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Audience development challenges for classical music organizations

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Table of Contents
Executive Summary ....................................................................................................................................... 2
Introduction .................................................................................................................................................. 3
Marketing activities of the classical music sector ......................................................................................... 5
Background ............................................................................................................................................... 5
Product ...................................................................................................................................................... 7
Price .......................................................................................................................................................... 9
Place ........................................................................................................................................................ 10
Promotion ............................................................................................................................................... 11
Market Research ..................................................................................................................................... 13
Brand Identity ......................................................................................................................................... 14
Recording Business ................................................................................................................................. 15
New business models.................................................................................................................................. 16
Webcast .................................................................................................................................................. 16
In-theatre vision ...................................................................................................................................... 17
Customer engagement through social media and smartphones ........................................................... 17
Strategic audience development model for the future .............................................................................. 19
Raising Awareness .................................................................................................................................. 20
Influencing people’s decision .................................................................................................................. 21
Enhancing experience ............................................................................................................................. 22
Conclusion .........................................................

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Audience development challenges for classical music organizations Audience development challenges for classical music organizations Document Transcript

  • ARTM 6350 Research PaperAudience development challenges forclassical music organizations:Current issues and the future strategiesHiroyasu Sudo (211145257) December 7th, 2011.
  • Table of ContentsExecutive Summary....................................................................................................................................... 2Introduction .................................................................................................................................................. 3Marketing activities of the classical music sector ......................................................................................... 5 Background ............................................................................................................................................... 5 Product ...................................................................................................................................................... 7 Price .......................................................................................................................................................... 9 Place ........................................................................................................................................................ 10 Promotion ............................................................................................................................................... 11 Market Research ..................................................................................................................................... 13 Brand Identity ......................................................................................................................................... 14 Recording Business ................................................................................................................................. 15New business models.................................................................................................................................. 16 Webcast .................................................................................................................................................. 16 In-theatre vision ...................................................................................................................................... 17 Customer engagement through social media and smartphones ........................................................... 17Strategic audience development model for the future .............................................................................. 19 Raising Awareness .................................................................................................................................. 20 Influencing people’s decision.................................................................................................................. 21 Enhancing experience ............................................................................................................................. 22 Conclusion ............................................................................................................................................... 23Appendix 1 -- Percentage of U.S. adults reporting arts attendance in the past 12 months: 1982, 1992,2002, and 2008 ........................................................................................................................................... 24Appendix 2 -- Global, recorded-music retail sales by genre ....................................................................... 25Appendix 3 -- Most frequently performed composers by 283 American orchestras and the TSO’sperformances .............................................................................................................................................. 26Appendix 4 – Entertainment prices in NYC, winter 2008 ........................................................................... 27Bibliography ................................................................................................................................................ 281|Page
  • Executive Summary Gaining popularity is not an easy task for the classical music sector. The sector is also the mostsusceptible to Baumol’s “cost disease”. Sales has been declining and funding cuts can be seeneverywhere. Classical music is not a profitable business. The reasons why classical music is not profitable are not limited to Baumol’s cost disease. Thewhole sector has uncontrollable problems with audience development. They are: the strong correlationbetween education level and attendance; and a dichotomy between aesthetic excellence and access. Inthis paper, I first discuss the characteristics and peculiarities of marketing activities in the sector, andsuggest the keys to success. Subsequently, I summarize and evaluate the various efforts in the sector toutilize new technologies for audience development. Lastly, as a conclusion, I develop a strategicmarketing model based on the analysis in the previous sections, and examine how it is applicable to areal organization. In the model, I focused on three steps of value creation: raising awareness, influencing people’sdecision, and enhancing customer experience. The peculiarities to the sector come into play throughoutthese steps. The new technologies can be utilized to improve the situation. One thing sure to say is that it is always necessary to challenge what is perceived to beunchangeable. The music world is drastically changing due to the new technologies. What is mostimportant is always staying on the customers side in order to avoid unsustainable self-satisfaction.2|Page
  • Introduction Classical music, including symphony, opera, and ballet, is considered to be high art. It had alwaysbeen the subject of private philanthropy in North American history to serve the elites who were willingto monopolize the art form that differentiated them from other lower social classes (DiMaggio, 1982).Thus, gaining popularity is not an easy task for the sector. Despite the efforts to engage widercommunities such as offering multilingual events and providing educational outreach programs(Orchestras Canada, 2011), there is still a strong correlation between educational level and attendance(Hill Strategies, 2011). Furthermore, speaking of the Canadian classical music sector, as the scope of thecultural policy has been expanding, the sector should expect less federal funding, provided the wholegovernmental budget for culture remains the same. This would be detrimental not only because the sector would have to rely more on sponsorsthat often negatively affect the quality of the events but also the classical music sector is the mostsusceptible to Baumol’s “cost disease” that refers to the fact that most of the labour-intensive artscannot benefit from the efficiency that is brought by technological development and economies of scale.Since each concert usually involves more than 50 artists, the sector is more susceptible to cost diseasethan other types of cultural activities that either involve less people or utilize new technologies. Looking back to the class discussions, Heather Clark mentioned that a subscription package thatallows subscribers to see the shows more than 10 times is hardly found anywhere in the world while asubscription used to mean more than 20 – 30 times per year 30 years ago. As discussed in class, this mayhave much to do with the general shift towards busy lifestyles and the proliferation of other kinds ofentertainment. The observable fact is that attendance in classical music concerts is decreasing.According to the National Endowment for the Arts, the American national agency that supports artsactivities, the number of people who attended a classical music (including opera and ballet)3|Page
  • performance in 2008 has decreased by approximately Figure 1. Box office figures of the MET30% from 1982 (see Appendix 1). The MetropolitanOpera (the MET) in New York experienced asignificant decline in the dollar capacity from 2001 to2007 (See Figure 1) (Rosen, 2008). Needless to say,this trend is relevant to smaller non-profitorganizations that endeavor to pursue morecontemporary, hence less popular, works. Despite thesomewhat incomprehensible nature, contemporaryworks are important in that they are the drivers of theevolution of the classical music. Then the question is, how the sector can attract more people to itselfwhen, in its nature, it has developed as an elitist culture. The answers lie in advocacy and audience development. In one class lecture, Jacoba Knaapenspoke about the necessity for arts organizations to get together and have a louder voice. She alsomentioned that the existence of large companies is essential for smaller companies in that they areattracting people to the sector from the outside. However, even if governments and people understandthe importance of the sector and contribute to funding the activities, the sector’s social significancebecomes meaningless if there is no audience. While “knowledgeable observers have been predicting themorbid decline of the performing arts, especially of classical music (Bernstein, 2007)” and the averageage of the audience of the MET is 57.7 (Glickel, 2011), the situation is not hopeless. As shown in Figure1,the MET quickly resumed lost revenue in 2007 and 2008. Class lectures taught that the average numberof audience members in Soundstreams jumped from 200 to 679 in a short term and 30% of the audienceat the TSO performances is under 35 years old. Moreover, in 2009, a classical music compilation toppedthe iTunes Canada music chart with an incredible discount (DigitalHome, 2009). All of these were made4|Page
  • possible by incorporating sophisticated business practices that many classical music organizations lack.Also, the entire music industry is experiencing a radical paradigm shift due to new technologies. SinceTimothy Dowd revealed, in his work From 78s to MP3s: The Embedded Impact of Technology in theMarket for Prerecorded Music, that technological changes impact the whole industry, this might be anopportunity for the classical music sector dependent on how to take advantage of the new concept. Therefore, the issue to be addressed is how a classical music organization can incorporate bestbusiness practices of other industries in order to develop broader audience, and to gain competitivenessin the digital era. In this paper, I first point out the characteristics and peculiarities of marketing activities in thesector, and suggest the keys to success. Next, I summarize and evaluate the various efforts in the sectorto utilize the new technologies for audience development. Lastly, as a conclusion, I develop a strategicmarketing model based on the analysis in the previous sections, and examine how it is applicable to areal organization, using the Toronto Symphony Orchestra (TSO) as a model company.Marketing activities of the classical music sectorBackground First of all, classical music is not a profitable business. I compared the revenue structures of theclassical music organizations that are discussed in class. As shown in Figure 2, none of the fourorganizations earn even a half of their revenue. The rest of the revenue is received from either privateor public funding, or other income sources. Interestingly, Soundstream, a small-scale contemporaryorganization, receives a substantial amount of grants in relation to its size. Apart from the geopoliticaldifferences in governmental funding policies, the larger organizations, whose performances are notlimited to contemporary works, are earning relatively higher revenue from their tickets. This fact well5|Page
  • supports Knaapen’s talk that explained that the role of large organizations includes attracting peoplefrom outside of the sector, and that smaller, yet pursuing meaningful activities, can survive with thefunds attained through collective advocacy with the larger organizations.Figure 2Revenue Structures of Various Classical Music Organizations (Million dollars) The MET NY Philharmonic TSO SoundstreamBox Office 93.0 33.1% 28.6 43.1% 9.6 42.3% 0.1 9.0%Funding (Private/Corporate) 124.0 44.1% 27.8 * 41.9% 6.1 26.9% 0.3 28.2%Grants 23.9 8.5% 0.0% 5.1 22.5% 0.7 62.8%Media 21.9 7.8% 0.7 1.1% 0.0 0.0% 0.0 0.0%Other 18.3 6.5% 9.3 14.0% 1.9 8.4% 0.0 0.0%Total 281.1 100.0% 66.4 100.0% 22.7 100.0% 1.2 100.0%* the number includes grants The reasons why classical music is not profitable are not limited to the aforementionedBaumol’s cost disease. The whole sector has uncontrollable problems with audience development. Theyare: the strong correlation between educational level and attendance; and a dichotomy betweenaesthetic excellence and access. The correlation between educational level and attendance makes itdifficult for organizations to reach out to the ‘non-elite’ market segment without adding another valuethan the intrinsic value of music. However, the additional value can be hardly created withoutcompromising the intrinsic value. For example, classical music is often used as atmospheric music.However, to make sense of classical music, it is important to tune in on the interpretative differencesfrom another performance (otherwise there would be no rationale for a record company to publishhundreds of different recordings of the same orchestral work). Even as atmospheric music, classical music is generally considered more ‘relaxing’ than popularmusic. This is why shopping malls usually play ‘exciting’ popular music to stimulate the purchasingmotivation of customers, and play ‘relaxing’ classical music when they wish the customers wrap up andleave. Given the prevailed commercialism and the excessive information people are generally exposed6|Page
  • to, music users should not use classical music in order to draw attention to their products/servicesunless they have specific reasons to do so. This tremendously reduces the chance for people to beexposed to classical music and increases the chances for people to be exposed to more current ‘exciting’music, setting the barrier for people to familiarize with classical music even higher. In other words, classical music has internal and external reasons for not being familiar. Internally,the intrinsic value cannot be easily consumed by ‘non-elites’. Externally, other kinds of music have beenmaking their presence even stronger in the market. Appendix 2 summarizes the global, recorded-musicretail sales by genre reported by Music & Copyright report. From this table too, it is observable thatclassical music sales have decreased since 2000, contrary to the rock and pop music sales. Some mightargue that this does not take into account online sales. However, given that brick-and-mortar musicretailers have shifted their inventories towards more risk-free, high-turnover products, the overalldecline in the popularity of classical music is not disputed. How are classical music organizations marketing themselves, then? In the next sections, Iexplore the activities of various classical music organizations from the viewpoints of each of the 4Ps ofmarketing theory (product, price, place, promotion), market research, branding, and non-performanceactivities.Product The major product is artistic performance. Hence the organizations are selling experiences orlearning opportunities. Thus, each of the organizations in the sector is a service provider. To figure outwhat differentiates services, it is important to consider the widely recognized characteristics of services.They are: Intangibility; Inseparability; Perishability; and Heterogeneity. Intangibility makes it difficult forconsumers to compare and evaluate a service. Therefore, people tend to use price or reputation as abasis for assessing quality. One way to take advantage of this characteristic is to use star power. For7|Page
  • instance, the MET regained its sales that had been decreasing since 2001 partly by featuring stars allyear in its advertising, brochures, tickets, bus signs, telephone kiosks so that their faces were all overNew York City (Rosen, 2008). Inseparability refers to the fact that the consumers and the service providers need to be at thesame place. Thus, consumers often have to take a service with others. Since each consumer hasdifferent behavior, a consumer’s behavior might disturb other co-consumers. Los AngelesPhilharmonic’s casual Friday concert series, in which the performers dress very casually while playingserious orchestral works, is an excellent example to tackle this issue in that people who do not like todress up can participate without feeling intimidated by other fancily dressed-up audience members. Perishability is related to the time services are offered and consumed. Unlike tangible goods,services cannot be stored as inventory. Although many classical music concerts start at around 7 in theevening or around 2 in the afternoon, there might be other people who would like to attend a concert atanother time of the day. In fact, Arts Council England’s forecasting report Towards 2010 identified timerestriction as the key barrier to arts attendance across almost all social segments (Hewison, Forecasting.,& England, 2000). The success of the TSO’s ‘Late Nite’ series that starts at 11 at night well addresses thischaracteristic. Heterogeneity refers to the fact that every performance is different, and hence it is difficult forservice providers to measure and control the quality of the services. In the classical music sector, this isnot usually an issue since the players are well-trained performers who are, in most cases, proud to beprofessionals, and each performance features, in most cases, different works or performers. Needless to say, the works played in a concert matters. The research done by a scholar at theUniversity of Sheffield revealed that more than 70% of people indicated the program as a reason forattending a concert (Dobson, 2008). However, as discussed, organizations cannot cash in on the most8|Page
  • popular works. Government funds are rarely granted to an organization that solely plays well-knownworks rather than contributing to the country’s artistic excellence by such activities as playing newworks and celebrating the creativity of young people. In addition, repeatedly playing the same works candecrease motivation in the players. This also leads to a quality problem related to heterogeneity.Moreover, repertoires have much to do with an organization’s identity. As revealed by Mary Ann Glynnin her work titled Maestro or Manager? : Examining the Role of the Music Director in a SymphonyOrchestra, organiztions are experiencing the struggle between defining themselves as artistic endeavorsand surviving in the market (Glynn, 2006). This is one of the peculiarities of the sector. In fact, the TSOperforms 15 world premieres in 2011-12 season, which is as high as the half of the number ofTchaikovsky performances. On the other hand, the performed works in the season are concentrated intothe top four most frequently performed composers during the 2008-09 Season by 283 memberorchestras of the League of American Orchestras (See Appendix 3 for the comparison).PricePrice is important as a major determinant of demand in classical economics theory. There are threetypes of pricing strategies: Cost-based pricing; Competitor-based pricing; and Value-based pricing. Cost-based pricing is not normally applicable to a classical concert since most organizations cannot pay theirexpenses with box office incomes alone. Competitor-based pricing seems to be prevalent throughout the industry since the prices for thesame seats for the same levels of performances are more or less homogeneous. However, competitorsare not only classical music organizations. People may substitute a classical concert experience withother kinds of entertainment such as movies and museums. Appendix 4 summarizes entertainmentprices in New York. From this chart, it is observable that classical concerts and performances are9|Page
  • positioned as high price entertainment. Thus, it is questionable whether they are competitively priced ascompared to other options in the entertainment industry. The Chicago Symphony Orchestra (CSO) utilizes the value-based pricing strategy very effectively.It focuses on the fact that the price elasticity varies depending on the place of the seat relative to thestage, programing, time and date of the show, and time of purchase (Ravanas, 2008). In 2007, itincreased the prices of highly demanded, thus price-inelastic, seats by up to 70% and decreased theprices of less desirable, thus price-elastic, seats by up to 55%, while maintaining the average price. Thisled to a drop of people who terminated subscriptions for prices down from 20% to 6% (Ravanas, 2008).This success can be explained as a result of exploiting the consumer surplus, a micro-economic theory,on wider levels of demands. People pay what they are willing to pay. Thus, avoiding underpriced ticketsis as important as avoiding them from over-priced to secure profit. The same theory is used for settingprices based on programing and timing by forecasting the demand of past similar performances. Sinceempty seats incur opportunity loss, the CSO significantly reduces the ticket prices on the day of theshow; however this is a prevalent practice throughout the sector.Place Performances are usually taken place in concert halls, churches, or opera houses. Since they arefixed locations, it is nearly impossible for a classical music organization to improve in ease of accessunless it changes the place. This is why the aforementioned strategy to start a concert at an unusualtime is relevant. However, there are a number of organizations that conduct performances at unusual locations.The Calgary Philharmonic Orchestra (CPO) is reported to be “reaching outside the traditional concerthall and directly into the community where various community voices, values, heritage” (Donna S. Finley,2006), and the UK has an event called National Orchestra Week in which orchestras across Britain10 | P a g e
  • perform a wide range of concerts in nontraditional venues such as restaurants (Bernstein, 2007).Furthermore, the BBC Philharmonic performed at a supermarket a work that uses various items fromthe supermarket shelves as well as traditional instruments (Bernstein, 2007). It may become acompetitive advantage if an organization is able to appear in more unconventional places.Promotion In one of the class lectures, Jennifer Green, the Executive Director at Soundstreams, spokeabout the importance of visibility. By enhancing the visibility of the company, she increased the numberof audience threefold. This held true to the MET that attributes the successful recovery of the lostrevenues to, “a first-class department has been created, with Times Square opening-night live telecasts,opera sets displayed in Saks Fifth Avenue windows, red carpet opening nights, free opening-performance dress rehearsals, creation of an art gallery, and Met signs and banners and posterseverywhere.” (Rosen, 2008). In order to gain visibility that raises awareness, digital technologies are a very important tool, inthat organizations can disseminate information at a significantly lower cost than physical advertisements.Currently, scholars that do researches on the impact of social media are proliferating. However, sincethe optimal use and the methods to evaluate the effects of social media have not yet been established, Idiscuss this topic in the new business model section. Traditionally, the sector has been offering special prices to younger audiences. This is asuccessful offer in that they can attract people who have the potential to be a repeat customer in thefuture, and it occurs in an environment where the average age of the audiences is high. This is great foryoung people whose incomes are relatively low, with young artists and students typically having lowestrange income. Giving them opportunities to see the performances is also a socially responsible activity.However, given the worldwide trend of funding cuts for arts/culture, it is not only young artists who are11 | P a g e
  • not sufficiently earning but also are experienced artists. In fact, the average income of artists in Canadais $22,731 (mean) or $12,886 (median) (Hill Strategies Research Inc.,, 2009). In Toronto, most of theperforming arts organizations offer discounts for people who are younger than 30, if any. Their priceelasticity is high. This is because people’s spending on performing arts is strongly correlated to thespending on other kinds of arts, and the attendance is also correlated to the income (Hill StrategiesResearch Inc.,, 2011). That is, those artists with low incomes have strong demand but the lack of abilityto pay for the tickets discourages them. As discussed in the previous section, audience members have tobe together with others when they attend a performance. As artists in the audience can be apsychological bridge between the performers and the other audiences, offering discounts to artistscould enhance customer experience. To implement any promotion plan, there is cost. So ROI is an important aspect. While traditionaladvertisement methods such as newspapers, magazines, public signage, and brochure distribution areeasy to implement and have established evaluation methods like IEG Valuation, they are not as costeffective as advertising methods that utilize newer technologies. Email marketing is one of the relativelynew methods. As they do not use physical advertising material, it is less expensive and faster todistribute. In fact, so many arts organizations use this method that it is hard to find one that does not. Asa result, however, a promotional email becomes merely one of a whole bunch of spam emails thatcannot expect any responses from the recipients. This would drag down the ROI. Thus, in order to sustain higher ROI, an organization should strive to enhance the response ratesof their email marketing. One of the most advanced tactics as of now is personalization. People aremore likely to respond if an email addresses the name, an offer that matches their interests ordemographic characteristics, and the relationship with the sender. This can only be possible withthorough customer database management that includes efficient data acquisition and constant data12 | P a g e
  • maintenance. This incurs a large amount of labor cost and deteriorates the overall ROI, nonetheless. Totackle with this problem, the MET, followed by about 400 arts organizations around the world includingthe National Ballet of Canada and the Vancouver Symphony Orchestra (Tessitura Network. Inc),introduced a software package called Tessitura that streamlines the database management processtypical of a performing arts organization. Although many of the organizations that introduced thissoftware are still groping for the best use of the system, it is expected to become an important tool tomaintain higher advertising ROIs that contributes to their future audience development. Since thissystem is becoming the standard of the sector, it may become an opportunity cost if an organizationstays away from it.Market Research Green also mentioned that market research using the focus group method helpedSoundstreams to increase its audiences. The focus group method brings together people who knowsmuch about a product/service and asks about problems and new ideas for improvements. Technicallyspeaking, this method is difficult to be effectively utilized without careful attention because the numberof people who participate in the research is too small to represent the entire consumer group. However,since it reflects direct voices from consumers, it can be the best way to know what an organizationshould do when the market size is small and the organization is doing something new. In hindsight,Soundstreams was successful in taking advantage of these characteristics of the method. In the Bon Cop,Bad Cop case discussed in the class, this method led the film to success. However, the distributor couldhave done another kind of survey that would have led the film to even an international success. For a larger market, a survey based on questionnaires is more effective in that it can beprojected to the entire potential market. Although this involves an onerous process to avoid biases thatlead to wrong decisions, this method provides important facts about what people want, or demands.13 | P a g e
  • However, as discussed, an arts organization cannot usually shift their programing towards what peoplemost demand as they have different missions to be funded. This is not a problem if the survey questionsare so well-prepared that the researchers can tell the demands by, for example, demography. If anorganization knows a certain demand is unique to a certain demographic group, it is possible topersonalize their promotional activities, which eventually leads to a higher ROI. This is how marketresearch is important.Brand Identity Knaapen insisted that an organization has to have an identity to be visible. Since visibility is thekey for promotional activities, it is necessary for an organization to have an identity that accompanies itsname, which means brand. Performing arts organizations that are prominent in a large city or that havea remarkable history do not have problems with building a brand like the Vienna Philharmonic Orchestra,Berlin Philharmonic Orchestra, Boston Symphony Orchestra, and New York Philharmonic Orchestra.However, those that do not have such privileges have to strive to emphasize, or even find out, theiridentity. Soundstreams’ successful promotional strategy was based on the fact that it had previouslyclarified its position as a contemporary music expert while it had neither a history nor a strong halo of aprominent city. However, it is even more difficult to do so by finding an identity in the works theyperform when an organization performs various kinds of classical music works. This might be due to itsmission to serve the local community as a leading company in the region, or due to the tastes of theperformers or the music director that are towards diversity. This is not a problem since these reasonsare the hints for them to find the identity. The Calgary Philharmonic Orchestra built its brand as acommunity-based orchestra by having two different segments: the core business segment and the newbusiness segment. The core business includes a conventional concert series that is aimed at subscriptionsales, whereas the new business segment explores styles to communicate with the locals includingconcerts at unusual venues and joint events with the local community. (Donna S. Finley, 2006) This14 | P a g e
  • success, which brought in significant new funding, was made possible through establishing its brand as anew face of the local community. A brand identity creates brand loyalty through building a relationship with the fans. This isparticularly important for the organizations without a history or a big-city power because, in most cases,the location is fixed and it is impossible to sustain its activities without having repeaters.Recording Business The music industry as a whole has been revolutionized every time a new technology wasintroduced. Although live performances are the main activities of classical music organizations, therecording business is not an ignorable business segment. In the class, efforts to make recordingprocesses more efficient being made by the Boston Symphony Orchestra and the TSO were introducedalong with key issues as to financial viability. This is how important recording is. Recording can be seen as a process to transform a performance, or a service, to an intangiblemedia, or a good. Thus, the characteristics regarding services can be eliminated. It enables orchestras(or stores) to stock inventories and distribute to remote places. Moreover, the incremental cost ofproduction diminishes as the number of reproductions increase. Therefore, it is not hard to imagine thatthe recording business has a significant impact on classical music organizations’ activities. Digital mediacan be a good resource for learners, which creates future audiences. It can help to improve standards ofperformances as the best quality recordings are available to everyone. It enables an organization tohave its name known in remote places. Thus, even if it does not bring in immediate cash to anorganization, it is worth doing. However, it has a dark side too. Sir Simon Rattle, principal conductor of the Berlin PhilharmonicOrchestra, impressively expresses his concern about the recording business.15 | P a g e
  • “The huge demand created by technological innovation has led to the overproduction of recordings. Many recordings of core repertoire have been produced with little distinctiveness, and with limited deviation from the interpretive ‘norm’, thus producing standardization.” (Patmore, 2010) This remark implies that market saturation causes identity problems in each organization thathas to be aligned with the standard unintentionally set by the world’s audiences. This may make it evenmore difficult to obtain a brand as a classical music organization.New business models Even though it is expected that recorded music products will completely shift to digital productsfrom physical products, classical music is still not a profitable business. Even the London SymphonyOrchestra, the best online classical music seller, have only sold 100,000 copies of the album thatreceived two Grammy Awards since 2002 (The LSO). Assuming the price of the album is $10 per copyand the split between the online seller and the orchestra is 3:7, the orchestra has received only$700,000 in the past ten years, or $70,000 per year, for this extraordinary hit. This number is small ascompared to the budgets of the other orchestras shown in Figure 2 in the previous section. However, the technologies are bringing in various different attempts to develop audience in thesector, some of which seem prospective. In this section, I introduce those attempts made by classicalmusic organizations around the world and analyze the implications.Webcast In the class lectures, Heather Clark introduced the simulcast system used by the MET. With itsHD quality moving images and the convenience, this is gaining popularity. People can watch not onlyperformances online but in movie theatres. This provides them with even more live-performance16 | P a g e
  • feelings. The Berlin Philharmonic Orchestra also introduced a live stream called Digital Concert Hall thatis made possible with sophisticated filming equipment and a recording system. This kind of system is revolutionary in that it combines the advantages of physical products andintangible products. It can be stored and easily distributed even across borders without taking upstorage space and store shelves. As the incremental cost of reproduction is zero, the prices can bereduced to a great extent. However, as discussed in the recording business section, it is only a matter oftime until this distribution model is proliferated. Organizations that are thinking of this new system haveto consider the ROI of it. Needless to say, the ROI should include such things as incremental brandloyalty among the customers and potential new customers to the performances.In-theatre vision Although this is not a very new technology, it is foreign to this sector. A huge screen that showsperformers’ subtle motions and sometimes the audiences to entertain them are an important essenceof a sports event. This can be utilized in a theatre as well. In fact, Houston Grand Opera introduced thisdevice and succeeded in enhancing its customer experiences.Customer engagement through social media and smartphones As I briefly touched upon in the previous section, social media is a remarkable phenomenon atthe beginning of the 21st century. One of the most important reasons that social media is drawing somuch attention in the business world is that it works as a tremendously effective market research andpromotional tool. For instance, an organization can easily know the interests and behavioral patterns ofthe fans of its Facebook page. This information can be exploited to both analyze an overall pattern ofcustomer demands and send highly personalized promotional materials. The New York Philharmonicreports the growth of its Facebook fans, Twitter followers, and YouTube viewers in its annual report.17 | P a g e
  • (New York Philharmonic) From this too, it is observable that engaging more people through socialnetworks is a key factor to success. In order to engage people through social media, the Arkansas Symphony Orchestra held anonline contest in which people uploaded a video that shows them singing and the selected winner couldsing on stage with the orchestra in a live performance. Also, it has a concert series in which it plays theworks that are most voted on its Facebook page. The Pacific Symphony allows, at one of its open-airconcert, people to turn on their smartphone and tune in the tweets of the orchestra that keepexplaining the work being played. The Los Angeles Philharmonic and the Royal Opera House launchedsmartphone game apps that engage users with them. All of these efforts are not profitable per se, however the potential to enhance brand awarenessthat leads to larger audiences are immeasurable. The brand value gained through these activities alsoaffects the organizations’ fundraising activities. These examples of effective use of new technology use seem to provide either customers withgreater convenience or organizations with more marketing opportunity. However, what is ultimatelyimportant is how the organizations can give value to the customers. The value is materialized throughthe process in which the customers become satisfied with the organizations’ services. The reason thishappens is that the customers’ personality matches the organization’s brand identity. Social media is anexcellent device to make these matches. Thus, it is necessary for the organizations to keep in their mindthat the social media activities are aligned with the brand identity in order to succeed in audiencedevelopment.18 | P a g e
  • Strategic audience development model for the future In the previous sections, I discussed the peculiarities and theoretical implications of the sectorsmarketing practices. I explained the importance of audience development as a means to fulfill anorganization’s mission and to be funded by external sources in order to achieve their goals. In thissection, I suggest an audience development model based on the discussions in the previous sections.While I use the TSO as a model company in order to make a real-life example, the essence of the modelcan be applied to any organization in the sector as the model does not address any TSO-specificproblems. The ultimate goal of audience development is to turn people into loyal customers whorepeatedly go to performances. To make them want to revisit, they have to perceive the performance,or the service, worth returning. To make them feel this way, the experience they have at a performanceis very important. However, before providing a great experience, an organization has to make themdecide to go. In other words, audience development starts from changing people’s mind into willing topay the price offered to take the service. Needless to say, people have to be aware of the organizationeven before. This whole process, raising awareness, influencing people’s decisions, and offering asatisfactory experience, leads to the creation of value of the organization. In the pricing section, I touched on value-based pricing strategy. Regardless of competitors orcost, this strategy puts a price tag on the products based on people’s willingness to pay. As discussed,this does not mean that the value should be exploited to increase ticket prices. Prices are merely areflection of the value. Since most of the organizations in the sector do not cover their costs with ticketrevenues, it is irrelevant to take advantage of the resulting higher prices. The value should be used forfurther audience development that eventually makes the organization’s activities sustainable. In the19 | P a g e
  • following, I go through each of the processes of value creation: raising awareness, influencing people’sdecision, and offering a satisfactory experience.Raising Awareness The most effective tool is star power as I discussed the excellent use of it by the MET along withthe ubiquitous advertisement. The TSO occasionally features stars as well. In November 2011, it had aseries of concerts featuring Lang Lang, one of the most well-known Chinese pianists. While the TSOdoes not feature a star all year around like the MET, the use of various stars ensures the ethnologicalvariety, or the diversity, that the city of Toronto has. Since the TSO is the leading orchestra of the city,this holds relevance to its brand identity. Since the TSO performs at Roy Thomson Hall in Toronto in most cases, the customers are largelylimited to people in the vicinity. Thus, it is important to be more exposed to the local community. Iintroduced the idea that a number of orchestras built their identity through local activities that includesperformances outside of a concert hall. Toronto, like any other mid-sized cities in the world, has variousplaces that can accommodate a classical concert such as the parks, the waterfront, the historicalarchitectures, the squares, the ballpark, and many more. Although it is difficult to remain as artisticallysignificant as in a concert hall, the awareness and praise it raises should be easy on the ear of theplayers too. In addition to having a concert at an unconventional place, the TSO may be able to have ajoint concert with other orchestras in Toronto, such as Soundstreams, to draw more of the localattention. Recorded music is also a tool to raise awareness. There are hundreds of works performed by theTSO on iTunes, however they do not seem to be contributing to its revenue much in both terms of directrevenue and raising awareness. As mentioned, it is nearly impossible for a classical music organization toexpect sufficient return from its recorded music sales. Also, the most of the recorded works seen on20 | P a g e
  • iTunes have been recorded by other world class orchestras in the past. There is no reason for aconsumer to bother choosing a Mozart’s symphony performed by the TSO rather than the ViennaPhilharmonic, for instance. It is available at the same place. I suggest making all the available recordingsfree unless there is a variable cost per sales regarding copyrights. I assume this is not an issue as most ofthe works recorded are already in the public domain and do not incur a copyright fee per play or sales.This would eliminate a barrier for local people to classical music and raise awareness of the orchestra. Ifthere is a way to limit people who can download them for free to the local people and do it on itswebsite, the local presence would be much higher than that of now. In the current available lineup,what is most remarkable about the TSO music lineup is that it includes a number of Glenn Gould’sperformances. He is a star, with whom the TSO can enhance its brand identity as a Canadian orchestrawhile disseminating its name to the world. Star power can also be utilized in the recording businesssegment as well.Influencing people’s decision As repeatedly mentioned, people’s response to advertising material highly depends on howpersonalized the material is. Personalized email marketing is thus important. To make it personal, anorganization needs to know about who they are influencing. This is the field where social media is bestutilized. Engaging people in social networks, an organization can understand what they want and howthey change their mind to purchase a ticket. Many businesses use membership, or customer loyalty programs, to retain existing customers.With this program, people usually benefit from repeat use of a store or a service. This is also beneficialto the issuers of the membership because they can collect the customer information and closely look attheir demands. A classical music organization could use this system as well. Additionally, people can21 | P a g e
  • keep the organization’s name in their mind longer if they obtain a membership card and occasionally seeit. Market research is also a field that could be improved. While it needs expertise to successfullyconduct and analyze research, the return would be more than enough to cover up the cost. This willalso lead to a more efficient promotional strategy that turn people to the venues.Enhancing experience Customer experience is formed not solely with the performances but every bit of the things theysee, hear, taste, smell, and touch. Not everyone who visits concert halls is seeking excellent music. Theymight just like the atmosphere of a theatre or would just like to spend some time with other people. Ifprograming is aimed at their objectives, the experience becomes more memorable. The aforementioned‘late nite’ by the TSO accompanies a lounge party in which people meet or socialize with each other.These kinds of events can be even more effective if it is planned in line with the demand, which can befigured out by market research. Knaapen asserted that courtesy is very important in the class lecture.This also has much to do with enhancing customer experience. Convenience is also an important element of customer experience. A good experience can beabruptly terminated by a nuisance. From ticketing systems to information booths, an organization hasmany things to care about regarding convenience. As suggested in the previous section, having artists as an audience enhances other customers’experience. This can be done by offering a discount to them. If a status as an artist is recognized as aprestigious membership, an organization can build a long-term relationship with them. They may bringother people in the future as well. The promotional cost may be more than enough to cover the costs.This is somewhat similar to a reciprocal program that allows people who work in the cultural sector tobenefit from discounts when visiting another cultural venue.22 | P a g e
  • Conclusion This model is easily actionable, in whole or in part, by any organization in the sector. However,this is not the ultimate remedy. Things always change. That said, one thing sure to say is that it is alwaysnecessary to challenge what is perceived to be unchangeable. The music world is drastically changingdue to the new technologies. We never know what is going to happen in the future.23 | P a g e
  • Appendix 1 -- Percentage of U.S. adults reporting arts attendance in thepast 12 months: 1982, 1992, 2002, and 2008Source: Report Beyond attendance: A multi-modal understanding or arts participation by NationalEndowment for the Arts (http://www.nea.gov/research/2008-SPPA-BeyondAttendance.pdf)24 | P a g e
  • Appendix 2 -- Global, recorded-music retail sales by genre 2000 2008 2009 (US$ bil.) % (US$ bil.) % (US$ bil.) %Pop 10.3 27.9% 7.8 28.0% 7.4 29.2%Rock 8.4 22.8% 7.5 26.9% 6.5 25.7%R&B 2.3 6.2% 1.8 6.5% 1.6 6.3%Country 2.3 6.2% 1.6 5.7% 1.5 5.9%Classical 2.4 6.5% 1.5 5.4% 1.4 5.5%Dance 1.7 4.6% 1.5 5.4% 1.3 5.1%Rap/hip-hop 2.5 6.8% 1.4 5.0% 1.3 5.1%Jazz 1.1 3.0% 0.7 2.5% 0.6 2.4%Other 5.9 16.0% 4.1 14.7% 3.7 14.6%Total 36.9 100.0% 27.9 100.0% 25.3 100.0%Source: Music & Copyright (http://musicandcopyright.wordpress.com/2010/08/11/pop-is-still-king-of-the-world%E2%80%99s-music-genres/)25 | P a g e
  • Appendix 3 -- Most frequently performed composers by 283 Americanorchestras and the TSO’s performances The number of performance % The number of performance % Discrepancy Rank Composer by 283 American Orchestra (a) by TSO in the 2011-12 season (b) (a-b) 1 Beethoven, Ludwig Van 872 20% 20 14% -6% 2 Mozart, Wolfgang Amadeus 705 16% 24 17% 1% 3 Brahms, Johannes 481 11% 27 19% 8% 4 Tchaikovsky, Piotr Ilyich 449 10% 31 22% 12% 5 Dvorak, Antonin 380 9% 6 4% -4% 6 Mendelssohn, Felix 330 7% 3 2% -5% 7 Ravel, Maurice 323 7% 0 0% -7% 8 Stravinsky, Igor 265 6% 3 2% -4% 9 Rachmaninoff, Sergei 253 6% 6 4% -2% 15 Bach, Johann Sebastian 205 5% 12 8% 4% 18 Shostakovich, Dmitri 173 4% 11 8% 4%Source: “2008-2009 Season Orchestra Repertoire Report” by League of American Orchestras26 | P a g e
  • Appendix 4 – Entertainment prices in NYC, winter 2008 $3004.50 Knicks Basketball - Courtside highest price $352.00 Jersey Boys - Premium Saturday night $220.00 The Met - Saturday night $160 $150 $150.00 Ringling Bros Circus - Highest price $140 $130 $130.00 New York City Opera - Saturday night $120 $111.50 Jersey Boys - Saturday night $110 $110.00 NY Philharmonic - Saturday night $100 $99.50 Knicks Basketball - 2000 lvl highest price $96.50 Cat on a Hot Tin Roof - Saturday night $90 $94.50 Aretha Franklin at Radio City Music Hall $80 $80.00 Yankees Baseball - Saturday afternoon $79.00 Off-Brodway Altar Boyz - Saturday night $70 $71.00 Magic Kingdom at Disneyworld $60 $56.25 Off-Broadway Beebo Brinker Chronicles $50 $50.00 Off-Broadway Non-profit - Saturday night $40 $30 $29.00 Madame Tussauds Wax Museum $20 $20.00 MOMA $11.75 Movie near Lincoln Center - Evening $10Source: Stage Money by Tim Donahue and Jim Patterson, 2010, The University of South Carolina Press27 | P a g e
  • BibliographyBernstein, J. S. (2007). Arts Marketing Insights: The Dynamics of Building and Retaining Performing Arts Audiences. San Francisco: Jossey-Bass.DigitalHome. (2009, October 26). Surprise! Classical music collection tops iTunes Canada charts. Retrieved December 1, 2011, from digitalhome.ca: http://www.digitalhome.ca/2009/10/surprise-classical-music-collection-tops-itunes-canada- charts/Dobson, M. (2008). Exploring classical music concert attendance: The effects of. Graz: First International Conference of Students of Systematic Musicology.Donna S. Finley, A. G. (2006). Phoenix In Calgary: How the Calgary Philharmonic Survived. THE NONPROFIT QUARTERLY.Glickel, J. (2011, February 21). Met Opera Inaccurately Reports Drop in Audience Age, Report Says. Retrieved December 1, 2011, from DNA Info.com - Manhattan Local News: http://www.dnainfo.com/20110221/upper-west-side/met-opera-inaccurately-reports-drop- audience-age-report-saysGlynn, M. A. (2006). The Business of Culture: Strategic Perspectives on Entertainment and Media. Mahwah: Lawrence Erlbaum Associates, Inc.Hewison, R., Forecasting., H. C., & England, A. C. (2000). Towards 2010 : new times, new challenges for the arts. London: Arts Council of England.Hill Strategies Research Inc.,. (2009). A Statistical Profile of Artists in Canada: Based on the 2006 Census. Hill Strategies Research Inc.,.Hill Strategies Research Inc.,. (2011). Patterns in Performing Arts Spending in Canada in 2008. Hill Strategies Research Inc.,.New York Philharmonic. (n.d.). New York Philharmonic: Annual Report 2010 edition. Retrieved December 2, 2011, from http://nyphil.org/about/annualreport2010/index.htmlPatmore, D. (2010). Recording and the Rattle phenomenon. In A. Bayley, Recorded Music: Performance, Culture and Technology (pp. 125-145). Cambridge: Cambridge University Press.Ravanas, P. (2008). Hitting a High Note: The Chicago Symphony Orchestra Reverses a Decade of Decline with New Programs, New Services, and New Prices. International Journal of Arts Management; Winter 2008, 68.28 | P a g e
  • Rosen, B. (2008, June 18). The Metropolitan Opera -- Turnaround Case Study. Retrieved December 1, 2011, from Huff Post Business Canada: http://www.huffingtonpost.com/ben-rosen/the- metropolitan-opera_b_107924.htmlTessitura Network. Inc. (n.d.). Tessitura Software Users. Retrieved December 2, 2011, from Tessitura Software Users: http://www.tessituranetwork.com/en/Users/Users%20By%20Country.aspxThe LSO. (n.d.). Company Profile - LSO Live. Retrieved December 3, 2011, from http://www.bpi.co.uk/assets/files/LSO_Live_Profile.pdf29 | P a g e