• One artist’s activism on immigration and visa reform (he’s banned from entering the USA for 10 years because of a paperwork snafu).
• The Obama administration has announced three new members of the National Council on the Arts, the body that oversees the NEA. Here are interviews with Maria Rosario Jackson, Emil Kang and Paul Hodes.
• Google’s chief executive is stumping for an unregulated internet in developing nations, but some musicians in Africa aren’t buying what he’s selling. (I wonder, though, if an internet free from censorship must also be an internet without copyright controls.)

MUSICAL CHAIRS

• Wow: after only two years in the driver’s seat at ArtPlace, Carol Coletta is jumping to the Knight Foundation, as Vice President/Community and National Initiatives. She writes a farewell letter via the ArtPlace blog.
  
• Margaret Hunt is the new director of Colorado Creative Industries.

ALL ABOUT THE BENJAMINS

• The Pew Charitable Trusts has restructured its culture program to emphasize project grants made through the Pew Center for Arts and Heritage. The Pew Cultural Leadership Program, which provides general operating support to Philadelphia-area organizations, will disappear over the next two years.
• Philadelphia arts philanthropist Gerry Lenfest is stepping down from his foundation, which is entering spend-down mode.
  

IN THE FIELD

• The San Francisco Symphony is on strike; here is a great background on the situation from San Francisco Classical Voice.
• A proposed merger between Los Angeles’s Museum of Contemporary Art and the LA County Museum of Art is off the table (for now).
• Linda Essig reports from the Association of Arts Administrators Conference in New Orleans; Steven Tepper offers his perspective on the 3 Million Stories conference in Nashville hosted by the Strategic National Arts Alumni Project (for which he is research director) and Vanderbilt’s Curb Center.

BIG IDEAS

• Michael Rushton is the newest ArtsJournal blogger and has 15 posts up in five weeks, including ones on dynamic pricing, free admission at the Indianapolis Museum of Art, faux-expensive admission at the Metropolitan Museum of Art, price discrimination as seen in the Veronica Mars Kickstarter, price discrimination, price discrimination, and more price discrimination. WHY DOES NO ONE TELL ME THESE THINGS. (Side note: Michael asks why people [incorrectly] think price discrimination is a bad thing. Hint: it’s because of the word “discrimination.”)
• Speaking of ArtsJournal, Doug McLennan has designed a Massive Open Online Course (MOOC) around the Spring for Music Festival, designed to get people to “listen smarter.” The class lineup looks pretty interesting and manageable (I particularly like the topics “How do you judge an orchestra” and “How does a piece of music become famous”), and the participants all get to sit together if they buy discounted subscription tickets to the festival. Looking forward to hearing how this plays out.
• Not everyone’s psyched about MOOCs though. Steve Lohr warns that the movement toward free online education could mean lots of financial trouble for universities, not to mention the teachers and staff in their employ.
• In fact, we’re getting more and more evidence from all sides that even “successful” cultural products – the likes of Gagnam Style and 50 Shades aside – don’t actually earn creators that much money. Here, Patrick Wensink spills the financial beans on his bestselling novel.
• Kristy Callaway has a helpful cheat sheet for early childhood educators, and Nina Simon considers varying levels of participation and co-design for children.

RESEARCH CORNER

• The McKnight Foundation has some cool visualizations of its research on individual artists; Laura Zabel comments.
• The National Center for Arts Research at Southern Methodist University answers the question, “what is it exactly that you DO?”
• Writing for the Daily Beast, Joel Kotkin gleefully makes hay on what he characterizes as an admission of defeat from Richard Florida on the efficacy of his creative class theory, but Florida says not so fast. A lot of it is the usual academic pissing match BS, but the original Florida essay that Kotkin cites is pretty interesting and provides some new fodder for gentrification warriors. The money quote (as it were):
  

  On close inspection, talent clustering provides little in the way of trickle-down benefits. Its benefits flow disproportionately to more highly-skilled knowledge, professional and creative workers whose higher wages and salaries are more than sufficient to cover more expensive housing in these locations. While less-skilled service and blue-collar workers also earn more money in knowledge-based metros, those gains disappear once their higher housing costs are taken into account.

  In other words, as this article on the region-wide effects of Silicon Valley new money points out, “in a free market, people with money drive demand, which then drives supply.” Among other things, the article tells of a just-out-of-college startup techie paying almost $3000 a month for a studio in San Francisco, “simply because he didn’t know better.”

Lots of movement these past couple of weeks!

• Shannon Daut, formerly Deputy Director of Western State Arts Federation in Denver, CO, will be the new leader of the Alaska State Council on the Arts.
• Vincent Stehle has been announced as the new director of Grantmakers in Film + Electronic Media.
• Fidelma McGinn, Executive Director of Artist Trust, is leaving to become Vice President of Philanthropic Services for the Seattle Foundation.
• Lawrence Tamburri is out as CEO of the financially troubled Pittsburgh Symphony, and has been replaced by a board member.

ART AND GOVERNMENT

• The DC Office of Human Rights has challenged the practice of offering discounts on performances to professionals under the age of 35.
• Nobel laureate Nadine Gordimer is speaking out against a wide-ranging state secrecy law in South Africa that she and others say will be a blank check for censorship.

RESEARCH CORNER

• Dance/NYC has released a report on the state of dance in New York City.
• The Otis College of Art and Design is out with its second study of Los Angeles’s creative economy.
• NPR’s Patrick Jarenwattananon takes a look at the Future of Music Coalition’s Artist Revenue Streams survey from the perspective of jazz musicians. (includes video)
• The Foundation Center’s Director of Research, Larry McGill, has a great post on Philanthropy News Digest talking about the limitations of measurement in the social sector. The comments are also well worth reading.
• Assets for Artists is conducting an evaluation of its program, and good for them, they’re offering $100 a pop to low-to-moderate-income Massachusetts artists who are willing to participate in their de facto control group. This is the way to do it, folks.

IN THE FIELD

• Jeanne Ruddy Dance, a part of the Philadelphia modern dance scene for 12 years, is shutting down.
• The Future of Music Coalition takes a hard look at the joint venture between Groupon and Live Nation offering heavily discounted last-minute concert tickets.
• This month’s article on classical music entrepreneurship got quite a lot of attention, and is now one of the most-viewed Createquity blog posts all time. One of the groups profiled in that piece, Classical Revolution, got its own writeup in Toronto’s Globe and Mail. And the LA Times‘s music critic Mark Swed shared the experience of another group that sounds like it could have been included, wild Up.
• I’m hearing more and more about the Trey McIntyre Project, a dance company that purposefully transplanted itself in Boise, Idaho, after a nationwide search for a community to adopt. (Baltimore’s Single Carrot Theatre is an example of an ensemble with a similar immigration story.) TMP received a $450,000 ArtPlace grant to “limit its touring to remain in Boise, where it will engage the community to make dance and dancers ever present,” aiming to “generate local identity and pride equivalent to that fostered by the university football team.” More about that project here.
• As someone with little experience in the visual arts trenches, I found this article on the economics and ethics of artists being asked to donate work to benefit auctions illuminating. (Thanks, Katherine!)

BIG IDEAS

• Will someone please offer Michael Wilkerson a blog? The American University arts administration professor participated this past week in yet another blog salon from Americans for the Arts (this one focusing on the private sector), and offered two blowout posts: one proposing a national dedicated revenue stream that would more than double the federal money available to directly support the arts; and a second questioning the good that proposal would do because of the fundamental assumptions embedded in how arts support is distributed.
• Great job-hunting advice from the Mission Paradox blog.
• The Foundation Center’s CEO Brad Smith compares Occupy Wall Street and the Giving Pledge as social movements in this lighthearted post.
• Cool story from a while back about a foundation that lets all of its staff members (even the receptionists) participate in grantmaking. (You need a subscription to Chronicle of Philanthropy to view.)
• Did you know that Zappos (the online shoe retailer that was recently bought by Amazon) offers its new employees a chance to quit after an initial weeklong training period and pocket $4,000? Ian Ayres and Akhil Amar suggest that law schools offer their students a similar “anti-incentive” to quit after their first year, in order to help save everyone a lot of time and money.
• Very smart analysis from Isaac Butler and Matt Yglesias about geographic redistribution in the arts vs. the rest of the economy.
• Are you ready for the neuroeconomics revolution?

The gauntlet thrown down

Landesman cites the NEA’s 2008 Survey of Public Participation in the Arts in saying that performing arts event attendance has dropped 5 percentage points. More specifically, in 2002, 39.4% of U.S. adults (or 81 million) attended either a jazz event, classical music event, opera, musical play, non-musical play, ballet, or art museum or art gallery. In 2008 that number dropped to 34.6% (or 78 million).¹

This 5% of decrease in attendance share, interpreted as demand, is juxtaposed against a 23% increase in the absolute number of nonprofit performing arts organizations during the same time period, interpreted as supply. The 5% is a decrease in percentage of attendees among the adult population, and the 23% is an increase in number of organizations, without reference to size or whether the additional 23% produce events at the same rate as previously existing organizations.²

It’s not a perfect comparison to put the 5% drop in percent of attendance against a 23% increase in number of organizations, but the opposite direction and the size of both changes is still disconcerting. If fewer people are attending arts events, but more organizations are creating them, then this could be a problem, right? Landesman said that we can’t realistically increase demand, so we ought considerer reducing supply. I.e., we need fewer performing arts organizations, or those organizations need to produce fewer events. This idea, that there is an oversupply of performing arts, has been met with negative reactions among many arts workers, to say the least. That the NEA also wants to fund fewer organizations has ratcheted up the anxiety level.

My problem is not that Landesman wants to further ration the already-rationed cookie jar. And I do not believe he thinks he can or should use the NEA to prune the gnarly tree of performing arts in the USA. My issue is that Rocco (can I call him Rocco?) presented a simplistic view of the economics of performing arts, one that hasn’t been much expanded in the discussion since, by focusing only on event attendance and NEA subsidies. Landesman, along with a passel of concerned bloggers, is ignoring what makes nonprofit economics sustainable, strong performance in multiple markets.

The demand function in nonprofit performing arts

Performing arts nonprofit organizations operate in at least three markets: markets for what people will pay to see them perform, the financial markets for debt, investments and endowments (do not apply to all organizations, and are not further discussed here), and the markets for private philanthropy and status. Markets for philanthropy and status are almost entirely missing from the demand side of Rocco’s equation (and the demand side of this traditional economic analysis by Devon Smith).

Rocco speaks of contributed revenue as if it is just a policy-driven subsidy, like a subsidy to the agribusiness industry. Or, as Trisha Mead later put it on 2amtheatre.com, a subsidy for scientific research and development, which is not a bad analogy when describing NEA funding. Frequently, a subsidy is the result of political influence, but when it is a well-intentioned policy instrument, a subsidy makes it possible to get things that we or the government think we need, but just aren’t willing or are unable to pay for on our own. It’s inherently paternalistic–making us eat our spinach (or at least pay for the spinach with a wee miniscule share of our taxes).

For now, I will use the word subsidy for policy-driven funding that somebody, like the government or a foundation, thinks is good for us. A subsidy pays for the spinach. But the vast majority of contributed revenue to arts organization comes from individuals (as the NEA knows; see page 1 of this report), out of sheer appreciation for the work that is generated. When a small business owner contributes $1000 every year to the symphony in her town, she is clearly stating that they music she enjoyed that year was worth at least $1000 more to her, and her community, than what she paid in tickets.³ That is a reflection of demand. Not only that, but she’s signaling to this organization that she likes what they’re doing. If they’re paying attention, and subsequently doing more of what they think she will like, then they are responding to market forces, just in a subtler fashion, and in a market with fewer participants.

Consider how demand differs from person to person. Conceptually it’s not complex. For any given thing that people buy, some people like it more, and are willing to pay more, than others. That’s why the iPhone cost so much when first introduced. Apple knew that some people would want one so badly that they’d happily pay a premium price, and when all their fanboys had one, it would be time to cut prices to reach the next group. If you can get everybody to pay the maximum they’d be willing to pay, then you’ll bring in the most money. Economists and marketers call it price discrimination. When you’re selling tickets you can do this, to a limited extent, with differences in price for seats in the front verses seats in the back (not exactly price discrimination), or through dynamic pricing (Trisha Mead is a big advocate of dynamic pricing). But to really get the most money, you’d like a way for somebody who adores your product to pay you even more than the highest price you’re charging. That’s exactly what you can do as a nonprofit organization when you accept contributions. If you have a good development & fundraising staff, you will get as much revenue as possible given the demand that exists. It will not be reflected, however, in the event attendance figures extrapolated from NEA surveys.

Some contributors aren’t so purely motivated. Corporations may donate for the PR or advertising. Sometimes donors want to sit on committees with other donors to make business contacts or find golf partners. Sometimes, they just want to be associated with a highly respected arts organization, because it impresses their neighbors or clients. This is the market for association and status. Don’t tell the donors that you know this, because such status may be more valuable when not explicitly acknowledged. But truly, there is demand for this. Naturally, this status is more likely to be supplied by larger, longer-lived institutions than by smaller upstarts.

Further, if you want nonprofit arts organizations to conduct R&D for the art world, donors (including foundations) often want to fund exactly that. They demand artistic R&D by funding it.

The demand to supply, and the benefits of competition to suppliers

The market for association and status is not limited to donors, sponsors and underwriters. It extends to the labor market, as well. Rocco is admirably concerned that if performing arts organizations oversupply, against lower demand, then they will have to share what he sees as a shrinking revenue pie with more organizations, which will eventually force organizations to pay their artists less, or at least will make it harder to pay artists a living wage. I think he’s generally right, if the industry structure remains fixed. When, on Twitter, a theater artist suggests that the “model is broken” if he or she doesn’t receive a living wage, I often reply that if they want to be paid more, then less theater should be produced.

Of course, each individual can’t alter the fact that artists supply their own talents for less than what the market will monetarily compensate. And, they really shouldn’t try. First, artists do get some intangible compensation. Anybody working for free, or almost free, creating art gets the intangible benefit of doing something that he or she loves or is driven to do. The artist may also receive respect and admiration from friends. Moreover, many artists are working to build recognition and reputation (or status), so that they have better opportunities to secure paid work in the future. There is a value to intangible compensation. And while we can’t perfectly measure that value, we know it’s there. If it weren’t there, people would stop creating art for free.

Further, the assumption that oversupply will lead to lower revenue per artist is one of those ceteris paribus arguments common in economic theory. If all else is held constant, then more theater and fewer theater-goers leads to less and less money for each theater. In real life, however, ceteris never stays paribus. If you want your city to gain a critical mass of creative, talented theater artists, it helps to have more production. Higher competition within a market will naturally give more options to your theater-goers, making it more likely that they’ll be able to find something they like. This might even increase demand, though there’s no guarantee this will happen, or happen quickly.

However, this is not a recommendation to form more theater companies or chamber orchestra groups. According to the National Arts Index, the vitality of the arts tracks fairly closely with the economy. Recessions impact all areas of demand discussed here. Since 2008, we’ve seen several orchestras fold or come close. Worse, the NAI research indicates that even during prosperous years this last decade, approximately 1/3 of nonprofit arts organizations ran at a deficit. This is a more serious concern, worthy of further analysis, but we still can’t leap to the judgment that this is driven by oversupply.

Conclusion

Demand is a function of more than just ticket sales and attendance. You have to include demand to provide funding, demand to contribute, demand for status, association, and even demand for truth and beauty. Further, the root of oversupply, if it exists, is in artists insisting on supplying more of their generative work to their communities. Rocco can’t stop this even if he wants to, and I doubt he really wants to. If it were to stop, our arts ecosystem would be less vibrant, would hold less potential, and would be less motivating.

Notes:

1. If you analyze the attendance decrease in absolute number terms rather than change in percent, the decrease is 3.7%. But the decrease in percentage of U.S. adults attending is 4.8%, which Landesman has rounded to 5%. The attendance number includes attendance at for-profit events (it’s based on a survey of attendees, many of whom will not know or care if they are at a for-profit or nonprofit event), and the organizations number includes fairs, festivals, and media.
2. The 23% increase in number of nonprofit organizations is taken from the Americans for the Arts National Arts Index. It is the increase from 2002 to 2008 in number of 501(c)(3) arts organizations in the above categories, plus nonprofit media organizations and fairs & festivals. It does not include for-profit arts organizations such as for-profit art galleries. If you convert this to the number of organizations per one million people, for more apt comparison to the change in attendees as percent of the population, then the number of organizations increased from 294 per million to 341 per million, a 16% increase. This isn’t a breakdown by organization size. We can’t assume that the total output of events increased 23% just because the number of organizations did. The additional organizations could be tiny, with low production capacity. If we look at both changes in terms of absolute numbers, you can see that attendance dropped 3.7% and number of organizations (not necessarily number of events) increased 23%. If we look at both changes in terms of percentage of the population, then attendance dropped 4.8 percentage points, and number of organizations per million increased 16.3%.
3. On the value of the $1000 from the small business owner: sure, there is a tax deduction, too. But even if she’s a rich business owner, in which case she might give a lot more than $1000, the tax deduction will only be worth $350 at most (less if a large share of her income is from dividends or capital gains), which means she still wants to give away at least $650 to the symphony.

I realize that there are some potential holes to be plugged, but I’m interested to know what people think. Is there any reason, besides political will, why something like this couldn’t work in practice?

After reading some of the critiques of the idea in comments and talking to a few other people, I haven’t yet seen anything that makes me doubt its overall feasibility, but it’s clear that the implementation would pose several challenges. Here are the main problems that would have to be overcome, as I see them:

1. Privacy concerns.
   Jodi SC in the comments to my original post raised an expected concern, that she’s “not sure if [she likes] the idea of everyone having a card that classifies them by income.” Maryann Devine mentioned as well that a report on arts participation by college students indicated that they were embarrassed to ask for student tickets at the box office. I suggested that perhaps the Art Card could only be used online, thereby bypassing any personal interaction when receiving the discount and limiting the number of people with exposure to the amount of the discount. On the other hand…
2. The digital divide.
   It’s well known that lower-income people are not only less likely to own a computer themselves but also less likely to have access to credit cards or bank accounts, both of which would be required for online ticket purchases. I suppose the Art Card could work like a charge card that would need to be paid off every month, but that would add a whole other layer of complexity for the issuing body (most likely the city) that doesn’t seem worth the trouble. So, certainly, an online option should be available, but the card will still have to be accepted at the box office in order to promote truly fair access.
3. The potential for fraud.
   The biggest potential issue with price discrimination is that the discount buyer, having received the good, can then turn around and resell it to someone else, thus becoming a direct competitor to the original supplier. So, let’s say we had a program like this in place for the Nintendo Wii. Because I’m po’, I could buy my own Wii for, oh, $120, and then turn around and sell it on eBay for full price, taking profits that arguably should have gone to Nintendo (since I clearly didn’t care enough about the Wii to keep it). Moreover, in theory I could do this many times, enough so that I could establish a side business as a bootleg Wii-seller sucking all kinds of profits from Nintendo. (Of course, if I got rich doing this I would no longer qualify for the discount program, but that’s not an issue in the short term.) The reason this is not an issue for something like college financial aid is because (a) it’s not possible to “resell” one’s college admission, and thus finanical aid package, to another party; and (b) you can’t keep going back to college over and over again to keep getting the “discount.” Now, arts tickets have more in common with the first situation than the latter, but some simple safeguards can protect against this kind of abuse. First, all online purchases with the Art Card could be held at “Will Call,” and the arts insitution could make a policy to ask for either the card or photo ID when picking up the tickets. (This gets in the way of problem #1 above, but you can’t have everything, I guess.) Second, it should be possible to disallow multiple purchases from the same Art Card for the same show (or the same day). That means that couples would have to each apply for their own card, unless there were a “family edition” of the card for married couples filing jointly, perhaps. And then what about the kids? Well, many museums and so forth already have kid-friendly admission prices, so hopefully that wouldn’t be too much of an issue. After that, you run into some questions of fairness–is it right to enable a family of 8 to see a show in a small theater for peanuts and take away other people’s seats, for example? I’m not sure. There would have to be a line drawn somewhere, I would think.
4. Where will the money come from?
   To be sure, organizations could compensate to some extent for the loss of revenue from lower-income customers by raising prices for higher-income customers and tourists. However, there is a limit to how far they can go with this without losing market share to other tourist attractions and cutting into their donor base. I suspect that in order to make the program palatable to arts institutions, the city would have to offer, either directly or indirectly, some sort of subsidy — or perhaps a guarantee of a minimum level of income for the first year or two based on previous years’ performance. This, of course, raises the cost of the program and makes the political challenge harder — hopefully not by that much though.

Taking all of this into account, I’m still not totally sure myself where this idea falls on the continuum between “interesting” and “great,” but I definitely think it is worth discussing, especially as arts institutions around the country struggle with questions of accessibility, diversity, and community relevance. We should give some serious thought to whether these aims would be best accomplished with the current haphazard, every-organization-for-itself approach or a more formal, centralized infrastructure like the one I’ve described.

These strategies are certainly welcome antidotes to the often eye-popping prices of mainstream big-ticket arts events. In essence, arts organizations already pursue price discrimination to a significant degree, making it possible for both high payers and low payers to experience the art by having the former effectively subsidize the latter. But the instruments used to identify such consumers are quite blunt, aren’t they? I mean, take senior discounts for example. Sure, many elderly folks basically live off of Social Security and aren’t in a position to pay $200 for a seat in the orchestra section. But on the other hand, many of the museum’s or the opera’s biggest individual donors are probably over 65. They certainly don’t need a senior discount. Or take the free Fridays – it’s pretty easy to imagine a family that was planning to come on Saturday deciding to go on Friday instead to save some cash. In that scenario, the foundation’s grant amounts to little more than a boost to that family’s expendable income. Is that the most efficient way to accomplish things?

If this is really about expanding access to the arts, why not make tickets income-sensitive? All of this classifying and filtering of customers into students, seniors, non-tourists, etc. basically amounts to a guessing game about their income. If a customer exhibits certain behavior or characteristics, the logic goes, s/he is more likely to be in need of subsidization. But why not just go to the source?

Educational institutions have this down to a science. Instead of guessing about students’ financial situations, they have the students and their parents fill out a series of federal and school-specific forms and submit their tax returns, so as to make a determination about just how much financial assistance each faimly really needs. Invasive? It sure is, but considering the amount of money to be saved, I don’t hear too many people complain about that. And hey, no one’s holding a gun to anyone’s head to apply for financial aid. (For the record, I was able to attend Yale College at an approximately 80% discount thanks to that institution’s generous financial aid program, which has only become more generous in the intervening years. If I were a student there today, my parents probably wouldn’t be paying a thing.)

Here’s how this could work in the arts. A city-wide agency, like the local cultural council, could offer an “Art Card” to all residents. Eligibility would be based on financial aid criteria like that described above, particularly tax returns. This information would be fed into a formula that would then be connected to the resident’s account with the city agency. The Art Card would then act something like a supermarket loyalty card for its holder, with a preset individualized discount off of any posted price for participating organizations. So say I want to go to City Opera. I buy a $50 ticket, present my Art Card to the box office or the website form, and am told that my price for this ticket will be $37.16 based on my personal financial situation. This setup would be expensive to implement, but it would be fundamentally fair — and would have the additional benefits to participating organizations of allowing them to dispense with other hard-to-verify discounts and raise prices on their highest-income customers (just as colleges and private schools have been doing with tuition for years). It also benefits residents and extracts value from tourists, something any local government should be able to get behind. And if institutions are reluctant to play along, the city could always make participation in the program a requirement of receiving grant funds (at least for its largest institutions).

I realize that there are some potential holes to be plugged, but I’m interested to know what people think. Is there any reason, besides political will, why something like this couldn’t work in practice?