{"id":2429,"date":"2020-08-23T21:59:25","date_gmt":"2020-08-24T04:59:25","guid":{"rendered":"https:\/\/www.artsjournal.com\/diacritical\/?p=2429"},"modified":"2021-05-16T15:39:02","modified_gmt":"2021-05-16T22:39:02","slug":"five-things-1-business-models-and-a-9-billion-idea","status":"publish","type":"post","link":"https:\/\/www.artsjournal.com\/diacritical\/2020\/08\/five-things-1-business-models-and-a-9-billion-idea.html","title":{"rendered":"Business Models and a $9 Billion Idea"},"content":{"rendered":"\n
\"\"
Image by StockSnap<\/a> from Pixabay<\/a><\/figcaption><\/figure>\n\n\n\n

NOTE: <\/strong>This is the first of five posts with my thinking on addressing long-term problems in the arts. My overview framing of the five can be found here<\/a>. My case for the once-in-a-lifetime opportunity the pandemic shutdown offers to reinvent is here<\/a>. I don’t have any easy answers or magic fixes. This is an attempt to organize my observations (from my vantage point)<\/em>
and try to provoke fresh thinking.<\/em><\/p>\n\n\n\n

The pandemic has exposed the poverty of our infrastructure across sectors: medical, political, postal, financial, logistical, and more. Add the crumbling of our roads and bridges, and it’s easy to see a pattern — we’re a country that has taken for granted a facade of competency but has failed to invest in or maintain the mechanisms that make it possible behind the scenes … until a disaster hits. Katrina. The financial crisis. COVID.<\/p>\n\n\n\n

Consider our cultural infrastructure: it’s been failing for years, and while the pandemic shutdown hasn’t revealed previously unknown weaknesses, it both puts an exclamation point on existing frailties while blasting away remaining resources and goodwill being thrown into the breach in attempting to survive this crisis.<\/p>\n\n\n\n

The poverty of our cultural infrastructure isn’t just in non-profit arts, where philanthropic and corporate funding has lagged and production expenses have increased, but in for-profit culture too. The digital revolution has disrupted virtually every creative industry. The internet has decoupled the ability to access content from the need to pay for it. A good example is the music recording industry, which sold $22.4 billion worth of music in 1999, at the height of compact disc sales, compared to last year when it sold $11.1 billion as streaming dominated and consumption was significantly higher.<\/p>\n\n\n\n

\"\"<\/figure><\/div>\n\n\n\n

Great for the consumer, but when Spotify pays only $0.00318 per stream<\/a>, <\/strong>the rights holder(s) of a musical work earns only about $3,180 for a million listens. Such disruptions have played out across creative industries over the past two decades. <\/p>\n\n\n\n

So now the virus has shut down whole sectors of the creative economy, commercial and non-profit alike. Foundations are rushing in with emergency funding. A consortium of national funders banded together<\/a> to offer hundreds of millions in aid. The Ford Foundation says it will borrow $1 billion<\/a> to help. There has been a campaign to lobby the government to create a new WPA program for the arts, modeled on the 1930s Great Depression model. Live music venues lobbied Congress for $10 billion in the “Save our Stages”<\/a> Act to tide them over. Congress so far has provided $300 million in the first CARES act<\/a> for non-profit arts, but as Americans for the Arts points out:<\/p>\n\n\n\n

As of July 13, 2020, the Coronavirus has had a devastating $9.1 billion economic impact on America\u2019s arts sector with a 67% unemployment rate among artists and gig workers. Since the first U.S. case was reported in January, 96% of arts and culture organizations have cancelled events\u2014some as far out as 2021\u2014resulting in a loss of 325 million ticketed admissions and billions of dollars more lost in event-related spending by audiences at local businesses (restaurants, lodging, retail), impacting 533,000 jobs.<\/p><\/blockquote>\n\n\n\n

The federal government, which makes the NEA, NEH and CPB go through an existential funding dance every other year, and whose funding is less now than it was in the mid-80s<\/a>, is unlikely to help on the scale needed to avoid mass defaults in the cultural sector. Nor is Congress, even under Democratic control, suddenly likely to wake up and significantly increase its annual support.<\/p>\n\n\n\n

Traditional arts funders will be weakened by their emergency efforts and less able to invest in culture going forward. And whatever emergency aid is possible will, at best — at best — save some cultural institutions, but surely leave them severely diminished and weakened going forward, propping up business models that already weren’t working very well. <\/p>\n\n\n\n

And the aid so far is doing little to help artists outside institutions: our funding models were designed at a time when institutions were at the center of our cultural life, and those days are long gone. One can see the history of the internet as a subversion of institutions, but the non-profit arts model, created in the 1960s, is largely unchanged and has failed to adapt, even in the midst of enormous change.<\/p>\n\n\n\n

And yet…<\/h2>\n\n\n\n

It’s easy to talk about the stresses of the cultural sector, but in context of the national economy, the creative sector is huge and successful. There are many business models for culture, many of them successful. The creative industries’ production, as defined by government statisticians<\/a>, was worth $878 billion in 2017<\/a>. Taken together, creative industries including “core arts” ($180 billion) accounted for 5.1 million jobs and 4.5 percent of GDP, making it America’s second largest sector after retail.<\/p>\n\n\n\n

But just because creativity is popular and glamorous and generates lots of money, doesn’t mean it’s healthy, and again I come back to my infrastructure argument — the facade might gleam, but the mechanisms that support it are rotten. <\/p>\n\n\n\n

Not just on the non-profit side. When we talk about culture models, we separate non- and for-profit culture for a number of reasons, both obvious and not. And those on either side often eye one another warily, even though many artists cross back and forth across the line wherever the work happens to be. But it’s impossible to think about commercial culture — design, movies, video, music, dance, broadcast, writing, fashion, publishing, entertainment, etc — without the significant contributions of the non-profit side.<\/p>\n\n\n\n

Europe and Canada have very different models, dependent primarily on government funding, with much less philanthropic and individual giving. But those models too have significant limitations (which could be a topic for a whole different post). The funding models have created very different cultural production aesthetics and expectations but each is also suffering.<\/p>\n\n\n\n

When we talk about trying to fix the arts model in the US, non-profits tend to think about it in only non-profit terms — more government funding, more philanthropy, tax breaks, etc. and in the reform hierarchy, for good or bad, preserving traditional institutions always seems to be at the top of the list. So non-profit models have stayed relatively static for 60 years, even as their ability to fund the arts has eroded and innovation has lagged. <\/p>\n\n\n\n

Much of the artistic poverty, lack of leadership and equity struggles across many of our institutions is because the non-profit \/institutional model is broken — resources are so scarce and institutional survival is such an all-consuming boulder to push that the marketplace of ideas has ceased to function effectively. Cost structures are locked in by calcified institutional silos, union contracts, insufficient investment in technology, and funder mandates that force institutional behavior. I’d suggest that much of the institutional bad behavior is because the field is so under-resourced and the need to raise money plays such an outsized role.<\/p>\n\n\n\n

For-profit models rise and fall all the time, consolidating and selling off, going through vertical integration, then blasting it apart. Artistic vitality waxes and wanes as the models change — for example, movies are at a creative ebb right now while TV is vibrant and experimental. Both industries are currently undergoing enormous transitions as streaming takes hold. But as technology disruptions continue, the wreckage along the way is significant.<\/p>\n\n\n\n

So what to do?<\/h4>\n\n\n\n

Few industries in America are simple buy\/sell transactions. Agriculture functions on an elaborate system of federal crop subsidies to even out losses and keep the larger farming industry viable. Motorists don’t pay directly to use a road every time they want to go somewhere; we pay gasoline- and motor vehicle taxes to subsidize the larger road system. Readers of newspapers traditionally haven’t paid for each story they read; journalists gathered up as many readers as they could and sold them to advertisers. I don’t watch ESPN on my TV but my cable provider makes me pay a monthly fee that includes it.<\/p>\n\n\n\n

The dominant tech industry model is to give away product to gain customers, then turn around and sell those customers’ attention and data to others. It’s a business that in addition to making enormous money for the companies also pays for the infrastructure that powers the web and its innovation. (Notice one infrastructure than hasn’t failed during the lockdown is the internet, despite getting slammed with exponentially more use.)<\/p>\n\n\n\n

In each of these cases (and many more), the infrastructure that keeps the system viable — even possible — is funded as a routine part of the individual transactions that run atop them. Where is that mechanism in the arts? I don’t profess to have the magic answer, but I think we need to acknowledge that the fact we can’t pay the full cost of making culture only out of ticket sales isn’t a failure — many so-called for-profit sector products are subsidized through a variety of infrastructure mechanisms and their consumer cost doesn’t reflect the true cost of making them. It’s just that in the arts, we call those subsidies charity, and the reality is that altruism is rarely a good model to depend on. So now we need to figure out something better.<\/p>\n\n\n\n

We need:<\/p>\n\n\n\n