A model for creative growth

For years I have kept a copy of The Emperor’s New Clothes beside my bed. I don’t look at it very often but it is there to remind me of the danger of failing to see something which should be blindingly obvious.

Unfortunately, despite this precaution, the last few years have shown that, over more than twenty years as a professional musician, I failed to understand the significance of the astonishing contradictions between the objectives we generally state and try to adhere to in the arts community and the reality of the message we actually present to the world. In the summer of 2007, though, at the final session of the League of American Orchestras’ conference in Nashville, I experienced a true “eureka moment” – or couple of hours – as, thanks to a brilliant and inspiring presentation, the realisation dawned that (a) pretty much the entire performing arts industry has been operating with an unproductive financial model for as long as I can remember and (b) this has been immensely damaging to our cause.

The session provoked some intense thought and when I returned to the UK a week it was with a firm conviction of the importance of immediately testing an entirely new financial model. The results of this experiment have revolutionised my thinking about the ways in which we attempt to engage people with our work. I have re- discovered the optimism with which I started out in this profession and I am now convinced that if the arts community works together there is truly an opportunity to create a climate in which artistic enterprise can flourish.

Some of the problems

A changing world

Over the last thirty years, the financial model for concert presentation has barely changed, yet the environment in which we operate has changed out of all recognition. Perhaps we need to find new ways of operating in order to promote our core values in the context of a changing world.

Over the last thirty years there have been enormous changes in the world around us and although I believe that the arts have the potential to provide a stabilising factor and that we should hold to the core values we aim to promote, it would be foolish to expect that our operating circumstances will not change. I have had numerous private discussions with managers concerning what might euphemistically be referred to as “long-term economic issues” but collective gatherings – such as conferences – seem to concentrate on the peripheral, such as the impact of technology on our work, rather than the central issue, the enormous elephant in the room: the question as to how we plan to solve the issues created by a changing world and how to sustain our organisations in the long term.

Thirty years ago, the operating model for most small freelance orchestras in the UK – and there were many – was to generate revenue from two primary sources: paid engagements – for single concerts and tours – and recordings.   If the management wished, the profits from these could be used to subsidise other kinds of work.

Running such organisations was therefore a legitimate form of business in the traditional sense. In the intervening years, we have lost not one of these revenue streams, but both. Paid engagements still exist to some extent, but not enough to solve the problem and the decline in this area appears to be an ongoing trend.  Not only that but I suspect the relative costs of operation have increased, as a result of burgeoning red tape, and we have – to my knowledge – identified no significant, sustainable alternative sources of revenue. This clearly presents this sector with a major problem, one which indicates a need for a considerable shift in both thinking and practice.

For those orchestras which have traditionally presented their own concerts, this market has changed equally radically: thirty years ago, if one got the mix and the pricing right the traditional concert financial model produced acceptable results – growing audiences and consequently growing revenue. Whatever the business model of the organisation, it is public performance which lies at the heart of all that we do and the changing environment connected with this has had a broadly similar effect on the viability and sustainability of arts organisations around the world.

From my discussions with managers from a large part of the musical globe, though, I perceive a widespread frustration with the status quo and a fear as to what the future may bring. What seems clear to me is that we need to find the means to work together more effectively to promote our message and that the economics, which underlie all that we do, have the potential to make a major contribution to providing those means.

The value of the arts is under-estimated

The reason that the value the arts bring to society is not more widely appreciated is because we give unclear messages.   An artistic agenda means that we must show that a given organisation has only one objective: to serve its community through the production of artistic work.

There is a widespread feeling within the artistic community that the value of the arts to society is not sufficiently widely understood, as a result of which we suffer a significant financial penalty. I am inclined to endorse this view but I have come to the conclusion that this is pretty much wholly our own fault: the mechanisms we have employed to engage with the public we have not only failed to effectively promote our message but actively undermined it; we have taken the wrong messages from the world of commerce, tried to present our work in a manner which broadly apes commerce, in some cases its most unappealing sides, and therefore we can hardly blame the public for valuing it accordingly.

I believe that the state of artistic work is one of the barometers of a healthy society. This state is defined not through the presentation of x number of entertainment opportunities for the public but by a wider message: my theory is that the arts generate spiritual capital, which might be described as a form of greater understanding, both intellectual and emotional; we might say the arts promote smart thinking.

Some years ago, in response to a showing at a conference of extracts of an opera in an overtly modernised setting, I remarked to a colleague that rather than through presenting hideous transgressions of masterworks, the best way to develop a new audience for opera in that particular city would be for the audience of one of the opera theatres to go around to the other one night and start a riot. Doubtless the audience profile would change pretty rapidly! This suggestion might seem facetious but, although extreme, the scenario contains what I am sure is a genuine truth: that people who are engaged with the arts are likely to contribute positively to society rather than negatively.

To use the business vernacular, this means that they add value to society and, although we cannot yet quantify it, I believe it to be a real economic value. Although it is difficult to quantify it is nonetheless clear and, since we live in a world seeking quantification, the financial value of the arts might therefore be measured as the hypothetical cost of their absence.

This, I would argue, would be a true measure but simply through difficulty in quantifying it, we tend to adopt measures of success which are easier to assess, essentially those of the small shopkeeper: cost, net revenue, sales patterns. None of these has any true meaning in the case of art and the use of such measures has led to an uncomfortable balance between commercial and artistic – and in some cases political – objectives.

How does this translate in practice? Well, for example, many orchestras present a relatively clear hierarchy of output, the differentiation being between concerts the organisation actually wants to present and those which create a greater financial contribution.  It has always seemed to me that there is a tacit implication that those who support the more commercial areas of output are somehow inferior to those who support the artistic ones. If we treat one section of our public with such contempt, though, we can hardly object if their interest extends only to buying entertainment, not supporting the organisation. The “elite” could also reasonably assume that the money we are perceived to make from the commercial work is providing at least significant subsidy for the artistic. Either way, we have failed to engage their interest in helping to solve our problems because we are using an economic solution which undermines, rather than supports, an artistic agenda.

Quite obviously, every organisation presents events which (under a traditional model at least) have more commercial potential than others.   In the past we have looked to this value as being a critical key to survival but what if it is not? Or indeed that it is actually counter-productive, through closing the door to the public support we need to create sustainable organisations? Perhaps, if we could find some way to engage people with the idea of supporting the art form and creating sustainable organisations rather than just paying to visit events, it would widen appreciation of the value of the arts.

This means that we need a model which encourages more people to participate more fully in artistic experience.    I know that I am not alone in believing that the power of artistic experience is such that if only more people were become engaged with it, money would eventually follow naturally because more and more people would wish to see the work continue and develop. Quite simply, we have to create a scenario

where people attend events because they support the organisation – and they support the organisation because they attend the events. Then, little by little, the value of the arts will be more widely understood.

Defining success

Too much of our activity is dominated by faulty analysis: we have taken the wrong lessons from the world of commerce and through doing so we have not only failed to get across the right message about the value of the arts, we have actively undermined it.

I would argue that a great performance given to a small audience, an event which lingers forever in the minds of just a handful of people, represents a far more valuable contribution to what we might call the “World Bank of Collective Artistic Experience” than a second-rate (for whatever reason but we all know it happens) concert presented with minimal costs which sells out a huge hall – and in the final analysis turns a profit where the former example shows a loss.

As artists, in our hearts we all know that the first scenario represents success where the latter represents failure but we currently operate in a world where the opposite applies: our thesis is regarded as purely emotional and hence cuts little ice for we lack the means to provide any rational analysis for the benefit of quality against cost. What is worse, the financial result of pursuing genuinely enhanced quality is not only generally punitive, through generating higher costs, but in many cases provides little or no revenue value – or even a penalty. The World Bank of Collective Artistic Experience may benefit but this success goes largely unrecognised when set against short-term economic impact.

The fact is that we have allowed ourselves to be manoeuvred into a position where the measures of success to which we must work are mostly the wrong ones: the size of the deficit or the amount of subsidy required. There is no doubt that these are important but they only show a fraction of the picture. Personally I have a suspicion that we would live in a far better world if business success were measured according to something which for the sake of example might be defined as “net worth to society”, taking account, for example, of human impact, environmental impact and social value as well as profitability. I have an equal suspicion, and it is a sad reflection on the state of our society, that the adoption of such measures would be met with an outcry and blank refusal, on the grounds that this is an irrelevant and unsuitable measure. In the arts we have silently accepted yardsticks of far less relevance to what we aspire to achieve and which result in communicating confused messages.

The price of a ticket

In purely practical business terms the traditional financial model for concerts fails to deliver and the underlying philosophy is so deeply flawed that we should hardly be surprised that the wider world views our work with some ambivalence.

There is a fascinating dichotomy around the world about the way the public is invited to engage with the arts: some points of contact are entirely free, such as looking at virtually any great building, at least from the outside. It has always seemed to me

bizarre that gazing at the Dome of St. Peters is free, yet to look at Van Gogh’s Irises at the Metropolitan Museum costs $20. Raphael’s Madonna of the Pinks at the National Gallery in London was purchased for over £20m yet I can look at that, and other pictures worth countless millions in today’s market, absolutely free.

Generally in Europe, visual arts – apart from special exhibitions – are free but attendance at performance art must be paid for. As Star Trek fans might say, “not logical Captain!” There are similar dichotomies within the musical world everywhere: I have long been uncomfortable with the fact that many youth concerts or other kinds of community or special events are provided free of charge but, for those who become interested, actually becoming a concertgoer is relatively expensive.

Not expensive relative to a Manchester United subscription its true, but rather than casting jealous eyes at the revenue gained by such successful commercial operations, should we not consider from whence their success derives? One might reasonably argue that in the case of what we might term premium sporting events, the operators are using a form of entertainment as a mechanism with which to redistribute wealth in favour of those who already have more than plenty.

Astonishing though it may be, the fact that such a system can work so brilliantly or not is hardly the point: this is no way of operating of any relevance to an artistic enterprise. Surely an artistic ethos would involve an attempt to redistribute wealth in the opposite direction?

Still more bizarre to me is the sales tool which underlies so much of arts promotion around the world: that of giving free tickets to people who have shown no support for or commitment to the organisation in the naïve belief that they will be so enamoured with what they experience that they will return for a half price ticket and graduate eventually to full price. Admittedly this is an exact parallel of the classic drug addiction scenario and it has been a huge success for the dealers so perhaps there is something to learn here. But this is a system which openly penalises our existing supporters, implies that we put little value on our product and, moreover, steadily penalises increasing commitment. Again this is a practice not unknown in the business – or criminal – world but is it a message the arts should be pushing?

A variant of the above system is provided by an orchestra I know of which regularly presents a free concert of modern music at 6.00pm before a second one (subject, of course, to admission charges) at 7.30. The argument in favour is principally that such a system encourages experimentation. This may be true but I would dispute it on the grounds that it is experimentation in the wrong context and that the counter argument is more convincing: that this “ghetto” approach to modern music gives a tacit implication that the organisation does not value it – and nor does it expect its audience to do so. If we demonstrate that we utilise our sorely limited resources in such a way it is foolish to expect the public to support us.

So how much should a ticket cost? At present, pretty much everywhere (and especially if one takes local personal disposable income into account) prices for orchestral concerts are astonishingly similar, despite business models ranging from outright commercial to those with a huge percentage of government subsidy. An average of probably $40.

What is the basis for this price? In most cases it fails to generate the funds we need but is still a significant sum. When someone buys any commodity for $40, especially in a context where the structure provides for a better ticket at a higher price, it triggers an unconscious switch in the mind: that this is a commercial transaction and that in some degree the seller is getting an acceptable deal. If not, why is it for sale?

In the case of concerts, we know it is not enough so we tolerate this for a while but at some point we mostly ask for some kind of donation as well, begging the question either “well if you actually wanted $80 why didn’t you say so in the first place?” or “if the price is not connected to the cost of supply, why did I have to pay $40?”  By operating in this way we create a dangerous subliminal message: not merely that we are operating a commercial facility, but that we are doing so with a breathtaking degree of incompetence.

Over the last year I have asked nearly every orchestra manager with whom I have talked to explain the rationale behind their prices. In every case the answer can be paraphrased as “the price levels are what we perceive to be the maximum our audience will tolerate.” Until a little over a year ago this would have been my answer too.

Philosophically such a method of pricing has no place in any artistic mission, in fact it is positively contrary to anything resembling artistic values and gives absolutely the wrong message to the world: our objective is surely to share a special experience, a message which is significantly diluted, if not heavily undermined, if participation is clearly dependent on ability and willingness to pay.

The commercial analysis is no less depressing: in business there is only one scenario where customer toleration should be the arbiter of pricing and that is where it is perceived that such a system would increase profits, such as is the case with computer software for example. I am confident that a well-known software producer would still have become rich even if his operating system had been sold from the beginning at a fraction of the price imposed. Despite creating an obvious potential problem of losses due to piracy, I suspect that the price was set high to maximise returns because the judgement was that, as we have seen, enough consumers would tolerate it. In the case of computer systems it is a questionable policy but in the case of concerts, high prices generally do not generate higher profits, certainly in the long term: since we lose money either way, clearly we need a different solution.

The next question for managers is “what determines price increases?” The answer is that rising costs make it necessary and that audiences will tolerate this from time to time – and that although numbers drop a little, the net revenue increases. The impact of this on long-term financial health is obvious but even this were not the case, such a policy operates from the premise that we measure success purely in terms of revenue and that the number of people with whom we share the experience is immaterial so long as we generate a better return. Anyone with any true belief in the value of art, though, can only take the view that an occupied seat, whether paid for or not, represents a musical experience, whilst an empty seat represents a wasted one.

The traditional model therefore creates some significant problems, both of philosophy and practice.   What is more though, is the problem that it works contrary to a fundamental premise of business: if it does not make money, it is not business. By this definition, presenting concerts is not business, and indeed it is an activity far better defined as the mechanism by which we fulfil our mission to share art.

It goes without saying that we have to find a means of funding this mission but the assumption that our traditional model essentially of maximised event income is the best way to do this, whilst not necessarily false, is also by no means a given. In trying to get as close as possible to covering costs from event income, we have overlooked the fact that this solves nothing if the organisation is still losing money. What is more, any well-managed business seeks not only to survive and to be profitable but to grow yet the traditional concert model fails not only to produce even a manageable status quo but certainly gives no chance of long-term artistic growth.

What we need to do is to (a) fulfil our mission to share art and (b) figure out how to cover the cost of doing so on a sustainable and growing basis. These are clearly two related issues, but perhaps they are not so directly related as we have tended to assume.

The price of friendship

The traditional model actively works against providing a fertile environment in which to develop our support base. As anyone likely to be reading this surely knows, artistic experience of any kind is dependent on our being open to receive it and this in turn involves trust in the people with whom we share the experience. It is our failure to return the trust of those who trust us and support our work which underlies many of our current problems and acts as a barrier to growth.

Over a long period of time as an artistic community, apart from a body of work of all kinds, we have created one other key asset: supporters for the work we produce.

Perhaps there are not enough but I am sure that all performing organisations count among those who support their work people who are prepared to book tickets for concerts even when the music to be performed or the artists performing it are far from being their favourites. These people continue to support us because they believe in the principle of what we do and in its ultimate value to society.

There is a widespread fear that such people are a dying breed and that we are being sucked into a world where what we do is only seen as entertainment; a world in which we are judged solely according to popular appeal and short term financial return. If this is truly the case, though, whilst we still have some loyal supporters then perhaps we should consider how we can work with them towards alternative goals. If we are to do this we should first consider where these people may have come from and the nature of our relationship with them.

Probably the answer to the latter is simple: if we think about the nature of relationships, our relationship with those who support the arts should surely be closest to that of friendship.  These people are our friends. How did we acquire them? If we theorise about their original introduction to our work, all the evidence I have ever encountered suggests that they had some kind of introduction to music

which created a spark to discover more.   What kind of introduction? It hardly matters for the purpose of this argument and was doubtless different in every case, but I would hazard a guess that in almost all it did not involve a decision to go and buy a ticket for a concert. Buying tickets came later, once the spark had ignited.

Once the fire was going they stayed in the game and played according to our rules. That does not necessarily mean, though, that we have been playing by the right rules or that we have nurtured their support and interest in the right ways. Perhaps we have failed in this regard and those left are only those of such diehard loyalty that, however horribly we might abuse their support, we cannot shake them.

Perhaps the reason that we find it hard to find similar levels of support from younger generations is that we have failed to adapt in the right way to changes in the world around us; changes which have meant that our traditional support base is not self- generating. Perhaps we have been complacent.

In any case, what seems incredible to me now is the fact that some people are still with us and that the great majority have not fallen by the wayside: it is a great testimony to the power of artistic experience for I think that we have collectively been guilty of a widespread abuse of the goodwill of our supporters.

In what way? Well, it goes without saying that the mission of any artistic organisation is to share artistic experiences of some kind. It is the act of sharing with an audience which defines performance, otherwise it is only rehearsal. This is not a controversial suggestion but if we accept it then surely the corollary is that we should share the performance experience with as many people as possible. The vital point is to share art with as many people as we can, unhindered by financial considerations; to understand that if we share the magic of our work with people and if they trust our artistic skills and objectives, then they will in turn share with us by contributing funds to enable us to continue to operate.

Yet what have we been doing? Rather than sharing our work with those who most value it, we have for years been asking those who support us to buy tickets for the very events which form our mission. Through doing so we have been undermining the nature and value of the friendship relationship we seek to create through reducing it to a crude commercial transaction.

My experience of life entirely supports the theory that most people are quite sensitive to expectation placed upon them, whether explicitly or implicitly and they behave accordingly. The most effective way to motivate people to do anything effectively is to openly show trust in their ability to accomplish the objective. When we oblige our supporters to pay for admittance to our events we are showing a lack of trust in the very people we exist to serve most loyally and who, if only we would let them, most wish to help us. Still worse, the general trend is that over time we increase ticket prices and wonder why the number of our supporters reduces. No wonder only the diehards are left!

What we need to do to look through the other end of the telescope and seek ways to reinforce the mutual reliance and trust which is the fundament of friendship. Quite simply, we must take courage and cease to demand that our friends pay to participate in our events.

Rather than continuing to operate through systems which inherently show a lack of trust in our supporters we must instead trust in their desire and willingness to help us reach shared goals. The obvious solution is to adopt a financial model involving the separating of participation from financial contribution. By doing so we can also eliminate the existence of any commercial transaction in our relationship with our public and consequently enhance their understanding of how and why we operate: if they can see that if their participation has no commercial basis they will equally see that we need financial help.

We all know that building friendships is about giving – at least until one has reached some kind of understanding – and when I invite someone to my home I never charge admission. To do so would not only leave one somewhat lonely, it would be regarded as a minor manifestation of insanity. The analogy of this situation with our work and mission in the arts is absolutely clear, yet it is one we have collectively chosen to ignore.