It's a rare museum that hasn't suffered a reduction in its revenue streams--endowment income, corporate contributions, individual donations, foundation gifts, store revenues and attendance. And it's a rare one that hasn't laid off employees and trimmed programs. But they are still staring at red ink.
Recently two of the most prestigious museums, the Art Institute of Chicago and the Philadelphia Museum of Art, answered the question by raising admission prices. In Chicago adult tickets will jump from $12 to $18; in Philadelphia the increase, which must be approved by the city, has yet to be disclosed. As if on cue, critics pounced. They warn that the moves will price people out of museums, prompt others to follow suit and make little difference to the bottom line anyway. Tickets cover only 10% of operating costs, give or take a few percentage points.
Maybe it's time to try something else. Instead of raising prices across the board, why not try variable pricing? Or combine a small price increase with variable pricing?
Every serious art lover has gone into galleries only to find them so full of people that the exhibit is not so much of paintings as of the backs of people's heads. As a measure of general interest in art, the crowds are uplifting. But they make for a terrible experience for visitors who want to examine the work and reflect. That demand exists: Why not raise prices, at certain hours, to accommodate it?
People have gotten used to variable pricing on airplanes, where the price of your seat depends on when you bought it and such irrelevancies as whether you are staying over a Saturday night. Customers tolerate price discrimination at Broadway theaters, at hotels, at sport events and in college tuition. Sometimes tiered pricing gets hooted down; Coke abandoned the idea of charging more for sodas from vending machines on sweltering days. But variable pricing isn't alien to American society anymore. It makes sense for museums because their offerings are not fungible: If you want to see "The Starry Night," you have to go to the Museum of Modern Art.
Museums have sown some seeds for it. Many charge extra for special exhibitions. The Los Angeles County Museum of Art has a pattern of charging more on weekends dating at least to its blockbuster 1999 exhibit, "Van Gogh's Van Goghs," which cost $20 on weekends and $17.50 on weekdays. "The market was there to bear that bump," says Melody Kanschat, the museum's president. So far, though, this and other museums use variable pricing to manage crowds, not increase revenues. "I have no idea what the impact on revenues is," Kanschat says.
A bolder attempt at variable pricing--said to be for crowd control but with money-spinning potential--occurred in 2006. Cosmetics heir Ronald S. Lauder had just spent $135 million to buy Klimt's "Portrait of Adele Bloch-Bauer I" and put it on view at his Neue Galerie in New York. The museum decided to let the public in on Wednesdays, when the museum is normally open (free) only to members, at $50 a pop. General admission was, and is, $15. But the plan created a public outcry, and the Neue Galerie scrapped it. Still, the nearby Metropolitan Museum of Art gets away with charging $50 for some special shows on Mondays, when it's normally closed to visitors.
Museums could get more creative with their pricing. Besides charging extra on weekends, they could get a premium for the first hour every day. Many people delay seeing special exhibitions until the last minute; maybe prices should rise as the end nears. Or maybe tickets purchased online to avoid lines should carry a service fee, as they do for movies. To make variable pricing a success, the differential has to be meaningful. The benefits have to be obvious--early entry, fewer people, for example. And the public has to understand the rationale, knowing that those who can't afford the premium are still welcome during most museum hours.
Variable pricing is not going to plug all the budget holes, but it could help keep doors open. Economist Tyler Cowen, who wrote Good and Plenty: The Creative Successes of American Arts Funding, says he knows of no good studies on variable pricing at arts institutions. Then again, it hasn't been given much of a try.