My Smartest Mistake: Limiting the size of the business (Hemispheres)
Paul Binder, founder and artistic director of the Big Apple Circus
When I founded the Big Apple Circus in 1977, I had a vision that it was going to be small and intimate. In my mind, what defined the dimensions was a size that was small enough so that the individual performer could make eye contact with everyone in the audience, so that he wasn’t some distant superhero but a human being like they were. Henry Miller wrote in “A Smile at the Foot of a Ladder,” that the circus arena is the thinnest excuse for magic, and that when people have an opportunity to see magic, then they can find it in their daily lives. But in order to create this kind of magic, you have to do it in an intimate environment.
So I sat down with the earliest designer of the tent and drew a tent that put the back row 50 feet from the front of the ring. That seemed like a good distance. I spent the next four years thinking I’d made the biggest mistake of my life.
In the entertainment business, if you have a successful show, you want to sell the maximum number of seats. Like the airlines, we rent space, but unlike the airlines, our prime space is on weekends. You make up for the bad days—Tuesday through Thursday—with the number of seats you sell on weekends. Obviously, if you have a large arena, you can sell an enormous number of seats. In fact, if you break even at 30 percent of capacity, the sell-out is 70 percent gravy.
This is both a labor- and capital-intensive business. There are enormous numbers of people involved and tons of equipment that constantly needs to be maintained or renewed. With those kinds of expenses, people thought I was crazy to limit the upside of the revenue.
Sometimes I agreed. Our initial results certainly didn’t support the notion that content meant anything. Even at full capacity on weekends, we weren’t grossing enough to make up for the horrors of the weekdays. The tent just wasn’t large enough to bring in the excess people to make the numbers work.
But I was too hardheaded to give up. I think I was so wedded to the vision of creating beauty, not dollars, and about creating virtuosity and contact with an audience that I had no choice but to hang in there. And, luckily, we had a board of directors that wasn’t about to declare bankruptcy.
The 50-foot-rule forced us to create the solutions to the economic problems. If intimacy was what we had to offer, then we would make the most of it.
We learned to offer shows at different times of day to appeal to different audiences. We do a show at 11 o’clock in the morning for school groups. We do midweek holiday shows at 2 in the afternoon. We have a show at 6:30 on weekday nights and 8 o’clock on weekends. We do the same show for each of those audiences.
We learned to price correctly. We had always believed in keeping the prices accessible, but our competitors were succeeding with a lesser product and a higher ticket price. So we said, “Hey, we shouldn’t be underselling.” Now the price of the ticket depends on the time of the show, the day of the show, the location of the seat and the location of the show. We still have low-priced tickets and low-priced shows, because you can’t lock people out. This past year, at New York’s Lincoln Center, you could buy a discounted weekday morning show ticket for as little as $10 but a ringside holiday seat on Saturday night cost you $60. Pricing also varies by market. New York, Washington and Los Angeles are traditionally strong markets, while most other cities, especially in the Midwest, just aren’t. It’s something you learn.
The ticket price is the major source of income, but we discovered that it’s the ancillary income that gets you to break-even point. Although I always thought that popcorn and cotton candy were part of the circus experience, I had no idea how to run a concessions department. For me it was like, get out of my way. Now, believe me, I believe in popcorn and cotton candy. They’re one of the keys to getting back from the minus signs.
We also learned to promote on limited resources, to maximize our advertising and to continue to build the product in such a way that customer satisfaction alone would be a draw. Word-of-mouth is the most effective advertising and it only comes from customer satisfaction.
We have big employee turnover, because that’s the nature of this business. At the beginning of each season I sit down with the ushering crew, the ring crew, the box-office crew, the food crew, the management and all the artists and I ask every employee who walks through the tent if they know who Konstantin Stanislavsky was. When they don’t, I explain that he was a great Russian actor and director who said, “Theater begins at the cloakroom.” I say, “Each and everyone of you is part of the show. The moment someone steps into the Big Apple Circus, the show begins. When we hang their coats, when we usher them to their seats, when we sell them popcorn, when the trumpet sounds, and the artists come in, we’re on. Are you going to use what my grandma called the magic words—please and thank you? Or are you going to say, ‘Yo, man, lemme see your tickets.’ Our audience is your neighbors and your relatives, even when we play in far-away places. Our job is to serve them and make them feel good and make their experience here markedly different from their everyday life.”
I really believe in building customers one at a time. We don’t have enough money to spend a million dollars in a small place to bring in the audience. So we do it by making the experience worthwhile. The validation is that we spend 11½ weeks in Lincoln Center in New York City every year and play to 90% capacity. We go as far west as Chicago, north to Shelburne, Vermont, and south to Atlanta, with Boston and Washington D.C. in between. And everywhere we go we have a loyal audience. When we started, we said, “This will go from generation to generation.” And there are people coming today who first saw us 15 or 20 years ago and are now bringing their children.
That’s our business. We don’t have a product other than making customers feel good.
But there’s another aspect to the feel-good experience that’s in our favor.
Big Apple Circus was founded as a not-for-profit organization offering services to the community. That’s the edge I have on commercial competitors. I knew from the beginning that the economics of my vision didn’t make sense. But the vision fit with my social philosophy that if we served the communities we brought this circus to, those communities would support the vision of the circus. And they do.
The revenue we receive from ticket sales and ancillary income makes up about 80% of our annual budget. The other 20% of our annual budget is contributed.
We have several large community programs, all of which spend money but they also bring in money. We started our community programming at the same time that we started the circus. My original vision allowed the space for Michael Christianson to create a Clown Care Unit to visit kids in hospitals and a circus arts and education program for kids. Today, the Clown Care Unit is in seven New York City hospitals, as well as in Washington, D.C., New Haven, Boston, Chicago and Seattle, serving chronic and acutely ill children five days a week year-round. Beyond the Ring, our circus arts and education program, is offered as an in-school and after-school program in conjunction with the Harbor School in East Harlem. We raise money for our subsidized ticket fund; it’s a legitimate appeal—send a poor kid to the circus. This year, the fund sent 50,000 kids. And we solicit money to pay for our Circus of the Senses, a special show for blind and hearing-impaired kids. Those are our community programs and they’re enormously successful.
Now, if you look at the Big Apple Circus one way, you could say we have no money and no capitalization at all. But the not-for-profit approach is just a different way of capitalizing a company. The currency exchange is unusual because the return on capital isn’t designated in dollars. We’re saying to investors, “You’re going to give us money but instead of getting money back, you’ll get the enormous satisfaction of serving the community because some clown is falling on his butt every day.” The business proposition is at once simple-minded and incredibly complex. But it does work.
Still, it took a while. In order to convince people to subsidize your business, you need to convince them that it’s a successful business. When you invest in a not-for-profit, you need to know it’s going to produce. The secret is to make sure everyone understands what the pay-off is; it’s not a dollar return, it’s a naches (a Yiddish word for psychological gratification) return.
Nobody ever ran this business before the way we do. The 19th-century notion of a theatrical one-ring, tented show ran against all economic logic of the latter 20th century. Now we are maneuvering it into the 21st century, and others are attempting it, too. Cirque de Soleil came to us for help when they were starting out. And this year, Kenneth Feld, has spent nearly $20 million to launch Barnum’s Kaleidoscape, a new one-ring circus that’s the first Ringling Brothers production to go under a tent since the Big Top was folded in the Fifties.
The creation of a circus has remained the same for the past 100 years. It still takes one person to do a double somersault. Obviously, that’s not the productivity formula of modern business. But the effectiveness of our kind of performer creates a new equation in the mind of the audience. The definition of a Big Apple Circus performer is that you have to be a virtuoso and you have to make contact with the audience. There are people juggling 12 hoops at once or doing quadruple somersaults, but they are not necessarily the best juggler or flier for the Big Apple Circus. Equally, there are some good artists who are all contact and no virtuosity. We don’t need them either. We always look to add to the art.
We didn’t have $20 million when we started, but we had stick-tuitiveness, and because of years and years of hard work and staying focused on touching the audience, the company is in the best shape of its 22-year history. Believe me, every one of us—from executives to administrative staff to performers—has said, “Maybe we should have a bigger tent.” Inevitably, we look at the equation. Hey, on Saturday matinees we could do twice the capacity easily. But then we wouldn’t be the Big Apple Circus.
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