TKTS has long been a Time Square fixture. For those unfamiliar with it, TKTS is a non-profit that sells discounted tickets to Broadway and off-Broadway shows. It recently celebrated its fortieth anniversary and Marketplace had a story summarizing its business (Broadway discount booth TKTS turns 40, Jun 26).
“Shows look at their inventory the day before and they say: I’ve got tickets to sell, I don’t have tickets to sell,” says Victoria Bailey, executive director of the Theatre Development Fund, a non-profit that owns TKTS.
Bailey says TKTS sells nearly 2 million tickets a year. Theaters get the ticket money, and TKTS takes a $4 service charge. Bailey says a good year on Broadway isn’t necessarily a good year for TKTS.
“A good year for TKTS: You need a lot of shows running, doing well enough that they keep running, but not so well that they don’t have empty seats and need us to sell seats for them,” she explains.
That’s all good. The quote in the story that got me thinking, however, was the following.
Larson notes critics have said TKTS pushes ticket prices up because theaters know that they can get rid of seats if they overcharge. TKTS’ Victoria Bailey says Broadway ticket prices have risen sharply over the years. Tickets now generally run $100-150, but can easily be more than twice that. Still, she says, you don’t have to shell out that kind of money to see a show. You just have to wait.
Does having a secondary outlet boost prices?
At face value, the proposition makes sense. If as a show producer I know I can move unsold tickets at, say, $50 the day of the show, I might as well start off asking for $100 instead of $75. But it is not quite that simple. If everyone knows that tickets will be available for $50 tomorrow, why would anyone pay $100 today? That is, committing to discounting at a future date cannibalizes full price sales today. This is not dissimilar to baseball teams not wanting to see their tickets dumped at a large discount on StubHub.
The caveat to that analysis is that (a) everyone needs to know that a discount is coming and (b) that enough customers must be willing to risk not getting a ticket once the show discounts. After forty years of being mentioned in innumerable guide books, it is hard to believe that most people don’t know that TKTS exists. But Point (b) is a valid issue. If you are planning on a vacation in Manhattan and want to see several shows, you may well be willing to pay a significant premium to guarantee that you get tickets to the shows you really want to see. TKTS then becomes a mechanism that allows theaters to segment customers. Those who are anxious to see particular shows or want to get good seats pay a premium while those who are more flexible get a discount.
That doesn’t seem to be the complete story however. TKTS would appear to be in the near-term irrelevant to shows that are selling out every night. That is, TKTS doesn’t per se explain why ticket prices for Book of Mormon are sky high since they are never moving excess inventory through TKTS. So high prices on hot shows is just what the market will bear. Where TKTS would make a difference is on shows that have been running for a long time. If, say, Mama Mia has jumped the shark and is not high on everyone’s list of shows to see, then extra revenue from segmentation through TKTS could justify running the show a little longer. The question then is how the length of the average Broadway run has changed over the last forty years. The real impact of TKTS could mean that fewer shows are opening on Broadway. That in turn would boost prices for new shows since frequent theater goers would have fewer new options to choose from.