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.