Yale School of Management

Seven Theaters in Search of Revenue

Overview:

How much should tickets to Saturday night’s show cost? Theaters weigh a number of concerns when deciding how to set admission prices.

Revenue is important, of course: theaters price tickets at the highest level the market will bear. But theater is different from other goods, and finances are just one factor that influences pricing decisions. Capacity also matters a great deal: companies want full audiences as well as revenue-generating ones. They must balance the need to maximize revenue with the need to maximize audience. In addition, most arts organizations attempt to expand the breadth of their audiences by reaching out to groups that seldom attend the theater. Revenue, turnout, and audience diversity are all factors that theaters take into account when setting ticket prices.

This case study examines the ways in which seven theaters from around the United States are capitalizing on high-demand shows while keeping programs accessible to all audiences. In order to achieve this balance, theaters vary prices according to several criteria.

First, most companies offer subscriptions for several shows in a season. Subscriptions are a way to generate both revenue and audiences: they provide capacity upfront, informing the theater of audience numbers ahead of time and providing income to pay for productions before they occur. Ideally, theaters would sell every seat ahead of time through subscriptions.  However, in reality, they only cover part of their needs this way. Subscriptions in the U.S. have been on the decline, decreasing seven percent from 2001 to 2006, according to statistics compiled by the Theatre Communications Group.

This means that theaters must meet an increasing amount of their revenue and audience requirements through single-ticket sales. The groups surveyed use a variety of methods to market single tickets. Some adjust prices according to seat location, anticipated popularity of show, or day and time of performance. Some offer targeted discounts in order to fill seats, maximize revenue, or attract a certain demographic. At the same time as they adjust prices, theaters must be alert to the ways in which discounted tickets affect brand perception.

In general, theater companies are becoming increasingly sophisticated in their pricing strategies. From demand-based pricing to single-priced low-cost tickets, they are trying many different approaches to meeting their financial needs while keeping their programs accessible.

Format:
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Teaching Note:
Yes
Suggested Citation:

Rebecca M. Rindler, Sharon Oster, and Andrea R. Nagy, “Seven Theaters in Search of Revenue,” Yale SOM Case 08-040, November 17,2008

Keywords:
  • Pricing
  • Arts
  • Women in Leadership
Perspectives:
  • Arts Management

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