Wednesday, February 29, 2012

Is Goldstar Killing Small Theatre?

I’m pretty sure I’m not the only producer who’s asked this question.  I’ve listened to a few who have deepened my understanding of the complex concerns:  Do half-price tickets devalue our work?  Do they teach customers to only buy discounted tickets? Does it make our work “accessible?”  Does it change theatre as a “public benefit” (and therefore worthy of grant support) into theatre as “cut-rate entertainment?” Can companies survive in this economic eco-system?


I started this article several months ago and delayed posting because I didn’t want to be perceived a “complainer;” I debated, dallied, and then discovered a new, even more disturbing aspect of my Goldstar experience.  Namely, that Goldstar was becoming less and less effective at selling my tickets, while at the same time offering more ways for me to gouge myself while increasing their profit margin.  I finally concluded that I was engineering the demise of my own theatre company.  Here’s how:

SWEET BEGINNINGS
Goldstar started as a great way to reach new customers.  With the decline of print newspapers, Goldstar has increasingly become the way my “potential audience” finds me.  Goldstar is, after all, a much more efficient place to find entertainment information than the alternatives in San Francisco (I can’t even find my own listing on SFGATE.COM half the time).  And they offer a media rich environment, complete with images, quotes, descriptions, reviews, and video.  All this sounds great, except that it’s quietly bleeding me into bankruptcy.  And if you run a theatre company—big or small—I believe they’ll get you, too.


Chances are you choose your ticket prices very carefully.  It’s an intricate balance between costs, perceived worth, mission, and audience demographics.  A couple of years ago I noticed that many theatres raised their prices rather suddenly.  Producers readily admitted it was to defray the losses from their half-price tickets sales. 


Theatre is one of the few products with almost no profit margin; if you count deficits from unsold seats—which is very similar to an unsold pint of milk, an item good for a limited period of time (in this case, a night)—then most small theatres operate at a loss—even considering foundation support.  They survive on donations of time and money.  This is true when the customer pays full price.  As more of our customers purchase tickets through Goldstar, it’s only natural that companies inflate the cost of their “regular” ticket to compensate.  I can name half a dozen companies in San Francisco that have done so.  I’ve watched Second Wind’s Goldstar sales rocket from 15% of our total tickets to 70%, so I’ll start with my own company: yes, we raised our prices to off-set half-price sales.


But inflating the cost of your regular ticket has other consequences.  If you have a subscriber base, they may suddenly find they’re paying far more than the person seated next to them.  This can undermine their willingness to subscribe, and companies lose that season-long commitment and connection.  And what about audience members who are unaware of Goldstar?  Now, theatre tickets seem rather steep, rather elitist.  But chances are, they’re not steep enough to cover your losses.  Most companies don’t have the heart to raise their prices by 100%, or even 50%.  But if your half-price ticket sales jumped from 15% to 70%, that’s exactly how much you’ll need to raise prices to cover the difference.


Consider who buys theatre tickets at full price nowadays.  Most often it’s the older couple who loves your matinee, the stalwart never-say-die supporter of your company, or an individual who has stumbled across a favorable review.  These are customers you cannot afford to alienate.  Now consider what a ten or twenty dollar increase in the ticket price might mean for them—first in attending the show, then to enjoying it, and finally to making it a habit.  By raising your prices to off-set your Goldstar losses, you’ve endangered an important segment of your audience.


But we’re increasing our Goldstar audience, right?  I mean, Second Wind’s audience from Goldstar.  Wait, who’s audience is it?  Goldstar dictates the terms in which we have access to them (50% off for the regular list; 60%-80% off for the Today Only; 100% off for a guaranteed Roar listing).  Goldstar keeps their contact info.  And on Monday morning, do they say I saw this great show by Second Wind, or on Goldstar?  Chances are it can go either way.  So can I really claim them as my audience?


THE NEW KILLER OPTIONS
Then came the truly troubling bit for me:  When we listed our last show, Vigilance, on Goldstar our ticket sales were initially flat.  Dead in the water.  Ten days went by and we barely sold a dozen tickets.  So we opted for the “Today Only” special. To qualify, we had to offer 75 tickets (regularly priced $20-25) for $5, and 75 tickets for $7.50.  This was in addition to 150 half-price ticket offerings.  It jump-started our sales, but it made me realize something terrifying: GOLDSTAR COULD NO LONGER SELL MY SHOW AT HALF PRICE.  Their customers were so hopped up on the sugar of 60%-80% discounts that half-off no longer satisfied.  It wasn’t that people weren’t interested in seeing the show.  They were simply addicted to better “discounts”… and they had no attachment to my show or my company. Goldstar had taken steps to separate them from us.  In truth, we sold a fair amount of tickets for the show.  We got superb professional reviews: the San Francisco Examiner called Vigilance “a winner… gripping, thought-provoking, substantive.”  Other newspaper reviews pretty much echoed the Examiner’s opinion.  We also got very good customer reviews— an average of 4.5 stars.  Nonetheless, two weeks later our sales flat-lined again.  There were better deals to be had. 


Sort of.  You see Goldstar charged a $4.75 fee on my $5 ticket.  Customers were still only getting about half-price.  They saved twenty-five cents on our $10 discount ticket and $3.25 on our more expensive weekend offer.  Our sales were jump-started by the deal because customers were being hoodwinked by flashy advertising and the illusion of an amaaaaaazing deal.  All in all, Second Wind made about $1523 from our first two weeks of ticket sales; Goldstar made an estimated $648*.  That’s 42% in fees.  We did all the work; we took the risks; we suffered a financial loss on the show.  They charged us for “credit card processing” on top of their fees to customers.  And the deeper we cut our prices, the bigger the fee they added to customers.


As producers we, too, have to keep our eye out for that hoodwink.  Because our deal isn’t actually what we think, either.  Imagine for a moment that you’re a farmer—and that for every bushel of apples you sell, you have to burn another bushel that you’ve painstakingly grown in your field.  Now look at your ticket sales: for every ticket you sold through Goldstar, they had you spend an equal number of dollars into advertising.  If you sold 100 tickets at half price and brought in $1,000 in revenue, then you gave up $1,000 on those ticket earnings on that seat.  The only difference is you weren’t charged up front for the advertising.  That’s why you don’t notice it.  So would you rather spend a grand on advertising to bring in $2K in tickets, actively promote your company’s identity, and obtain your audience’s contact info?  The answer isn’t an easy “yes,” because there’s no guarantee on that income.  You could spend a grand and bring in only $1300 in tickets.  And that’s the magical allure of half-price ticket vendors: you pay only for your successes.  But the truth is, for every $10 ticket sale, we’re still burning $10 off the regular price; money Goldstar used to advertise/promote your show. 


A two-to-one ratio** of sale income to advertising dollars is pretty poor business practice; it only works if the product has a greater than 100% mark-up.  We don’t.  Do you?


WHO’S MY CRITIC?
Don’t get me wrong:  I’m all for customer reviews.  I think they’re great.  In terms of generating sales they are often more powerful than “professional” reviews.  But they should never take the place of them. 


Customer reviews are great for promoting (or preventing) ticket revenue.  Professional reviews may not generate mass sales, but they are vital for developing a strong community, for marketing efforts, and for grant writing.  They’re also good for the artists—actors, writers, directors, and designers who rely on these types of reviews to draw attention to their work.  Good customer reviews have great short-term benefits; good professional reviews have great long-term benefits. 


Readership of arts pages in print and electronic newspapers is in decline, and it’s a cyclical demise.  Increasingly, publishers are faced with budget woes from declining readership, and arts writers often fall victim to shrinking budgets.  When that happens, the arts community not only loses a consistent, learned voice, but the lay-offs often coincide with reduced coverage.  Reduced—and therefore incomplete—coverage means that readers look elsewhere for their arts news.  Fewer readers result in diminished advertising sales for the paper, resulting in more budget woes.  In the end, this hurts theatre companies and the community.  If audiences begin to rely more on customer reviews than professional, we’re engineering a different type of problem for ourselves as artists.


ECO SUM
Currently, the Goldstar system is gradually engineering lower ticket prices—and thus lower overall sales— while undercutting small theatre’s ability to develop a subscriber base and connect with customers.  By filling the ever-increasing gaps in newspaper coverage, they are inadvertently hastening their demise, as well undermining our long-term benefits.  Large theatre companies are less affected by these issues because they have bigger houses, and tiered seating arrangements offer some degree of protection. But I predict that they too be caught in a Catch 22 scenario: as their subscriber base opt for half-price and patrons become accustomed to never paying for a regular ticket, they will see a gradual decline in full price sales and long-term patronage. 


Let’s be honest.  Some companies are in the position where Goldstar is helpful.  Others find that their service helps some shows but hurts others.  Better known plays have a sure advantage over new work within this system; the same is true for better known companies.  The damage done isn’t black or white, something clearly and immediately evident.  But my crystal ball says sooner or later they’ll undermine everyone’s financial base, regardless of their company’s size.  They are not TKTS or TBA’s Tix Booth.  Those are alternative half-priced systems in an eco-system that supports full priced tickets.  Goldstar is dramatically changing the theatre eco-system in San Francisco.


WHAT TO DO?
So how do we revive it?  First, we need to devise ways to regain our connection with our audiences; to cut out the middle-man bent on making us dependent.  Offering incentives for people to join your mailing list is great, but it actually doesn’t get them to purchase tickets through you at a fair price.  They can still look for your show on Goldstar.  So educating them about what it means to buy a half-price ticket is vital.


Second, figure out a way to tier your ticket sales.  Small companies are used to a “one-price” general admission system.  If you have two prices, you can use Goldstar for the more expensive ticket.  But your upper tier offer has to be honestly, and significantly, different.  Don’t cheat your audience in attempt to manipulate Goldstar.
Third, if you work in theatre, call up the company that’s offering Goldstar tickets and ask for discount directly from them.  Give them an opportunity to connect to you.


Over the past three years, our source of income at Second Wind has shifted dramatically.  At the same time, our overall income has remained about the same.  We consistently sell slightly more tickets for each show (which may be a victory in these lean years); but they are more often half-priced tickets.  We plan to explore several different options to reduce our income from—and dependency on—Goldstar.  I have no doubt it will have severe financial repercussions, at least in the short-run.  But I’m also fairly sure Goldstar—in its current form—will kill my company.  By striving to become the Amazon.com of entertainment, their frenzied, bargain-basement approach has ravaged the frail eco-system of theatre.  Instead, they’ve become the Walmart of entertainment.  And we’ve helped them.


Goldstar and Jim McCarthy (their CEO) don’t have to be the villains in the piece.  (Neil Patrick Harris, help ‘em out, would ya?  You’re on the board, now.)  There are ways they can help— three very simple things they could do that would support our growth rather than damage it, and it wouldn’t cost them a penny. 


First, allow companies to set the amount of reduction.  Rather than a blanket 50% or more, let the supplier choose its rate.  Require something, not everything.  Customers are smart enough to work out what’s meaningful.  That’s the number one thing Goldstar can do.  Goldstar calculates their fees based on the full price, so it wouldn’t harm their overhead. 


Empowering producers to set their own rates won’t mean anything, of course, as long as Goldstar creates competition between those willing to slash their ticket prices by more than 50% with those trying to sell the “regular” Goldstar price—so they have to stop pitting the desperate against the more desperate.  No more “Today Only” specials—that’s number two.  Instead, they should promote everyone equally. 

And finally, be transparent on what Goldstar makes from each event.  Don’t just report my income; report yours.  Credit cards report on interest collected; phone companies report on taxes and fees.  Report your revenue from my event.  If 42% is a percentage you don’t want to advertise, then don’t charge that much.


Customers, understand that after the service fee you only saved, on average, 29% on your ticket. Yes, having your entertainment options delivered to you on a single, engrossing website is attractive, but decide whether that’s worth being less supportive of the company.  After all, we’re only one click away from the website you’re looking at.


Oh, and Goldstar:  stop charging me a credit card processing fee, ya douche.  That should come out of your cut.

* Since Goldstar doesn't report their fees, you have to look at the amount at point of purchase, and then calculate based on your ticket sales
** If your full price ticket is $20, then you spend $10 in advertising by using a half-price vender.

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6 Comments:

Anonymous Brian said...

It is a good post with interesting points, many of which I agree with. Certainly we have not been thrilled about their charging us credit card processing, which is absurd.

I do not agree about the "Today Only" because it is effective if one plans ahead. We use it for previews and the first week of the run only. Otherwise, you are correct, you are cannibalizing yourself. There is something to be said for a service that will front page promote your 50-70 seat show over whatever is happening on Best of Broadway.

That might be where I have questions re: your POV. Yes, there is danger here - but the advantage of being on the amazon.com of theatre is the same for the indie book seller that wont get picked up by Simon & Schuster-- how else do you get to those 100,000 people? My Google Grants freebie of $1 bid, text only, gets me a few clicks a week. I throw Facebook a few bucks a day, but cannot afford more. My own website a couple hundred hits a day, my snail-mail list is 3.5k, email is 6.5k. We cannot buy lists, so how do we reach those who do not know how to find us, or even know they should find us?

I have this argument with concerned people on our end all the time, but until they can tell me how to replace this traffic, I have to embrace it. But one does have to plan, find ways to extract contact info (try giving away a bottle of wine, or a pair of tickets, at intermission and watch those email addresses fly in), and use it wisely. Just like any other tool. We do track (or try to) when Goldstar patrons turn into our own patrons (i.e. they buy a subscription or a single ticket) We also track return Goldstar names. Most of the time, these patrons are new. A percentage repeat thru GS. And an acceptable # have become converts to our own single ticket sales or even subscription.

I would actually argue that Goldstar has greatly helped small theatre. The marketplace is what it is - and it is very hard to get new patrons to new, obscure work, especially if it isn't a niche show. The trouble here is we cannot do a control group, and see what you would have made on the show w/o them. Would those "today only" people have taken the chance on your show anyway? It is very hard to prove one way or the other. What we all have to do is not get addicted to these sites, and use them wisely.

March 1, 2012 at 2:08 PM  
Blogger Ian Walker said...

Thanks for your post, Brian, and I actually agree with almost everything you say. There are indeed ways to use GS more wisely by planning ahead (we were obviously caught behind the ball). Goldstar has built a powerful marketing tool with (as you point out) a remarkable egalitarian approach. And I think you're right to point out that they've helped small theatre by creating a venue, a shared place for the adventuresome theatre-goer and the adventuresome theatre to meet.

What I see, though, is a growing problem. If we become more dependent upon them, and they become less effective (by requiring steeper discounts), system failure is the only possible outcome. It's made more dangerous by the fact that "we" aren't just theatre companies; "we" includes our audiences which we have very little influence over. They're not having this discussion. It terrifies me that despite the jump start, great reviews, and strong customer reviews our ticket sales would flat-line during our third week. Overall, our Goldstar sales were pretty good compared to previous shows, but the steps we took were pretty drastic in comparison. In the end, we maintained decent houses through the strength of our non-GS sales.

So I have to ask: Three years ago, were you using "Today Only" discounts, or has this been a new development? Compared to three years ago, have you increased the number of times you offer free tickets during the run in order to increase visibility? If the answer to either of those is yes and your ticket sales haven't increased dramatically, then I think it spells trouble. More energy is going into the system; less coming out.

As a side note, I found it interesting that despite all the added sales, promotions, etc., the majority of tickets were sold for Saturday night at our most expensive price-point. People were more often driven by WHEN they wanted to see theatre than by "discount attraction."

There's little doubt that effective options to reach new audiences are few and getting smaller. We've used Google ads, Highlighted Listings in the SF Chron, Facebook Ads, TIX booth online ads, and SF Chronicle online ads. Truth told, Facebook was the only option that seemed to yield any effect I could track. Faced with these options, spending 50 cents on every dollar through Goldstar seems like a good deal. Comparatively.

At Second Wind we've got some distinct challenges. We do two shows a year, which means the number of folks who remember us-- and see our shows simply because we produce them-- is relatively small. And very precious. We also tend toward new work, which is harder to sell to strangers. We can't really afford to do a "cash cow" money-maker show, because it would be half our season. And we have no subscription series, so it's more difficult to "convert" customers. As distinct as our situation is, I can't help seeing how many other companies are in similar situations, and what our theatre eco-system will look like if the trends of the past five years continue into the future. Vigilance did just fine, financially, but I'm seeing writing on the wall. So next year I'm commited to reducing our dependence on Goldstar-- not eliminating them completely.

March 1, 2012 at 5:39 PM  
Anonymous Brian said...

To answer the questions posed, 1)"Today Only" is something Goldstar started this year, I believe. 2) I have dramatically DECREASED the number of comps given to Goldstar since it started. In fact, I think I've given about 30 for the entire 2011-12 season (and we're four shows in). Comps to Goldstar right now means something went wrong, or there is an event in the city (or holiday) that is killing us. 3) Our ticket sales have been steadily increasing, from all sources. I am now knocking on wood and hating that I wrote that and have probably doomed myself.

"Today Only" changed things for us. Now it is extremely rare that I offer Goldstar free tickets. We just put "A Bright Room Called Day" on "Today Only". Before the promotion, we had done about a dozen tickets on Goldstar, which was fine for a show going into previews next week. We're now over 275 tickets (price points: $8, $10, $12.50 and $16) - my previews are close to sold out and, if people like the show, I will be able to limit half price ticket sales (currently I give them 20/65 seats most of the run.)

So yes, I do think our tickets sales have increased dramatically. But who the heck knows why? We're on our second season in a new space, maybe people have just found us? Maybe we're hot today, and will be cold tomorrow? Maybe I should send Goldstar flowers and a cut of the profit? I wish I really knew the answer. Until then, I have to keep doing what works.

I suspect Custom Made has a Goldstar following. I've had to come to terms with sharing my customer with them, but in the end I'm okay with it. Some people really like their service, especially being able to review and say their piece (where it will be seen.) As you pointed out earlier, sometimes the math doesn't even add up, they pay about the same, but as long as they are seeing my show, and come back, I think I have to be okay with selling them a $16 ticket that they buy far in advance.

All this said, if you do find yourself over 50% tickets to a half-price outlet, you are probably right about reducing dependency. I think we're at about 30-40% to them ATM. As one of my advisory board type people keeps asking me, what happens if Goldstar goes under? Could you still do your shows? My quick answer is that I am pretty nimble, and will hopefully find whatever replaced it, but yes this does lead to dangerous thoughts about not owning our customer.

Then again, times have changed. Patrons habits are changing. Subscription is not dead, but it is niche. Just like Sears has had to learn, customers don't have the same feelings of loyalty they used to, especially when there is a bargain to be found (and who does't like a good deal?)

p.s. I love this discussion!
p.p.s. CMTC is going to be trying, I hope, a few new things next year to address this:
1) Ridiculously cheap preview subscriptions, to convert "today only" folk
2) Cheap industry subs
3) a 3, 5 and 7 package to have more choice.
4) possibly trying a Groupon or even GS to sell subscriptions.
5) thinking about different prices for different days like you pointed out. ive never pulled the trigger on this because the only day that is consistent is Saturday.
6) thinking about increasing prices as the run goes on, but am fearful of that with an unsuccessful show, and then having to lower prices which looks and feels bad.

I know Second Wind doesn't have a sub series, but some of these ideas might apply to individual shows?

March 2, 2012 at 10:48 AM  
Blogger Ian Walker said...

Brian!

I'm thrilled it's working so well for you-- and thanks for sharing your approach to making the most of Goldstar. Certainly there are ideas there that can cross over to a lot of companies.

I think, too, that Custom Made is more unique in the community than typical (and I mean that in the very best way). You got your start-- and developed an audience base-- well before Goldstar came into being (which is different than fledging companies); you run a full season of shows (which allows for diversification of money-makers and risk projects); you've got your own space (which facilitates that season, puts a cap on certain costs, and increases the overall number of seats you have available to sell); and it sounds like you've actively strategized how to keep a balance between Goldstar and your full-priced customers. We're old-timers at Second Wind, but we're just now realizing that "strategy" is our only balancing tool, and we've been a little neglectful in that area. Which is why we've noticed that left to its own, the system tended toward decline, not stability. With fewer options to reach potential audiences, Goldstar's influence and attractiveness has grown, but their system-- in my eye-- is structured to support further dependence and deeper "discounts" (you may have stopped using free ticket lures, but GS hasn't-- rather they've added the option of Today Only cuts).

In a way, I don't think we're in that much of a disagreement. I think you've positioned Custom Made very well, and are one of the companies who are in a position to do just that. And you're constantly strategizing how to turn a one-time discount buy into a regular customer, and a regular customer into a full-paying one.

I don't mean to say that Goldstar is the root of all of theatre's decline here-- they're certainly not responsible for declining newspaper readership, for example. And there many factors that contribute to where your audience comes from. Last year, we did a new play with a small cast and nearly 70% of tickets were through Goldstar; this year we did a new play with a large cast and Goldstar was closer to 55%. Still too high-- still not diverse enough-- still unsustainable, but a much more manageable starting point.

I don't think theatre needs discount tickets to survive or grow. Yes, there are a lot of obstacles to going out to the theatre-- and a lot of cheap fast alternatives-- but I don't think discount tickets (and I differentiate that from inexpensive tickets) is the answer. What works so well in the Goldstar system is the full collection of show options in a media rich environment, and a system than allows customer input. The majority of our ticket sales through Goldstar was our most expensive offer, so I don't believe that price was that significant a driver.

March 5, 2012 at 9:36 AM  
Anonymous Jim McCarthy said...

Very thoughtful discussion here, and I'd love to talk about it with you more. The long term health of small theatre is really important for our long term health, and so naturally, where we can do something different to help, we'd like to look at it.

Can you contact me offline? Perhaps we can talk about getting together to discuss these thoughts and others. I won't post it here because of bots, but it's pretty to figure out my email address or you can reach me at @goldstarjim on twitter or on Linkedin.

March 30, 2012 at 3:44 PM  
Blogger Abhi said...

Thank you for sharing this information. I Googled "how does goldstar pay artists" and found your post. Thought you would be happy to know that reading this made me close the GoldStar tab and buy tickets directly from my local theatre's website. :)

April 5, 2017 at 10:52 AM  

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