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Demand Pricing and Extraction Mindset

July 15, 2015

by:

Joe Patti

This story has been getting a lot of circulation today on social media, but I think it was Thomas Cott who first linked to a story about how a new law in Washington State will prohibit the use of “ticket bots” to buy up all the tickets for a show and then resell them all at higher prices.

In the comment section someone complained about the law saying the venue likely undervalued the tickets if people were willing to pay the reseller’s higher prices. Someone responded noting that perhaps the venue was actually trying to make the show affordable for a wider range of people.

Since the subject of people moving from the corporate world to head up non-profit organizations has been on my mind recently, my first thought was that these two people represent the difference in philosophies between the for- and non-profit sectors. If more people transition to non-profit management, this could be the subject of increased tension.

Except, it is already a focus of debate in the non-profit arts community. There are a number of non-profits who have started to institute demand based pricing for their shows as unearned revenue continues to diminish.

Even organizations that have no desire or technical capability to effectively implement demand based pricing are increasingly pressured to use it. I regularly get contracts that say if the artist is getting a piece of the gate, we will be required to establish milestones at which we will employ demand pricing.

Seth Godin had a post a month ago in which he addressed this exact situation which he termed the extraction mindset.

Thirty years ago, I asked the fabled rock promoter Bill Graham a question that I thought was brilliant, but he pwned me in his response. “Bill, given how fast a Bruce Springsteen concert sells out, why don’t you charge $100 a seat and keep all the upside?” (In those days, $100 was considered a ridiculous sum for a concert ticket).

“Well, I could do that, but the thing is, I’m here all year round, and my kids only have a limited budget to spend on concerts. If I charged that much for one concert, they wouldn’t be able to come to the other shows I book…”

Bill wasn’t just spreading the money out over time. He was investing in a community that could develop a habit of music going, a community that would define itself around what he was building.

Now this was 30 years ago. It is difficult to be sure rock promoters are employing this same mindset anymore.

Though I was actually faced with the same question regarding an annual Christmas show by a national act we present every year. Someone suggested given that we always sell out and have the date for the next year set before the current year’s concert starts, why not sell tickets for next year when the curtain comes down this year.

Problem is, people are so rabid about getting the same seats they had the year before, we were concerned we might force them to decide between buying tickets for the following year or buying Christmas presents. Better that we wait and not put them in that sort of bind.

Godin goes on to talk about the two different economic mindsets that exist today.

The promise of our connected economy was that it would reward the good guys, the long-term players, the people who cared enough to contribute. The paradox is that this very same economy has become filled with people who are easily distracted, addicted to shiny objects and too often swayed by the short-term sensation or by short-term profit.

I think most people embody both mindsets and unless they are really mindful of their actions, don’t necessarily see a conflict between them. People will take advantage of the low prices and convenience of shopping on Amazon and religiously show up to the farmers’ market on weekend mornings because they also value personally connecting to their local producers.

There isn’t necessarily a contradiction in this approach if there aren’t any local companies that make sleeping bags and vacuum cleaners for them to connect with the way they do with the beekeepers, farmers and candle makers.

Even without contractual obligations, when it comes to setting pricing it can be a real challenge for arts organizations to balance economic necessity with access. If you have 1000 seats, gauging whether an additional $10 a seat is going to be an impediment to audiences can mean a difference of $10,000.

If the show sells out easily, there is a lot less labor and expense involved in making that $10,000 than if you have to approach someone for a sponsorship, or write a grant application and final report.

Audience Relations, Pricing, State of the Arts

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Stuff To Think About: Take My Employee, Please

July 14, 2015

by:

Joe Patti

Last week I drew attention to Joan Garry’s post for people in the for profit field who wanted to interview for a position as a non-profit executive director.

Since then, I came across a post on Creativity Post where a researcher at Cambridge, Will McAskill, was urging people not to enter the non-profit field right out of college if they truly wanted to make a difference.

His reasons are as follows:

1. Most nonprofits have little impact
A significant fraction of social interventions don’t work, and this means that the nonprofits who implement these interventions don’t have any impact.

2. Poor skill development
Nonprofits are usually small and have a shoestring budget, which means there’s little room for training or career development compared to organisations in the for-profit sector.

3. Poor option value
It’s much easier to transition from the corporate sector into nonprofits than vice versa, so if you want to try both, it’s better to start outside of nonprofits, then enter later.

Instead, he suggests if people really want to make a difference, they should get into a lucrative career like finance and then donate a significant portion of their income. In that way, they will have a greater impact.

Other career paths he suggests are entrepreneurship, research, politics and jobs like consulting that allow you to build your skills. Each of these options will either afford you an opportunity to make an impact, or develop your skills to the level required by highly effective charities.

While McAskill’s findings are mostly focused on social welfare and health related charities, arts organizations need to grapple with most of the same issues. It is difficult for arts organizations to show quantitative impacts; there generally isn’t a budget for training and career development; and the sentiment that the organization ought to be run like a business often sees business people hired into leadership positions over non-profit career professionals.

The other consideration is that we are told Millennials want to make a difference. McAskill’s suggestion that non-profit work come later in life combined with pressure to study business or science rather than the liberal arts could see some of the most talented individuals diverted away from the non-profit sector.

The tough question the non-profit arts world may need to seriously grapple with is whether it might be better if we recruited for profit mid- to late careerists for our jobs. We all bristle at the idea–and not infrequently reality–of someone from the corporate world coming in and telling us we are doing it all wrong.

It might be possible to mitigate that by forming partnerships/alliances with companies to establish a non-profit track where interested individuals volunteer with your organization or take a position on the board. In that way you might solve the challenge of getting younger people on your board and groom people to eventually be a non-profit leader.

Perhaps only 10% of those in the track ever decide to transition from their corporate job, but those that do are more thoroughly versed in non-profit operations. Those that don’t have satisfied their urge to make a difference.

Though perhaps a simpler solution would be to see if your staff could piggyback on a professional development opportunity a local business is providing their employees. They may have a speaker that costs $20,000 to engage for one day so you would never be able to afford that. But if you pitched in $250 per employee, they might let you participate.

The same with conferences. There are a lot of artists that piggyback in on a vendor’s badge allotment at arts conferences or pay the reduced “additional employee” rate. Corporate partners may allow your employees to do the same.

Or as part of your sponsorship request, you could ask a corporate partner to out and out pay for your employee to join their employees at some training event or conference.

True, the content of the conference may not be entirely applicable to the arts–but it may inspire something you might never have considered. Not to mention 80% applicable can be better than no professional development at all.

Tagging along on professional development seminars doesn’t solve all the issues Will McAskill cites, but it does start to address them.

Info You Can Use, Leadership, Management Philosophy, State of the Arts, Working In The Arts

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You Are Now Free To Exploit Your Interns

July 13, 2015

by:

Joe Patti

For the last year or so, non-profit arts organizations have been somewhat nervously wondering whether the criteria being used to define what constituted an internship might be applied to the non-profit industry as well.

The concern arose over a ruling against Fox Searchlight pictures in a case where interns on the film Black Swan where the court found the interns should have been classified as employees instead under the six points of criteria set down by the U.S. Labor Department.

Earlier this month, an appeals panel vacated the decision of the lower court saying the Labor Department criteria was out of date and providing a different criteria.

He argued that the proper way to determine workers’ status was to apply a “primary beneficiary test” — a concept proposed by Fox in which the worker can be considered an employee only if the employer benefits more from the relationship than the intern.

Judge Walker wrote that he and his fellow judges on the panel “agree with defendants that the proper question is whether the intern or the employer is the primary beneficiary of the relationship.”

He further argued that the test should hinge largely on the internship’s educational benefits: for example, whether the internship was tied to the intern’s formal schooling and whether it occurred in an educational setting.

Summer is the high season for internship and apprenticeships in the arts since so many students are out of school. It is fortunate that this ruling came out when it did. Now arts organizations can squeeze more labor out of their interns in the remaining weeks of the summer without any concerns.

Everyone knows that the arts are good for you and that you must suffer for your art. Ergo, any task an intern performs must be more beneficial to them than it is to the employer. Misery and lack of pay constitute authentic experiences for arts practitioners after all.

Yeah well, be that as it may, this is more a case of just because you CAN do it, doesn’t mean you SHOULD. Just because the environment is potentially more relaxed than it was last month doesn’t mean proper standards don’t need to be developed for internships to make the experiences more valuable.

Schools like the Ringling College of Art and Design have clear standards (no more than 20% clerical work) and a series of evaluation forms.

There are a good number of people who don’t enter internships under the auspices of a formal training program. In either case, the success of the internship heavily depends on the type of experience the work site provides/creates.

If anything, an internship should be viewed as an additional responsibility the organization is taking on, not a solution to a lack of labor. Even beyond the consideration that staff members will need to take additional time to train an unskilled individual, time and effort to regularly evaluate and provide feedback to the intern needs to be factored in.

Having informal discussions over lunch or at the bar after hours still constitutes work for staff, especially if the need to address problems arises. Of necessity, intern assessment and evaluation needs to be a much more rigorous process than periodic evaluation of employees. (Not that many arts organizations do that very well, but that is a different post.)

Legal Topics, Working In The Arts

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Don’t Worry About The Backstage Door, Guard The Electrical Outlets!

July 8, 2015

by:

Joe Patti

You may have seen this story that has been circulating about the guy who brazenly climbed up on stage just before a Broadway performance in order to plug his phone into the (unbeknownst to him) fake outlet on stage.

Lest you think this an isolated incident, only a few months ago I was in an airport and saw someone plug their phone into at the ticketing kiosk by the gate. Emboldened, other people did the same until there was no more room on the power strip and people started unplugging the computer and ticket printer.

This is another issue arts organizations need to make note of. It used to be you only need to have security standing in front of the stage when the performer was famous enough to warrant it. Now you need to do so when anything appearing to be an outlet is in line of sight! (Just imagine a fan rushing the stage and the lead singer darting away before realizing the guy is making a bee line for an extension cord.)

But in reality, having sufficient outlets and charging stations available may be another amenity, along with things like good parking and opportunities socialize with friends over drinks before/after a performance, that serve as criteria when deciding whether to attend or no.

Arts organizations are frequently frustrated trying to keep up with the changing expectations of audiences and all the options there are for interacting with them. Just when you feel you have your presence correctly aligned on a social media channel, everybody you want to reach shifts elsewhere.

In this case, it’s just as you feel like you your lobby is particularly welcoming and your staff isn’t pressuring people to leave the lobby after the show, you start to worry about whether you have enough accessible outlets and Wifi service.

But of course, people who work in the arts aren’t without sin either. They share the same expectations as their audiences. If you are sitting outside the changing room in a clothing store waiting for your kid to come out, there is a fair chance you are going to be looking for an open outlet, too.

Sometimes there are opportunities to manage scare resources and still keep many people feeling satisfied.

The restrooms in our facility inevitably develop lines at intermission and other periods of high traffic. However, there are some people who know about some seldom used restrooms in an out of the way location. Even though these restrooms are physically less convenient to the theater than the lobby is, knowing the secret about our restrooms and not having to wait on line is regarded as a satisfying outcome.

So by posting a pro-tip about where to find secret restrooms, outlets or whatever on a site like Yelp, you can keep those who value being in the know happy even as they are crawling under a staircase to plug their phone in.

Arts Facilities, Arts in an Age of Technology

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