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If Other People Can Make Money At What You Do…You Might Not Be A Non-Profit

July 22, 2014

by:

Joe Patti

I almost passed by a recent post by Lucy Bernholz on Philanthropy 2173 blog titled What Are Non-Profits For?

I’m glad I didn’t because her news that health clubs were challenging the YMCA’s non-profit status based on the idea that they were competing for customers left me a little incredulous. (my emphasis)

In both cases above the challenge comes because of who the organizations serve – in the YMCA case the membership is very similar to those folks who join commercial gyms, so why does one get tax privileges over the other. The argument raised in the case against free software is that such a resource might be used by commercial enterprises – so where’s the public benefit?

The nature of these challenges focuses on who might be benefitting from the services, not whether the services themselves are a public benefit. This is ironic from a nonprofit standpoint. For decades nonprofit managers and funders have been trying to build sustainable revenue sources for nonprofit organizations so they can survive. So much so, the Red Cross recently argued that its spending practices are trade secrets! BUT, at least in the logic of the two headlines above, if the organizations might serve those who can pay (one source of sustaining revenue) then they may not be nonprofit.

The other case she refers to is a situation where the IRS denied non-profit status to an open source software company because for profit companies might use their product.

While it doesn’t apply to all non-profits, one of the basic reasons often given for why we need non-profit organizations is that they often provide necessary and useful services that other entities won’t, in part because the opportunities for profit were low to non-existent.

In my experience growing up in the 1970s, the YMCA was offering services like swimming, exercise classes, weight rooms and summer camps long before health clubs and specialized exercise clothing were even on anyone’s radar.

The idea that the YMCA is a competitor with an unfair advantage in a niche they pioneered now that businesses can make money running yoga and kettlebell classes, is a little appalling to me. Rather the fact that these challenges have gained traction in different places around the country is what appalls me.

Does that mean that a gallery can open near a museum and challenge the museum’s tax exempt status because they are a competitor in art sales?

Or that if a movie chain notices that a demographic shift in their city has created a substantial demand for foreign films, they can demand that the a venerable art house movie theater be required to pay taxes?

I can understand the skepticism about the non-profit status of organizations like Roundabout Theater, but the vast majority of non-profits haven’t been competition to other companies–until apparently societal views shifted to make what they do worth pursuing.

I wondered if anyone was hearing similar rumblings in other lines of business.

State of the Arts

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Info You Can Use: Who Owns An Artist’s Booking Data?

July 21, 2014

by:

Joe Patti

A very interesting question regarding the relationship between an agent and artist was recently broached on the Musical America blog. An agent who has an artist leaving their representation for another company asks who owns the leads and contacts they have cultivated on behalf of the artist.

However, the question has come up as to whether we are obligated to give the artist all of the leads and contacts we have been pursuing on his behalf that have not been booked yet. That doesn’t seem fair. We have been working on some presenters for years, have invested a lot of time, and consider that to be our proprietary information. If we turn all of that over to his new manager, that’s just going to be a gift to the new manager who will follow up on all of our work and take the commissions.

Now you may think the agent is correct. It doesn’t seem fair that the new manager will benefit from the efforts of the company that the artist is leaving. However, lawyer Brian Taylor Goldstein answers that under the law of agency, representatives, a term which applies to people like attorneys, realtors, accountants, artist agents, etc, work for a principal party and all the work they do belongs to that principal. (my emphasis)

…there are four key concepts:

(1) An agent works for the principal and, while the agent can advise the principal, the agent must follow the instructions and directives of the principal.

(2) An agent can never put his or her own interests above that of the principal.

(3) All of the “results and proceeds” of the agent’s work on behalf of the principal belongs to the principal.

(4) Any contractual provision, written or oral, that contravenes rules (1) – (3) is null and void.

In short, when a manager represents an artist, the manager has no proprietary information. In other words, those aren’t your leads and contacts, they are the artist’s. While your leads and contacts may start out as your own, once you contact someone on behalf of an artist, the artist is legally entitled to know anyone you have spoken to on his or her behalf, including the details of such conversation. Moreover, unless there is an agreement to the contrary, the artist is also free to contact anyone directly on his own behalf.

This information was surprising to me. I knew that this relationship existed with one’s realtor, but didn’t realize it extended to artists and agents/managers as well.

Goldstein goes on to explain that the law is set up this way to protect the agent from liability for any breach by the principal. The agent isn’t liable if the artist fails to show up for a performance, for example.

(Of course, since the agent will be the first to receive an emotionally fraught phone call if the artist doesn’t show, they will bear a lot of non-legal responsibility.)

He also enumerates a number of aspects of the agent-artist relationship that people may assume are a matter of law, but are merely a result of traditional practice, and perhaps due for a change.

Info You Can Use, Legal Topics, Working In The Arts

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Talent Is Only For Artists and Athletes

July 16, 2014

by:

Joe Patti

You may have seen a number of articles out in the last day or two debunking the idea popularized by Malcolm Gladwell that we need 10,000 hours of practice to achieve mastery. A New York Times article quoted a researcher who contributed to the results of a new study who said,

“We found that, yes, practice is important, and of course it’s absolutely necessary to achieve expertise,” said Zach Hambrick, a psychologist at Michigan State University…“But it’s not as important as many people have been saying” compared to inborn gifts.”

One thing I noticed- despite the fact the article starts out talking about a kid kicking a soccer ball and a man learning Japanese and goes on to talk about mastery in the areas of language, sports, chess as well as music, the majority of the comments reference talent versus practice in artistic pursuits. Out of the 260 comments to the article at the time of this post, only about 10-15 talk about athletes and there isn’t really any mention of achieving mastery in any other area.

Perhaps it is due to the influence of the title of the article referencing Carnegie Hall and the fact the pictures are of dancers and musicians. However, I wondered if the artistic orientation of these comments revealed an underlying belief that we only need to consider talent versus practice in relation to artistic achievement.

No one mentioned the impact of talent or practice on writing press releases, analyzing business plans/financials or installing electrical wiring. Yet no one coming straight out of a training program can automatically do any of these things masterfully. It takes time to develop a proficiency and for many, there is a level of quality beyond which they can not advance no matter how much effort they invest.

I wondered if this belief that practice and talent are important to be successful in artistic pursuits might be contributing to the idea that the arts are an elitist pursuit that only a few can participate in.

The reverse of this plagues school teachers and professors. Students and parents who might acknowledge that hard work will never allow them to be a pro-athlete will insist that an A grade or admission to a honor class be granted because a student had worked hard. Other than Lake Woebegone where all the children are above average, there exists a level beyond which some students can’t be successful academically.

So while everyone may believe they achieve academic excellence due only to hard work, the belief that you need to be blessed with innate talent to achieve artistic excellence may contribute to the idea that only an elite few can become artistic masters or have the capacity to understand art.

Of course, people are damned by the inverse assumptions: If you are not succeeding academically, you aren’t working hard enough. If you are a rich and famous artist, you must be talented.

All this occurred to me as I was reading the article so I haven’t really tested this theory with a few days of thought. What do you think?

General Musings, Working In The Arts

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Movie Theaters and Demand Pricing

July 15, 2014

by:

Joe Patti

A few days ago, NPR’s Planet Money ran a story asking why there isn’t demand pricing for movies where you pay more for blockbusters and less for the stinkers. Among the suggestions the correspondents made were having some movies free with a two popcorn cover.

They spoke to a movie theater owner who expressed concerns about low prices signaling that a movie was bad. Not to mention he worried that people would pay for the stinker and sneak into the blockbuster.

The biggest impediment to demand based pricing, however, is the movie studios. As the reporters mention, no studio wants to invest tons of money into making and advertising a show only to have a movie theater price it at $1.

If you are not aware, something similar occurs with many of the big Broadway touring shows, especially those that are getting a percentage of the gate. Theaters have to submit proposed ticket pricing and a marketing budget for the production company’s approval.

One interesting fact that came to light was that the term “B-movie” actually refers to an early practice where movies were graded A, B, C, etc and had corresponding pricing. The practice has fallen by the wayside, but the B movie term stuck around in common parlance.

One of the problems live performances face is the ability to provide such transparency in its pricing for audiences. The price for single perform doing a solo acoustic set might be low because the cost to the theater for one person is low. On the other hand, if that single performer is Eric Clapton, the ticket price is going to be commensurately high.

But a ticket price may be low because the theater has good funding, or will take a loss to encourage people to attend or because the quality stinks. The audience member doesn’t know why prices are the way they are and there isn’t really an elegant way to communicate it, should the arts organization so desire.

As I listened to the reporters asking if movie theaters weren’t foolish not to institute demand based pricing, I wondered if we might be approaching a place where audiences would be psychologically ready for arts organizations to implement similar pricing strategies for their own events. The whole question of demand pricing has been hotly debated by arts organizations and the fact that the subject is popping up in various forms indicates the topic isn’t going away any time soon.

Audience Relations, Pricing

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