IMPORTANT: Changes To Music Licensing May Impact Any Performance At Your Venue

Some important information about changes to music performance rights came to my attention today and I wanted to share it with readers.

Apparently the consent decrees under which ASCAP & BMI operate are up for review by the Department of Justice. The public comment phase is ending on Friday, August 9.  You can find out more about the consent decrees on the MIC Coalition website.

Basically, because ASCAP & BMI operate akin to monopolies, they and other performing rights organizations (PRO) are limited as to what they are able to do when licensing performing rights. They want these limits loosened. You can provide feedback to the Department of Justice here.

Even with these limits, dealing with these companies is often confusing and criteria seems inconsistent. Many have felt they were forced into purchasing broader licenses than they needed.

Today I received a huge flurry of emails urging myself and others to oppose the loosening. I was confused about why there was this sudden urgency when the public comment phase opened at the start of June. I started to wonder if there was an effort to create a huge sense of urgency by rallying support at a late date. Especially since there were initially few details provided about why one should voice their opposition.

Come to find out, the reason is that a large number of organizations across the country received revised licensing agreements from BMI this week containing some alarming changes. There is some suspicion they timed the mailing to hit toward the end of the public comment phase.

Here is a page of the agreement that is causing the biggest uproar.

In section 1 (g), terminology has been changed from “Gross Ticket Revenue” to “Gross Revenue.”  According to the new definition, in addition to ticket sales, calculation of a fee will now be based upon revenue from sales on the secondary ticket market, service charges, handling charges, VIP packages, advertising revenue, box suites, sponsorships, merchandise, concessions and parking.

So essentially, if you have a sponsor for your show; sell VIP packages, merchandise, food, and charge for parking, all that gets factored in to what you pay BMI rather than just ticket sales as was the case in the past.

From what I am told, the definition of “licensee” has been expanded to include a wider range of activities.

For events without an admission charge, the definition of what is included in the fee calculation has been expanded from a flat fee based on seating capacity to one based on entertainment expenses like room, board and transportation costs for the artist.

There are other problematic issues which are a little difficult to explain in a blog post and might not apply widely to many venues. I suspect there are problems that people have yet to discover.  If you do any sort of licensing with folks like BMI and ASCAP or if you have been trying to fly under the radar, you want to pay attention to this.

If you don’t think this applies to you at all, but you have live music performance, you may find that it does. That band that plays at your museum during First Fridays is probably subject to music licensing.

With more opportunities for revenue available, especially if the strictures of the consent decrees are loosened, there is more incentive find the places that have been trying to slide under the radar.

If you have concerns, check out the MIC Coalition website to learn more or provide feedback to the DOJ.  Also –read any new licensing agreements you get very, very carefully.

 

CRM Software Isn’t Strategy

Arts Professional UK had a great piece on developing a customer relationship management strategy (CRM). It is chock full of great resources including case studies, guides on how to choose a ticketing system and analyzing the costs of a ticketing system. It got me thinking about approaching Drew McManus about employing his web expertise to write something similar in the context of U.S. arts organizations for the ArtsHacker site.

A lot of the materials from that site appear to absolutely be useful for U.S. non-profits so take a look.

The thing that really caught my eye though was that customer relationship management (CRM) was first coined in 1995 and a lot of arts organizations are just starting to think along these lines nearly 25 years later.

Although technology is really what makes it possible to cross reference and analyze information in an effective amount of time, the heart of CRM is an organization wide investment in using the information to inform interactions with customers.

In other words, it doesn’t matter how sophisticated and informative the analysis produced by a CRM system if staff isn’t using it in decision making and conversations with customers.

As Helen Dunnett writes in the Arts Professional UK piece,

A key factor for success is embracing CRM as a strategic function that is led from the top and not seen as purely a marketing function. Being clear about the end-game and the cultural change that will be needed is important in ensuring the technology is used effectively. CRM isn’t a quick fix: the process requires a fundamental change to the way strategies are planned, budgeted, communicated and monitored. CRM has to become a way of life.

Sure, that is all well and good to say, but cost is pretty much the big factor and this sort of data processing capacity doesn’t come cheap, right?

Yep, you are right and this is how to approach that question according to Dunnett,

Cost is often highest in the minds of many arts organisations when considering an appropriate CRM/ticketing system, but there quite simply isn’t an inexpensive system that will offer the necessary functionality.

Do your research across several system suppliers and work out the cost of ownership over a three-to-five-year period. This is the best time period to test comparative cost-effectiveness,…

This becomes especially important when looking at systems that charge on the basis of a commission on the value of sales. 2 to 3% can sound like a low percentage but you need to be clear about what constitutes a sale

Often We Pay More For The Illusion Of Control

If you want a lesson in the power of custom and pricing psychology winning over objectively better options, check out this New Yorker piece on failed attempts by restaurants to eliminate tipping.

Research conducted by Michael Lynn, at Cornell University, who is the foremost academic authority on tipping, has shown that people of color receive lower tips than their white colleagues, which arguably qualifies tipping as a discriminatory pay practice. The system perpetuates sexual misconduct, because service workers feel compelled to tolerate inappropriate behavior from customers who hold financial power over them. As restaurant prices have risen, gratuities—which are tied to sales, as a percentage—have too, so that there is now a substantial and hard-to-defend disparity between the pay of the kitchen workers who prepare food and the servers who deliver it.

A statistical model created by Ofer Azar…found only a small correlation between tip size and service quality, leading him to conclude that servers were motivated mainly by other factors …Another study by Lynn showed that perceived service quality affected tip size by less than two percentage points. A female server, by contrast, can expect to hike her tips by an average of seventeen per cent if she wears a flower in her hair.

A number of restaurant groups and owners have tried to eliminate tipping to help resolve this issues. Some have decided to eliminate tipping and set their prices higher in order to provide health and leave benefits in addition to a living wage.

While there have been some difficulties finding people who are willing to work in a no-tipping environment, the bigger problem is resistance from customers.

New research by Lynn shows that when restaurants move to a no-tipping policy, their online customer ratings fall. One factor that explains that dissatisfaction is how we, as consumers, respond to “partitioned” prices versus “bundled” prices. A partitioned price divides the total cost of an item into smaller components—say, a television listed for a hundred and ninety dollars that has a ten-dollar shipping fee. A bundled price would list the television, shipping included, for two hundred dollars. Consumers tend to perceive partitioned prices as cheaper than bundled ones.

Later the article notes people have an aversion to service charges. Even though people will typically tip 20%, if a 15% surcharge is automatically added in the place of tipping, people perceive it as a “gotcha” even though it means they will pay less. People also believe that service will suffer in the absence of tips.

There is a lot in this article that speaks to the value of using psychology in pricing strategy and providing the perception of the consumer being in control.

If you have ever shopped on sites like Amazon where there are multiple sellers of an item, if you pay attention you will often see items that are offered a few dollars cheaper than the rest of the group—until you get half way through the transaction and you realize that with the shipping and handling it is much more expensive than the sellers who offered free or included shipping. I often wonder if they are counting on people not noticing or deciding it is more trouble to back out of the transaction and starting anew with another vendor.

Surcharges on ticket sales would likely disappear immediately if the sales weren’t restricted to a single service. (Ticket prices rarely fall below face value on re-seller sites.)

Speaking about the ethics and motivations behind your pricing does gain traction with certain demographics and may make them more willing to pay a higher price if they know people are being taken care of. But this New Yorker story seems to suggest tricks like ending a price with a 9 rather than a 0 will still be a significant motivator of purchasing behavior.

Money May Make The World Go Round, But Education Drives Participation

In a recent “Taking Note”, National Endowment for the Arts’  Director of Research & Analysis,  Sunil Iyengar mentioned that in the coming year the NEA will commission some monographs exploring the role of taste and preferences in arts participation.

He later points out a study conducted in Spain that touches on this very notion.  With the obvious disclaimer that the cultural norms of Spain differ from that of the U.S., I wanted to point out a couple interesting observations the Spanish researchers made.

They categorized study participants as either “absolute” or “recoverable” non-attendees. The absolute non-attendees were those who were “impermeable to cultural policy” and would not attend for any reason whatsoever. Recoverable non-attendees were those who had not attended recently but  shared characteristics with people who did. Among the “recoverable” are people who might have had children and will become increasingly open to participating as their kids got older.

The researchers categorized willingness to attend across cultural events, visits to historic/cultural sites or attend cinema.

In all three cases, education works independently of income, in positively affecting attendance. Even the effect of income on arts participation is shown to be “more significant” for people at the higher versus lower education levels.

[…]

The researchers conclude that as education rises, interest in arts attendance grows dramatically. For example, changing a respondent’s education level from “primary education”-only to “higher education” would cut his or her likelihood of being an “absolute non-attendee” by 50 percentage points—for all three arts activities.

Again acknowledging that Spain and the US are different situations, I was pretty astonished to see a 50% reduction absolute non-attendance closely associated with education level. In the conclusions, the researchers suggest cultural policy should be more closely integrated with education policy with an eye to the way technology changes expectations and mode of content delivery.

What I also found interesting was that income level doesn’t seem to have the same impact on attendance that education does for arts events and cultural site visits. Cinema is more price sensitive.

At the same time, the category of “recoverable non-attendee” (that is, a person who just feasibly might have attended an arts event) remains inflexible when income levels are raised, for both cultural-place visits and live performing arts attendance. The authors thus remark on the “clear polarization” among Spaniards when it comes to either high demand or absolute non-interest in these activities.

The way I read this was that people with high levels of education are more likely to attend regardless of income level. Whereas people of low education level don’t take on the characteristics shared by “recoverable” attendees as their income level rises. The first section I quoted above appears to say people with high levels of education become more likely to attend frequently as income goes up, but people with high levels of education and low income will have a tendency to attend at some point.

I scrutinized the original research report (which is in English) for a plain statement either supporting or refuting my reading of this, but I didn’t find a statement that clarified the matter for me.

What I was ultimately hoping to find was something that showed preference (or lack thereof) shaped by education was a greater barrier to participation than price. This would resonate with recent research results from a number of sources that suggest price isn’t as large a barrier as has been assumed.

A caveat to my caveats: While I continue to assert the differences between Spain and the U.S., the Spanish researchers themselves say their findings match that of U.S. researchers so don’t read my disclaimers as a diminishing the validity of the Spanish research on U.S. behavior.  I am just making it clear that I am not ignoring the distinction.

In the three activities, a very large group of absolute non-attendees is observed that it will be difficult to interest in cultural activities, especially in live performances and sites of cultural interest. This result is very general and similar to that obtained by Ateca Amestoy and Prieto Rodríguez (2013) for the United States.