As the UK economy seems set to enter another recession, Richard Howle says he foresaw the trouble in March by looking at ticket sales and things could get worse before they get better
Ticketing is an industry that acts as a canary for the economy – the trained eye can always see an economic downturn coming in ticket sales. I was predicting a recession in March and no one believed me.
But with the UK economy contracting in the second quarter, with its biggest fall since 2012, and the third quarter expected to be the second successive quarter of negative growth, which will officially herald a recession, the early-warning ticketing system will once again have proved itself to be a reliable barometer.
My colleagues across the ticketing industry have all seen it, including those selling theatre tickets. A quick search for tickets in the West End shows there is plenty of availability – you can easily pick up a pair of tickets on a Saturday night in September for even the ‘hottest’ shows in town. This is not a good time for ticket sales. Yes, the weaker pound has meant an upsurge in overseas visitors, but is this just papering over the cracks? What happens when the tourists go home?
September is always one of the worst months of the year for theatre – the tourist season is over, the schools are back, and no one books advance tickets in August. This year looks set to be as bad as they come – look out for plenty of cut-price offers attempting to lure potential theatregoers – it really will be a buyers’ market.
And here is the problem: after a sustained period of year-on-year growth, theatre productions have been able to charge more and more and the whole ecosystem has become addicted to the riches that come with higher ticket prices. Inevitably, with that increased revenue, costs have risen as the multiple parties involved in staging a production (from theatres, to performers and marketeers) take a share of the bigger pie. So, when the sales dry up, and productions cut prices to attract sales, somebody in that value chain has to take a haircut.
The higher the prices have risen, the further they have to fall to find an audience. If the market dictates that to find an audience a production has to charge £35, then who cares that Band A seats are normally £90? “What if we give a £30 discount?” a producer may plaintively ask. It doesn’t matter: a price-sensitive audience doesn’t care about the £30 discount – the tickets still cost £60. In this market, if they only want to pay £35, that’s all they want to pay. Take it or leave it.
The trouble for producers is, just because a production is playing at only 40% capacity, it doesn’t mean that costs have fallen, there is still the same number of people in the cast, still the same number of people backstage. The number of lights or costumes on hire isn’t cut. The costs of running a big old building, paying the electricity, the exorbitant West End business rates, don’t change. They still have to market the show (in fact they may have to spend more on marketing if audiences aren’t buying tickets). The initial production budget still needs to be recouped – even if there are only 20 students sitting in the balcony. If producers have budgeted to pay for all that and banked on getting an average ticket price of £50 to do so, then having to sell their tickets at £35 is going to cause them real issues.
Usually deals are done, equipment hire companies are persuaded that they have made enough money from the production, and a promise of future contracts will encourage them to cut a deal. Perhaps the marketing budget is trimmed after all – but the only thing that will really make a difference is if the theatre reduces its rental charges.
And this is where the cat-and-mouse game begins. Because theatres can’t afford to be dark – although reduced, the costs of running an empty building are still extremely high – is it better to have a production in on a lower rent, or even no rent, picking up the bills and at least taking some money at the bar? However, more often than not, in recent times, such has been the demand for a West End house that this hasn’t been a concern for theatre owners – if this production closes, then there is another one lined up to replace it. As soon as the producer attempts to renegotiate their deal with the theatre they are signing their own death warrant – “Of course we can talk about lowering the rent, dear chap. When were you thinking of closing?”
As long as there is demand for theatres, producers are always going to be faced with a Hobson’s choice if ticket sales begin to dry up. Hang on, slash prices and absorb the losses until sales pick up – or do a deal and start the countdown to closure of the show. Sometimes the latter is by far the best option – on countless occasions I have seen producers bow to the inevitable, do the deal, announce the closure of the show and then see a huge surge in the box office as customers flock to see it before it shuts, with everyone making a fortune.
Until the demand from new productions for West End theatres dries up, this cycle (including the ever increasing ticket price rise) will continue.
Although ticketing is the first to notice the recession, it is also usually the first to notice the start of the recovery too. We are not there yet. I fear the current uncertainty and instability will mean that things get worse before they get better, but in the gloom and depression of a recession the first green shoots are often seen in entertainment. The need for escapism, joy and distraction become even more important in dark times and birthdays and anniversaries still need celebrating. Gradually they come back (as long as the price is right).
Richard Howle is the director of ticketing for the NEC Group and former commercial director for Really Useful Group