Categories: all aviation Building a Biplane bicycle gadgets misc motorcycle theater

Thu, 29 Jul 2010

The economics of theater

Feel free to skip this one, it's kind of heady, and may not make a lot of sense.

So, think about how a normal consumer transaction goes. I make a widget, and it costs me $5 to produce. Let's say I spend another $5 on packaging, distribution, marketing, etc. My total cost to put a widget in a customer's hand is $10. I charge them $3 on top of that to have some profit, total $13 charge to the customer. They pay their $13, and go away happy with their widget. Don't dwell on the amounts here, just get that process in your head: cost, product, price, overhead, etc.

The end of that process is that I'm out my $5 product, and the $5 I spent on marketing and overhead, but I'm up by $13, so I've made $3 at the end of the day. Pretty straightforward. Do that a lot, and that's the basis of most trades.

Theater, however, is an entirely different beast, as occurred to me the other day.

In theater, you spend various resources to put together a product (a show) -- time, money, reused materials, etc. Rent costs a certain amount. If you assume a fixed-length run of a show, the product cost (the cost to put on the show) is pretty much fixed.

However, unlike many other transactions, the customer doesn't diminish your supply of the product. Whether you have three paying audience members, or a full house, one night of a show costs the same, and uses up the same amount of your product. You end up with the same amount of product left whether you cancelled for lack of sales, or completely sold out.

So income is, effectively, completely disconnected from cost. If you spend $100 on a show that is for whatever reason a hit, your profit would be enormous. If you blow $10 grand on a show that's a complete flop, you're out $10 grand. And through all that, the amount of product you have never changes -- your show is always (within the limits of what fate doles out in the form of actor performances, tech successes/failures, etc.) the same. Time is the only thing that diminishes the amount of product you have.

I don't really have a point here, it's just such a weird business to be in. The normal rules don't apply.

Posted at 16:22 permanent link category: /theater


Categories: all aviation Building a Biplane bicycle gadgets misc motorcycle theater