Sunday, July 24, 2011

The Effects of Social Media on Traditional Journalism

In my role as Director of Communications at Arena Stage, I supervise media relations in addition to marketing and a few other areas. As originally intended, this blog was developed to discuss arts marketing, however from time to time, I stray a little and write about topics that affect media relations, as will be the case today.

A couple of weeks ago, I found myself participating in a very interesting discussion via Twitter with Howard Sherman, Peter Marks, Trey Graham, Nella Vera, David Loehr and Kris Vire. This impromptu panel discussion was centered around the affects of social media on traditional practices in arts journalism. With both publicists and journalists recognizing that the traditional media landscape is changing, it made me think about what's next. Below are my thoughts that formed in the weeks since.

For a primer on the subject, may I suggest the following articles:
"Should Theater Critics be Allowed to Tweet an Opinion Before Writing a Review?" Washington City Paper, 10/20/2010
"Hey, Broadway-Based Spiderman Boosters: Twitter's Not a Supervillain" NPR, 12/1/10
"Will the Embargo Hold?" 2amt, 7/12/11
"Stop Telling Me What to Think About Your Show" The Craptacular, 7/12/11

From my point of view, the affects of social media on...

New Play Development
The days of developing new work under the watchful eyes of millions of New Yorkers may be over. And the Broadway tryout in major metropolitan areas could be as well. Why anyone would make the choice to develop new work directly on Broadway itself baffles me, as there is no room for error. I couldn't imagine a worse place to develop work. To be extraordinary, one must be able to take risks. With the rise of social media, every risk taken (and failure made) is a potential headline in the now influential blogosphere. In the past, producers and publicists had to concern themselves with crafting stories for professional journalists and preparing for traditional reviews, but in today's world, before the first review hits, public opinion can be persuaded by millions of tweets, Facebook posts and blogs. In some cases, by the time the impartial and professional critic walks through the doors of a theater, the verdict in the court of public opinion has already been rendered. As information travels at the speed of light to every corner of the world these days, it would not surprise me if the major development work for high profile, Broadway-bound productions starts to occur at smaller and smaller venues in more remote areas of the country. Even major regional theaters in large metropolitan areas may become too "exposed" to be able to shelter the development process of new work. My prediction: Places like Virginia Stage Company, a LORT D theater in Norfolk, VA which just recently produced a highly acclaimed pre-Broadway run of Bruce Hornsby's SCKBSTD, will become the new go-to places for development of high profile projects.

Preview Performances
A production is never fully complete until it is performed in front of an audience. Preview performances used to be a testing ground that allowed creatives the ability to make adjustments to a production and then try them out in front of an audience. Previews are handled differently depending on the company. I have worked for companies where previews were very rough, often times being obvious that the creatives and the cast were still in the process of creation. However, I have also worked for companies where in most cases, the first preview looked as polished as opening night. As marketers, we know the most powerful marketing tool is word-of-mouth, and social media allows for the development of instant word-of-mouth campaigns. These days, artists and administrators have to be prepared that the first preview will bring instant feedback, and that feedback will have a direct impact on sales. Some administrators, as mentioned in the aforementioned article entitled "Stop Telling Me What to Think About Your Show," try to appeal to audiences to halt or slow social media. However, as a paying member of the audience, patrons have every right to say what they think to whomever they want using whatever means they want to. Trying to control social media is a waste of energy, and asking audience members not to discuss the play is like telling a teenager not to do something. Even more ludicrous are the producers that are charging $150+ for previews, and then asking patrons not to share their experiences. Whoever advised them to do so obviously has very little understanding of the value of transparency which drives so many social media mavens. My prediction: Producers will forgo long preview periods, and will in turn rely more heavily upon the developmental runs as discussed in the previous paragraph.

In his excellent blog referenced above, Howard Sherman predicts that the embargo "has begun to crumble and that erosion will only accelerate as every single person who cares to becomes their own media mogul and true stars of the medium begin to achieve influence akin to that afforded by old media." I couldn't agree more. As of today, traditional journalists are expected to hold back on reviewing until a producer settles on an opening date and then invites the critic to see the production. In the meantime, "citizen reviewers" are blogging, tweeting, posting on Facebook and Yelping, thereby allowing everyone except the professional critic the opportunity to weigh-in. However, to pull a line from Spiderman, with "great power comes great responsibility." Professional critics are expected to act with journalistic integrity and to honor embargoes as they are the arbiters of culture for, in some cases, millions of readers. But there are grey areas. What happens when the same producer that requests an embargo from professional critics invites Oprah Winfrey to attend a preview, and then Oprah tweets her thoughts to her 6.7 million followers weeks before critics can? or when an advertising firm uses pull quotes from comments on Yelp or Twitter to promote a show in ad campaigns weeks before a show is officially open to review? My prediction: The use of embargoes between producers and the media will change in the next few years as social and traditional media will compete directly with each over for prominence.

For some reason, when Washington City Paper theater critic Trey Graham tweeted a response to a show that he was reviewing from the theater, it caused a little bit of a brouhaha. To get the facts straight, he was an invited reviewer attending a production that was open to review at the request of the theater. I guess a couple of actors who normally like to avoid reading reviews encountered the tweet, and were upset because a review caught them by surprise as it was delivered via social media, thus leading to a complaint. From a publicist's perspective, Trey was well within his rights to tweet his thoughts. Theaters can (as of now) embargo reviews based on time (when shows are available for review), but it is amusing to think that any institution would expect to be able to embargo based on delivery method. Social media is just a delivery mechanism, just like a newspaper is. Critics have every right to deliver their criticism via whatever mechanism they like. Journalism is a very competitive field, and often times being able to weigh-in first, or before others, creates a competitive advantage. As such, I am not surprised at all that critics are now sending immediate, albeit 140 character, responses. Although I disagree, Howard Sherman developed a well reasoned argument as to perhaps why critics should not tweet responses in his previously mentioned blog. That being said, as a publicist, I would argue that whether we think critics should or shouldn't tweet their responses is a moot point, as it isn't up to us. The fact is, they are doing it and we don't have any logical reason to ask them not to. My prediction: Many more traditional critics will start tweeting immediate critical reactions so that their responses are competitive in the fast paced environment of social media.

Friday, July 08, 2011

The Nonprofit Variant of Dynamic Pricing

I think for most of us that work in the nonprofit theater, our dream is to create exceptional art that is accessible to everyone. Speaking for me specifically, this is the reason I decided to make a career in the nonprofit resident theater, rather than some of my peers who opted for the commercial theater. There are times when I am envious of the visual arts, particularly in Washington, DC, which due to their funding models, many of which can provide exceptional art free of charge to the public. The predominant model for visual arts institutions in DC is based on uninhibited access. Wouldn’t it be great if the performing arts were the same way? The nonprofit resident theater model developed in a completely different manner however. In fact, Arena Stage was founded in 1950 as a for-profit entity, and thrived for years as such. From the very birth of resident theaters, patrons were charged to access the art, and we have had to fight to keep funding models in place that support accessible fees. With the development of the nonprofit model, it allowed previously for-profit resident theaters the opportunity to raise contributed funds (private donors, government entities, foundations, etc) in an effort to keep ticket prices as accessible as possible. Most resident institutions took advantage of this new found opportunity to improve access for all and to provide educational programs, however there were some that did not. Still to this day, in our community (not to mention on Broadway itself), nonprofit theaters and for-profit companies compete all the time, which seems to be somewhat unique to the theater world (do you know of any for-profit symphonies?).

Prior to 2008, few companies had experimented with dynamic pricing, primarily because the technology wasn’t readily available to operationalize what had previously been a well thought out theory. The idea was relatively simple -- if your house was playing to less than 100% capacity, it was symptomatic of the failure to determine an optimum price. If an optimum price could be determined, which perfectly aligned demand and supply, every house would be at capacity. The first use of dynamic pricing by a nonprofit organization to my knowledge was at the Chicago Symphony Orchestra. In 2003, Deborah Rutter joined the symphony as their new president, and introduced the idea of dynamic pricing (resident theaters would experiment with dynamic pricing much later). Tessitura, an advanced new database system developed by the Metropolitan Opera, had entered the market in the early 2000s, but was so costly that only major symphonies, operas, presenters and commercial entities could afford it. However, Tessitura was robust enough to handle the operationalizing of dynamic pricing for those institutions that could afford it. From 2003-2008, most marketing directors at nonprofit resident theaters were aware of a new “dynamic” pricing model, but we didn’t have access to the technology to implement it. While very large nonprofits were experimenting with dynamic pricing, so were commercial entities. The Producers broke records in 2001 by establishing an unheard of top ticket price of $480 (which by the way, The Book of Mormon just surpassed on June 16 with a top ticket price of $487). I immediately began to notice a difference in how for-profit and nonprofit entities were applying the principles of dynamic pricing. From my observations, Broadway producers did not consider accessibility in the least when establishing ticket prices. They had responsibilities to their investors, and would charge the maximum price they could for every seat in the house. On the other hand, I noticed many nonprofit companies increased their top ticket price when demand warranted in order to keep a significant portion of their houses at very accessible prices. And even the top “dynamic” prices at nonprofits didn’t get anywhere near $480 (I wonder if this is what Diane Ragsdale meant when she said that "nonprofits are expected to leave money on the table?"). Whereas both nonprofits and for-profits were using the same pricing theory, it has been applied and operationalized very differently.

A tipping point for nonprofits occurred in 2008. By that time, Tessitura had been on the market for almost a decade. Competing database products were being developed and tested, and the pricing for Tessitura had decreased to a level that most nonprofit resident theaters could now afford it. In addition, the world experienced the beginnings of the global economic crisis during September of 2008. That fall, I gave a couple of speeches at national conferences, and the predominant question on the minds of arts administrators was how a crisis at such an enormous scale would impact organizations. We had models from 1987 and the 1970s, but all indications were that this crisis would far exceed anything we had ever weathered.

Some organizations cut back programming and reduced expenses in a hope to ride out the storm. Others recognized the crisis as an opportunity to reexamine business models. Most correctly identified that contributed revenue sources would be heavily impacted. As nonprofits operate on two revenue streams (contributed and earned), in order to maintain the same level of artistic excellence, maintain living wages for artists and offer extensive educational programs, many organizations looked for ways to bolster earned revenues. Nonprofit resident theaters became very good at maximizing revenues from non-ticket sources in order to maintain accessible ticket prices. New sources of revenue were popping up everywhere from real estate ventures, event rentals, restaurants, parking, corporate visibility opportunities, summer camps, bars, consulting services, and partnerships with for-profit ventures. However, new earned revenue streams took time to develop and decreases in contributed revenue were coming quickly. In order to maintain accessible ticket prices for a significant portion of the house, many nonprofits had to seriously consider a dynamic pricing model that allowed for an increase at the top pricing levels when demand warranted it. With a decrease in contributed revenue, organizations had a choice to make:

1. They could reduce expenses, cut programming and lay off staff in an attempt to resize themselves to match the new levels of contributed revenue available.
2. They could increase ticket prices at all price levels to make up for lost contributed revenue, however in doing so, making themselves less accessible across the board.
3. They could increase top ticket prices according to demand, and keep a significant portion of their inventory at accessible prices.

Not surprising to me, many nonprofit resident theaters went for option #3. To my knowledge, almost all the nonprofit resident theaters in the DC metropolitan area now utilizing dynamic pricing, and none so far have seen the negative ramifications as forecasted by some experts.

In today’s debates concerning for-profit vs. nonprofit incorporation, I am mindful of something Arena Stage Founder Zelda Fichandler said in a speech she gave in the 1960s: “while we are gathered here in the name of the nonprofit corporation (and, indeed, without the nonprofit income tax code, our American theater would simply not exist), being nonprofit does not really define us—our goals, our aims, our aesthetic, our achievements. What defines us, measures us, is our capacity to produce art.”

Ultimately nonprofit resident theaters should be measured by their capacity to produce art, and to make that art as accessible as possible without sacrificing excellence or their ability to compensate artists at reasonable levels. Given today’s new realities of reduced contributed revenue sources for many nonprofit resident theaters, the development of new revenue streams and the implementation of dynamic pricing allows institutions to make up for lost revenue without sacrificing their ability to be accessible to their communities.