South-Western College Publishing - Economics  
Circuses: It's not about fun and games anymore
Topic Monopolistic Competition
Subject Circuses now compete among themselves to hire the most popular high-profile clowns to revitalize their shows and make their shows more financially competitive.
Key Words circus, costs, clown, revenue, profit
News Story Circuses have now rely on high-profile clowns to revitalize their industry. Bello Nock, a clown with Ringling Brothers and Barnum & Bailey Circuses is paid $600,000 annually, and has his own custom RV with a driver and personal assistant when he travels. "Grandma," portrayed by Barry Lubin with Ringling Brothers, receives 5% of the gross revenue that his souvenirs generate. In the financially competitive world of circuses, clowns are now the key attraction. Clowns are now expected to perform more acrobatic stunts, to engage in more dangerous activities, and to interact more with the audience, but obviously, they are paid very well to perform these activities well.

Surprisingly, directing the audience's attention to clowns in the circus is a way to cut costs. Even though clowns attract a premium salary, they are still cheaper than the costs to maintain animals. Elephants can cost up to $100,000 to purchase, and each of Ringling Brothers' 22 performing elephants cost approximately $50,000 each annually to feed, house, transport, and insure. More exotic animals are progressively more expensive. As a result, circuses have reduced the number of acts in the last 10 years, from 22 per show in 1995 to 16 last year. Circuses have also been able to reduce their personnel, both because of the reduction in acts, and because several people (clowns) can perform in multiple acts now.

The move has apparently helped the industry. Last year, Ringling Brothers, with about 80% of the industry, reported an increase in gate sales of approximately 10%, to over 10 million tickets. Smaller circuses were also reporting increases in sales, as families stick closer to home for entertainment.

"As Mr. Nock explains, clowning used to be defined by performers like Marcel Marceau, who mimed smelling a rose. 'Then the next generation said, 'let's take that and make a glass rose. That's artistic,'' says Mr. Nock. 'But I took that glass rose, and I ate it.'"

Questions
1. Why would hiring a clown for $600,000 reduce costs for a circus?
2. As more and more circuses develop their own "headliner" clowns, what would you expect to happen to the elasticity of demand for circus entertainment? Why?
3. As more and more circuses develop their "headliner" clown acts, what will happen to the profitability of each circus? Why? In other words, what will you expect to happen in the long run?
Source Kelly Crow. "The Power Clown," The The Wall Street Journal, 12 August 2005. W1+.

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