What's the value proposition of that institution?

  • Posted on: 5 October 2010
  • By: Tony


"As the business demands on theatres have become more stringent, the responsibilities of management have grown increasingly demanding and complex. As theatre expanded from their beginnings as artistic collectives, there was a concomitant (and necessary) growth in management; recognizing the need for administrative expansion if theatres were to survive as institutions, theatres staffed accordingly. Generally speaking, they were transformed from companies of artists – especially as resident acting ensembles began to be abandoned in favor of freelance hiring of artists – to companies predominated by administrators. This transformation altered the theatres' loyalties as well; it became more incumbent on the theatres' leaders to support dedicated, permanent employees (primarily administrative staff) as opposed to part-time labor (primarily artists). Moreover, freelance costs have always been easier to control than staff salaries. It is simpler to scale down production costs – by doing smaller cast shows, for example – than it is to cut fulltime staff members, who are part of the daily life of the theatre and whose interests are, therefore more regularly voiced...*

When I was younger, my grandfather ran a farm and a farm market that did pretty well. I've been in and around pricing discussions since before I could read. Granted, back then they didn't call it dynamic pricing. It was just part of the day to day operations. Prices change perpetually. So when discussions about pricing in theatre come up, I have a pretty good grasp on where they are going to go.

I, among others, have been pretty critical of many of the pricing strategies that are coming into vogue, arriving from the airline industry. (Well, not really from the airlines, but who would look at centuries of agricultural pricing when there's airplanes to talk about? Mostly joking, but the idea of evolving pricing is hardly new.) My criticism isn't of the tool. It's of the forces driving its implementation in the non-profit arts world.

While I tend to work with smaller theatres, my day job is with a higher ed non-profit with an annual budget upwards of $80Mil. I'm not wholly ignorant of the inner workings of large non-profits. It probably makes me even less tolerant of how most large theatres operate. It's only my experience, but spending years in other non-profits has only sharpened many of my criticisms.

Some, myself included, have tended to take a moral stance against raising ticket prices. If a non-profit is doing pretty much the same shows for the same prices as for-profit theatre, why do they need a tax exemption (read massive tax subsidy)? That's where a lot of the moral stance comes from, I think.

Non-Profits don't pay taxes on revenue related to their mission and people get tax deductions for giving them money. That's part of the responsibility of being a 501c3. If an org can't show how they're different from for-profit groups, the IRS can and has revoked their exemptions.

Hasn't happened with many arts groups yet, but it should be something to be wary of as the for/non-profit lines become increasingly blurred.

For me, the pricing debate isn't as much about how as it is why.

The way I see it the larger philosophical issue isn't large or small, it's about the values of different organizations. From an outsider's perspective, spending tens of millions of dollars on new digs and the raising ticket prices to make up for the increased expenses (let alone cutting the literary dept like Portland Center Stage did) sends a pretty strong signal on what and who is valued.

The philosophical debate, for me at least, isn't whether large or small is more valid, it's whether people are valued. There is no theatre without artists and audience. There was theatre for millennia without fancy buildings.

How far can an organization expect audiences and donors to buck up before turning their backs on the many organizations who have made gross miscalculations over the long term. Organizations who in turn pass on the costs to the people who paid for their growth in the first place?

What does that value proposition look like? Do organizations tell your patrons they have to pay more to help increase revenue in part because of irresponsible building? Short-sighted programming? Lack of leadership?

To argue that price increases are tied to artist compensation is a sham. At least most tiny companies who don't pay people are honest about that. What is the value of organizations who suck up most of the resources and still fail to pay artists a living full-time wage? Who take all the local money they can get their hands on and pay out of town artists to show up on stage? What does that value proposition look like?

How much of the need to drive more revenue is really because of the work and how much of it is to feed the building? What percentage of most budgets actually go directly to the work? To the artists?

What are the long term effects of the rapidly accelerating steam engine thirsting for additional revenue?

Today Jim McCarthy posted “Several Non-Opinions about Ticket Pricing” He's pretty dead on, especially on number 5: “Dynamic pricing moves prices down as frequently as it moves them up. At least, it would if people didn’t feel the need to “fix” the results of the dynamic pricing algorithm.”

That’s a huge problem with how many arts organizations operate in general. In most lines of business, you get better or die. You don’t send out an emotional appeal to be saved. You find a new line of business. Maybe someone else comes in and does it better than you, maybe not. Prices aren’t set in the backwards way that arts orgs tend to set them. “This is how much we’re gonna spend, lets figure out how we can make that much.” The game has been set so prices only go one direction over time. Organizations almost never let prices or capacity drop without ‘fixing’ the formula.

Adam adds There are only two arts pricing questions: 1.  How much can I charge?  2.  How much should I charge? (to which I also agree.)

Looking at the big picture, how does pricing tie in with donor cultivation, overall marketing strategy etc. How does the pricing tactics fit with an organization's mission?

In the commercial world you'd get less argument from me. Guys like Ken Davenport are out there under no pretenses that they're out do do anything other than make money.

And I'm not anti-revenue. It takes money to fulfill most companies missions. And in theory, if you can avoid severe mission drift, more money equals more mission. But when maximizing revenue trumps missions, not for profit theatres need to do some soul searching.

Organizations who have a clear mission and stay true to it tend to fare much better a la Jim Collins' hedgehogs. And organizations whose missions are “blah blah, bullshit, something we think funders would fall for”, tend to be bullshit organizations.

Everything you do should be held against your mission and how it works for your patrons. But I've yet to hear almost anyone even mention mission in any discussion around pricing. That is deeply troubling to me.

Many many theatres have lost their way, lost sight of their missions and the community around them. That has been pretty widely discussed for decades. As expenses explode, audiences and funders shrink, and the field pitches itself to a continually narrowing niche, how far do you want to push your patrons? How far do you want to blur the line between commercial operations and non-profit organizations?

How does a theatre operate with an alienated audience, no sight of their mission and one more short-sighted scheme to save themselves? All the while further removing themselves from the only two things that are needed for theatre to exist—artists and audiences. What's the value proposition of that institution?


*--The Artistic Home: Discussions with Artistic Directors of America's Institutional Theatres, by Todd London, 1988