(This post, by TRG Arts CEO Rick Lester, was originally posted May 31 on the blog Analysis from TRG Arts.
Terry Teachout, the drama critic at The Wall Street Journal, suggested a few weeks ago a correlation between regional theatre’s “play-it-safe” programming strategies and the collapse of the American theatre subscription.
He wrote: “(T)here seems little doubt that the [subscription] model itself is going bust.” Citing Theatre Facts 2011, Theatre Communications Group’s (TCG) annual study of industry financial and business trends, he noted, “nationwide revenues from subscribers plunged 18% between 2007 and 2011.”
That’s just one number, but it’s not the whole story.America’s leading business and financial newspaper is too important an information source to cite – unchallenged – just one research fact when suggesting causality. Mr. Teachout’s cherry-picked data point provided a titillating headline – “Theater’s Expiring Subscription Model.” But any serious study of Theatre Facts finds data pointing in a number of directions – some good and some worrisome – yet entirely overlooked in Mr. Teachout’s piece.
While Theatre Facts 2011 did indeed report that theatre subscription revenues dropped (11% in actual dollars, or 18% when adjusted for inflation), it also finds that subscriptionattendance – the number of tickets sold to subscribers – dropped 16%. Lower subscriber attendance is the far more troubling statistic. It means fewer actively engaged patrons.
The lost lifetime value of diminished subscriber loyalty is enormous, and its cause is more deeply rooted than Mr. Teachout’s headline assumption. Theatre Facts indicates several trends affecting subscriptions in American theatres today. I’ll address three:
1. Flat single tickets sales are the real threat.
The TCG study reports stagnating single ticket sales (table on right). As the economy cratered in 2008-2010, the average number of single tickets sold slipped downward before recovering in 2011.
This tracks with another Theatre Facts data point. As single sales were languishing, our analysis shows that new subscriber acquisition sales dropped more than 20%.
Subscribers almost always begin as single ticket buyers. TRG Arts analysis of arts consumer behavior corroborates this finding, as we discussed in a recent webinar. Fewer single ticket buyers mean fewer new subscribers. Even with fairly consistent subscriber renewal rates of 72-75%, theatres did not produce enough new subscribers to offset subscriber attrition. Therefore, subscription numbers and associated revenue declined.
Theatre Facts also reports cost-of-sale metrics that indicate marketing spending declined for subscriptions during this period. One might ask: Did theatres consistently promote new subscriber sales during the recession? This is a reasonable question, given the facts, and begs another posed in Mr. Teachout’s post.
2. If so many audience-pleasing programs were onstage, why didn’t bigger sales result?
I’m no theatre critic or dramaturge, and not equipped to judge artistic content for the field. I accept Mr. Teachout’s assessment that artistic directors are planning safer seasons in the hope of finding bigger audiences.
But if that was the course theatres felt compelled to follow, where is the bigger audience? Subscriber attendance is down and single ticket sales are flat. This “safe” programming strategy obviously did not have the intended effect.
The fact is: whatever was on stage, fewer people came.
Why might that be? Theatres cut the number of performance weeks over the study period. Fewer performances mean fewer opportunities to attend theatre. As noted above, 2010 produced the smallest number of single tickets sales during the five-year study period. This was also the year with the fewest number of performance weeks: 33, down from 35 in 2007.
3. Subscribers keep coming year after year.
Theatre Facts states, “If we focus only on productions offered on subscription,subscribers filled 32% of the capacity in 2011.” Plus, three-quarters of those subscribers came back each year via renewal.
Whatever was offered – be it blockbuster or more challenging work - subscribers continued to attend. The bottom line? Subscriber numbers may have diminished, but a significant core of loyal theatre patrons keep returning year after year.
Is the subscription ‘going bust’?
Like it or not, subscriptions are still one of the most reliable sources of revenues for most theatre companies. As Theatre Facts reports, subscription income is the second largest source of a theatre’s earned revenues.
Single ticket buyers are individually less loyal and are much less likely to become donors. Ongoing TRG Arts analysis of patron data shows that only 29% of single ticket buyers ever return to an organization for a second visit. Until or unless they can be coaxed back, they are less reliable and less invested. If anyone thought building a business model around subscribers was hard, a single ticket buyer model is riskier, less scalable and more costly.
Mr. Teachout concluded his article by asking if the subscription model can be modernized. I would suggest that the basic product itself is just fine. The missing ingredient is a new subscriber acquisition sales model based on a data-driven understanding of actual patron behaviors. That approach works every time.
This post is analysis from TRG Arts of TCG’s Theatre Facts 2011 which was co-authored by the person to whom I report as distinguished visiting professor at SMU—Zannie Giraud Voss, Chair and Professor, Department of Arts Management and Arts Entrepreneurship—and by Glenn B. Voss, Professor, Marketing Department, Cox School of Business, SMU, along with Christopher Shuff, Director of Management Programs, TCG, and Ilana B. Rose, Management Programs Research Manager, TCG.
Rick Lester, Chief Executive Officer, founded TRG Arts in 1995 on a 30-year career in entertainment marketing that included marketing and executive management of four major U.S. orc hestras. Rick leads TRG’s counsel on patron behavior trends. Industry best practices have emerged from his pioneering work in demand-based and dynamic pricing. He blogs about arts consumer behavior on Analysis from TRG Arts and is a frequent guest on conference programs nationwide. Rick is a distinguished visiting professor in arts management at Southern Methodist University and a guest lecturer at Drury University, University of Wisconsin-Madison, and Yale School of Drama.