket or getting free space and selling a lesser priced ticket?  Either way there is a cost, but one is much less risky (this is just one of the reasons why Off-Broadway shows full price buyers are only 25% of the audience as opposed to 50% of Broadway shows).

Consumers changed their behaviors.  And now, to get back to those past growth rates, we’re going to have to do the same, because we’re not discounting properly yet.

What’s next for us to tackle?  Yield Management. Just like we learned from the airlines in sending emails for perishable inventory, it’s time to tackle different prices for different weeks of the year, different days of the week, etc., depending on supply and demand.

Here’s a bonus graph for you.  It’s the Dow during the same sixteen year period.

graph 5

  • In the years from 1992 – 2000, the DJIA grew 210.06%
  • In the years from 2000-2008, the DJIA grew 20.08%

I left off what happened in the year following January 1, 2008, because, well, we all know what happened then . . .

Special thanks to all my friends across the industry who helped with the research for this blog, including The Swami, Laura, Hugh, Darren, Jennifer, Karen (one of my assistants) and The League.

Comments
  • Will says:

    It it’s obvious that the discounts haven’t helped, it’s not at all because of any evidence we see here. These tests are inconclusive, and one could have predicted that they would be inconclusive even before collecting the data. The problem, as Ken states, is that there are many factors contributing to the pricing of tickets. Statisticians have ways of isolating the effects of different variables, but you’d need to keep track of all the variables in order to isolate the effect of the discounts alone (you would try to track disposable income, demographics of who’s going to the theater, the focus-group-rated attractiveness of the productions on offer, and as many other things as you could think of).
    A better way, and a way scientists use more often, is to pick individual cases where you can look at changes in performance after isolated changes in the variable of interest (we turn genes on or off, leaving everything else intact, to see the effect of these genes). So, pick a show that had one period where no discounts were offered and another period where a discount was offered, and look at the sales before and after the discounts began. Again, you’d need to minimize the effects of other factors before and after the discounts started being offered. And you’d want to repeat the examination with as many shows as you could find. But it’s a lot cleaner than looking at the whole industry.
    Also, statisticians have a strict criterion (p < 0.05) by which they judge something to have had a significant effect. If this criterion is not met, but it seems qualitatively to sort of have had a little effect, they don't say "We think it had a little effect." They say "we don't know at all if it had an effect, and maybe more trials would help us answer the question, but in the meantime we will not make any decisions based on the assumption that it had an effect." We like our drugs tested this way, so we should like our businesses analyzed this way too. Tough questions!

  • Will says:

    I meant, “there are many factors contributing to the SALES of tickets.”

  • I remember attending a League session some years ago and the conclusion was whatever the amount is of your highest discounted ticket price, that’s the highest average price people will pay to see the show. So in other words, you can have a $100 ticket price, but if you offer a discounted ticket $75, that’s what you’ll find the highest average ticket price is for the run, so goals need to be set with that price in mind. Looks like that’s proving accurate.

  • Darryl Rosin says:

    Ken, have you got graphs 3 & 4 swapped?

  • Ahh, dangit. We made some changes this afternoon and the graphs got swapped. All fixed now. Thanks for the heads up!

  • Richard says:

    Ken is right-on when he says toward the end that there are many factors that influence ticket buying. I think there are two main issues with the reluctance of consumers to understand that expectation of discounting should be an exception: (1) it’s ubiquitous! Discounts need to be harder to get and they need to offered less often. Of the ticket requests I get from folks, I’d say 25% either expect to get a discount on a house seat OR would rather pay less for a seat that is not nearly as good. (2) Consumers are inundated with entertainment choices. Literally inundated. (You could spend two years just watching YouTube.) They have come to expect to pay for live entertainment in the same way they pay for canned entertainment, that is, they have come to think that the cost of putting on a live show is fixed, and that well, they should be paying marginal cost not the full cost for them to see it. That’s where producers and their advertising colleagues (SpotCo, Serino, etc.) need to re-brand their shows as special. Live is LIVE. No two nights are alike. As a society, we’ve come to prefer slick perfection. Broadway needs to differentiate itself from that, and then maybe people will prefer to pay more for something that is unique.

  • I have seen Altar Boyz so many times and I have done so because one reason is that it is almost always on sale. I have seen it maybe 50 times or more. I feel that discounts help. I see a show almost always because of a discount. I would see Altar Boyz even without one but thats only because it’s such a great show. Off Broadway shows almost have to have discounts. Hair was on sale for $60 with a discount and Altar Boyz regular price is more than that. The problem is if the show discounts too much or too early. Shrek and the Disney shows made Perezhilton.com because they offered such big discounts. It ultimately is a double edged sword but I don’t see it going away.

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  • A Contrarian says:

    Perhaps discounts would be less frequent if shows would actually price themselves differently instead of everything having the almost the same top price.

  • Mark Briner says:

    Are you kidding? Discounts aren’t hurting your sales. the absurd cost of a single full priced theatre ticket is killing you. It’s unafforadable for most would be patrons, and the only way they can afford to see anything is with the various discounts. You’re just selling them in advance instead of selling more day-of at the TKTS booth. I used to go every other month-and bring friends or family with me for multiple sales, or see multiple shows–when tickets were affordable. But they are approaching double the cost of what they were then, and I can barely afford to bring one child at a time for their birthday at these prices. Trust me, discounts are the only reason Broadway is still in business at all.

  • Mark Briner says:

    AND, as Contrarian pointed out, price yourself on what you offer and what you spend. Why should I pay as much for a single set, small cast, one costume show as I do for a 40 person set and costume extravaganza like Phantom in it’s prime. I remember one year completely resenting Once On This Island because I saw that and City of Angels in the same weekend–one having TWO matching sets of elaborate sets and period costumes, the other featuring 12 actors wearing one set of costumes you could purchase on ebay and a unit set that was designed to look like it was made of cardboard. Same price for the audience???

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  • Bdim says:

    Ken,
    I would love to see a blog on why the tickets price for a show is ridiculously high when, according to your research, 79% of shows don’t recoup. That would be interesting to read from you

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