In April, the Saint Paul Chamber Orchestra (SPCO) announced the launch of a Netflix-style membership model where you could “get all the SPCO you want for $5 a month.” Still relatively untested in the arts world, this pricing model allows subscribers to see an unlimited number of performances for a low monthly fee. Additional perks may be included, but the key differentiator between this membership model and traditional subscriptions is that subscribers cannot select their seat and can choose to go (or not go) at the last minute.
The Netflix model, although currently under the gun due to strategic misfires, was the go-to in the home movie business for most of the last decade due to the convenience of mail delivery, Netflix’s wide selection of DVDs, and affordability. Its success was a disruptive innovation that permanently changed the video rental market. The Netflix model is now the superlative example for new or existing businesses that want to increase share of wallet (and time) of existing customers.
So how does Netflix translate into the world of the performing arts? The existing subscription model ties a customer to an annual fee for a fixed number of pre-determined performances. We’re well aware that audiences are increasingly reluctant to commit to 12 or even 6 concerts ahead of time. Although choose-your-own subscriptions allow flexibility in the subscription package, they still demand commitment to a set program far in advance as well as substantial upfront costs. A Netflix model allows subscribers to attend any performance on an organization’s schedule at the last minute and importantly, spreads out the financial burden.
What makes this model really interesting is the psychology behind it. The approach captures an individual’s desire, not commitment, to attend more arts events. Arts marketers know that in order to become a subscriber, an individual must first have been a single ticket buyer, then a multi-ticket buyer. The Netflix model’s purchasing psychology is different; people decide that they can part with a small amount of their monthly earnings to have the opportunity to see art. There is less upfront financial commitment than a subscription and a lot of promise that they will become closer to the art form. Latent demand may be captured in ways that single tickets or traditional subscriptions do not.
Another interesting facet of the Netflix model is that memberships are able to capitalize on excess capacity. On any given night at the theater or concert hall, seats go unused. If there are too many seats left available, marketers will try to paper the house with free tickets. The membership model doesn’t necessarily address the issue of empty houses, but it does allow arts organizations to sell unoccupied seats at a discount, acting as an additional source of cash when the monthly memberships come in. Even if no subscribers of a monthly membership attend a performance, a fraction of their monthly fee can be attributed to the performance. Similar to gym memberships, you can have many more members than can actually attend the concert because 1) there is no guarantee that you will get a seat and 2) it is highly unlikely that all members will attend the same performance.
So where’s the rub? Essentially free money for seats that you had anyway? Arts marketers have plenty to say about why this won’t work. Just like Netflix or any subscription, after a while, if it goes unused for too long, members eventually cancel their account. Additionally, the amount of staff time it takes to run such a program might not be worth the incremental revenue it would bring in.
Research by TRG Arts shows that people who attend once are only 30% likely to return, but if they attend twice, that number doubles. If purchasing a membership encourages repeat attendance, those who are able to attend even twice within a season are more likely to become loyal to the organization. You can almost think of the membership model as trial pricing. It can be a low-cost entry to increasing the lifetime value of an audience member.
In Seattle, this model has been working for the ACT Theater, which has created a Netflix-style subscription called the ACT Pass. Becky Lanthrop, marketing director for ACT, says that two-thirds of their members who have an ACT Pass use it on a monthly basis. Launched in 2009, the program started with 40 subscribers and grew to 1200 in 2011. At $25 a month ($20 if you are under 30), this fee is more expensive annually than ACT’s subscription for 4 performances for $200. Thus, the ACT Pass could cannibalize the theater’s traditional subscribers, and yet the company would not lose revenue. In fact, ACT might even reduce marketing costs, as annual renewal campaigns are no longer be necessary when subscribers have to opt out of the program in order to end their subscription. Regardless of whether the ACT Pass becomes the primary model for subscriptions, it’s clear that the goal of the ACT Pass is to increase revenue and loyalty to the theater company.
The SPCO’s goals are quite different than ACT. At only $5 per month, the SPCO claims the goal is to increase access, not revenue or members. Ticket sales are a marginal source of revenue and the SPCO is not focused on increasing earned revenue from subscriptions. Marketing Director Jessica Etten has this to say about the project:
Over 80 percent of our revenue is related to philanthropy and less than 20 percent comes from ticket sales. We exist because people come to the concerts and fall in love with what we do and want to support the organization. So, we’ve always said that what we need to do is make it possible for people to come to concerts and come often and come over a long period of time, so the SPCO becomes a big part of their lives.
With prices for single tickets starting at $10, this new program seems to be aimed at audiences who already know they want to see the SPCO multiple times per season. Although the program is well positioned to increase access for existing audiences, it may not be as successful in attracting newcomers. There is nothing wrong with this, except that increasing access in the arts typically refers to broadening participation rather than deepening it.
There is another major difference between the ACT’s and SPCO’s model. ACT’s inventory of performances is a bit larger than the SPCO’s. ACT works with other venues and companies to produce additional shows, significantly expanding their choice of offerings. In addition, they produce shows all year, so subscribers do not run the risk of not having enough selection during the summer months. Although SPCO presents concerts in ten venues across the Twin Cities, there is no summer season and its typical season has 100 concerts. This is the biggest issue for any performing arts organization considering the Netflix model. Unless an organization has a large and diverse selection of productions or partners with other arts organizations to increase its offerings, the value proposition just isn’t strong enough. Netflix’s model hinges on its inventory – even now, one reason Netflix is struggling because its streaming business does not have as large a selection of new movies as its DVD business.
Lastly, targeted marketing and compelling pricing is necessary when adopting a membership program. The ACT Pass had a very clever marketing campaign, including videos, clear pricing, and purchase channels. The ACT Pass is listed separately across the top navigation of the webpage, and you can start ordering online with one click. Although not too difficult to find, the SPCO’s membership is listed under “Concerts & Tickets”, and you can purchase online, after clicking through 2 or 3 pages. I did find a zinger in the SPCO model – you have to keep with the program for a year or accept a $50 cancellation fee. The ACT Pass only requires that you stay on 3 months. This latter approach is in better alignment with the commitment-phobes who are likely attracted to this program in the first place.
After years of working to expand audiences, it turns out that performing arts organizations’ problem is not with attracting new people; it’s getting them to come back. The membership model can be part of a retention strategy for certain performing arts organizations with a wide selection of offerings and excess seat capacity. Regarding the SPCO, it’s likely their program will increase attendance by loyal audiences, but I’m not convinced the new pricing structure or marketing messages are going to broaden their audiences as they claim. Even so, if the program does increase loyalty of current audiences and increase attendance, it will send a strong message to other orchestras that this model is worth trying out.