Heretic’s Foundation XVI: A New Business Model for Shakespeare & Company?

Shakespeare & Company's new artistic director, Tony Simotes
Shakespeare & Company's new artistic director, Tony Simotes

By John Hudson
Special to the Clyde Fitch Report

Much of my professional life has been spent either creating new business models or reinventing industry models, so the recent news about the Lenox, MA-based Shakespeare & Company has most interested me. As a recent article — ‘Shakespeare & Company’s Fiscal Crisis; Catastrophe or Bump in the Road?‘ — bluntly puts it, “The business model that has prevailed through the life of the company is no longer viable.” This is but one sentence in a nearly 3,000-word story that examines the organization’s financial mess from every conceivable angle.

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The article begins by describing a report called “An Independent Assessment of the Current Financial Situation of Shakespeare & Company, Inc.” It was commissioned and paid for by the Massachusetts Cultural Council and prepared by the Nonprofit Finance Fund. It suggests that there are, indeed, significant problems with the organization’s current business model, stating, in part:

“Assuming that there are no material changes to current timing and amount of S&Co.’s existing obligations, it appears that S&Co. can only continue operations on its own in the short term (through March 31, 2010) if approximately $2.3M in cash is raised in very short order….[develop] firm commitments for up to c. $8.15M in replacement funding to restructure a significant portion of its c. $8.15M balance sheet debts and (ii) present an achievable and credible business plan for a business model that is more extensively restructured so it can reliably produce operating revenues that (a) cover operating expenses….and (b) provide for sustainability surplus to cover renewals, replacements and renovations…” (page 34)

Shakespeare & Company claims, in an article now available only in the Berkshire Eagle‘s paid archives section, that the study’s assumptions are “unrealistic expectations,” that they are not on their “last legs” or, worse, “moments away from closing.” That is great news — and it’s a real pity that far fewer media outlets have communicated this good news.

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Quite apart from Shakespeare & Company’s immediate cash flow issues, however, the study noted that because its operating costs are so high, it will need to restructure its operations based upon a new business model. Even though they have cut year-round staff by 24 percent, even though they are trying to “streamline operations,” as the New York Times put it, the study implied none of that will be enough. It argued that only a new business model would generate revenues reliable enough to cover the operating costs, to enable repayment of current debt obligations, and, on the positive side, to generate a small surplus.

Rather than rely on unpredictable grants and donations, therefore, Shakespeare & Company has two alternatives: develop a budget in which they do not spend more than their productions bring in, plus add in contributed income and continue to cut down management, marketing and overhead accordingly. Or they could subsidize productions with profits from new business ventures, such as space rentals or a scenery construction business, both of which are options the company is said to be considering. If they opt for the latter idea, it will still take considerable time and resources to generate enough profits to equal some of the income Shakespeare & Company has relied on in the past. (For more detail, here is a link to the organization’s most recent available financial statements.)

I believe Shakespeare & Company’s problems are not simply due to the recession and not simply due to committing to real estate they ultimately could not afford. The underlying problem is their whole industry. Any Shakespeare performance is expensive to mount and to bring to market. If one has already seen a performance or two of, say, Othello, the incremental value of seeing yet another one is low — unless, that is, there is a star worth paying big bucks to see, such Jude Law in the current Broadway revival of Hamlet. One might just as well watch a production by the Royal Shakespeare Company, the Royal Court, the Young Vic, etc., which, courtesy of a new service called Digital Theatre will be downloadable for $14 over the Internet. The technology will give broader exposure and income to British theater companies by giving them global distribution. Unfortunately, in the U.S., it will inevitably diminish the revenue that might have gone to American actors, whose union, Actors’ Equity, appears stuck in pre-Internet, pre-video, pre-film mode of thinking.

Shakespeare and Company says it is examining dozens of good ideas coming to them from all quarters. So, in the spirit of conversation, here is one more. A certain percentage of foundation funding comes with constraints, since general-operating grants are increasingly rare. Indeed, one school of thought suggests foundation funding sometimes can inhibit what kinds of work can be created. The coming decline in grant-making, therefore, may provide certain companies with the opportunity to take more risks, to focus on how to create more inherently challenging theatrical experiences. For Shakespeare & Company, my suggestion would be to focus on its core business and add some kind of value to create a premium product. One way of adding value — without, again, Jude Law over a marquee — would be to devise productions that more deeply investigates the text, in order to reveal and to perform its underlying meanings. You know from my previous columns that this is my mantra, as past examples have shown:

I believe that helping audiences to understand these challenging textual meanings would deliver enhanced value. It could perhaps justify the ticket prices Shakespeare & Company may have to charge in the future if they still must bring future box-office receipts in line with their cost structure.

It’s said that every crisis offers an opportunity. This is an opportunity for Shakespeare & Company to offer intelligent and premium Shakespeare productions that could transform, confound, pique and challenge people’s lives and beliefs. What proposition in the theater could be more valuable or more worth support than that?

John Hudson is a strategic consultant who specializes in new industry models and has helped create several telecoms and Internet companies. He has recently been consulting to a leading think tank on the future of the theater industry and is pioneering an innovative Shakespeare theory, as dramaturge to the Dark Lady Players. This fall he is Artist in Residence at Eastern Connecticut State University. He has degrees in Theater and Shakespeare, in Management, and in Social Science.