The price of West End theatre tickets

There is an ongoing debate in British politics as to whether or not the government should subsidise the arts, and I hope to address this debate in a future post.  My purpose in writing this post is to consider the impact of state subsidy on theatre prices.

It is reported in the national press that the famous actress Juliet Stevenson has complained about the price of theatre tickets in London’s West End, and these tickets are certainly not cheap. Tickets for musicals can apparently cost up to £200.

Let us suppose that you establish your own theatre company, and rehearse a show.  You book a theatre, and your play comes before the public.  You need to recover your production costs from the ticket sales, and so you price the tickets accordingly.

It is probable that you will sell more tickets if you opt for a low price than if you opt for a high price, but either way you need to make a guess at the minimum number of tickets you will sell, and then ensure that the tickets are priced so that you will at the very least break even.  If your tickets are priced too high, and you do not sell enough to break even, then your theatre production fails.

Now suppose that your production receives some government subsidy.  This can be offset against your costs, and you can adjust the price of your tickets accordingly.  Your tickets can be sold cheaply, and you stand a good chance of covering your costs.

At the point at which your theatre production opens, the ticket price is guided primarily – perhaps exclusively - by the need to cover costs, but another factor could soon come into play.

Suppose now that your play is well received.  The reviews in the press are glowing, and before long you are selling out every performance.  Covering your costs is no longer an issue, as you are making a healthy profit.  The price of your tickets is now driven firmly by supply and demand.  A high demand relative to supply allows you to charge a high price for your tickets, and some people start complaining that your prices are beyond their means.

In this situation a subsidy would make no sense at all.  You are making a profit, and you are free to make use of this profit to reduce your ticket prices so that more people can afford them.  The drawback here is that lowering the ticket price of a sell out show will merely cause it to sell out the sooner.

Suppose you try to book tickets for a theatre play, but are told that it is fully booked for weeks ahead.  The logical conclusion is that the tickets are not priced highly enough.  Raising the price will dampen demand, and allow people to book tickets at short notice.  Any tickets for a given show which are unsold on the day of the performance can be sold at a reduced price, but otherwise the price remains high.

Some readers may note that charging a high price for theatre tickets merely exchanges one unfairness for another, and this is true.  Nevertheless it tends to replace the said unfairness with one that is more efficient.

When tickets for a popular show are priced so as to be affordable to as many people as possible, then it causes the afore-mentioned problem of people having to buy tickets a long way in advance.  It also creates a situation where revenue is lower than it could be.

If your theatre play owes its success to the presence of a famous actor, then that actor might leave if another theatre company offers to pay him more money.  In other words, not pricing your tickets highly enough could be counter-productive to your show’s ongoing success.

By contrast, if you price your tickets so as to exclude those on modest salaries, then you can maximise your revenue and potentially keep your show running for many weeks – or perhaps even years.  The success of your show might also encourage another theatre to stage the same play - albeit with a less impressive cast - and charge a lower ticket price, and so the less well off might not be completely excluded.