Monday, March 21, 2011

The Rise of With-Profit Endeavors: Trend 2 of 7 for the Future of the Arts

This is part three in an ongoing series of posts on 7 Trends for the Future of the Arts. Originally published (and partially reprinted here with permission of the publisher) in the book: 20 Under 40: Reinventing the Arts and Arts Education for the 21st Century. I'm presenting selections from each trend, and you can follow the whole post series from here. If you are interested in these arguments, check out and think about purchasing the book here.

Trend 2: The Rise of For Profit and With Profit Endeavors:

Today’s combined economic and business practice turmoil also creates a perfect environment for strategic outside players to unseat established organizations. It’s not that the established players in the music industry, for example, didn’t see that change was coming due to digital technology. The changes brought about by digital technology are so disruptive precisely because in order to embrace the new paradigm, one must undercut an existing, often very profitable business model.

Likewise, it is difficult for established arts organizations to embrace change that might undercut their current business models, but this leaves room for others to enter the sector. One could argue that such a shift is already occurring today. For example, the amount of promotion, fundraising, sharing, career-building, and market-creation of such new online arts discovery services such as YouTube, Flickr, Spotify, Pandora, KickStarter and Etsy alone, all of which started very small and outside the nonprofit arts, have likely had more impact on the arts than any six nonprofit cultural organizations can claim in the last five years.

It isn’t impossible to imagine such services being created, much differently, in the nonprofit arts sector. For example, if a film festival had thought broadly about the combination of cheap access to the means of production and distribution and the growing forces of participation and disintermediation, it could have created YouTube. The site might look somewhat different, offer more curatorial sidebars and probably have a less catchy name, but it arguably should have been possible.

There was a time in the arts world when small arts organizations contributed to this sense of innovation. Organizations such as Nexus Press in Atlanta served as incubators for cutting edge book artists regionally, and the Off-Off-Broadway theater scene acted much the same way, pushing the field forward, taking chances and launching many careers. Today, however, that sense of excitement and innovation is sorely lacking from the arts sector. Innovation, risk-taking, and flexibility have migrated back to the for-profit sector, and cool new ideas aren’t brought to fruition as nonprofits, but as Internet start-ups that capitalize on the access to funding and the risk-taking, free-for-all atmosphere of the new digital economy.

Similar innovations could be developed in the nonprofit arts sector today, but due to the risk averse, highly structured funding environment that has evolved in the nonprofit arts sector, it is more likely that several organizations will get funding from a Foundation to think about and strategically plan for the future of their field. While they workshop their ideas for the future, two people in a garage will probably out-think them in two weeks and launch the next big thing that further disrupts the ecology of the arts.

Building a culture of entrepreneurship in the sector will require fresh thinking and innovative approaches to funding and support that aren’t readily apparent. Few nonprofits have unrestricted income with which to explore new, especially risky, programs and fewer still have enough general operating support to hire and pay the usually higher salary expectations of the skilled workers to build such new ideas. Most foundations won’t fund a new nonprofit until it has been around for three years, require grant proposals that take longer to write than most business plans and they often discourage any risk-taking, preferring “tried and true” programs.

In contrast, a sense of experimentation often, and importantly, without true strategic planning but rather a sense of “let’s just try it because it’s cool” is what works for most innovative companies and is what’s missing (and actively discouraged) from within the nonprofit arts. Ironically, this is what many arts organizations expect from their artists—experimentation and risk—and artists seem to flourish given this freedom. Unless this sense of exploration is recaptured, most innovation will likely be led by the for-profit sector.

If neither non- nor for-profit models seem to work perfectly, perhaps the arts sector should explore new ventures at the junction of the two, combining the assets of the for-profit and nonprofit sectors to realize both financial and social profits. This new space, perhaps called with-profit, as in social goals “with profit potential,” promises a rich field for the arts sector to explore. Such experiments could be undertaken by existing or new nonprofits on their own, in partnerships with existing for-profit organizations, or by creating new for-profit subsidiaries and/or affiliates of nonprofit arts companies. With-profit endeavors could use nonprofit funding to accomplish that which the market won’t support, while for-profits would step in to capitalize on those items that have commercial appeal. For example, perhaps nonprofit arts funding could be used to seed the development of 12 new plays, with a commercial arm (or separate entity) ready to step in and take the one project with the most promise to market. Of course, this would need to include some remuneration to the nonprofit and would require some clever legal thinking, but it could be applied to any number of art forms.

A with-profit partnership would allow a nonprofit to continue to serve its underlying mission, and maintain its tax status, while providing a vehicle for exploration of profit-making activities. For-profit partners (or divisions) could bring in investments, explore more robust marketing and program development with other for-profit companies and maintain an eye on the “double bottom line” of profits and mission. Such alliances are not uncommon in the health and science sectors and should be considered by arts organizations as well.

Next Up: Trend 3: Disintermediation, The Audience as Curator.
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Rick Falls said...

It isn't just the arts that are in need of tweaking to fit the internet revolution, it's EVERYTHING.

"The Arts" went from being right brained to left brained, and now they need to make the same radical changes that virtually every other "too big and too stodgy" to function entity does, from the local level of government and businesses all the way up to the federal government and the largest corporations.

Brian Newman said...

Thanks Rick - you're correct, it's everything. The focus of this book (from which this is adapted) was just on the arts, but it's hard not to elaborate on how it hits everywhere. More on that soon I hope.