Why Selling Out Is Less Important Than You Think

It’s funny to me that so many people are in a lather about certain shows not selling out.  This piece from a Dallas TV station humorously (well, supposedly humorously) addresses the issue of why Paul McCartney hasn’t yet sold out his tour date there.  It’s not to be taken seriously (with theories such as “If you read the e-mail marketing backwards, it says ‘”Paul is Dead.’”), but it does reflect a kind of strange hysteria that’s sweeping many industry observers because concert tours aren’t selling out.

I have, as you might expect, a few things to say about that:

First, this isn’t new.  Back in 2006, concerts had an absolutely miserable year, with sales of tickets down 40% from 2005.  I was talking about how this indicated an important shift in the business, but for some reason at that point, no one was interested in talking about it.  Don’t listen to people who say it’s about the recent rough economy.  This trend has been in the works for half a decade, and at a deeper level, longer than that.

Second, so what if a show doesn’t sell out?  If you’ve looked at the P&L of a live event, it starts to get extremely profitable at about 75 to 80% sold in most cases.  Selling 100% of the house is nice, but it’s neither necessary nor common.  I would estimate that only a low single digit percentage of shows sell out.

Third, there are a lot of externalities that can lead to not selling out.  One of the biggest ones is the size of the house. There was a play in Los Angeles that “sold out” every performance for several years in a row.  I put “sold out” in quotes because the producers were so fixated on the notion of selling out that it was more about selling out than being successful.  How? First, they kept this popular show in a very small house.  It’s easy to sell out something popular when you’ve only got 120 tickets per night.  What about the show that ran for six months and sold 350 tickets a night, but played in a 400 seat house?  Which would you rather have?

Well, these producers believed that it would lead to fabulous success taking the show to other cities, on Broadway, to the movies, and beyond, but it didn’t.  They had created an illusion about the popularity of the show that ultimately fooled even them.  They thought they could “sell out” when in fact what they could do was sell about 120 tickets per night.

Fourth, the world has changed and what’s popular isn’t as popular as it used to be.  I talk about this all the time, but in the old days, tastes accumulated in a few very popular things, whether you’re talking TV shows, musical acts, or even live productions.  Production and distribution of material was expensive and difficult, so the people who controlled that tended to tell people what their entertainment options were.  As a result, we all liked Prince and Bruce Springsteen, everyone watched the M*A*S*H finale, and there were not hundreds of small theatre productions in cities like LA and New York every night.

But now that’s changed.  The most popular act isn’t, shouldn’t be and never again will be as popular as the big boys of yesteryear.  It’s not necessarily a reflection on the quality of their work, the corporate soul-lessness or even directly of ticket prices.  It’s a reflection of the fact that as consumers we have many, many choices and many, many ways of getting to those choices.  The result is a wider distribution of tastes, coming mostly at the expense of the most popular things.

Which is why Paul McCartney might not sell out his show in Dallas until showtime.  At very aggressive ticket prices.  During a severe recession.  Even though he hasn’t had a hit song in 25 years.  As part of a massive and extremely profitable tour.  On the heels of a similarly successful tour a couple years ago.

Yes, times are tough for McCartney, aren’t they?