Saturday, October 1, 2011

Front End or Back End? Where's the Real Action

How do we produce the vast majority of shows in Ireland. If we're honest a small number of highly motivated people multitask for far less time than the project needs, pay themselves a pittance and by some miracle a show opens on time, runs for a very short period to an average of about 55% capacity in an auditorium that couldn't make back the cost of production even if they sold out.

For most shows that's it. Some shows develop legs, they do the festival circuit for a bit, grow tired and fade away. But in terms of the overall industry these shows leave no legacy. All that work, that funding is gone. Get drunk and plan the next one.

Take a moment and think what would happen if every other industry used the same approach. It would be like a developer building a whole load of houses and then not bothering to sell them, just walking away and leaving them empty....

Just a second, am I suggesting that the economic meltdown happened because the  construction industry borrowed their business model from the arts!? There are similarities: the developers started to believe that all the money was at the front end, at the point of construction, and so they kept building and borrowing and destroyed their own market. In a sense the theatre sector has been doing the same thing and making the same mistake. (The film industry displays the same symptoms by the way). The theatre industry for years has focused on the front end, the point of production, believing that this was where the money was. Very few people knew, or believed, or understood that money could be made at the back end, at the point of sale (and we're not just talking about tickets here; Back end includes royalties and sell on values, territory options, film rights etc. David Pugh, one of the West Ends leading producers has pointed out that with many projects the real return is not in the theatre run but in the the other property rights acquired). 

So, both theatre and construction share an unsustainable business model (believing that money is made at the point of production and not the point of sale) and they both deal in property. Chunks of land on the one hand, bundles of intellectual and artistic property (scripts, productions, performances) on the other.

In the same way that the flow of money into construction dried up, the money available for production is drying up. State funding will be cut even more, we don't have any tax incentives in place to attract investment in theatre from those able to invest, and the big shiny sponsor on the big white horse is not going to come over the hill because the sector is too fragmented and too uncoordinated (these are the words of several senior brand managers and one international sponsorship broker). Oh, and the audience have less disposable income and for many of them, theatre is just not value for money.  In the face of all this can we turn a profit, reinvest some of that profit  and make the theatre industry sustainable?

There are a couple of things that can be done. Sell more tickets (subject of a later blog); expand the audience size for any given event (subject of a later blog) but I believe that even before that we need a fundamental rethink. Producers and production companies really need to consider how the properties they invest in can best be exploited, and they need to invest in exploitable properties. They and the state funding agencies need to rethink and move away from the "grant aid" mentality and start thinking about this relationship as an investor relationship. Yes, funding for the arts carries all kinds of secondary socio-economic benefits and there are all manner of multiplier effects which are great, but lets - for the sake of argument - keep it simple.

In the classic funded situation. A project receives an amount of money from the Arts Council which is invariably less than the cost of the project. A deal is done with a venue whereby either the venue, (funded by the Arts Council and Local Authority), "invests in" or does a box office split with the project. Any remaining shortfall in the production must be "met" by the producer/production company either from their own resources or from their "share" of the box office. The main sources of money are the Council, the Venues (using Council money), the box office and the production company (funded by the Coucil). The problem here is clear - the risk is too high, the return too low. (The audiences too small in many cases to justify the cost of the production, but that's a different days work)

The Arts Council is clearly the principle investor but at this time it it receives funds from central government which it disburses to selected artists. Money comes into the Arts Council, money goes out of the Arts Council, money is gone and no obvious wealth is created.

What if the council - as  the primary investor in the sector -  looked for a return on that investment. To use one very simple example and one very simple model lets take a theatre production in Project Upstairs. The event is budgeted at €80,000 and the potential take is €100,000. The Council should underwrite the total cost of the production, (ensuring that an effective marketing plan is in place and correctly budgeted).

The Council should then take back all of the first 50% of the potential  box office (€50,000), 50% of the box office from there to the 75% point (€12,500) and 25% of the balance (€6250). The council has recovered €68,750 of its grant (86%!), the producer has earned a profit of €31,250 (which can be used for further productions or development work) and no unacceptable risk has occurred.

If you applied this to every project funded by the Council,  then when a show has the potential to "go commercial" the council, as well as all the other artists involved including actors, get to share in that success.

It's possible that if you apply this model of investment in property to all the other arts supported by The Arts Council, then in a very short space of time the arts sector would become a net benefactor of the state as opposed to a net beneficiary. Impossible? Bear in mind that approximately 70% of all funding goes right back to the state in various taxes already so we only have to earn enough to bridge that 30%.

Look at it this way, if we put away the medieval  model of patronage and disbursement that characterises state funding models, and if we charged the funders to invest public money, taxpayers money, in such a way that wealth is created, allowing the successful artists to repay the public investment in their work over time then the Arts Council can make a simple, direct and honest case that it is a profit and not a cost centre in terms of public accounting.

A whole lot of stuff has to change for this kind of model to work.  (I was told, by an arts council officer,  that the main reason it couldn't work is that the council had no mechanism for receiving money.....I guess that's that then), but the principal change needs to occur in the  relationship between the Arts Council and its clients.

The council should not concern itself with the nature or the quality of the art or the artists it supports. The artists and the public will work that out. The council needs to begin the process of investing in a robust and sustainable infrastructure that has the capacity to provide opportunities for all artists. A sort of Cultural IDA.

On the other hand the artists and producers/production companies need to realise that they are in the property game, and that a property is developed in order for it to be sold on; and that the security and freedom they seek in and for their work as artists lies at the point of sale not at the point of production.

So, if a sustainable industry is to be established as we head into a very bleak future we need to understand what business we're in, we need to realise that the real money, the stuff that allows for growth and investment occurs at the point of sale, and the model of funding and the relationship between funder and clients need to change.

Seems simple enough. Blogging is fun.