Thursday, August 25, 2011
The Roses of Success
As I reach the end of my master’s program in entertainment business, I thought I’d take a look at reasons why many theatres fail. It happens all the time. Most of us tend to only hear about the major failures. Does this mean live theatre, as we know it, is dying in America? Not hardly.
According to the 2008 National Endowment for the Arts survey, nonprofit theatres with an annual budget of $75,000 or more have doubled in the past 15 years. That’s the good news. The bad news is that audiences for non-musical plays have steadily decreased from 13.5 to 9.4 percent of the general population.
The NEA survey goes on to state that theatres are doing a good job of balancing earned income against contributed income. A good job? The report states that earned income fell 13 percent since 1990. I’m unsure how they see this as a good thing. In fact, I believe the dependence of theatres on contributions is one primary reason some theatres fail.
I am all for public support of the arts... but at what cost? I understand funding new companies, new work, experimental programs and arts education outreach programs. Where or when does it stop? I think it’s time for theatres in America to start being held accountable for their financial responsibility and stop using ART as an excuse for not running their operations as a business.
I know I could take a lot of flack for that statement but it’s true. I’m really sick of hear how the arts are not profitable and can’t sustain themselves. Does this really make any sense? What about the over one billion dollars in Broadway grosses earned by commercial theatres?
Art is everywhere around us. If you breathe, hear, touch or see...then you experience art every minute of the day. Yes, popular art forms change and some disciplines have their ups and downs but all art forms are crucial to our society.
I believe if those in the theatre community would stop lamenting the pending death of live theatre and focus their energies on promoting and celebrating it; the public negative connotations might just disappear.
Here are some of the reasons I think I think theatres fail:
Poor Financial Management
According to the NEA, the majority of theatres in the United States rely on government and private funding for half of the operating costs. I feel this is irresponsible and does not promote the sustainability of the company. Outside funding cannot be depended on, especially in a weak economy. I would term this as “living beyond their means”. Unless it is corrected, the mounting debit will far outweigh the income and lead to the company’s demise.
Plain and simple: you have to know your audience. Many theatre companies successfully challenge their patrons with one or two productions a season that it outside their normal offerings. I think this is terrific. I think it should be the mission of every theatre to educate and expand their audience’s exposure to unfamiliar work. Unless your entire mission is based on producing new and/or experimental work, to suddenly present a season that moves far away from your established genre can assure your subscribers won’t be coming back.
Marketing is rapidly changing with new technology and its affects on our daily lives. Theatre companies have to constantly re-evaluate the effectiveness of their marketing and stay with the current trends. Ultimately, I think the area where most theatre fail is creating a personal relationship with their community. Word-of-mouth continues to be the number one reasonpatrons chose to attend specific shows. More theatres need to focus on this.
The Wrong Staff and Board
Staff and board structures are frequently known to be love-hate relationships. There has to be a respect and balance between the two. Theatres can fail when a board suddenly (or finally) decides to clear house and replace the artistic leadership. Obviously, there are times this needs to happen. It is a huge mistake for any theatre company to base its entire future on one individual and their reputation. Board and staff members should be constantly communicating how to better the company. Allowing the focus to shift from the company to an individual is one clear way to destroy a theatre’s future life.
The Elite Effect
Arts organizations, as a whole, have a reputation of being elitist. This persona hinders growth and creates a wall between them and the patrons they purport to serve. Granted, much of this is not intentional, but changing a company’s image once it has been established can be nearly impossible. Companies and the art they produce needs to be completely accessible to the entire community. Branding, image and reputation play a huge role in the success or failure of theatre companies around the world.
CultureBot’s Jeremy M. Barker has written a great response to an article about failed theatres in Seattle. He provides an interesting commentary, as does the original article on which it is based. I do have to disagree with his assessment that theatres should not be more “business-like”. How many business do you know of (yes, theatre is a business) that rely on 50% private and government support?
I believe if the art is good, it can be created and exhibited in a business-like fashion without compromising the art. It may not always be profitable, but that isn’t the point. The point is that sustainability and financial responsibility need to be taken into consideration when deciding how or when art is produced and displayed.
Theatre companies can take risks with works that are outside their normal genre or that may be considered too risqué or experimental; they just need to be balanced with the creation and presentation of work they are familiar with, and their audiences expect of them.
On a somewhat related topic, I found this interesting article on the privatization of community organizations and services you should read. Could this be our future?
Posted by Jeff Linamen at 8:58 PM
Saturday, August 13, 2011
Money, Money, Money
Do you have the perfect business idea? Are you passionate about your product or service? Are you so sure that you can be successful but you don’t have the funds to get started? There is hope.
Before you even think about approaching a bank or alternative source of funding you must have a solid business plan. You need to show potential investors that you not only have a great idea and the passion to bring it to life, but also a well thought out plan of how you will make it happen and that it will be profitable.
Once you have your business plan you need to carefully research all the available sources for potential financing. Banks are usually the first source business owners approach. Understandably, many times they are turned down. All is not lost. There are many other sources of alternative financing out there, you just have to know where to look.
First, let me say, venture capital (VC) is probably not an option for most us. Venture capital firms focuses primarily on big investments in big companies that are high risk, high yield start up companies in the fields of technology, healthcare and more recently green technology. Occasionally, firms have financed smaller companies, and are now openly doing so as Venture Lending for Start Up Capital. Firms are particularly interested in small businesses that could potentially explode in to big businesses. Where VC focuses on big loans with big returns, venture lending for start up capital are often smaller loans where the firm may not require an ongoing piece of the business.
Bootstrap Financing, or self-funding is a common way many small business receive at least partial financing. This can include borrowing from friends and family and bartering products and services. The main advantage to this is that it can eliminate high interest but could also present problems if the financing cannot be paid back in a timely manner. Relying on this type of financing can also limit the company’s growth. First and foremost, never accept a loan from friends or family without drawing up a clear contract. Handle it as you would a bank loan.
Community Banks are another great alternative to the standard bank loan. They often have money to lend particularly to local, community driven businesses that might help build the local community and economy. Some community banks are certified lenders through the U. S. Small Business Administration. Instead of your business being analyzed by a computer, as is done why most of the big banks, community banks give businesses the opportunity to actually present their business plan to see if it might be a good fit.
Angel Investors can be a good resource for many businesses. Most angel investors are wealth individuals, or networks of individuals looking primarily to invest in new businesses, usually seeking lower amounts than those seeking venture capital. Similar to venture capitalists, angel investors are usually looking to own a healthy portion of your business as a result of their investment.
When discussing angel investors, business guru Guy Kawasaki said, “The best investor for your start-up will be the one who cancontribute significant experience, knowledge, and networking opportunities, aswell as the cash you need to grow your business.”
Credit Cards are often used by small businesses needing small loans quickly. With high interest rates, this type of funding should only be considered in emergency situations.
Here are some other types of alternative financing you might want to consider:
Last but not least, there are grants available to small businesses. Especially if you or your business has or creates some relational ties to organizations offering the grants. They may be difficult to find but they are out there. Do your research. In fact, you might want to try searching for grants first. After all, they are valuable assets that don’t have to be paid back.
Here are some additional links you will find useful in your search for funding:
U.S. Small Business Administration: http://www.sba.gov/
Angel Investor Networks: http://www.businessplanmaster.com/angel-investor-networks.html
Posted by Jeff Linamen at 4:39 PM