11. Write some notes on the institutional changes that have occured in the performing arts sector in the 20th Century for the following: 1. theater 2. dance 3. opera and 4. symphonie orchestra. What are the relative sizes of these sectors

THEATER: In the 18th and 19th centuries there were numerous touring theatrical companies. During 1920s through the 1940s Broadway Theater became synonymous with American Theater. Many forms of competition developed for the performing arts since the turn of the century particularly motion pictures and tel evision. Local theaters around the country declined first due to the great depression and subsequently due to the mobilization for WW II. In 1961 the Theater Communications Group was established as a service organization for the notİforİprofit professio nal theaters. In 1966, they had 35 members. By 1992, there were 226 members. Most are organized as not for profit, yet some are commercial such as most of the OffİBroadway theaters. The Off-Broadway theaters are incubators for new playwrights and new pro ductions. The relationships between OffİBroadway and Broadway Theaters are guided by the Equity contract. All producers in New York City have agreed to this contract in which theater capacity is limited to less than 499 seats and they cannot perform in designated "Broadway" area of mid-town Manhattan. Wage scale for OffİBroadway theaters is typically lower than at Broadway.

DANCE: Ballet was considered decadent and a European art form associated with a moribund aristocratic class by most Americans well into the 20th century. Among the earliest developments of Ballet were the Atlanta Ballet established in 1929 and the San F rancisco Ballet that begun as the San Francisco Opera Ballet in 1933. Ballet Theater later to become renowned American Ballet Theater was established in 1940. George Balanchine brought to America from Europe in 1933 did much to popularize Ballet in theU S. In 1963, the Ford Foundation provided a $7.8 million grant to strengthen professional ballet in the country. Ballet companies continued to receive grants from the Ford Foundation well into the eighties. The number of ballet companies rose from 18 in 1958 to 287 by 1980.

Isordora Duncan and her contemporaries developed a new style of dance called modern dance. From the late 1960 s into the 1970s modern dance was spurred with help from the National Endowment for the Arts. Growth of the dance sector was phenomenal. In 195 8 there were 28 dance troupes. By 1989 there were 289. Thus it is apparent that support from the Ford Foundation and the National Endowment of the Arts has been critical for both forms of Dance i.e. Ballet and modern or American dance..

OPERA: Of all the performing arts, Opera is the most expensive to produce. An opera must play to a full house to recoup their expenses and make any profit. Metropolitan Opera in New York cityÔ d by 1990 there were 117 member companies including 98 from the United States. Support again came by the way of a grant from the Ford Foundation. Between 1957 and 1979, the Foundation provided $ 16.9 million to opera companies.

SYMPHONY ORCHESTRA: The oldest existing symphony orchestra is the New York Philharmonic founded in 1842. Other important orchestras in the country are the orchestras from St. Louis, Boston, Chicago, Cincinnati, and Philadelphia. In 1971 there were at least 87 US orchestras each of which had a budget of at least 100 ,000 dollars a year. Orchestras commonly draw on endowments and investments which account for a significant share of their total income. In 1965, the Ford Foundation gave a grant of 80.2 million dollars to 61 U.S. orchestras as a matching grant. By 1989 there were 217 orchestra groups in the US.

Judging by gross receipts, the relative sizes of the various sectors of the performing arts are as follows: theater > symphony orchestra > opera > dance.

12. What is the diference between an audience survey and a Population survey and why is it important to conduct them?

An audience survey is done on the premises of a production, for example, at a theater. The people attending are interested in a particular type of the performing arts. We would measure such things as age, gender, occupation, education, income level, an d race to get a specific view of the audience, the centralized tendencies of those attending, their tastes and preferences, and the circumstances of their visit. Audiences differ from place to place. This type of survey is important in understanding the audience for reasons such as knowing how to price tickets and who to target for advertising.

In a population survey a broad selection of socio-economic groups, similar to the socio-economic distribution of the US is studied to find out the behavior patterns of the general population. This type of survey is important to conduct as the people who attend live performances constitute only a sub-group of art appreciators. Yet it is very expensive. This survey gives a broad view of the population and the tendencies of those who appreciate the arts to aid in the formation of public policy.

These types of surveys are extremely useful to many different groups of people. It is important to the government in making spending decisions regarding the size of public subsidies and the type of assistance to provide the performing arts, to the busine ss managers of ballet and dance production companies to assist them in their understanding of their competition, to theater managers for understanding the complexity of pricing, toÔ cs of their visitors and for social scientists to trace the influences of social and economic forces.

13. How does the us compare internationally in participation rates for the performing arts sector and which country has the highest participation rates?

The US is typically compared to Canada and Australia as the three have a shared experience and similar history of being immigrant based countries. Internationally the US compares rather poorly, except in the category of classical music though Canada still leads U.S. participation rates in most categories. In theater,b allet, and opera, participation rates in Australia are ahead of those in the U.S. Attendance at art museums is relatively high but behind Norway, Canada and Sweden. A comparison between the US and eight European countries based on estimates of annual admi ssions to theatres and concerts per 100 population, shows Austria with the highest participation rates with the US coming last.

14. What are some important factors that influence participation rates judging by the responses from various surveys?

Some important factors influencing participation rates are:

  1. Location- Theaters are often located in the inner cities. This helps to off-set transportation costs for those who reside there who happen to be the lower income bracket households. On the other hand, an inner city location would raise the costs for those who reside outside the city, namely, the suburb ian middle class.

  2. Education- Surveys show participation rates increase with the higher levels of education. Teachers and educators have a high rate of participation.

  3. Home-environment- With home education, e.g.: a mother or father with an interest in the performing arts, appreciation of the arts can be fostered.

  4. Advertising and mass-media- Theaters can recoup the high cost of production by attaining a sponsor to televise an event for additional revenues. Surveys show that those who watch televised performances will also pay for the seats. Television can also advertise up and coming events and reach a much larger audience than any other form of advertising to date.

  5. Income- Attendance to performing arts events rises with the income brackets.

  6. Occupation- Teachers and educators are more likely to attendÔ position although participation is high for all of the three professional categories.

15. Which is most important in influending participation rates; occupation, income, or education?

Education is most important in influencing participation rates for several reasons:

  1. Students and faculty at a university are more exposed to live performances on campus. They are produced on the premises in very close proximity to most of the population at school. Advertisements of the events are highly visible. Students commonly have requirements in the fine arts to fulfill as part of their general education curriculum.

  2. Once a person is exposed to live performances they usually acquire a life-long taste for the performing arts. This person is more likely to buy a ticket at almost any price.

  3. Those who are raised in a home that is supportive of the performing arts carry a life-long appreciation.

  4. Teachers and educators are more likely to attend a live performance than any other occupation class.

  5. In studies where the population has been divided into four categories using income and education variables such as high incomeİhigh education, high incomeİlow education, low incomeİhigh education and low incomeİlow education, participation rates haveb een shown to increase with education in each of the four sub populations.
16. What are some of the characteristics of the broadway theater audience?

In 1979 the Broadway Theater audience consisted of:

  1. More high school and college graduates than those either without a high school education or those with a graduate degree (although in 1979, there were fewer people with graduate level degrees).

  2. Mainly of people in the mid to upper middle class income levels, with attendance rising with increases in income.

  3. Mainly those in a managerial or professional position over technicians, sale positions, service or clerical positions or blue collar workers.

  4. A younger crowd with more people in the 25-34 year bracketÔ

17. Why do consumers buy any good or service? Why do consumers buy tickets for events in the performing arts?

  1. Demand is defined as a human desire backed by the ability to pay for the particular goods or service. A consumer will buy goods or service to receive satisfaction from their purchase.

  2. The utility theory is useful in understanding the motivation of the consumer and the law of diminishing marginal utility holds true in the performing arts.

  3. As taste for the performing arts is acquired, consumers with the acquired taste and the ability to pay will buy tickets. Consumers attend performing arts events because they perceive it as a culturally enriching event. This contributes to their sense of self esteem and their quality of life. In the 1980s when thea ter s revenues were down, the theaters responded by raising ticket prices understanding that consumers with a taste for the performing arts would pay the higher prices.

18. What two forces interact in the market place? What determines the price in a free market?

See figures 4.3, 4.4, and 4.5

  1. The two forces that interact in the market place are supply and demand. While demand is adjusts instantaneously to changes in the market, supplying the good or service involves production time lags. In demand, price and quantity are inversely related. On the supply side, price and quantity are directly r elated. A supplier aspires for market equilibrium where supply is equal to demand at the going price since market surpluses or market deficits impose additional costs. [Draw figure here, label the diagram and show market surpluses and shortages for full credit]

  2. Price is determined in a free market through transactions between those who demand and those who supply the goods. An equilibrium price is the market clearing price where quantities that consumers are willing to purchase and have the ability to buy is being matched by the willingness and the ability of the suppliers to produce and make available for sale assuming ceteris paribus conditions in the market. [ Show in the diagram equilibrium price and quantity to be determined at the intersection of the s upply and demand curves]

19. How are prices set for theater performances and how does this influence revenues?
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  1. Traditionally prices are set for theater performances before the market demand is understood. Once set, due to long standing traditions, the theaters will not change their prices.

  2. As the supply of seats available remains constant in a theater, the supply curve for admissions is vertical at house capacity. The only variable is the demand for the seats.

  3. If the show is a hit and prices are set too low, revenues are lost due to the activities of investors and speculators who may engage in scalping i.e. buying cheap tickets and reselling them at a high price although this practice may be illegal. These revenues are lost to the Arts sector and accrue to another sec tor of the economy. The profits associated with scalping is refered to as ice.

  4. If the show is a flop and the price of admission set too high then revenues may be lost due to the additional tickets that could have been sold at a lower price. These shows have many empty seats.

20. How do economists set prices and what is their suggestion to improve theater revenues?

Economists set prices after understanding the market demand and having analyzed the influences of own price, prices of related goods and incomes of the consumer on quantities demanded.

They suggest using the two tier pricing technique to improve theater revenues:

  1. Where a number of tickets are available at a higher set price for those consumers who prefer the guarantee of a seat and date confirmation to see an event. Part of the patron's utility comes from having a guaranteed seat.

  2. Then placing the remaining tickets up for sale for at lower price available on a first come first served basis. There is no guarantee of ticket availability for this patron when he/she desires to see the show.

Using this method, Broadway Theater for instance gained revenues previously lost to scalpers in the form of ice. Unsold tickets at the high price are sold at an outlet in Times Square and two other locations in New York city at lower prices to boost reve nues. [For full credit, draw figures to complement your answer]

21. Write some notes on price elasticity, income elasticity and cross price elasticity.

Price elasticity is the measure of how demand stretches with regard to a price change. It is the percentage change in the quantity demanded due to a percentage change in price. Understanding price elasticity will help to maximize profits.

If as price goes down for a good or service, total revenues go up than it has an elastic demand. If price goes down and TRs remain unchanged then it has unitary elasticity of demand. If price goes down and TRs go down it has an inelastic demand showing that the consumers are less sensitive to the price change. Necessity type products as well as addictive goods tend to have inelastic demand where as luxury type products tend to be elastic. Short run and long run studies using time series data indicate that various performing arts show an inelastic demand. This implies one can raise revenues by increasing price of admission for many types of performing arts events. One would expect that given the large number of substitutes available for entertainment events, demand would be elastic for the performing arts. However, when the art patron "acquires taste" for a particular form of performing art event he/she clearly does not consider anything else a substitute for the "real thing". This is the explanati on for why performing arts have inelastic demand.

Income elasticity measures the consumers' response to a change in income. Income elasticity measures the percent change in quantity demanded due to a percent change in income. An income elasticity of > 1 implies consumers spend proportionately more on this good as income rises. Cross section and time series data show that theater and opera have income elasticities greater than one. This means that consumers will spend more on theater and opera as their income rises. If income elasticity is less than 1 but greater than zero, it is considered to be inelastic and may in dicate that consumers regard it as a necessity good. If income elasticity is < 1, this means consumers regard it as an inferior good which is certainly not the case with performing arts events.

Cross-price elasticity measures the consumers' response to a change in the price of related goods. It is measured as the ratio between a percent change in the quantity demanded of X due to a percent change in the price of Y. Crossİprice elasticity helps determine if two goods are complementary or competitive in n ature. If cross price elasticity measure is greater than 0, it indicates X and Y are substitutes, if cross price elasticity is less than 0, it indicates X and Y are complements. For example, theater, opera. symphony and dance have competitive relationship s with each other where as parking and transport have complementary relationships with various performing arts events.