By Jeffrey Pompe, Lawrence Tamburri and Johnathan Munn
Symphony orchestras have increasingly relied on flexible ticket subscriptions and higher ticket prices for revenue generation. We found that relying on flexible ticket subscriptions may decrease total ticket sales. We discuss how more flexible subscription sales combined with higher ticket prices can have deleterious effects on symphony orchestra finances.
The subscription missionary Daniel Newman in his 1977 industry-changing, arts marketing book Subscribe Now! promoted subscriptions because he felt this was the best method to fill houses and bring additional revenue to performing arts organizations. Additionally, he stated that subscriptions were a powerful educational program because they expanded the understanding of audiences for art forms by creating the opportunity to attend a diverse offering of events, not just those with the most star power or attractive presentation. Newman concluded that subscriptions would build loyalty between the arts organization and cautioned that the “pick-your-own” alternative to standard subscriptions would “take the raisins from the cake,” thus voiding two of the most powerful attributes to standard subscriptions – educating audiences and building loyalty.
In recent decades, symphony orchestras began raising ticket prices and promoting flexible subscription tickets to increase revenues. However, while increasing ticket prices may raise short-term revenue, there is much evidence that when orchestras began raising ticket prices faster than inflation, audiences began to decline. In addition, we demonstrated statistically, that when orchestras began to promote flex passes and pick-your-own series, there began an erosion of the standard subscription package and ticket sales in general.
In our study, we collected ticket data for symphony orchestras with budgets of $5 million or more (known as Group 1 and 2 orchestras) for the 2002 through 2013 fiscal years. For the 2002 through 2013 seasons, average seasonal attendance declined steadily from 102,324 in 2002 to 80,902 in 2013. The average attendance per concert also declined from 1,586 in 2001 to 1,398 in 2013. For the initial six seasons, the percentage of total ticket sales that were subscription ticket sales remained near 70 percent (Table 1). Sales fell below 70 percent in 2008, declined precipitously by 8.5 % for the 2010 season, and continued to drop each following season. The percentage of flexible subscription ticket sales increased from 6.4 percent in 2008 to 8.0 percent in 2013, while average advertising spending per attendee increased from $26.21 in 2008 to $28.36 in 2013. Thus, it is costing more to attract each attendee which contributes to diminishing profits.
We estimated separate models for total subscription tickets, fixed subscription tickets, total tickets, and single tickets using multiple regression analysis to examine how the recent trend of increasing sales of flexible subscription tickets impacts ticket sales in general. We found that consumers are more sensitive to prices for subscription tickets than single tickets. For example, a 10 percent increase in the average price for a single ticket and subscription ticket will decrease sales by 3.6 percent and 7.1 percent, respectively. In addition, when more flexible tickets were sold, ticket sales decreased overall. Additionally, we found that hiring a contemporary music director may increase ticket sales, as is generally expected.
Given the decline in subscriptions, some suggest that buyers have become accustomed to more options with many products and expect the same when spending their entertainment dollars. However, increasingly relying on flexible subscriptions – as many organizations are doing – may not be a good long-term policy if the benefits of the traditional subscription ticket are lost. Newman (1977, p. 244) explained that although a flexible subscription has ” … a short-term advantage in that it quickly answers a potential subscriber’s fear of being “tied down” to a definite commitment for a specific date. It also has a basic and very destructive effect from the long-term standpoint in that it tends to defeat one of the most important advantages we get from having a subscription audience.” That is, the fixed subscription represents an individual’s commitment to the season.
As we showed in this study, ticket buyers are most sensitive to subscription ticket prices, and although increased ticket prices may increase revenue in the short-term, attendance will decline over time. A large drop in audience members will cause a decrease in donations, which is a major concern. Although there may be various strategies to deal with declining subscription ticket sales, ticket prices – which have increased significantly in recent years – may be a critical area to examine. Also, ticket prices that are too high promote an appearance of elitism that could deter new audience members.
Dependence on the subscription model, which appears to be failing, is a problem that symphony orchestras must solve. If subscriptions continue to decline, deficits will increase unless costs can be reduced, and/or other revenues can be increased. Raising more money appears to be the most common solution, but, internally with fewer subscribers – the traditional donor base – and externally with interest in in the arts declining, this will be challenging. In addition, as important as marketing is for ticket sales, there are limits to the benefits of additional dollars spent on advertising. Symphony orchestras will need to create a product that will engage and interest customers; that is, the perceived value of a symphony orchestra performance must be enhanced to continue drawing audiences.
Table 1 Percentage of Total Ticket Sales from Subscription Tickets
Source: League of American Orchestras Note: Subscription tickets include both fixed and flexible subscription tickets.
The article is based on:
Subscription ticket sales for symphony orchestras: Are flexible subscription tickets sustainable? Jeffrey Pompe, Lawrence Tamburri, Johnathan Munn, 2018/1/1. Managerial and Decision Economics. 39: Issue1, 71-78
About the authors:
Jeffrey Pompe is Professor Emeritus of Economics from Francis Marion University
Lawrence J. Tamburri is executive director of the Newark School of the Arts and Lecturer in Arts Management at State University of New York at Purchase College
Johnathan G. Munn is the Associate Dean, School of Business, and Associate Professor of Economics at Francis Marion University
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