Follow-up on Nonprofit/Commercial Coexistence

In a post in June, I suggested that

Commercial productions that benefit from nonprofit development pay a certain amount of after-cost profit into a fund, perhaps administered by an organization like Creative Capital or Doris Duke or even an agency like the NEA (noted with more hesitation), that would in turn support artists creating new work at theatres across the country, theatres that in turn support local talent.

Several commenters both publicly and privately derided my notion of reducing investors’ ROI in this manner because doing so would be such disincentive to investment in the commercial sector that the sector itself could cease to exist.  There is, however, precedent for a similar system: the Major League Baseball (or other professional sport) luxury tax.  MLB logoMLB owners function as a cartel. The luxury tax was adopted by the cartel to keep the competition on the field both truly competitive and geographically dispersed.  Everyone in the cartel benefits by having a playing field that is within some range of “level.”  Thus, owners of wealthy teams with player payrolls that exceed the range set by the owners (the cartel) pay the league. The league then uses the funds for some specific purpose. In other sports, the luxury tax gets distributed directly to teams in smaller markets to supplement their payroll. In other words, New York subsidizes Kansas City.  It doesn’t take much imagination to substitute “Broadway League” for “Major League” in this scenario.  The existence of the luxury tax has not hindered investment in professional sports (although it has enabled some salaries to be inflated to obscene levels).

As to the commercial theatre sector ceasing to exist, as long as the potential for reward is great, there will be investors willing to take that risk. One such investor is Universal Pictures. On track to gross more than Jurassic Park and E.T., Universal Pictures highest wicked_splash_internationalROI property has been Wicked. That would be Wicked the Musical on Broadway, the commercial theatre production with a $3 billion gross. Lion King (the musical, not the movie) has grossed over $5.4 billion.  With the potential for grosses like that, producers asked to contribute, say, 1% (a total random number) to support a geographically dispersed theatre R&D infrastructure “farm system” are unlikely to be deterred from investment.

File this in the “wild idea” category if you like (along with seed funding lotteries and nonprofit “ownership” stakes), but if there’s going to be some change, better to have a few wild ideas to toss around.

About lindaessig

Linda Essig is director of Enterprise and Entrepreneurship Programs at the Herberger Institute for Design and the Arts at Arizona State University, including its award-winning arts entrepreneurship program, Pave: http://pave.asu.edu The opinions expressed on creativeinfrastructure are her own and not those of ASU. You can follow her on twitter @LindaInPhoenix and "like" the Pave Program in Arts Entrepreneurship at http://www.facebook.com/pages/pave-program-in-arts-entrepreneurship/386328970101 Find Pave's journal, Artivate, at http://artivate.org
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4 Responses to Follow-up on Nonprofit/Commercial Coexistence

  1. Pingback: Who Benefits? | Creative Infrastructure

  2. This is a very intriguing idea. In addition to the benefits you named, it fosters a closer interdependence between commercial and nonprofit theater – an acknowledgement that we are coming at the same goal from two different directions. I also agree with you that nonprofits had better start thinking outside the box before our future is forced on us from the outside.

  3. Your argument seems to imply that cartels in the performing arts either can or do exist and that somehow this is desirable. This seems to me mistaken on both counts. In no way would anti-competitive practices be desirable as a model for the performing arts.

    I also suggest that your analogy is irrelevant: in a competitive spectator sport like baseball there may be a need to restrict one team from consistently out-competing others, whereas when you go to watch drama you do not watch one theatre playing against another.

  4. Pingback: Follow-up on Nonprofit/Commercial Coexistence | Symposium Magazine

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