I have a hit! Should I extend?

As I have written about previously, often times marketers get themselves into trouble because they focus too much of their attention on under-performing productions causing them to ignore opportunities to better capitalize on productions which are over-performing.

So, now you have a hit on your hands, and you know you have to strike while the iron is hot. Sometimes hit productions can be few and far between, so what you do next could make or break your season. When a hit does occur, many entrepreneurially minded non-profit producers start to consider an extension to their previously announced runs. Before announcing an extension, here are a couple of things you should consider: 

Feasibility. Is it even possible to extend your run? Oftentimes non-profit subscription houses have another show coming in right on the heels of the previous one, and there is no room to extend. Are your actors available for an extension? Many times actors have other projects already lined up, and they are unavailable for an extension. And if some actors are unavailable, can you continue a run with replacement actors?  

Extension Costs.  How much will it cost per week to run an extension? Make sure that you include all relevant costs, such as:

·         Casting and put-in costs for replacement actors

·         Any increases in fees due to extension clauses

·         Marketing and press fees to promote an extension

·         Applicable overhead costs such as house management, box office, etc.

·         Cost of sales fees such as credit card service charges

·         Increases in royalty payments

The higher the weekly operating costs, the more risky an extension will be. The decision to extend a popular play with a modest cast size will be much easier than the decision to extend a large musical, which can have weekly operating expenses 4 to 5 times higher than a play. 

Current Sales and Inventory. How many tickets did you sell in the previous couple of weeks and how much in single ticket revenue did you realize? Even if you are currently achieving more revenue in single ticket sales than what you are projecting as your weekly operating costs for an extension, it may not be a good decision to extend. For example: production X has sold 2,000 single tickets for $100,000 in single ticket revenue per week for the past three weeks. You have projected that your weekly operating costs for an extension will be $80,000 per week, leaving a $20,000 positive differential between current weekly revenues and projected weekly operating costs leading you to believe an extension is advisable. But, when you take a look at your available inventory for the remaining 6 weeks of your run, you notice that you have 18,000 tickets left to sell in your 1,000 seat theater. Selling at a pace of 2,000 tickets per week with 6 weeks left, you will sell 12,000 additional tickets which represents only 67% of your remaining inventory. In this situation, it may not make sense to extend, as you could avoid additional extension costs and maximize net revenue by selling out your remaining inventory.  [note to reader: I chose to use relatively large round numbers as the arithmetic is easier, and they illustrate arguments in a more succinct manner. These concepts are easily scalable for smaller or larger houses.]

Burn and Sell Ratio. Are you realizing more in single ticket revenue for future performances than you are burning off each week? For example, in your 1,000 seat theater with an average ticket price of $50 and a 60% paid capacity for a performance schedule with 8 shows per week, you will burn off $240,000 in ticket revenue each week of performance. If you are selling more than $240,000 each week for future performances, and your weekly operating expenses for an extension are below $240,000, it is a good indication that an extension is viable. 

Time to Sell.  If you decide to extend a run in your 1,000 seat theater for an additional week, with an 8 show per week schedule, you will bring an additional 8,000 seats online to sell. Do you have adequate lead time to sell the extension? If you have relatively low weekly operating costs, the financial risk may be low, but you don’t want to announce an extension only to play to 30-40% paid capacity because you didn’t have enough time to adequately promote it.  

Other random thoughts…

·        Extending a popular production can ensure an influx of new patrons, which can lead to an abundance of excellent leads to develop new multi-show ticket buyers. That said, scarcity can also be a very valuable marketing tool. Nothing encourages early ticket buying behavior better than sold out houses.

·        Extensions are not always extensions. Some theaters have developed business models which involve “extending” almost every show they produce. At other theaters, extensions are very rare. Why is this? For those that always seem to have extensions, most “added performances” are likely built-in and planned as part of their original run lengths, but tickets are held off sale until a predetermined date, thereby creating the perception that when tickets are placed on sale, the production has indeed extended. It’s quite a clever marketing strategy until you go to the well too many times, and the public starts to understand what’s going on. At which point, I would guess that marketing a production as “just extended” starts to lose some of its value.

Is Your Organization Fun?

Last weekend was my annual pilgrimage to the National ArtsMarketing Project Conference hosted by Americans for the Arts. It has become my favorite conference of the year, not only because I get to catch up with friends from all over the country, but because it reminds me that sometimes the most profound marketing decisions are the most basic ones.

I attended a session entitled “The Curated Arts Experience” featuring Ceci Dadisman, Deeksha Gaur and Nella Vera. During this session, Nella started talking about something really fundamental – having fun. She gave several great examples of organizations that went out of their way to create fun and memorable experiences for their audiences. Immediately prior, we were treated to a lunch session featuring cdza, a trio of guys who create musical experiments.  With their experiments, they make classical music fun and accessible, and in doing so have millions of viewers worldwide. I have to wonder how many people have been introduced to classical music via their performances?

Cdza’s success is really pretty simple:

1)      They feature the work of brilliant artists – Michael Thurber is the “chief music guy,” a young man who from age 14 spent his life in a music conservatory and graduated from Juilliard.

2)      They don’t take themselves too seriously

3)      They create memorable and fun experiences 

Their motto: “first build your audience by offering them dessert before you introduce vegetables.” Simple. Clear. Brilliant.  

In previous blog posts, I’ve mentioned that when building audiences, you must program “gateway drugs” – a couple of options that are easily accessible and offer up a fun evening of entertainment in an attempt at proving that the non-profit arts can be a viable entertainment alternative to audiences that currently don’t view them as such. Great art doesn’t have to be devoid of entertainment value. It is possible to have art of the highest quality that is fun. 

Earlier this week, Adam Thurman of Mission Paradox reminded us that we need new audiences more than they need us. And here’s the painful truth – since art is essential to our lives, we like to believe that they are essential to everyone. That just isn’t the case. A good amount of the population does just fine without the arts. That isn’t to say that I believe the arts couldn’t enrich their lives, it is merely meant to point out that in the hierarchy of needs, we’re closer to the bottom. In today’s economy, merely meeting basic existence needs has become difficult, so convincing someone to spend their remaining disposable income on a discretionary item like the arts is harder than ever.  

We have to make our organizations inviting, accessible and fun. And understand that providing a fun experience doesn’t equate to sacrificing artistic credibility. We don’t have to sacrifice the core of who we are to attract new audiences, and those that make that argument, in my opinion, are short-sighted. 

New audiences need to be cultivated carefully. Create a path for them. Give them an easy entry point. Provide an amazing experience. Steward them so they return soon after their first experience. Build their confidence with multiple experiences, and then provide an opportunity to sample something a little more challenging. Introduce them to new experiences. At some point, if you don’t provide them with a challenge, they will grow bored. We are responsible for cultivating our audiences’ artistic growth. If we lack audiences for classical, challenging or new work, perhaps it is because we try to short circuit the system, and ask that new audiences sample what they would at first perceive as vegetables before getting to the dessert.  

In some circles in Washington, DC, the Kennedy Center has been criticized for programming work that isn’t as challenging as some would like. I however, appreciate the role the Kennedy Center plays in our ecosystem. Each year they introduce thousands of people to the performing arts for the first time. This in turn acts as a feeder system to other arts organizations.  

A balanced meal is important, but so too is the order of consumption. Start with dessert, and the chances increase that the full meal will be finished. Roll out complex foods to a novice palate, and you may not make it past the first course. 

The Plight of the Newspaper (and Preparing for the Future)

A couple of years ago, I was speaking at a conference and someone from the audience asked me what I believed to be the biggest marketing challenge of the next five years. I answered with the death of the newspaper, which surprised many, who thought I would point to declining subscription bases or overall drops in arts participation.  We had just experienced the death of four major newspapers – the Seattle Post Intelligencer, the Rocky Mountain News, the Tucson Citizen and the Christian Science Monitor – at a time when most non-profit arts organizations had important symbiotic relationships with their hometown newspapers.  

So let me pause to ask – if your newspaper were to go out of business today, how would that impact your organization?  

And here’s why I am asking. According to the Newspaper Association of America (NAA):

·        Total print advertising has dropped from $47.4 billion in 2005 to $20.6 billion in 2011 – the lowest print advertising has been since 1983 (not factoring for inflation).

·        In 2011, the total daily circulation of all the newspapers in the United States was 44.4 million, the lowest on record since 1940.

·        Citing a 2010 Scarborough report for adults 18+, 47% of the U.S. population 35 years and older read an average issue of a daily newspaper in comparison to only 26% of the population under 35.

According to The Pew Research Center, since 2003, the Internet has been on par or more popular than newspapers as a news source, and currently just 21% of young adults report newspapers as their primary source of news. As the Internet has become increasingly popular as a news source, newspapers have invested tremendous amounts of resources in building their online presence, but here’s the problem – for every $1 gained in online advertising, newspapers lost $10 in print advertising in 2011. And the reason? In print advertising, newspapers are dominate, but online, they compete in a very crowded marketplace, where Google and Facebook combined will share just under 30% of total online display advertising revenue in 2012.  

Using the statistics provided online by the NAA, in 2005 1,452 daily newspapers shared $47.4 billion in print advertising for an average of $32.6 million in print advertising per daily paper. Six years later, 1,382 daily newspapers shared $20.6 billion in print advertising for an average of $14.9 million in print advertising per daily paper.  

In six years, the average daily newspaper lost more than 50% of its print advertising revenue, placing in jeopardy the entire business model of most newspapers and leading to drastic changes. Newspapers around the nation are slashing their newsrooms, laying off veteran reporters and in the best case scenarios, replacing them with freelance reporters with little experience. In worst cases, they aren’t replaced at all.  Just recently the theater world received news that veteran Philadelphia Inquirer arts writer and critic Howard Shapiro, after 42 years with the paper, was reassigned to cover South New Jersey in what seemed like an attempt to make him miserable enough to leave. And it looks like it worked.

With fewer reporters and less experience, not only has coverage decreased, but quality has diminished as well.  Many of us shook our heads when a small online magazine named Pasadena Nowhired two writers in India to cover local events but just recently we’ve learned of Journatic,a company that outsources journalism to the Philippines for US newspapers.  Others have transitioned from primary reporting to aggregating content from other news sources and then providing commentary on the aggregated material. When I was at the Smithsonian, one such company drew inaccurate conclusions by providing editorial on aggregated stories. When I called to tell them of the inaccuracies and offer to set up interviews so they could report on the story directly, the freelance writer told me they didn’t pay him enough to do any original reporting. Unfortunately for us, other outlets picked up his story.  I understand cutting as much fat as possible from budgets during tough economic times, but at some point, there isn’t any fat left, and what remains is only muscle. Cutting further sacrifices your ability to deliver an excellent product, which is why I advise arts organizations to avoid cutting investments in the artistic product itself if at all possible when making budget adjustments.  By sacrificing quality, I’m afraid newspapers could be pouring gas on an already blazing fire.  

Every great arts city has a great newspaper. Every great theater town, a well respected critic. If your city is affected by cuts to arts coverage, let your voice be heard. Activate your bases. Support outlets with extensive arts coverage with your advertising dollars. That said, I advise non-profit arts organizations to prepare themselves for the possibility that their local newspaper could go out of business.  Cultivate relationships with bloggers, social media mavens and other influentials in your community. Develop online communities where your audiences can speak to one another. Produce and distribute original content yourself. Diversify your advertising strategies. Budget resources to grow your database. Hopefully these efforts will be for naught, but if the day comes that your local newspaper declares bankruptcy, you’ll be better prepared.