Small is beautiful: a study of theatre pricing as if theatre mattered

In his book ‘The Undercover Economist’, Tim Harford investigates the question, why can you never seem to get a decent meal in a tourist area.  His answer is interesting.  It is not just to do with the obvious connection between an inflated price due to higher rents, or because you have a captive audience.  His explanation is that it doesn’t make economic sense to go to the effort of providing a high quality meal, when most of your customers will probably only visit once.

You can see where we are going with this.  Is the West End falling victim to the same economic forces, with producers realising that there is really no point trying to go for quality, when profits can just as easily be made without it.  And is there any point making ticket prices affordable, when it is quite clear that profits can continue to increase without needing to grow audiences.  Could it be that, rather than West End theatres making a terrible mistake, it is us, the regular theatre-goers, who have been making the wrong assumption all the time – that West End theatres need us at all?

We have been led to believe that rising ticket prices are necessary, because costs are high.  Yet, at the same time, the rationale for premium price tickets is not to do with that at all.  Suddenly theatre is a ‘good cause’, and the premium pricing is an attempt to claw back money which previously went to ticket touts who pocketed the cash for themselves.  We are expected to believe that this ‘internal touting’ is good for theatre because the proceeds will come back into ‘the industry’.  But theatre in the West End is a business like anything else and we don’t see any signs that we, the ordinary theatre-goer, are any better off than we were when touts took the profit.  There is an inherent contradiction between the notion that high prices can be justified on the basis of high costs, and the notion that theatres should charge ‘what the market can bear’.  Clearly, the market can bear some very high prices.  Don’t forget, one of the biggest investment costs associated with a new show is advertising.  Yet surely the amount of advertising required is relative to other shows.  If everyone is plastering the tube with posters and electronic displays, you have to, the logic goes.  Yes, a big slice of your hard-earned cash goes to fund what is essentially an arms race.

Why is it that people are prepared to pay these prices, recently reported in a special edition of The Stage?  How can premium seats of nearly £100 possibly give you nearly four times better value than a trip to the Print Room, where you can be almost nose to nose with Iain Glen?  Or over three times the value of Michael Sheen’s Hamlet at the Young Vic.  The fact is, you cannot express these experiences in monetary value.  And we don’t believe most West End audiences are even trying to do this.  To quote another famous Tim Harford hypothesis, they are succumbing to the Starbucks syndrome, whereby coffee consumers pay vastly over-inflated prices for a few marshmallows on their coffee to feel ‘special’ – and identify themselves as ‘price insensitive’ in the process.  Notice that theatres didn’t simply raise the top price.  They had to establish the price of the best seats first so that they could get more money for ‘extra special’ seats.  These are the audiences they want, and recent interviews with producers such as Sonia Freedman confirm that these are the first seats to go – it is the cheaper seats that are harder to sell.  Could that possibly be because audiences wanting to pay less (those that are more price sensitive) are still on the old system, the one that expects value for money, and realises that nearly £50 for a seat in the upper circle is a rip-off.  If it is true that premium pricing is another version of the ‘marshmallow factor’, then we really are in trouble – if audiences paying these prices are doing so to feel special, there is plenty of room for price inflation, and value for money or ‘fair prices’ won’t come into it.

And so the hand-wringing about quality, originality, risk-taking, new writing, old writing, new musicals, juke-box musicals seems to be missing the point.  Of course there will be times when quality appears in the West End – every Spring there are flowers in Death Valley but only rarely is the display spectacular.  Ladykillers is a recent example of a fantastic production which happened to originate in the West End.  The point is that quality is not at the top of the agenda in commercial theatre.  If it happens, or if it can be harvested from elsewhere, so be it.  ‘Quality’ is just another part of the ‘product’.  But it’s not an essential part.

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3 Responses to Small is beautiful: a study of theatre pricing as if theatre mattered

  1. John Branch says:

    Good points, and I agree with everything you say about commercial theater. The same situation applies in New York City, where many people–residents as well as visitors–somehow became persuaded long ago that being able to attach “Broadway” to your plans conveys prestige. Incidentally, in geographical terms “Broadway” doesn’t even make much sense, because it’s merely a very long street in Manhattan, whereas I’d suppose that “West End” still means what it says. Broadway is an economic category determined mainly by number of seats in the house.

    All that I wonder about in your post is the conclusion by Tim Harford given in your first paragraph. Is it true that most people who patronize any particular restaurant in the area go there only once? London has many highly paid residents, just as New York does, and those in New York make frequent visits to the playhouses as well as to the bars and restaurants in their vicinity. These people are just as apt as many of the rest of us are to find a few favorites and return to them.

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    • rageoffstage says:

      Hi John – interesting that this phenomenon is also going on across the pond. As far as the restaurant analogy goes, there are always exceptions, but quite often the locals head for somewhere slightly out of the way, off the beaten track. At least the West End is close to Chinatown so its always possible to get something cheap and cheerful – definitely a good option for the price sensitive!

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  2. Pingback: Hello? The Book of Mormon tops the league table for overpriced tickets….again | rageoffstage

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