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Ticket Pricing in Theaters

Theater performances in bigger cities often have attendance rates close to 100%, and tickets of popular theaters are sold out weeks or even months before the shows, which is a clear sign of considerably under-optimized ticket pricing. Although the markets and challenges are different, theaters can optimize their pricing in the same way as cinemas. Some cultural institutes in Western Europe and USA have started to experiment with dynamic pricing years ago, and due to their success, this pricing strategy is getting increasingly prevalent among theaters.

Theater tickets are in high demand. To illustrate the point, we consider Hungary as an example, the capital of which has one of the most vivid cultural lives throughout Europe, while its other cities are moderately sparkling in this aspect. Remarkably, the Hungarian market of theater tickets is approximately 10% bigger than that of cinemas’: in 2016, audiences spent about 10 million EUR more for performing arts shows than for movie screenings. In a reaction to the wide interest, the number of theaters has increased by 25% from 2010 to 2016, while the number of available seats increased even more, by an astonishing 74% (resulting in 1 seat per 170 inhabitant). At the same time, tickets got more expensive. Nevertheless, the audience’s appetite did not decrease a bit: the number of sold tickets has increased by 56% in the time span of the same 6 years, and tickets for popular performances are still sold out within a few days or hours. Apparently, the Hungarian market has hitherto not managed to balance out supply and demand.

As we have highlighted in a previous blog post, the current pricing strategy applied by the majority of cinemas (static and completely undifferentiated prices) brings huge inefficiencies in the system, like extremely wobbling demand and notoriously low attendance rates. Despite all the differences between how cinemas and theaters currently operate and have to work with (in theaters, attendance rate is much higher, demand is steadier, tickets are priced differently in the different sectors), they still face the same challenges in their pricing. Given its versatility, we argue that dynamic pricing is the ultimate and common remedy for theaters just as for cinemas.

Indeed, an increasing number of theaters in Western Europe and in the USA have found the solution in championing dynamic pricing: a few examples include theaters in London’s West End, or US-based Children’s Theater Company and Twin Cities Theaters and the Broadway. Initially, some customers were outraged when premium ticket prices for Broadway hit shows like “Hello, Dolly!” or “Hamilton” have soared to $748 or $849. Nonetheless, it was not like the Broadway has become an exclusive preserve for the ultrarich: some tickets for “Hello, Dolly!” were available below $200, the average Broadway ticket during the season just before mid-2017 costed $109, and there were tickets for $29 as well. As an expert interviewed by the New York Times has put it, “This is simply a rationing problem. If you keep prices low, people will buy tickets and resell them on the secondary market. Someone is going to pay a market-clearing price, no matter how high. The only question is who should get the money: the investors and performers and creators, or a speculator who managed to snap up the tickets the moment the box office opened?” As expected, audiences have eventually accepted the change and learned how they can use dynamic pricing to their advantage.

Undoubtably, there are some challenges to implementing dynamic pricing in theaters. First, a significant number of theater tickets are pre-printed and sold by ticket sales people off site (in Hungary, 17% of all theater tickets were bought from such a source in 2016, although this was already a substantial change when compared to the 2010 value of 29%). Second, theaters considerably rely on patrons, so it is crucial not to alienate them. Third, those theaters that receive public subsidy may be less dependent on earned income, and thus may have less motivation to experiment with expanding their income streams. Fourth, some argue that the core utility of a theatre performance is primarily subjective, so the conscious and subconscious calculations of price against value are entirely different, which all makes it much harder to predict demand. DynamO can help you overcome these challenges.

DynamO’s team of experts can help you to get the most out of dynamic pricing. DynamO has been established in the recognition that the service sector’s increasing interest in dynamic pricing in now coupled with an increasing acceptance among end customers. Our vision is to make dynamic pricing as widespread and common in the service sector as credit cards and online shopping in everyday life.

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The New York Times: Broadway tickets, for the price of an economics lesson

The Guardian: West End grrs: best seats in the house up 300% for top shows

Központi Statisztikai Hivatal: Színpadi szórakoztatás, 2016 Dynamic pricing: an introduction

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