A West End Shop Navigates the Rough Seas of Discounting
Autograph Sound Recording has been involved in the UK theatre sound design and equipment rental market for 30 years. In that time we have seen many competitors come and go, and the contentious practice of rental rate discounting grows more cut-throat, a situation which will also be familiar to our counterparts on Broadway.
One of the main reasons for this is that theatrical budgets have fallen over the past 15-20 years while, disproportionately, the cost of putting on a production has risen, thus creating a trend for producers to strip running costs to the bare minimum, persuading us to give more of a discount than ever. A knock-on effect of this can be a partial compromise of equipment used, particularly in the touring industry, where prices are lowest but expectations higher, as people expect West End standards throughout the country.
The amount and complexity of equipment has increased constantly over the last 30 years, and the current rate of innovation and expansion has forced Autograph to speed up the reinvestment process while slowing the rate of return, so that our investment far outweighs the budgets being set by producers. This is compounded by the fact that although technology has reduced the prices of some products, they also become fashion-driven. The result is that their useful life becomes shorter. For example, a new sampler may only cost a few thousand pounds, but it will quickly be superseded and become yesterday's technology — and sometimes tomorrow's doorstop — in a matter of months.
By the nature of what they do, audio rental companies will choose the projects they consider to have the highest profile, giving the big producers the strongest buying power. Such strategy goes on in every market, but it can be dangerous in a small environment such as ours, as it promotes a situation where the big producers develop faster than anyone else, thus making it harder for the next generation of producers to grow.
Also, the extremes have become exaggerated. We used to work on the theory that for a major show, which was pretty much guaranteed to have a good run, we would give a 70% discount from our weekly list price as a maximum. Now when I look at the list prices, I have to start at a 70% reduction before I get close to an acceptable price. Bring into this equation a high-profile show by a producer with strong buying power, and the other rental companies will bring even greater pressure to bear. Fifteen years ago the disparity between rental quotes wasn't huge. Even the most competitive price would only come in at around 10% to 15% lower than the norm. The current trend can be compared to recent developments in the airline industry, with companies taking the approach of easyJet and JetBlue and slashing prices to 50% lower than the norm. It seems that there is always one player in every market prepared to cut prices — which inevitably means a consequent drop in service. This is something that Autograph feels very strongly about, and we would never be prepared to compromise our market position by joining in with this practice.
When it comes to competition, clearly a good thing in any market, a cyclical pattern has emerged whereby the companies we come up against change over a period of time. These companies will fight extremely hard for three to four years, holding the industry's prices back in the process. Eventually they reach the point where they have to stop because they haven't nearly recouped their investment in new equipment. The danger here is that it allows producers to feel they can have as much equipment as the designer requests, as seemingly there is always someone who will undercut the market.
The theatre world has become much more commercially driven, but not on every level. Often the equipment specifications are “wish lists,” and while at Autograph we obviously understand the need to allow our designers to be as creative as possible, we are also keen to encourage them to have a commercial responsibility. Many independent designers will ask for the newest desk and equipment on every show, without being fully aware of the budget constraints. If there is a rental company happy to provide everything on the list at a ridiculously discounted price, they are sometimes none the wiser. I would like to see the designer being given a budget from the start in order to ensure that the specification is comparable with the financial scale of the production. This is particularly relevant when West End shows develop into tours. All too often the designer is not briefed by the producer as to what scale of reduction or redesign they require financially. Hence we find ourselves touring West End-scale sound systems on a fraction of the budget, both in terms of rental and personnel.
At the root of all this is the fact that the increase in ticket prices is not commensurate with the whole industry's expenses. Because of this disparity, the producers are squeezing everyone's margins accordingly. The obvious answer is to increase ticket prices. However, opinion is strongly divided over whether prices are already too high, or if they could be 30% higher and not affect theatregoers and therefore have a negative effect. I personally feel that if somebody wants to see a show, they will pay whatever it costs. An extreme example of this is that a significant number of seats are held back every day for The Producers on Broadway. The tickets go on sale 24 hours before the performance at $400 each, and yet they sell out every day. (This is probably perceived as a very “un-British” sort of idea.)
The other way forward is perhaps to work with a sliding scale system linked to box office receipts. The rental companies could support the producers with a reduction if they don't reach their break-even, but the producers would allow the rental companies to speed up their return when a show becomes a hit. This would allow companies to continue to provide the level of service and equipment required, keeping average prices at a sensible rate by offering producers a discount on slow weeks but also allowing everybody to share the success when the show does well. Once a show exceeds its break-even repeatedly, the profit pool increases at an impressive rate. Maybe I am being naïve, but who would object to rental companies enjoying more success from a hit than from a flop?
Theatre is such an unpredictable market; it is impossible to tell from one day to the next how many shows will be opening in six months' time, how many of them Autograph will be doing, and whether the ones we do get will run for 10 years or 10 weeks. There are always the success stories to break the mold, such as Mamma Mia!, Les Misérables, or Cats (who could have known that it would run for 21 years?). Examples like these serve to remind us why we carry on providing top-quality service with no compromise, to the very best of our ability.
Duncan Bell is the financial director for London-based Autograph Sound Recording. He can be contacted at duncan@ autograph.co.uk.