Business Models for the Arts and the Whole New Awakening


It has been a beautiful month thus far here in Clyde Fitch Report-land, weather notwithstanding, for reasons I can’t make public quite yet but for which I’m deeply happy. Beautiful is infinitely better than horrible, of course, and horrible could easily describe the last half of my 2010, what with my father’s surgery and my parents selling their longtime home and moving due south. (That’s not horrible, I just miss them.) Much as beautiful is better than horrible, a third word — frustrating — squats in the proverbial middle, a state that exhilarates and maddens at the same time.

But why “frustrating”? Well, not to do the hora at my own pity party, but I feel I spent two years in an alternative universe — talking about the resumption of the culture wars, warning of the phoenix-like rise of the radical-right, and now there’s growing chatter about the need for new business models for arts and culture. In the grand, high-flying, dizzying historical moment following President Obama’s inauguration, I felt compelled to shout from whatever rooftop I could find that the sector was in jeopardy of complacency: “Daddy will take us in his arms,” “Daddy will take care of us,” “Daddy will make everything all right” all struck me as warm and comfortable, certainly, but dangerous. My gut told me that all would not be all right. Even in a world in which — as many of our arts leaders hopedwe could fund the National Endowment for the Arts at $300 million a year, such a number would be unlikely to remain stable for any length of time. The nation did manage to inch up annual NEA appropriations to about $167 million, plus there was that one-time $50 million stimulus, and that’s all swell. Indeed, for many, many arts organization, I know it meant the difference between life and death. Perhaps because the stakes were so high and the situation so stark, so dire, my gut also told me at the time that we, as a sector, really ought to start thinking ahead — seriously ahead — to a time when the conversation might not be only about the seemingly endless fight for public funding but might question the use of public funding and measure its effectiveness. I was frustrated in my attempt to make clear that the conversation needed to go beyond the largesse of private philanthropy, too, beyond the nonprofit business model that had fueled the growth in the cultural sector more than any other during the second half of the 20th century. More than once on this website, commenters dismissed or goaded or chided or challenged me: “It’s not enough to talk about the arts needing new models — which new models do you mean?,” they intoned. They were right to — you can’t say something is broken without offering to find some fixes. It is interesting to me now, though, that the question of “new business models” is all the rage, like a total zeitgeist moment, and here I was trying to engineer this conversation two years ago when everyone thought I was a babbling, blithering kook.

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Which is to say — restating the obvious — that this post isn’t about NEA funding, per se, or about state or local arts funding or the need for foundations to give more, give better, give wiser or give at all. What I started to write about two years ago (with admittedly varying degrees of clarity and success) is why and whether the nonprofit business model — and yes, friend, it is a business model — should be the only or the dominant one for the arts and culture sector. Indeed, why is it the business model we think of first when we think about how to make our work?

For the sake of self-indulgence, let me state another core tenet of my personal faith and relate it back to the frustration I have felt. I believe in activist government, with some limitations. That is to say that I categorically reject the notion that, for example, programs like welfare lull people into a catatonic state of over-entitled laziness. I find that to be class warfare, not good sociological observation. At the same time, my thought process during the last two years has been a challenge to this core belief. Increasingly, I liken the nonprofit business model for the arts to birds huddled in a nest, waiting for their mother to swoop in each year to regurgitate their nutrition. That’s fine if, say, the birds are young, but when do the birds learn to fly? More to the point: Don’t we want our arts and culture organizations, if they can be, to be fiscally self-sufficient? That question raises an even more fundamental one: What social function, what national good, should public arts funding serve? Should it, for example, serve as a catalyst for arts and culture organizations to — back to the metaphor — fly? Under what circumstances, if any, does it act as an unintended pill of complacency, keeping the birds in their nest until their next meal?

I’m not an economist. I’m an arts advocate. And it has been hurtful to have seen so many people question my devotion to arts and culture because I have dared, however clumsily, to articulate these questions. I am reminded of one arts leader who instructed two people on her staff to keep a dossier on me — me — because I was publicly challenging the system, the holy status quo. That’s flattering, I guess, but terribly sad. It tells me that preserving the holy prerogatives of the system is more important than what American artists, and the American creative economy, needs and wants and deserves.

After spending the last 10 years as an arts reporter and advocate, I know for a fact that the nonprofit model has some inherent imperfections that have long gone unaddressed. When public revenues collapse, as they have nationally, at the state level and at most local levels, maintaining cultural appropriations obviously becomes challenging. Even when public revenues rise, it’s hard for the arts to get — proportionate to their economic impact — their fair share. And so yet another question arises: Is it fair — is it even moral — to ask the cultural sector to engage in economic planning when so many market variables exist? After all, markets crave stability. How do we ensure a robust cultural sector when most of the elements of its existence, as The Smiths instrumentally put it, oscillate wildly?

Now here we are in 2011, with one or more state arts agencies on the verge of being eliminated, and all of a sudden the issues, warnings and questions I raised long years ago are on the table. That’s frustrating. Consider my hora done.

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So now, onto the main aspect of this post.

Andrew Taylor, on his Artful Manager blog, in a post called “Back to Business Models,” pointed his readers to a post by Diane Ragsdale, on her Jumper blog, called “Waiting for a New Business Model for the Arts.”

I am including the first three of Ragsdale’s five paragraphs because, to me, it’s a bull’s-eye:

What do nonprofit arts people mean when they say ‘the business model is broken’? I’ve heard this phrased decried ad nauseum in the US for at least the past three years. It was a working hypothesis before the economic downturn; now it seems to be a statement of fact. So what model are we talking about? The American ‘nonprofit’ model for the arts? A particular ‘business’ model used by individual organizations? A Stanford business school professor once gave me the following definition: a model is a representation of your beliefs about causality. Perhaps more interesting questions would be, what beliefs about causality underpin our ‘model’, and are they still valid?

Last year, in his post, One business model to rule them all, Andrew Taylor referenced a comment Clara Miller of Nonprofit Finance Fund made at an Americans for the Arts conference in 2010. She said, “There is one business model: reliable revenue that meets or exceeds expenses. Any questions?” I was at that session. A lot of people chuckled when she made the comment.

And then I remember thinking: So, which revenue sources are reliable at a nonprofit arts organization? Government arts programs across the country seem to go into duck and cover mode on a regular basis; corporations are often skittish-lavish one year and austere the next; foundations are overly cautious and generally dole out funds one year at a time, being careful to avoid enabling ‘dependency’; fewer and fewer people want to commit to buying a season’s worth of tickets up front; single ticket buyers are notoriously unpredictable; and individual donors are as varied as … well, individuals: some are dependable and loyal but many are fickle and elusive.

Again, I don’t pretend to be economist: When Ragsdale’s second paragraph refers to Taylor writing of “B Corporations, Low-Profit Limited Liability Companies (L3C), co-operatives, holding companies, fiscal sponsors [and] hybrids,” I feel duty-bound to take a step back and read and listen, not respond. Similarly, a comment on Taylor’s newer post cites the “Osterwalder/Pigneur ‘business model canvas’,” which obviously I ought to read about ASAP.

Meanwhile, the comments on Ragsdale’s post also intrigue. Gwydion Suilebhan recommends reading Michael Kaiser’s “The Art of the Turnaround,” which I started some time ago but managed, shamefully, not to finish. (Then again, Kaiser also wrote “Why the Arts Don’t Pay for Themselves” for the Huffington Post in July 2009. Contradiction?)

A commenter on Ragsdale’s blog named “Jesus,” however, seems significantly less sanguine about the whole scene:

…when I say that the model is broken, is that its a stupid system. The model itself from the get go is wrong and broken.

I come from a family of small business owners. At the end of the day, theatre companies, much as they like to deny it ARE businesses. People will pay money, or support your business, if you offer them a product worth their time and money.

“But we can’t cover all of our expenses for a season from ticket sales alone!”

Thats not my problem, nor the governments, nor the audiences. Produce within your means. Figure it out.”

…The expectation that the government, corporations, or the generosity of others should fun your business has never made much sense to me. The model is broken.


And there’s more. A commenter named Aaron Andersen finds “most annoying” the fact “that there are already quite a few business models running in the arts,” some “as sustainable as any other business”; Danielle Loebs asks if someone — maybe Ragsdale — would actually mind “mentioning or sharing links to those models in order to help those of us who are trying to learn about them?” (Here’s a free tip: go to the website for the new anthology 20Under40: Re-Inventing the Arts and Arts Education for the 21st Century and start reading, or read the CFR’s chapter-by-chapter coverage of the book, starting last month.)

And there’s still more: Heather Beasley says the [nonprofit] system is broken because “funding sources…demand that we come up with multi-year budgets formulated on the falsehood that we can precisely predict the unpredictable,” but, with all due respect, Beasley’s doesn’t question the solidity or sanity of the nonprofit business model so much as blame the money sources for not coughing more up. Lee Streby examines the myth — or maybe folly — of “capacity building,” in what is possibly the most acute comment on Ragsdale’s post. And a commenter named Baxter, perhaps with good reason, makes the political case for why the issue isn’t the nonprofit business model but a right-wing that distrusts and bears so much antagonism to arts and culture that it would dearly love to exterminate it.

I guess, for me, the lesson may be that being first or being right isn’t much of a consolation prize. Yay for me. And I will totally own the fact that, particularly in the horrendous late weeks of 2008 and the first half of 2009, I had a tendency to be shrill. But at least more and more of the sector is actually talking now, instead of playing the Pollyannish ostrich. And that, I think, is some kind of beautiful.

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  • Anne

    Interesting- although the lack of differentiation between different business models in the arts (including those of producing/non-producing organisations etc) and the capacity of different art forms to get ticket revenue (people habitually pay to go the theatre but not a gallery- unless a big temporary exhibition).

    Until then this is really just a blame game not a real debate.

  • It seems to me Leonard that the key issue is the absence of markets, and thus the absence of ways to monetize important arts assets in terms of their long term value. I was horrified by the statistic yesterday by NEA chairman that this country has three Arts Administrators for every artist. Administrators do not enable artists to capitalize the value of their work, markets do, by making the value of work evident and visible and allowing it to find capital. I was very struck by an article in today’s New York Times by Michael Cieply ‘A soundtrack to invest in’ which describes a new way in which creators of movie music can find financing. That is what I mean by the infrastructure for a new business model, which allows a futures market to be created in an arts asset.

  • Heather Beasley

    Following you here from Diane’s blog–to clarify, I am very interested in “questioning the solidity and sanity of the non-profit business model”, and am looking forward to reading the sources you mention to learn more about potential alternatives. My original comment was intended to indicate that arts organizations can’t generate or switch to new, successful business models in a vacuum. Funders exacerbate the problem because of the data many of them demand, and currently base their decisions on. I’d turn that problem back onto our arts organizations, and ask: how can we turn the discussion to evaluating ourselves on metrics other than the economic model? How can we create explicit models for measuring production quality and creative output? Rocco Landesman’s blog entry here:( touches on this issue when he describes the “the too limited definition of success in use by many theaters today (attendance + revenue + national attention).” We need first to generate our own definitions of artistic success, then find ways to encourage arts supporters to switch to or incorporate those metrics into making funding decisions.