If you’ve been at all persuaded by my arguments thus far about artists taking control of the means of production through the purchase of shares in a company, you’ve figured out that there is really only one answer to the question “for profit or nonprofit?” that matches up with the values I’ve expressed: for profit.
I know this goes against conventional wisdom that has developed over the decades since William J. Baumol and William G. Bowen published their 1966 report, Performing arts, the economic dilemma; a study of problems common to theater, opera, music, and dance, in which they made the case that the arts required government and foundation support because there was simply no way for the arts to be self-sustaining in a contemporary economy. To summarize their reasoning: the arts can’t take advantage of efficiencies created by technology in the same way other industries can because it still takes the same number of actors to perform Hamlet today that it did in 1601, and the same number of musicians today to perform Betthoven’s Fifth Symphony as it did in 1808. All those people need to be paid. In order to cover costs, ticket prices would have to be raised so high that only the wealthiest and most committed citizens could afford them. In a democracy, this is unacceptable.
Their arguments were persuasive at the time, and still are to some extent, and they gave added support to the necessity of the newly-established National Endowment for the Arts as well as encouragement to foundations and private donors to pull out their checkbooks. This was the time when the Ford Foundation and the Rockefeller Foundation were throwing around money like confetti. Baumol and Bowen’s arguments continue to form the foundation for nonprofit management and fundraising today. So am I simply being contrary by going in another direction? Here are my reasons for prefering the for-profit choice for theater startups.
- A nonprofit is led by a Board of Directors who “do not have any financial ownership of the organization.”
- So when an organization assumes nonprofit designation, the artists once again become employees, not owners. They don’t directly benefit financially (i.e., profit is not distributed to shareholders) from any of their artistic efforts, and thus the immediate connection between artistic decisions and financial outcomes is severed. Artists collect their paychecks and leave. I sincerely doubt that Shakespeare would have written three plays in 1599 if he was going to get the same salary for writing two.
- The Board of Directors can fire anyone in the organization, including the founders and artistic director.
- Essentially, the artists work for the Board–that’s the nature of being an employee. Let me give an example of how this worked in real life. In 1980, the Guthrie Theater hired internationally-acclaimed Romanian director Livieu Ciulei to be their Artistic Director, resulting in a great deal of glowing media excitement. Five years later, after a conflict with the Board, he resigned (likely before being fired). Guthrie Board member David Speer was quoted as saying, “When you go to theater in Bucharest or Prague you are looking for some nuance or comment you can transfer to what goes on around you….In this country, you read outrageous things in the paper and see them on television, so you go to the theater for escapism.” Even today, the self-confident ignorance displayed in that statement takes my breath away, but it isn’t uincommon in the least. It is rarely the case that Board members bring any professional knowledge to their position; rather, they are often chosen because they either have money themselves or know a lot of people who do. These people often believe that their business acumen can be directly applied to the running of the theater: “Give the customer what they want.” It’s a different ball game.
- A nonprofit does not distribute profits to its owners, but rather puts any profit back into the organization.
- Again, I think artists should benefit from their own successes, and be pinched by their failures. I think it is healthy for artists to learn how to balance artistic and business considerations, because it keeps them in an honest relationship with their audience, rather than with their donors.
- Nonprofit status too often creates institutions.
- I’m suspicious of institutions. They tend toward sprawl and stagnation. Eventually, someone will justify not making a change by intoning, “Well, you can’t turn a battleship easily.” I think arts organizations ought to be lean and agile in order to quickly respond to new developments in the art and in their audience. The circus, not Disney.
While I prefer the for profit model, that doesn’t mean you can’t create a company with a so-called “triple bottom line” that commits the organization to considering more than just profit when making decisions. But you can do that without creating bylaws and boards and all the nonprofit rigamarole.
But what about the main reason for being a nonprofit: being able to offer tax deductions for contributions? Well, that’s true–you have to find your money through loans, investors…or Patreon. You can’t rely on tax deductible gifts. And maybe in 1966 this would have been a big deal. But today, when the NEA budget is woefully inadequate and when foundations and donors are shifting their focus to other pressing social problems, the pursuit of unearned income is getting more and more difficult. And whatever money you do locate is usually project-based and can’t be used for operating expenses. So what often happens is organizations desperate to receive funding will twist their mission and their focus in order to qualify for some grant that will provide them with 50% of what they ask for while expecting the same outcomes. They’ll then cut costs by staffing the grant tasks with interns and part-timers at low salaries, and then skim off the rest.
I have spent fifty years hearing theater artists of every generation gesturing wistfully toward the subsidized European theaters and, like Vladimir and Estragon in Beckett’s play, waiting year after year for Godot to arrive with a sack of gold. It’s not going to happen; it’s time to get real.
Finally, what a pain in the butt creating a nonprofit is. There are all these governmental hoops and reporting requirements, and grant applications require page after page facts and figures and narratives,. and you don’t actually get tax-exempt status for donations or grants until you’ve been in existence for a couple years, unless you can get another nonprofit to provide fiscal sponsorship… I dunno, I just want to get to work.
However, if you’re attracted to the nonprofit model, you can learn a LOT from Fractured Atlas, who “help individual artists and arts organizations at every level of the cultural ecosystem, in every creative medium by providing fundraising tools, educational resources, and personalized support.” I remand you to their knowledgeable care.
Here, though, we’re looking at partnerships.
<– forming a company (part 3): money (get back)
forming a company (part 5): why a playwright should be part of the company –>
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