Wednesday, 27 November 2013

Using the power of the secondary market for good.

So this puts lots of things together at once. It'll be a bit long before you get to the punchline. Sorry.

I was reading recently, and whilst there are lot of bits in it worth thinking about and responding to, the one I want to talk about here is:

"4) I don’t do box office splits. Unless the gains are commercially sized its NEVER worth it. Stop asking me Dammit! I am a self employed person, have NO regular funding. I do not have a bank account with more than about £500 (if I am lucky) buffer before all hell breaks loose… so WHY would I ever do a box office split. Why should I, a lowly human being, take as much of a risk as an RFO venue. This is bollocks. I am amidst a negotiation at present that means if my show didn’t sell (heaven forbid!) I would walk away losing £1200 in 4 days. Remember my monthly wages is £1500, so why the fudge would I ever gamble that sort of cash with a venue. We all know that venues audience development teams are RARELY any good, if they exist at all. We all play to houses of 20 every once in a while because a venue is too stretched or just SHIT at marketing. So why would I trust THAT KIND OF DEAL. Stop asking me to share your risk in such an unfair way. I will do ALL I can to get bums on seats, I hate playing to empty rooms more than you hate hosting them… but if I live 200 miles away, don’t know a soul in your area and have no budget how can I really effect anything!"

Within the context of a blog post that could be (unfairly) summarised as "I've won awards! Who do I talk to about a pay rise?", one of the apparently often made suggestions is that she take some of the financial risk of putting on the production in return for a share of the profits instead of just a fixed fee. Whilst I can totally understand not being in a position as an artist to take that risk, I doubt that venues are all that keen to take it on either; regular funding helps keep the staff on the books full time and the lights and heating on, but I'd be surprised if it were generous enough to cover the costs of repeatedly picking the wrong show and not being able to sell it but having to pay the artists in full anyway. A show with lots of actors and a complex set that was simply expensive to tour and needed to charge a commensurate fee might be off putting to some venues.

Separately, I've been having conversations about the secondary market. I'm not keen on it, but there's a lot of money to be made whenever someone starts selling tickets with a face value well below their true market value. Now, the bugbear of the secondary market is the figure of the tout, who waits for a performance to obviously be a sell-out, and buys up the cheap tickets that have been subsidised by the arts council so that the poor can come to the theatre too, and then sells them on ebay for a 500% markup, and pockets all the cash whilst doing none of the work. Well, perhaps this doesn't happen much in the theatre. Mentally translate to rock and pop as appropriate, and your favourite band at the Brixton Academy and Led Zeppelin at the O2.

We still want to do dynamic pricing, ranging from a simple "Wednesday Matinees are cheaper than Saturday Evenings" all the way to the full Easyjet, once we find someone who wants to let us try it out and research what the appropriate pricing models are for their segment.

Whilst we aren't keen on building support for secondary markets as such into our system, and one of the benefits of dynamic pricing is that it helps reduce the margin that touts have to operate in, we have to deal with the problem that when the ticket prices vary dynamically and someone wants to do a completely legitimate "I'm ill and want to return tickets to the box office" or "can I exchange these Friday tickets for Saturday?" you get interesting problems if the tickets for Friday are now more expensive than the tickets for Saturday (but weren't when they were purchased), or if the tickets the customer wants to return are now worth more than they were when the customer originally bought them.

For example, it would be perfectly normal for a venue to say "We will take the tickets back and put them on sale again, but you will only get a refund (less 15% admin fee) if these tickets are actually sold". Which sort of means the tickets sort of belong to the original purchaser until they're resold, and if they aren't resold they might use them after all or give them to a friend. But if they are resold for twice the original price, who gets the extra? Might the original purchaser have a reasonable claim to some of that money?

Of course, touts don't always get it right. Sometimes they buy tickets for shows that don't sell out, and have to resell them at a loss. Which actually makes them quite helpful when they get it wrong; they're taking risk away from the promoter, and bearing a fraction of that risk themselves.


When we put these three things together - the unwillingness of some potential promoters (viz. Bryony Kimmings) to take all of the financial risk, dynamic pricing, and the interaction between normal refund policies and dynamic pricing requiring a sort of built in secondary market to function properly - we end up with something that looks a bit like Kickstarter for plays. If you were trying to put your show on in venue X, and they didn't want to meet your full fee, and you want more money than the fee but don't want to assume all the risk that a box office split implies, it's possible that someone - not a tout, per se, let's just call them a supporter - might buy up 20 seats in advance - because they like you and your show and not because they're merely out to make money, so you don't have to face the risk of not being able to sell those seats. And other supporters buy advance tickets too, whether they think they will be willing or able to attend themselves or not, and you have that revenue for sure, and you might keep some other tickets back to sell yourself. And the supporters then return those tickets they don't want to use themselves to the box office to be resold, and if you're allowing dynamic pricing and the show sells out, then those tickets might end up being sold for more than was originally paid, and those supporters might make a modest amount of money - not for nothing, but in return for sharing a part of the risk that the show flops.

We end up with something that looks a bit like a 10 way box office split, with a guarantee to the artist and a first call to the venue and then with luck extra money to be spread around for everyone.

We end up with something that looks a bit like the debenture tickets offered by the Royal Albert Hall or Wimbledon, where the depenture holder, in return for their capital investment, have the right to sell "their" seats to whoever they like for as much as they like - or just put them back into the box office pool if they prefer; but on a smaller scale, for one performance at a time.

You could just do it all in Kickstarter, like Amanda Palmer, but that would take a lot of admin overhead of sorting all the monies out - better if the ticketing system just handles it. It gives an opportunity for the Members and Friends or whatever of the theatre to actually help with putting on a show, which if all goes well will not cost them anything, might make a little money, and if all goes badly they are presumably in a better financial position to bear that small loss of the value of one or two tickets than the artist/promoter is to bear the loss of the cost of putting on the entire night.

Many organisations have pre-sales periods exclusive to members already - one of the perks of membership. What if this process went on before the show was finally booked, and the membership base's financial help was a factor in deciding which shows a venue invited? It would make membership mean something more than a small discount at the bar, a newsletter you put in the bin, and priority access to the best seats.

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