Another pricing post. Don’t “cry” – this one is only $54!

I couldn’t help but continue with my pricing motif when I saw the Cry Baby marquis this weekend advertising “All Tickets for Previews Only $54!”  (The show is set in 1954. Get it?  1954.  $54.)

The hopeful Producers of Hairspray II are betting that this reduced price (about the same as what the price would have been at the TKTS booth) will pull in more of an audience during the ever important early weeks, when a show’s expenses are high and grosses are low.

But will it work?

By slashing their prices across the board, they have eliminated the consumer’s option for choice, which breaks my Kardinal Kenism:

There is always someone who wants to fly first class.

First class may seem out of reach for most of us, and a full price ticket might seem too expensive for an unproven show in previews for most of us as well, but data shows there is always someone who will buy it, no matter what the price is.  They just want “the best.”  Dance of the Vampire, Moose Murders, Carrie . . . all of the biggest flops in history had full price ticket buyers during previews.  Stupid ones, but still.  My opinion?  Just take the money.

The other problem with across the board pricing strategy is that your
TKTS price is proportionally adjusted.  So, the Producers of Cry Baby aren’t only losing income from the potential $115 ticket buyer who is now
paying $54, but they’re also losing money from the people who would have
paid $57.50 at the booth (50% of $115) who are now going to pay $27 (and remember – at the TKTS booth, you don’t see the actual prices display . . . only 25%, 35% or 50% off, so the customer thinks they are all the same).

The Producers of Baby are smart people.  They understand the above theory.  But obviously they believe two things:

  • They believe they are going to sell approximately 2x the number of tickets from this promotion than they would have sold using traditional pricing.  Even if they sell the same, they will have double the butts in the seats.  And more bodies = more word of mouth.
  • The public discount will allow them to spend less on advertising so they can avoid certain email blasts, direct mail, etc. which reduces their overall expenses.

Time and Variety will tell how this theory works, but if I were playing my favorite game, I would have made a different call.

I would have priced it more traditionally, based on my first class rule above, and because I don’t believe that the price is that remarkable of a call to action.

Then I would price the entire house for just the first preview at $19.54.

That’s a price worth talking about.  And it would have gotten the most people in to the see the show early, so they would hopefully stop talking about price.

And start talking about the show.

This just in . . . theater tickets are expensive.

Ok, you knew that already.

But here’s something you may not have known . . . They’ve always been expensive.

Hal Prince once gave a speech where he confirmed my theory that people have been complaining about theater prices since The Black Crook opened.

Yet one of the most common complaints I still hear at meetings regarding the problems of Broadway and the theater in general is that tickets are too expensive and if we could only fix that, the theater would be restored to its past glory!

Sorry, not gonna happen.

As Hal insinuated, it’s time we acknowledge that theater tickets are expensive and get over it, because it’s not gonna change.

Theater tickets are a high priced commodity.  They are a luxury good.  But are they too expensive?

Let’s compare Broadway theater tickets to other live entertainment options:

  • A recent scan of the web found me a pair of Bon Jovi tickets for a top price of $129.50 in Wisconsin (something tells me people in Milwaukee may earn less than people in New York City so $129.50 might feel like a heck of a lot more to them).
  • The Yankees offer a bunch of different ticket options, including SEVEN price levels at $100 or higher (up to $400).
  • Top price for Ka in Las Vegas?  $169.50.
  • Disney World?  $71.

Our ticket prices are not out of line.  They are even cheap by some comparisons (something tells me those $400 Yankees tickets will go faster than premiums to A Catered Affair).  And most Producers (as they should) have a small allocation of much lower priced seats to offer those who can’t afford the high priced options (lotteries, rush, etc.)

People will pay the $125, $250 or sometimes even $500 for the
right ticket to the right show, which demonstrates that people are not
price resistant.

They are value resistant.

We need to stop worrying about how to decrease prices and start worrying about how to increase value.

Your customers will pay top dollar plus for an experience that they believe is worth it.  Your job is to make the value of your ticket seem even higher than the price your customer is paying so it seems like they got a bargain.

Oh and to all the people that say we need to cut the price of the ticket to
save the American theater, I point to all of the shows that have
discounted tickets down to the $20s and $30s to “save their show” only
to still see them close (there is no value in a crappy show).

And, vice-versa, every time I’ve raised prices on a Broadway or Off-Broadway show, attendance never drops.

The day of the $1,000 theater ticket will be here some day, and as depressing as that sounds, don’t worry.  It’ll still be less than what a lot of people pay for tickets to the Super Bowl or The Kentucky Derby.

I’ve got the mouse on my mind.

I was looking at a bunch of different Broadway budgets recently and I wanted to compare the budgeted breakevens with what the market was currently bearing.

I wanted to see what shows were grossing over $700k, even in the tourist-free winter months, so I flipped open my Variety and here’s what I found:


Broadway Grosses w/e 02/10/2008
Wicked                            $1,310,705
Jersey Boys                     $1,127,362
The Lion King                      $962,925
The Little Mermaid              $889,942
Mary Poppins                     $731,687

What’s interesting about this?

The mouse has 3 of the 5 shows above $700k.

And this list looks very similar if you look at the week before.  And the week before that.  AND the week before that.

Leverage works.  So well, in fact, that it’s a little scary.

You know what else is interesting?

Of these five musical behemoths, only 2 got good reviews from the New York Times.

Why investing in Broadway or Off Broadway is better than investing in the stock market.

Whenever you are selling anything . . . from tickets, to why a star should sign on to your show, to a vacuum, you have to remember that you’re never selling IN a vacuum.

There is always something that your “consumer” could buy instead.  They could always get tickets to another show (or, God forbid, a movie).  The star could always sign on to another show (or, God forbid, a movie).  And they could always get a Swiffer (or, God forbid, they could just leave their apartment a mess and go to the movies.)

You not only have to sell why your product is worth whatever price they are paying, you also have to sell why your product is better than the other products that are out there.

For example, when raising money, one of the common questions that I always have to be ready for (and one that you should be ready for when you start raising money) is, “Why should I throw money into such a high risk venture when I could throw it in the stock market instead?”

Hmmm, good question, right?  Actually it’s a great question.

There are of course a bunch of reasons why someone would invest in the theater as opposed to the market:  opening night tickets, high risk but big upside potential, house seats, billing, potential tax write off, or just because they believe in you.

But most of those are indirect comparisons.  When you’re selling stuff, you need to find direct comparisons between the competition, like . . .

Yes, investing in the market is safer, without a doubt.  And you should encourage your investors to do so, to create the most diversified portfolio possible.

But when you buy a stock, you not only have to know when to buy . . . you also have to know when to sell.  Stocks go up, but they also come down.  You could invest in a blue chip a year ago that everyone was recommending and a year later it could post almost a 10 billion dollar loss.  And no matter how much your stock went up over the last year, if you didn’t get out in time, you lose.  You may have made a smart decision a year ago, but if you’re not a expert market watcher, then you could end up with a tax-write off anyway.

Here’s the thing about shows . . . once they get over that humungo hurdle and actually recoup, they never go the other direction.  Once you’ve got a winner, you’ve got a winner, and your gains only increase.  Sure, the gains may be small, or they may slow down when the Broadway show closes and when your show is only being done in high schools, but you never have to worry about selling.  Returns diminish, but never reverse (barring some sort of extreme circumstance like litigation).

When you buy a stock, you have to be smart twice.  When you buy Broadway, the pressure is on only once.

Ok, that’s not true.  You also have to figure out what to wear to the opening night party.  (And there’s another reason why people invest in the theater instead of the market – you don’t see Citigroup throwing parties for investors when they buy 100 shares, do you?)

Would the traders at Goldman Sachs punch holes in the above theory and find direct comparisons of their own to prove why investing in the market is better than a musical?  Probably.

That’s just as much their job as it is yours.

Then again, they were also recommending Citigroup last year.

So don’t sell in a vacuum.

(Insert your own Davenport-style “sucking” reference here)

 

If you are interested in learning more about investing in Broadway shows, click here.

It Happens To The Stock Market And It Happens To Broadway.

We had our own version of a “market correction” 2 days ago when Color Purple announced that it is closing.

Although everyone knew that Purple was showing signs of weakness post-Fantastia, the announcement, leaving the Broadway Theater empty during the Spring, was a bit of a shock, just like the Dow dropping a few hundred points in one day.

I should have predicted this one.  I picked up on a sign that we were due for a correction a few weeks ago when Variety reported that Broadway grossed 15 million on 30 shows.

But what did it gross during the same week last year?  17 million.  On 28 shows.

2 more million.  2 LESS shows.  With last year’s prices.

Something had to give.  And it was Oprah.

While the closing of Purple is unfortunate, let’s hope that it helps stabilize the street and sends us (and the Dow) back up.

This brings up an interesting point.  Too often we worry about watching our grosses from week to week.  We celebrate being “up from last week”, or lament being down.  For those of you who have never seen a box office statement, look at this . . . you’ll see that the weekly comparison is part of the automatic reporting.

What’s the problem with obsessing over week to week comparisons?  Too many factors that affect sales change from week to week:  holidays, Super Bowls, weather, etc.  What we really should study is the gross changes from year to year.

Unfortunately, since the average run of a new musical on Broadway is only 52.67 weeks, most people don’t bother to look at yearly trends.

Here’s a graph of three years of data for one my shows.  Look at how closely the weeks line up from year to year.  Cool, huh?

Your sales trends emerge naturally.  When you discover them, that’s when you can really put your producing skills to work.  Discounts (or cutting discounts during busier weeks), expense cutting, etc.

When I look at a graph like this, I think of the low points like enemy targets, and my initiatives are my missiles.  By analyzing the trends over several years, I’ve isolated by targets.  And when you isolate your targets, your missiles are much more effective.

Don’t have a show that has run years?  Graph overall Broadway/Off-Broadway trends from year to year.  It is better than nothing.

(Anyone have any ideas what the giant spike is on that graph?)

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