FULL HOUSES: Turning Data into Audiences

How much did you pay?

Chicago Tribune

Demand-based pricing means your ticket may have been more (or less) than the seat next to you

By Chris Jones
Tribune theater critic

February 25, 2007

As little as two years ago, a last-minute call to the box office for a great Saturday night seat to a hit Broadway show sparked two disappointing words: sold out. Not anymore. If you want to see “Jersey Boys” at New York’s August Wilson Theatre next Friday night — or any other “sold out” Broadway attraction — Telecharge can likely help you. You just hit the “premium tickets” button on the official Web site. And prepare to shell out $351.50 per ticket.

Behold a sudden revolution in the way people buy tickets to entertainment — demand-based pricing.

Just as the person in the seat next to you on United Airlines may have paid hundreds of dollars more (or less) for the same type of seat, so arts and entertainment marketers are becoming much more sophisticated in matching ticket prices to demand. Sold-out houses — houses that are really sold out — seem heading toward the same extinction as hand-torn ticket stubs. For those willing to pay, in the future there will always be seats, just as there are always full-fare seats on a peak flight.

In no-nonsense Chicago — where culture patrons don’t like the mercurial profiteering more common in New York — arts administrators approach this whole topic very warily. But demand-based pricing is here, nonetheless.

Broadway in Chicago, for example, has long offered premium tickets — which it calls VIP tickets — at the relatively modest premium of $125 (depending on the show, between about $25 and $50 more than the official “top” price). But for weekend performances of the high-demand “Jersey Boys,” VIP tickets will be bumped to $150.

For the last three years or so, the Chicago Symphony Orchestra has quietly raised single-ticket prices for concerts, once the organization’s computerized models indicate that early sales suggest the event will likely sell out. Premium single tickets are under discussion at the Lyric Opera of Chicago. Goodman Theatre executive director Roche Schulfer says his non-profit group is seriously considering offering premium, last-minute tickets to hit shows to patrons “who are also willing to make a contribution,” perhaps as soon as next season. And on Tuesday, the League of Chicago Theatres launches a new program wherein half-price, day-of-performance seats will be sold online, making discount tickets much easier to get.

Beware the pitfalls

But everyone knows this topic is fraught with pitfalls.

It may be efficient and profitable to vary ticket prices to arts events — and arguably beneficial to consumers. But a ticket to the opera, experts say, just isn’t viewed the same as a hotel room. And arts patrons can be far more ornery than other consumers.

“If the Chicago Cubs are charging more when the Cardinals are in town or you’re just talking about an airline ticket when you need to get to New York, people tend to be willing to accept variable pricing,” says Tom Smith, an economist at the University of Illinois at Chicago. “But there’s a different kind of attitude when it comes to the consumption of culture. Someone going to the Joffrey Ballet expects the company to appreciate them as a patron of the arts. They don’t necessarily expect them to be maximizing revenue.”

Even in the commercial theater in Chicago, premium pricing isn’t something that gets shouted from the rooftops. The Broadway ticket premium here is a lot less than New York — and probably less than demand would bear, especially in the early weeks of a red-hot touring show such as “Jersey Boys.” And although premium tickets are ubiquitous and increasingly accepted in New York (even though they still aren’t included as the official, published “top” price), the Chicago versions don’t pop up as readily on the local Ticketmaster database. You have to know about them — and you have to ask the agent.

This is intentional. Broadway in Chicago vice president Eileen LaCario says her organization tries to talk New York producers out of overplaying their hands in Chicago when it comes to premium tickets.

“We’re reluctant to participate in these kinds of programs because we don’t want theater pricing to be difficult or unfair for the patron,” LaCario says. “We care about the health of the business in the long term. And we want the highest amount of people to see the show. We’ve worked hard to ensure that pricing here doesn’t get like New York.”

To some degree, of course, the live entertainment industry (and its ticket brokers) has always adjusted ticket prices to accommodate varying demand. Discounts are always more pervasive on weeknights. Matinee prices have always been lower. Hot Tix-type programs unload unsold inventory at the last minute. And the so-called “scaling” of the auditorium, wherein different seating sections of a venue are ascribed vastly different pricing, has long been seen as a way to allow people with different levels of disposable income to see a show.

Selling in tiers

But historically, arts tickets have been sold in very simple tiers — a dozen, say, at most — by contrast with the thousands of different prices held in the database of Alamo Car Rental.

So what changed?

According to Jim Palos, the president of the New York-based Institute for Media and Entertainment, three major new factors are now in play.

First, the old independent promoters and producers have mostly been swallowed by big corporations who pay a lot more attention to the bottom line. “Instead of focusing only on mission,” Palos says, “a lot of these entertainment companies are more focused on profitmaking.” And non-profits, too, are being forced to pay ever more attention to revenue enhancement.

Second, arts managers are becoming more sophisticated. They’re now more likely to have MBAs — and thus to have studied the benefits of demand-based pricing. “When you have people like that,” Palos says, “you’re going to see a lot more of these ideas spring up.”

Third — and probably most important– is the advent of affordable technology that makes it possible, say, for the Chicago Symphony to monitor its sales and know when to adjust the prices.

“A key consideration,” says Matthew Gentzkow, an assistant professor of economics at the University of Chicago and a specialist on pricing, “is the cost of having to keep changing prices. Airlines spend millions of dollars on computer systems and employ a lot of smart people to keep track of it all.”

If you take demand-based pricing to its logical extreme, the prices of breakfast cereal at Jewel would move up and down based on the time of day and the shopper’s level of income. The main reason that doesn’t happen, Gentzkow said, is that it’s just too complex and costly.

But with event tickets — wholly perishable goods that have a lot in common with airline tickets — it’s doable these days, with the right software. “We can now predict relatively far in advance,” says Kevin Giglinto, vice president for sales and marketing at the Chicago Symphony, “how fast tickets to a concert will move.”

The key, though, is to change these prices without alienating the people buying the ticket. In a famous cautionary tale, Amazon.com once tried offering different prices to different people based on their past buying patterns on the site. The angry backlash was swift and the whole scheme was dropped.

“They were using their data in a very logical way,” Gentzkow says, “but people really didn’t like it. It was perceived as unfair. And people don’t like it when things change.”

In the arts world, the last thing you want to do is offend habitual subscribers. And that’s why major arts institutions are wary of dropping their prices at the last minute to fill empty seats. If subscribers see other people getting a better deal, they get upset. And they might not renew. Worse yet, a lost subscriber can also be a lost donor.

That’s not a factor in an airline’s thinking, but there’s a mantra at the likes of the Lyric, the Symphony or the Goodman: Never, never undercut the subscribers. Or, at least, don’t throw it in their faces.

“We want to guarantee that the subscribers always get the very best price,” says the Symphony’s Giglinto. “They’re the ones with the biggest commitment to the institution.”

“If I found out,” says Susan Mathieson Mayer, director of marketing and communications at the Lyric Opera, “that the person next to me had paid far less for their seat, I’d think very hard about what my contribution was going to be next year.” That’s why you don’t see cheap opera tickets all over the Internet.

Arts administrators also tend to be uncomfortable with pricing the arts based on demand. It all feels too, well, mercurial and reductive. “Could we charge three times as much for Renee Fleming than a singer who is not famous yet,’ asks Mathieson Mayer, rhetorically. “Sure. Would we do that? No.”

If you charge more for “La Boheme,” the thinking at the Lyric goes, you make an implicit statement that a popular opera is worth more than, say, “Dialogues of the Carmelites,” a more challenging piece for which ticket demand is lower. That’s not a statement the Lyric wants to make — even though United has no equivalent qualms about charging more for a 5 p.m. New York-to-Chicago flight on a Friday, even though the peanuts are just as good at 11 in the morning.

But as the Goodman’s Schulfer points out, demand-based pricing also can allow theaters to cut prices to develop audiences. “I’d be happy to charge twice as much for [Robert Falls’] hit revival of `King Lear,’” Schulfer says, “if that meant I could charge half as much for Brett Neveu’s new play.”

Models are dated

But under the tricky current arts pricing models — with their old-fashioned, pre-Internet reliance on subscription revenue and high baseline prices — that’s surprisingly hard to do. “A lot of our economic models in the arts,” Schulfer says, “are dated.”

And there’s the rub. Free-market economists invariably advocate demand-based pricing, on the grounds that it allows the market to ration a scarce good (like a weekend seat to “Jersey Boys”) to the people who value it most. A scarce good, the thinking goes, has to be rationed somehow. And in a capitalist society, most things are rationed by price.

So who gets that ticket under the old stable pricing system? In arts and entertainment, Gentzkow suggests, that scarce ticket tends to go not to the neediest soul, but to the sophisticated patron who knows a lot about the event, who knows what and when to buy far in advance, and who knows how to play the right game to get it.

You could argue that’s even more elitist than giving it to the customer with the most money.

———-

cjones5@tribune.com

Copyright © 2007, Chicago Tribune

15 March, 2007 at 12:56 am fullhouses Leave a comment

Customer service at the box office just the ticket

The Australian

Customer service at the box office just the ticket

• Just what are you paying for when you put your hand in your pocket at the theatre, asks Rosemary Sorensen
  

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• March 13, 2007

ASK venue managers or producers how much they can charge for a ticket to a performance and the answer will be something like: “As much as you reckon people are willing to pay.”

The cost of tickets has come under scrutiny in New York, where adding not only a booking fee and often a transaction fee but also a restoration fee, to go towards upkeep on historically significant theatres, can bump up the price of each ticket by more than 10 per cent. Theatre-goers also question why, when technology enables you to book online and print your ticket at home, the transaction fee often is the same, if not higher, as having the ticket posted out.Producers blame the venue managers for charging for everything from security to toilet paper; venue managers say they have to bargain constantly with ticket agencies to keep booking and transaction fees low enough not to scare off customers.

It’s a battle for financial survival at Australian box offices, too. So far, no one has added a restoration fee to the cost of tickets. Richard Fitzgerald, general manager of Her Majesty’s Theatre in Melbourne, says theatre-goers “wouldn’t accept it here”, even though his 120-year-old building could benefit from upkeep assistance.

The entertainment business’s combined big guns are still trying to get a fix on scalpers while, behind closed doors, it’s hand-to-hand combat over contract details with the ticketing agencies. You get the occasional sniping when you talk to those who decide what we pay at the box office, but everyone agrees, publicly at least, that ticketing in Australia is clean, fair and at least trying to be transparent.

“It’s easy to bash the ticketing companies,” says Fitzgerald, who has just re-signed a contract with Ticketek. “But if you look at doing it on your own, the cost would be astronomical. The agency has the network, with the equipment set up, and there’s also the value of the marketing, which is huge, and they maintain and keep alive and fresh a database of customers. The ticketing fees and charges don’t really make that much of a difference in the overall price, and to get the prices down is almost impossible.”

Many venues are moving to set up their own ticketing services as software for increasing online sales is being refined.

The Victorian Arts Centre uses Ticketmaster because they have a long relationship dating back to before the government-owned Bass agency was bought by the American company. The Arts Centre’s programming and presenter services manager Milos Miladinovic says about 50 per cent of venues and events formerly managed by Ticketmaster are using their own integrated systems. He says Ticketmaster’s network provides large-scale, mass marketing opportunities and it’s cost-effective to channel his centre’s 1.2million tickets through the agency.

Sydney Opera House and Queensland Performing Arts Centre, on the other hand, have invested in systems that allow them to finetune the customer relationship.

QPAC has run its own ticketing from the day the four-theatre venue opened in 1985.

“There’s definitely an international trend to bring ticketing in-house,” QPAC’s marketing and ticketing director Anne-Maree Moon says. “Promoters and organisations are becoming a lot smarter when it comes to marketing and audiences, and they’re demanding more from ticketing agencies. The costs are not cheap and we didn’t want to pass on those costs to patrons.”

Ticket prices are agreed on by the promoter or producer and the venue, which is usually in an exclusive contract arrangement with the ticketing agency. Fees and charges can vary widely show by show. For example, a B reserve ticket to Cirque du Soleil’s Varekai, which opens in Canberra in March, will set you back $89, which Ticketek’s website tells us includes the (unspecified) booking fee and GST. Some in-house agencies, such as QPAC’s Qtix, state how much of the face value of the ticket is taken up in booking fee (a modest $3 maximum for that agency) but it is wrapped into most commercial agencies’ advertised prices.

On top of your Varekai ticket’s face value, there’s an added transaction fee: you can pay $7.95 to have the ticket sent to you by regular post (allowing seven to 10 working days or up to six weeks, according to which statement on the site you believe) or, if you’re the worrying kind, ask to have it sent by registered post, at a cost of $9.95.

If you want to see George Benson and Al Jarreau at the Sydney Entertainment Centre, you’ll have to pay $159 for your ticket through the other of the big two agencies, Ticketmaster. That includes a booking fee, which is again not specified; if you want the ticket sent by ordinary mail or if you pick it up from the venue or a ticket outlet, there’s no extra transaction fee. Registered post will cost you $3.25, express delivery $4.20.

“A lot of the big agencies will charge a booking fee and then a transaction fee, but no one kicks up a stink,” Moon says. “The agencies are doing some good stuff on a marketing level and making it possible to print your tickets at home, but then you’d think the fee would come down.”

Scott Lorson, chief executive of Ticketek, says that the fees for what is known as ezyticket (internet print at home) have come down by $3, or nearly 40 per cent, since the beginning of the year, and the Publishing and Broadcasting Ltd-owned company is gradually phasing in a fee structure that will eliminate what appear to be haphazard variations in transaction fees.

Ticketek’s clients range from car races to musicals, and Lorson points out that their “multimillion-dollar investment in state-of-the-art technology” enables them to sell out a concert at Sydney’s Telstra Stadium within an hour.

Enter the scalpers. Anna Hoffmann, policy and strategy adviser with Live Performance Australia, says the industry is organising itself to try to stay ahead of aggressive and “highly organised” scalping mechanisms.

“It needs to be looked at from a consumer protection perspective,” she says. “Online ticketing has made all our lives easier but it has also made the scalpers lives easier. The big ticketing companies could do it themselves, putting in software tomorrow so they could auction off tickets, but everyone knows it’s a matter of getting all the industry players on the same page of the hymn book.

“The important thing is for customers to know that when they buy a ticket, it’s a real one. You buy off eBay and you can’t be sure.”

Hoffmann says the worst outcome would be for governments to “make quick decisions that would bind industry members into legislation that would be impossible to put into effect”. LPA is responsible for updating the code of practice, which places transparency high on the agenda.

Fitzgerald says that while it’s good to have an advocacy organisation, it’s difficult for such an organisation to represent everyone, from the theatres to the producers and the ticketing agencies. “It’s the ticketing agency that, in a sense, becomes the umpire within the industry and it’s an important role,” he says. “They do a lot of the accountancy for us and they add a greater level of security for the punters, to get refunds for example.

“We don’t have any say over the transaction fee, but we know the ticketing agency has been trying to standardise it and we’ve been encouraging them to reduce it. The booking fee is at their suggestion, too, but you might be able to influence it at contract time.”

14 March, 2007 at 1:09 pm fullhouses Leave a comment