Audience development challenges for classical music organizations

ARTM 6350 Research Paper
Audience development challenges for
classical music organizations:
Current issues and the future strategies
Hiroyasu Sudo (211145257)

December 7th, 2011.

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 ............................................................................................................................................... 23
Appendix 1 -- Percentage of U.S. adults reporting arts attendance in the past 12 months: 1982, 1992,
2002, and 2008 ........................................................................................................................................... 24
Appendix 2 -- Global, recorded-music retail sales by genre ....................................................................... 25
Appendix 3 -- Most frequently performed composers by 283 American orchestras and the TSO’s
performances .............................................................................................................................................. 26
Appendix 4 – Entertainment prices in NYC, winter 2008 ........................................................................... 27
Bibliography ................................................................................................................................................ 28

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Executive Summary

Gaining popularity is not an easy task for the classical music sector. The sector is also the most

susceptible to Baumol’s “cost disease”. Sales has been declining and funding cuts can be seen

everywhere. Classical music is not a profitable business.

The reasons why classical music is not profitable are not limited to Baumol’s cost disease. The

whole sector has uncontrollable problems with audience development. They are: the strong correlation

between education level and attendance; and a dichotomy between aesthetic excellence and access. In

this paper, I first discuss the characteristics and peculiarities of marketing activities in the sector, and

suggest the keys to success. Subsequently, I summarize and evaluate the various efforts in the sector to

utilize new technologies for audience development. Lastly, as a conclusion, I develop a strategic

marketing model based on the analysis in the previous sections, and examine how it is applicable to a

real organization.

In the model, I focused on three steps of value creation: raising awareness, influencing people’s

decision, and enhancing customer experience. The peculiarities to the sector come into play throughout

these 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 be

unchangeable. The music world is drastically changing due to the new technologies. What is most

important is always staying on the customers side in order to avoid unsustainable self-satisfaction.

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Introduction

Classical music, including symphony, opera, and ballet, is considered to be high art. It had always

been the subject of private philanthropy in North American history to serve the elites who were willing

to 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 wider

communities 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 the

cultural policy has been expanding, the sector should expect less federal funding, provided the whole

governmental budget for culture remains the same.

This would be detrimental not only because the sector would have to rely more on sponsors

that often negatively affect the quality of the events but also the classical music sector is the most

susceptible to Baumol’s “cost disease” that refers to the fact that most of the labour-intensive arts

cannot 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 disease

than 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 that

allows subscribers to see the shows more than 10 times is hardly found anywhere in the world while a

subscription used to mean more than 20 – 30 times per year 30 years ago. As discussed in class, this may

have much to do with the general shift towards busy lifestyles and the proliferation of other kinds of

entertainment. 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 arts

activities, the number of people who attended a classical music (including opera and ballet)

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performance in 2008 has decreased by approximately Figure 1. Box office figures of the MET

30% from 1982 (see Appendix 1). The Metropolitan

Opera (the MET) in New York experienced a

significant decline in the dollar capacity from 2001 to

2007 (See Figure 1) (Rosen, 2008). Needless to say,

this trend is relevant to smaller non-profit

organizations that endeavor to pursue more

contemporary, hence less popular, works. Despite the

somewhat incomprehensible nature, contemporary

works are important in that they are the drivers of the

evolution of the classical music. Then the question is, how the sector can attract more people to itself

when, in its nature, it has developed as an elitist culture.

The answers lie in advocacy and audience development. In one class lecture, Jacoba Knaapen

spoke about the necessity for arts organizations to get together and have a louder voice. She also

mentioned that the existence of large companies is essential for smaller companies in that they are

attracting people to the sector from the outside. However, even if governments and people understand

the importance of the sector and contribute to funding the activities, the sector’s social significance

becomes meaningless if there is no audience. While “knowledgeable observers have been predicting the

morbid decline of the performing arts, especially of classical music (Bernstein, 2007)” and the average

age 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 number

of audience members in Soundstreams jumped from 200 to 679 in a short term and 30% of the audience

at the TSO performances is under 35 years old. Moreover, in 2009, a classical music compilation topped

the iTunes Canada music chart with an incredible discount (DigitalHome, 2009). All of these were made

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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. Since

Timothy Dowd revealed, in his work From 78s to MP3s: The Embedded Impact of Technology in the

Market for Prerecorded Music, that technological changes impact the whole industry, this might be an

opportunity 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 best

business practices of other industries in order to develop broader audience, and to gain competitiveness

in the digital era.

In this paper, I first point out the characteristics and peculiarities of marketing activities in the

sector, and suggest the keys to success. Next, I summarize and evaluate the various efforts in the sector

to utilize the new technologies for audience development. Lastly, as a conclusion, I develop a strategic

marketing model based on the analysis in the previous sections, and examine how it is applicable to a

real organization, using the Toronto Symphony Orchestra (TSO) as a model company.

Marketing activities of the classical music sector

Background

First of all, classical music is not a profitable business. I compared the revenue structures of the

classical music organizations that are discussed in class. As shown in Figure 2, none of the four

organizations earn even a half of their revenue. The rest of the revenue is received from either private

or public funding, or other income sources. Interestingly, Soundstream, a small-scale contemporary

organization, receives a substantial amount of grants in relation to its size. Apart from the geopolitical

differences in governmental funding policies, the larger organizations, whose performances are not

limited to contemporary works, are earning relatively higher revenue from their tickets. This fact well

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supports Knaapen’s talk that explained that the role of large organizations includes attracting people

from outside of the sector, and that smaller, yet pursuing meaningful activities, can survive with the

funds attained through collective advocacy with the larger organizations.

Figure 2

Revenue Structures of Various Classical Music Organizations (Million dollars)
The MET NY Philharmonic TSO Soundstream
Box 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 aforementioned

Baumol’s cost disease. The whole sector has uncontrollable problems with audience development. They

are: the strong correlation between educational level and attendance; and a dichotomy between

aesthetic excellence and access. The correlation between educational level and attendance makes it

difficult for organizations to reach out to the ‘non-elite’ market segment without adding another value

than the intrinsic value of music. However, the additional value can be hardly created without

compromising 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 differences

from another performance (otherwise there would be no rationale for a record company to publish

hundreds of different recordings of the same orchestral work).

Even as atmospheric music, classical music is generally considered more ‘relaxing’ than popular

music. This is why shopping malls usually play ‘exciting’ popular music to stimulate the purchasing

motivation of customers, and play ‘relaxing’ classical music when they wish the customers wrap up and

leave. Given the prevailed commercialism and the excessive information people are generally exposed

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to, music users should not use classical music in order to draw attention to their products/services

unless they have specific reasons to do so. This tremendously reduces the chance for people to be

exposed 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 been

making their presence even stronger in the market. Appendix 2 summarizes the global, recorded-music

retail sales by genre reported by Music & Copyright report. From this table too, it is observable that

classical music sales have decreased since 2000, contrary to the rock and pop music sales. Some might

argue that this does not take into account online sales. However, given that brick-and-mortar music

retailers have shifted their inventories towards more risk-free, high-turnover products, the overall

decline in the popularity of classical music is not disputed.

How are classical music organizations marketing themselves, then? In the next sections, I

explore the activities of various classical music organizations from the viewpoints of each of the 4Ps of

marketing theory (product, price, place, promotion), market research, branding, and non-performance

activities.

Product

The major product is artistic performance. Hence the organizations are selling experiences or

learning opportunities. Thus, each of the organizations in the sector is a service provider. To figure out

what differentiates services, it is important to consider the widely recognized characteristics of services.

They are: Intangibility; Inseparability; Perishability; and Heterogeneity. Intangibility makes it difficult for

consumers to compare and evaluate a service. Therefore, people tend to use price or reputation as a

basis for assessing quality. One way to take advantage of this characteristic is to use star power. For

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instance, the MET regained its sales that had been decreasing since 2001 partly by featuring stars all

year in its advertising, brochures, tickets, bus signs, telephone kiosks so that their faces were all over

New York City (Rosen, 2008).

Inseparability refers to the fact that the consumers and the service providers need to be at the

same place. Thus, consumers often have to take a service with others. Since each consumer has

different behavior, a consumer’s behavior might disturb other co-consumers. Los Angeles

Philharmonic’s casual Friday concert series, in which the performers dress very casually while playing

serious orchestral works, is an excellent example to tackle this issue in that people who do not like to

dress 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 the

evening or around 2 in the afternoon, there might be other people who would like to attend a concert at

another time of the day. In fact, Arts Council England’s forecasting report Towards 2010 identified time

restriction 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 this

characteristic.

Heterogeneity refers to the fact that every performance is different, and hence it is difficult for

service providers to measure and control the quality of the services. In the classical music sector, this is

not usually an issue since the players are well-trained performers who are, in most cases, proud to be

professionals, 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 the

University of Sheffield revealed that more than 70% of people indicated the program as a reason for

attending a concert (Dobson, 2008). However, as discussed, organizations cannot cash in on the most

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popular works. Government funds are rarely granted to an organization that solely plays well-known

works rather than contributing to the country’s artistic excellence by such activities as playing new

works and celebrating the creativity of young people. In addition, repeatedly playing the same works can

decrease 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 Glynn

in her work titled Maestro or Manager? : Examining the Role of the Music Director in a Symphony

Orchestra, organiztions are experiencing the struggle between defining themselves as artistic endeavors

and surviving in the market (Glynn, 2006). This is one of the peculiarities of the sector. In fact, the TSO

performs 15 world premieres in 2011-12 season, which is as high as the half of the number of

Tchaikovsky performances. On the other hand, the performed works in the season are concentrated into

the top four most frequently performed composers during the 2008-09 Season by 283 member

orchestras of the League of American Orchestras (See Appendix 3 for the comparison).

Price

Price is important as a major determinant of demand in classical economics theory. There are three

types 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 their

expenses with box office incomes alone.

Competitor-based pricing seems to be prevalent throughout the industry since the prices for the

same seats for the same levels of performances are more or less homogeneous. However, competitors

are not only classical music organizations. People may substitute a classical concert experience with

other kinds of entertainment such as movies and museums. Appendix 4 summarizes entertainment

prices in New York. From this chart, it is observable that classical concerts and performances are

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positioned as high price entertainment. Thus, it is questionable whether they are competitively priced as

compared 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 the

stage, programing, time and date of the show, and time of purchase (Ravanas, 2008). In 2007, it

increased the prices of highly demanded, thus price-inelastic, seats by up to 70% and decreased the

prices of less desirable, thus price-elastic, seats by up to 55%, while maintaining the average price. This

led 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 tickets

is as important as avoiding them from over-priced to secure profit. The same theory is used for setting

prices based on programing and timing by forecasting the demand of past similar performances. Since

empty seats incur opportunity loss, the CSO significantly reduces the ticket prices on the day of the

show; however this is a prevalent practice throughout the sector.

Place

Performances are usually taken place in concert halls, churches, or opera houses. Since they are

fixed locations, it is nearly impossible for a classical music organization to improve in ease of access

unless it changes the place. This is why the aforementioned strategy to start a concert at an unusual

time 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 concert

hall 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 Britain

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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 from

the supermarket shelves as well as traditional instruments (Bernstein, 2007). It may become a

competitive 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, spoke

about the importance of visibility. By enhancing the visibility of the company, she increased the number

of audience threefold. This held true to the MET that attributes the successful recovery of the lost

revenues 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 posters

everywhere.” (Rosen, 2008).

In order to gain visibility that raises awareness, digital technologies are a very important tool, in

that 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, since

the optimal use and the methods to evaluate the effects of social media have not yet been established, I

discuss this topic in the new business model section.

Traditionally, the sector has been offering special prices to younger audiences. This is a

successful offer in that they can attract people who have the potential to be a repeat customer in the

future, and it occurs in an environment where the average age of the audiences is high. This is great for

young people whose incomes are relatively low, with young artists and students typically having lowest

range 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 are

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not sufficiently earning but also are experienced artists. In fact, the average income of artists in Canada

is $22,731 (mean) or $12,886 (median) (Hill Strategies Research Inc.,, 2009). In Toronto, most of the

performing arts organizations offer discounts for people who are younger than 30, if any. Their price

elasticity is high. This is because people’s spending on performing arts is strongly correlated to the

spending on other kinds of arts, and the attendance is also correlated to the income (Hill Strategies

Research Inc.,, 2011). That is, those artists with low incomes have strong demand but the lack of ability

to pay for the tickets discourages them. As discussed in the previous section, audience members have to

be together with others when they attend a performance. As artists in the audience can be a

psychological bridge between the performers and the other audiences, offering discounts to artists

could enhance customer experience.

To implement any promotion plan, there is cost. So ROI is an important aspect. While traditional

advertisement methods such as newspapers, magazines, public signage, and brochure distribution are

easy to implement and have established evaluation methods like IEG Valuation, they are not as cost

effective as advertising methods that utilize newer technologies. Email marketing is one of the relatively

new methods. As they do not use physical advertising material, it is less expensive and faster to

distribute. In fact, so many arts organizations use this method that it is hard to find one that does not. As

a result, however, a promotional email becomes merely one of a whole bunch of spam emails that

cannot 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 rates

of their email marketing. One of the most advanced tactics as of now is personalization. People are

more likely to respond if an email addresses the name, an offer that matches their interests or

demographic characteristics, and the relationship with the sender. This can only be possible with

thorough customer database management that includes efficient data acquisition and constant data

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maintenance. This incurs a large amount of labor cost and deteriorates the overall ROI, nonetheless. To

tackle with this problem, the MET, followed by about 400 arts organizations around the world including

the National Ballet of Canada and the Vancouver Symphony Orchestra (Tessitura Network. Inc),

introduced a software package called Tessitura that streamlines the database management process

typical of a performing arts organization. Although many of the organizations that introduced this

software are still groping for the best use of the system, it is expected to become an important tool to

maintain higher advertising ROIs that contributes to their future audience development. Since this

system is becoming the standard of the sector, it may become an opportunity cost if an organization

stays away from it.

Market Research

Green also mentioned that market research using the focus group method helped

Soundstreams to increase its audiences. The focus group method brings together people who knows

much about a product/service and asks about problems and new ideas for improvements. Technically

speaking, this method is difficult to be effectively utilized without careful attention because the number

of 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 organization

should 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 could

have 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 be

projected to the entire potential market. Although this involves an onerous process to avoid biases that

lead to wrong decisions, this method provides important facts about what people want, or demands.

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However, as discussed, an arts organization cannot usually shift their programing towards what people

most demand as they have different missions to be funded. This is not a problem if the survey questions

are so well-prepared that the researchers can tell the demands by, for example, demography. If an

organization knows a certain demand is unique to a certain demographic group, it is possible to

personalize their promotional activities, which eventually leads to a higher ROI. This is how market

research is important.

Brand Identity

Knaapen insisted that an organization has to have an identity to be visible. Since visibility is the

key for promotional activities, it is necessary for an organization to have an identity that accompanies its

name, which means brand. Performing arts organizations that are prominent in a large city or that have

a 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, their

identity. Soundstreams’ successful promotional strategy was based on the fact that it had previously

clarified its position as a contemporary music expert while it had neither a history nor a strong halo of a

prominent city. However, it is even more difficult to do so by finding an identity in the works they

perform when an organization performs various kinds of classical music works. This might be due to its

mission to serve the local community as a leading company in the region, or due to the tastes of the

performers or the music director that are towards diversity. This is not a problem since these reasons

are the hints for them to find the identity. The Calgary Philharmonic Orchestra built its brand as a

community-based orchestra by having two different segments: the core business segment and the new

business segment. The core business includes a conventional concert series that is aimed at subscription

sales, whereas the new business segment explores styles to communicate with the locals including

concerts at unusual venues and joint events with the local community. (Donna S. Finley, 2006) This

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success, which brought in significant new funding, was made possible through establishing its brand as a

new face of the local community.

A brand identity creates brand loyalty through building a relationship with the fans. This is

particularly 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 was

introduced. Although live performances are the main activities of classical music organizations, the

recording business is not an ignorable business segment. In the class, efforts to make recording

processes more efficient being made by the Boston Symphony Orchestra and the TSO were introduced

along 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 intangible

media, 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 of

production diminishes as the number of reproductions increase. Therefore, it is not hard to imagine that

the recording business has a significant impact on classical music organizations’ activities. Digital media

can be a good resource for learners, which creates future audiences. It can help to improve standards of

performances as the best quality recordings are available to everyone. It enables an organization to

have its name known in remote places. Thus, even if it does not bring in immediate cash to an

organization, it is worth doing.

However, it has a dark side too. Sir Simon Rattle, principal conductor of the Berlin Philharmonic

Orchestra, impressively expresses his concern about the recording business.

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“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 that

has to be aligned with the standard unintentionally set by the world’s audiences. This may make it even

more 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 products

from physical products, classical music is still not a profitable business. Even the London Symphony

Orchestra, the best online classical music seller, have only sold 100,000 copies of the album that

received two Grammy Awards since 2002 (The LSO). Assuming the price of the album is $10 per copy

and 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 as

compared 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 the

sector, some of which seem prospective. In this section, I introduce those attempts made by classical

music organizations around the world and analyze the implications.

Webcast

In the class lectures, Heather Clark introduced the simulcast system used by the MET. With its

HD quality moving images and the convenience, this is gaining popularity. People can watch not only

performances online but in movie theatres. This provides them with even more live-performance

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feelings. The Berlin Philharmonic Orchestra also introduced a live stream called Digital Concert Hall that

is 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 and

intangible products. It can be stored and easily distributed even across borders without taking up

storage space and store shelves. As the incremental cost of reproduction is zero, the prices can be

reduced to a great extent. However, as discussed in the recording business section, it is only a matter of

time until this distribution model is proliferated. Organizations that are thinking of this new system have

to consider the ROI of it. Needless to say, the ROI should include such things as incremental brand

loyalty 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 shows

performers’ subtle motions and sometimes the audiences to entertain them are an important essence

of a sports event. This can be utilized in a theatre as well. In fact, Houston Grand Opera introduced this

device 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 at

the beginning of the 21st century. One of the most important reasons that social media is drawing so

much attention in the business world is that it works as a tremendously effective market research and

promotional tool. For instance, an organization can easily know the interests and behavioral patterns of

the fans of its Facebook page. This information can be exploited to both analyze an overall pattern of

customer demands and send highly personalized promotional materials. The New York Philharmonic

reports the growth of its Facebook fans, Twitter followers, and YouTube viewers in its annual report.

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(New York Philharmonic) From this too, it is observable that engaging more people through social

networks is a key factor to success.

In order to engage people through social media, the Arkansas Symphony Orchestra held an

online contest in which people uploaded a video that shows them singing and the selected winner could

sing on stage with the orchestra in a live performance. Also, it has a concert series in which it plays the

works that are most voted on its Facebook page. The Pacific Symphony allows, at one of its open-air

concert, people to turn on their smartphone and tune in the tweets of the orchestra that keep

explaining the work being played. The Los Angeles Philharmonic and the Royal Opera House launched

smartphone game apps that engage users with them.

All of these efforts are not profitable per se, however the potential to enhance brand awareness

that leads to larger audiences are immeasurable. The brand value gained through these activities also

affects the organizations’ fundraising activities.

These examples of effective use of new technology use seem to provide either customers with

greater convenience or organizations with more marketing opportunity. However, what is ultimately

important is how the organizations can give value to the customers. The value is materialized through

the process in which the customers become satisfied with the organizations’ services. The reason this

happens is that the customers’ personality matches the organization’s brand identity. Social media is an

excellent device to make these matches. Thus, it is necessary for the organizations to keep in their mind

that the social media activities are aligned with the brand identity in order to succeed in audience

development.

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Strategic audience development model for the future

In the previous sections, I discussed the peculiarities and theoretical implications of the sectors

marketing practices. I explained the importance of audience development as a means to fulfill an

organization’s mission and to be funded by external sources in order to achieve their goals. In this

section, 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 model

can be applied to any organization in the sector as the model does not address any TSO-specific

problems.

The ultimate goal of audience development is to turn people into loyal customers who

repeatedly 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 performance

is very important. However, before providing a great experience, an organization has to make them

decide to go. In other words, audience development starts from changing people’s mind into willing to

pay the price offered to take the service. Needless to say, people have to be aware of the organization

even before. This whole process, raising awareness, influencing people’s decisions, and offering a

satisfactory experience, leads to the creation of value of the organization.

In the pricing section, I touched on value-based pricing strategy. Regardless of competitors or

cost, 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 a

reflection of the value. Since most of the organizations in the sector do not cover their costs with ticket

revenues, it is irrelevant to take advantage of the resulting higher prices. The value should be used for

further audience development that eventually makes the organization’s activities sustainable. In the

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following, I go through each of the processes of value creation: raising awareness, influencing people’s

decision, 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 with

the ubiquitous advertisement. The TSO occasionally features stars as well. In November 2011, it had a

series of concerts featuring Lang Lang, one of the most well-known Chinese pianists. While the TSO

does not feature a star all year around like the MET, the use of various stars ensures the ethnological

variety, 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 largely

limited to people in the vicinity. Thus, it is important to be more exposed to the local community. I

introduced the idea that a number of orchestras built their identity through local activities that includes

performances outside of a concert hall. Toronto, like any other mid-sized cities in the world, has various

places that can accommodate a classical concert such as the parks, the waterfront, the historical

architectures, the squares, the ballpark, and many more. Although it is difficult to remain as artistically

significant as in a concert hall, the awareness and praise it raises should be easy on the ear of the

players too. In addition to having a concert at an unconventional place, the TSO may be able to have a

joint concert with other orchestras in Toronto, such as Soundstreams, to draw more of the local

attention.

Recorded music is also a tool to raise awareness. There are hundreds of works performed by the

TSO on iTunes, however they do not seem to be contributing to its revenue much in both terms of direct

revenue and raising awareness. As mentioned, it is nearly impossible for a classical music organization to

expect sufficient return from its recorded music sales. Also, the most of the recorded works seen on

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iTunes have been recorded by other world class orchestras in the past. There is no reason for a

consumer to bother choosing a Mozart’s symphony performed by the TSO rather than the Vienna

Philharmonic, for instance. It is available at the same place. I suggest making all the available recordings

free unless there is a variable cost per sales regarding copyrights. I assume this is not an issue as most of

the 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. If

there is a way to limit people who can download them for free to the local people and do it on its

website, 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’s

performances. He is a star, with whom the TSO can enhance its brand identity as a Canadian orchestra

while disseminating its name to the world. Star power can also be utilized in the recording business

segment as well.

Influencing people’s decision

As repeatedly mentioned, people’s response to advertising material highly depends on how

personalized the material is. Personalized email marketing is thus important. To make it personal, an

organization needs to know about who they are influencing. This is the field where social media is best

utilized. Engaging people in social networks, an organization can understand what they want and how

they 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 beneficial

to the issuers of the membership because they can collect the customer information and closely look at

their demands. A classical music organization could use this system as well. Additionally, people can

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keep the organization’s name in their mind longer if they obtain a membership card and occasionally see

it.

Market research is also a field that could be improved. While it needs expertise to successfully

conduct and analyze research, the return would be more than enough to cover up the cost. This will

also 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 they

see, hear, taste, smell, and touch. Not everyone who visits concert halls is seeking excellent music. They

might just like the atmosphere of a theatre or would just like to spend some time with other people. If

programing 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 be

figured 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 be

abruptly terminated by a nuisance. From ticketing systems to information booths, an organization has

many 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 a

prestigious membership, an organization can build a long-term relationship with them. They may bring

other 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 to

benefit from discounts when visiting another cultural venue.

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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 always

necessary to challenge what is perceived to be unchangeable. The music world is drastically changing

due to the new technologies. We never know what is going to happen in the future.

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Appendix 1 -- Percentage of U.S. adults reporting arts attendance in the
past 12 months: 1982, 1992, 2002, and 2008

Source: Report Beyond attendance: A multi-modal understanding or arts participation by National
Endowment for the Arts (http://www.nea.gov/research/2008-SPPA-BeyondAttendance.pdf)

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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/)

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Appendix 3 -- Most frequently performed composers by 283 American
orchestras 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 Orchestras

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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
$10

Source: Stage Money by Tim Donahue and Jim Patterson, 2010, The University of South Carolina Press

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