The primary reason front-row seats are expensive is because they usually offer the best view of a performance. They are also the easiest ones to find when you enter the venue, since they are right in front of the stage. Even during times when the economy is down, these tickets remain the most expensive ones in the house.
Given the chance, most people would prefer to sit in the front row of a theatre instead of several rows back or in a high balcony. The demand for the best seat in the house---especially if the stage production is very popular---significantly affects ticket prices.
Musical artists put together special ticket packages for fans that include front-row seats, as well as perks like merchandise, free parking and an autograph session with the band. Premium prices are charged for these packages to generate more revenue.
People are excited to be able to sit near their favourite band when it comes to town to perform, or to witness a famous Broadway actor onstage up close and personal. When you buy a front-row seat, you are buying a way to experience a show in more exciting manner.