As quantity of production increases from Q to Q2, the average cost of each unit decreases from C to C1
A recent post by Drew McManus at Adaptistration reminded me of a brief argument I had with Greg Sandow at his blog. In my previous post I talked about one way to increase performance or earned revenue through Price Discrimination for Orchestra Tickets. Another way to increase performance revenue as well as lower costs is by changing the scale of the operations.
This is commonly referred to as Economies of Scale, and no, this has nothing to do with reducing pay or cutting back a season to lower costs. The reduced costs comes about as the result of increased production, thus lowering cost per unit. As the Investopedia defines it:
The increase in efficiency of production as the number of goods being produced increases. Typically, a company that achieves economies of scale lowers the average cost per unit through increased production since fixed costs are shared over an increased number of goods.
One of the benefits from being the composer for a production is the comp tickets! These were from Chicago’s Commedia Beauregard’s production of “A Klingon Christmas Carol” winter 2011
Drew McManus (of Adaptistration.com)had a fascinating post about Placebo Pricing (also see his follow-up post) that was the subject of a blogpost by Joe Patti (of Butts in The Seats) which might be a technique that could be used by Orchestras to generate more ticket sales. Lisa Hirsh has been blogging up a storm about some of the issues of ticket pricing from the audience standpoint.
Back in 2004, McManus reported on a new pricing strategy being used by the Toronto Symphony Orchestra and the Nashville Symphony in their tsoundcheck and Sound Check programs. Simply put, the programs offerred a lower ticket price for folks under 30. While I’ve not heard much about how the Nashville program has worked (or even if it is still in place), there has been much news and blogging about the young age of the TSO’s audience. There has even been some wonderful audience testimonies–see this one at McManus’ follow up (again, in 2004) to the above post, and this recent comment at Greg Sandow’s blog.
The lingering question to all this reduced pricing for tickets issue is, as McManus states in his Placebo Pricing post: “In the end, the devil is certainly in the details; not the least of which being what to do about reduced earned income from lower ticket revenue” and as Sandow states in his recent post about the TSO: “Some classical music institutions attract a young audience by lowering ticket prices, but then they need funding to offset the loss from selling tickets at a cheaper price” and even I’ve said as much over at Eric Edberg’s blog: “And in the end, since these tickets are actually cheaper, that means pound for pound it will take more of these tickets to make the difference from a normal subscriber or ticket buyer at standard prices.“