• Two bills under consideration by Congress would adjust the music licensing rates paid by internet streaming radio services like Rdio, MOG, and Spotify to match what cable and satellite providers pay.

IN THE FIELD

• Artists often neglect to realize that crowdfunding campaign money isn’t free – in addition to the fees you have to pay Kickstarter or one of its competitors like Indiegogo or RocketHub, the perks offered to donors often cost money as well. This handy web toy from Reuben Pressman helps you think through how much money you really need to raise if you’re thinking about starting a Kickstarter campaign (or really any crowdfunding operation).
• Still not seeing a ton of post-recession nonprofit mergers, but here’s one in New York City: the Urban Arts Partnership has acquired the operations of the Manhattan New Music Project, which had recently won several large Department of Education grants for arts residencies for special-needs students.
• Nina Simon takes on public voting for winners in art competitions, noting that only a small percentage of those eligible actually take the time to vote. She sees positive implications for engagement but possibly negative ones for artistic integrity; I see further evidence for the need for a hybrid approach.
• Typical: just as games (including video games) are being touted as the next big new thing in arts circles, in the rest of the world their business model is collapsing.

ALL ABOUT THE BENJAMINS

• Barry Hessenius has a short interview with Regina Smith, Senior Program Officer for Arts and Culture at the Kresge Foundation and Board Chair of Grantmakers in the Arts.

RESEARCH CORNER

• Creative placemaking giant ArtPlace has been busy lately. Now accepting applications for its third round of grants (letters of inquiry are due tomorrow, November 1 UPDATE: deadline has been extended to Monday, November 5), the funding collaborative released a short thought piece detailing thirteen “principles for successful creative placemaking” in late summer.  And earlier this month, ArtPlace “soft launched” its vibrancy indicators, a research effort accompanying its two-rounds-and-counting of creative placemaking grants. While the indicators aren’t totally done yet – data points covering value creation and racial/economic diversity have yet to be fully defined or published, and a promised website showing vibrancy in various corners of the country has not yet materialized – these two documents provide the most detail available to date on ArtPlace’s efforts to understand and measure creative placemaking. Andrew Taylor and Linda Essig offer initial reviews, and stay tuned to this space for more in-depth analysis from a special guest.
• The fall issue of the Grantmakers in the Arts Reader has a very interesting feature taking a look back at historical research studies that, in the opinion of guest editor Alexis Frasz, deserve a second look. One of the studies in question is a re-release of 1988’s “Autopsy of an Orchestra: An Analysis of the Factors Contributing to the Bankruptcy of the Oakland Symphony Orchestra Association” by Melanie Beene, Patricia Mitchell, and Fenton Johnson, now available for the first time in digital format. Each study comes with two responses, one from an “established” and one from an “emerging” grantmaker. Other studies (re)considered include Gifts of the Muse (Createquity’s take here), “Art and Culture in Communities: Unpacking Participation,” “Crossover: How Artists Build Careers Across Commercial, Nonprofit and Community Work,” and “Champions of Change: The Impact of the Arts on Learning.”
• WolfBrown researcher Jennifer Novak-Leonard declares crowdfunding the fourth mode of arts participation (the other three being arts creation/performance, arts engagement through media, and attendance at arts events). Quoth she: “I also suggest that this information [about the relationship between crowdfunding activity and other modes of arts participation] would be valuable to each of the platforms currently helping crowd-funding grow and thrive. This is a shameless pitch to these platforms to engage in dialogue with me about how to get this research effort underway… ideally in a timeframe that would inform and expand the conversations that will begin in 2013 as we begin to see the results from the 2012 [Survey of Public Participation in the Arts].”
• The Foundation Center’s march toward establishing a data standard for grants continues, with 15 foundations now having signed on to share their grants data publicly via the Glasspockets website. Among the arts supporters participating in the initiative are the Annenberg, Getty, Hewlett, MacArthur, and Rockefeller Foundations.
• The UK’s Mark Robinson offers his take on the NEA’s new “system map” and research agenda, “How Art Works.”
• Cool social network visualization here: the Seattle Band Map illustrates connections between musical acts via shared band members or project collaborations.
• Direct mail advertising campaigns are getting a bad rap, and research shows that they’re surprisingly effective at reaching consumers, says TRG’s Will Lester.
• William Baumol has a new book out summarizing his decades of thinking on cost disease. Joe Patti has more.
• “Back in 2001, when it started, economists would not have predicted Wikipedia’s success; nor can they really explain it now.“
• Great Q&A with Nate Silver (one of my blog heroes) about his upcoming book about forecasting. A couple of choice quotes:
  

  Q. When predictions involve human ‘systems’ & behavior (social, economic, political etc) that are by their very nature ‘adaptive’, how do you deal with the tricky “Heisenberg Principle” — like effect where the very act of predicting itself becomes a factor that adds information that alters the system and influences individual and/or collective behavior? –John

  A. This is a gigantic problem. In the book, we discuss how consumers, politicians, and businesses make plans based on economic forecasts that can have a host of problems. We also look at how this manifests in disease modeling. If you accurately forecast a very bad flu, it may cause people to stay home, which is good but cancels your forecast. But, the forecast served its purpose because it made people aware of their circumstances.

  and

  Q. What’s your assessment of economics as a discipline, judged in terms of its ability to make politically useful predictions? For example, can economists predict with any reliability what the economic impact of a tax cut or a government spending program will be? –Dan Schroeder

  A. The view of macroeconomic prediction in the book is pretty harsh. Economists have shown no real ability to predict a recession more than six months out. See the Wall Street Journal panel that predicted there would be no recession in December, 2007. It’s hard to measure the economy. Revisions can be as substantial as 5% in some quarters. Therefore, it is hard to predict and judge what the right policy is and what the implications of any policy are. So, we should be skeptical of anyone who predicts the impact of policy with a high degree of certainty. Humility is key.

• RIP Artnet Magazine; more here. I will always be grateful to Artnet’s Ben Davis for being just about the only arts journalist worth his salt during the whole Yosi Sergant debacle.
• Congratulations to GiveWell, which has announced a not-quite-merger with Good Ventures, an emerging foundation led by Cari Tuna and Dustin Moskovitz (the latter is one of the founders of Facebook). The blog post is a bit thin on details, but it sounds like this arrangement will ensure GiveWell’s financial security for some time to come while substantially enhancing its real-world impact.
• Indiana University is set to open the country’s first School of Philanthropy later this year. It’s early, of course, but these snippets from the article suggest to me that buyer beware: “As with any academic setting, funding is an issue….With the nonprofit sector roughly 5 percent of the nation’s gross domestic product and 10 percent of the workforce, such [a] school could be a profit-center for the university, Rooney said.”
• One of the NEA’s lesser known programs, the Citizens’ Institute on Rural Design, will now be a partnership between the NEA, the Department of Agriculture, Project for Public Spaces, the Orton Family Foundation, and CommunityMatters. CIRD facilitates and hosts workshops on community design in places with fewer than 50,000 people.

BIG IDEAS

• Michael Kaiser has a penchant for inciting digital controversy, and his recent two–part post calling bullshit on “new business models” was no exception. At the core of the debate is this central question: how much is the nonprofit arts sector going to change in the next 50 years? Kaiser says not so much; Adam Huttler, on the other hand, thinks quite a lot. Huttler’s second post on the subject, in particular, is one of his most thought-provoking and brilliant in quite some time. EmcArts’s Richard Evans and Sarah Lutman also weighed in.
• Whither the future of open data and philanthropy? The Knight Foundation is currently considering a proposal to digitize 10 years of IRS 990 nonprofit data and make it available to the public for free. GiveWell’s Alexander Berger, writing on his personal blog, argues that this presents a clear opportunity to GuideStar’s next president to reform its business model around open data. (GuideStar’s current president, Bob Ottenhoff responds in the comments.) And the Foundation Center’s Brad Smith makes a passionate case for data standards and greater transparency among foundations.
• We’ve now entered an era in which college-age students have never known what it’s like to have to pay for music. Casey Rae and J. Holtham have more.
• What is the future of museums?

BIG MONEY

• The Irvine Foundation has announced its first set of grants under its new arts strategy that emphasizes audience engagement.
• Jon Silpayamanant makes the interesting point that sports teams have a performance income gap (i.e., expenses that outpace ticket revenue) just like symphony orchestras do.
• Wait, nonprofits are allowed to have shareholders?
  

  The deal will settle a lawsuit the Koch brothers filed in February over shares that determine control of Cato. It results from the original division of shares between the two Koch brothers, Crane and late Cato Chairman William Niskanen. After Niskanen died of stroke complications in October, the Koch brothers claimed a founding shareholder agreement gave them the option to buy Niskanen’s shares. Crane held they should go to Niskanen’s widow, which would leave him in effective control of the organization.

  The settlement involves dissolving the shareholder agreement. In addition, Crane is expected to retire under an agreement that allows him to select his successor, though the Koch brothers could veto the hiring.

RESEARCH (AND EVALUATION) CORNER

• FSG’s Valerie Bockstette points out the dangers of measuring what’s easy to measure instead of what’s most important.
• The Colorado Health Foundation’s Anne Warhover describes her organization’s approach to impact assessment.
• If you thought the theory of change and measurement framework for ArtsWave was ambitious, just take a look at this new comprehensive sustainability plan for Rockford, IL, which intends to measure economic, social, and environmental outcomes in 16 categories including cultural life and the built environment. The transportation category alone tracks 43 indicators.
• Kudos to the Cultural Policy Center at the University of Chicago for the most blockbuster release of an arts research study so far this year. Called “Set in Stone: Building America’s New Generation of Arts Facilities 1994-2008,” the report takes a critical look at the billions of dollars thrown by arts institutions at new buildings, museum wings, expansions, renovations, etc. during the decade and a half in question. Authored by then-grad-student Joanna Woronkowicz (as her dissertation), Carrol Joynes, and about a half dozen others, “Set in Stone” argues that much of that building boom was of questionable wisdom. The report is available in full multimedia regalia, even including an animated video, and scored a feature in the New York Times, along with reactions from The Atlantic Cities, Lucy Bernholz, the Nonprofit Finance Fund, and Sunil Iyengar (now Woronkowicz’s boss at the NEA’s Office of Research and Analysis). Elizabeth Quaglieri has a helpful summary over at Technology in the Arts. Congratulations, Chicago, you sure know how to get our attention!

ETC.

• Umm, please apply for the Createquity Writing Fellowship, Delali Ayivor?

The Flanagan report confirms that labor costs at the nation’s top symphony orchestras have, indeed, risen faster than earned income, and this has some people upset. They seem to think that the report is a Chicken Little doomsday speech pushed by a cadre of orchestra managers in a conspiracy to build a public case for breaking the musicians’ union. While I can’t speak for the motivations behind the report’s origin, the report itself doesn’t say anything of the sort. On the contrary, it states on page 87 that,

The trend in total performance plus nonperformance revenue (regression 8) is modestly higher than the trend in total expenses (regression 9), so the overall financial balance improves slightly over time, after controlling for the effect of general economic conditions.

So orchestras (or at least the 63 relatively wealthy ones that were a part of the study) have successfully compensated for their increased labor costs by a combination of raising prices and seeking more donations—exactly what Baumol and Bowen’s model predicts. Now, there is nothing inherently wrong with raised prices and more donations, assuming the market can bear it. And when combined with increased price discrimination, such as in the case of college financial aid programs, the social effects can be quite positive as access is increased rather than limited. However, an increasing reliance on contributed rather than earned income still feels scary, because contributed income just seems less stable. How can we count on people to just keep giving money away, against all rational instinct? Although orchestras have managed to stay afloat these past few decades, with some experiencing genuine financial success, I don’t see these issues going away anytime soon. The entire model is extremely dependent on the orchestra’s ability to find new donors and convince existing donors to give more and more for essentially the same experience. If the bottom were to suddenly drop out of that revenue stream, orchestras would find themselves incredibly exposed.

Now, what does this have to do with newspapers? Well, in addition to my Nonprofits class I’ve also been taking a course called Media Economics and Financing Journalism, taught by a member of the family that used to own the Boston Globe. As the semester has progressed, I’ve slowly become convinced that newspapers are in almost the exact same boat as symphony orchestras. They also face a Baumol effect in that technology advances have had limited benefits for the efficiency of quality original reporting. Furthermore, the most profitable sections of the newspaper (the sports, travel, and health pages) and the section that provides the most public good (the news division) are not the same. Our guest speaker in class yesterday even remarked that the demographics of his newspaper subscribers and subscribers to the local orchestra are virtually identical: aging, upper-income, and mostly white. However, unlike orchestras, most newspapers have had to rely solely on earned income to compensate for their rising labor costs—and so far, it’s not working. As a result, staff positions are being cut at print publications all around the country, with critics (music, dance, theater, and now even film) some of the first to go. After all, why should a paper pay someone to go see a movie and write about it when so many are willing to do just that for free? Even the educational environment in the two fields invite parallels, with both conservatories and journalism schools churning out new graduates at record rates, giving them the highest quality training for jobs that simply don’t exist.

If we can agree that journalism does provide an indispensable public good, in the form of in-depth, factual information not available anywhere else, I can’t help but see it gravitating toward a contributed income model in the coming years. No matter what steps the current industry giants take to shore up revenue streams, whether it be the Washington Post buying Kaplan or the New York Times Co. grabbing a piece of New England Sports Ventures, their core journalism operations will remain loss leaders, and thus vulnerable to cost-cutting pressures. Absent a significant change in industry dynamics, I would not be surprised if nonprofit journalism models become more common in coming years.