Home PublicationsCommentary Limiting Dynamic Pricing on Broadway Will Hurt Live Theatre

Limiting Dynamic Pricing on Broadway Will Hurt Live Theatre

by Sujai Shivakumar
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With shows set to re-open in September after more than a year-long shutdown for the pandemic, Broadway is facing massive losses—the last full season brought in $1.83 billion. Unfortunately, New York State Senator James Skoufis has introduced a bill to reform how Broadway shows price tickets that would likely hurt, not help, the industry’s recovery and do nothing to benefit consumers.

To be sure, New York Senate Bill S6716, includes some worthwhile proposals. For example, it would require online ticket sellers to display the total price of each ticket, including all fees and additional charges, at the beginning of each transaction so that consumers can better compare prices. It would also ban theater owners from forcing producers to sign exclusive ticketing deals as a condition of using their venue. This change would allow producers to use competing ticketing services, driving down commissions on ticket sales.

Unfortunately, the legislation would prohibit theatres from raising ticket prices in response to strong demand to popular shows—a practice known as dynamic pricing—undercutting revenue at a time when the theatre industry is attempting a revival after suffering from a year of financial losses from the pandemic.

In the past, theatre companies mostly sold tickets at a fixed price, with some exceptions such as discounts to unload tickets for same-day performances, because they lacked the information and capacity to predict demand. However, with the increased availability of demand data and better predictive models, theatres can now charge the price that consumers are willing to bear to see an in-demand show. For example, in response to strong demand for a Hugh Jackman concert, producers raised the price of some orchestra seats from $155 to $175, and the price of premium seats from $250 to $350.

Restricting dynamic pricing for Broadway tickets reduces theatre revenue. Limiting dynamic ticket pricing forces producers to set a fixed price for tickets—where prices cannot be raised in cases of high demand. But producers do now know which shows will be successful at the outset, so initial ticket prices may be lower before demand surges due to positive reviews and word-of-mouth. Preventing producers from raising tickets prices forces them to leave money on the table.

Moreover, these restrictions on dynamic pricing will not benefit consumers. Ticket brokers can still resell tickets on the secondary market above the box office rates, so consumers will still end up paying premium prices for popular shows. However, these profits will go to ticket resellers instead of those who produced and invested in the shows. Given that producing Broadway shows is a form of venture capital, where a few hits like Hamiltonand Book of Mormon offset the investments lost in flops and mediocre ticket sales of other shows, limiting revenue for these successes will only deter future investment, discouraging efforts to produce live theater and eventually reducing the quality and variety of shows available for theatre goers. Moreover, limiting dynamic pricing could lead to higher prices if producers know that they can never increase prices dynamically, they may set initial prices higher than they might otherwise.

While the proposed legislation has some positive elements, restricting dynamic pricing for Broadway shows would be a mistake.

Image credit: Ronile

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