Arts Reporter

When I first read Charles Isherwood’s article in the New York Times this weekend about ticket price discounting at a number of major New York performing arts venues, my first thought was that New York had finally priced itself into irrelevancy, and therefore perhaps this presented an opportunity for the rest of the country to showcase another way of doing business.

But how could that be when, contrary to the institutions cited in Isherwood’s article, the overwhelming majority of the theaters I was familiar with were struggling to get any audience in the door, and used steep discount in hopes of attracting strangers - those beyond their own circle of family and friends - to come and see their show? I have always been highly critical of this practice, and not just because of the obvious challenges frenetic discounting presents to my ticketing business.

My issue with steep discounting in small theaters is that it sends entirely the wrong message to the prospective non-family audience. It is to treat their production as if it were a commodity, where only price matters. But choosing a performance of Richard II over one of The Pajama Game right around the corner is completely unlike the decision whether to buy a pack of batteries from Wal-Mart or Target. The latter decision can be made purely on price (or politics, if you’re a Wal-Mart hater) because the item is exactly the same no matter where you buy it. This is the very definition of the word commodity: “a good or service whose wide availability typically leads to smaller profit margins and diminishes the importance of factors (as brand name) other than price” www.m-w.com.

Indeed, the reason marketers push brand names and their associated images is to convince us that there really is a difference between Duracell and Energizer batteries. But no theater goer ever makes the decision to see Richard II over Pajama Game on price alone, (unless the price differential is astronomical, like in New York) because unlike batteries these productions aren’t the same. Indeed, two side by side productions of The Pajama Game wouldn’t be the same, and from night to night, the same can be said for the same production of The Pajama Game. That’s part of what makes theater wonderful. The show has value, it cost something to produce, and the pricing should reflect that without going to Mel Brooks extremes ($450 for Young Frankenstein, according to Isherwood). Small, lesser known theaters, sometimes suspect in the public mind for that reason alone, should be pushing quality, not a low price guarantee.

My quibbles with excessive discounting by lesser known theaters aside, it turns out that the problem of ever ascending ticket prices is not limited to New York, a fact that has been known to anyone who has bothered to look since 1966, when Baumol and Bowen came out with their book, Performing Arts - The Economic Dilemma. Here’s the short version: “the richer societies become, the more difficult it is for them to maintain live performing arts”, Bruno S. Frey. This is so because while technological innovation increases productivity and drives down costs, the performing arts, unlike other parts of the economy, do not reap any benefit. It costs the same in man hours today to put on Richard II or Pajama Game as it did in 1966. This phenomenon is now known as Baumol’s Cost Disease, or Bowen’s Curse, a classic example of blaming the messengers, in spite of the fact that Baumol is quite the artist himself. He paints and is a member of the board the Theatre Development Fund.

Why didn’t Isherwood address this in his article? I posed that question in an email interview with Professor Baumol himself, who responded “[T]he NY Times seems to be almost alone in failing to consider the Baumol-Bowen explanation of the persistently rising cost of the performing arts, health care and education…it is recognized that what we have called “the cost disease” and others have labelled “Bowen’s curse” or Baumol’s disease shows that there is no cure in sight for the persistently and cumulatively rising prices of these activities, and this means that their prices will surely have to follow if the activities will be anywhere near self supporting.”

But what about the Signature Theater Company solution Isherwood describes? Prof. Baumol says yes, some can replicate it for a while, but since most of them are already financially strapped they can’t afford discounting even if it does lead to an expansion of audience. Then what about the NFL, an activity which also costs the same in man hours as it did in 1966, but which is played in larger venues, and has a TV contract and merchanding to boot? “The answer” the Professor tells us, “is that it gives the NFL the opportunity to price more cheaply FOR A WHILE. But compoundedly increasing costs must catch up even with a large stadium size and overwhelm the revenue advantage made possible by the very large capacity at the NFL’s disposal”.

I’ll be following up on the ‘portability’ of the Signature’s subsidy model in the future, as well as talking with a marketing expert on pricing who takes issue with Baumol’s Cost Disease. For more on Baumol-Bowen in the music industry, see this excellent article. And yes, the Professor agrees with my critique of discounting by lesser known theaters. Smart man.