Ever since jotting down a few observations on theater’s crappy business model, I’ve found myself mildly obsessed with finding a solution to the problem of funding theater.

Why?

I’m not sure. Because I love it, I guess. Because although I’m not convinced the arts are strictly necessary, I am convinced they’re one way we make the effort to survive worth the while.

Do theaters deserve success?

No, of course not. At the level of physical law, no one deserves anything. At the level of human law, we deserve some things, like the freedom to pursue happiness. But it’s important to remember that, when it comes to things we might deserve, “running a financially successful theater company that pays its workers a living wage” doesn’t show up on the list. It strikes me as healthy to keep that fact in view. No matter how many people you know and love who are killing themselves trying to make a living in the theater, the painful truth remains: they don’t deserve it just because they want it really, really bad and are working really, really hard.

But:

We accomplish many things we don’t deserve.

Many, many things.

Is there any hope for this particular thing?

I think so. I think we can build theaters that don’t rely on slave intern labor. I think our theater educators can stop selling snake oil. I think we can give good story tellers a chance to tell good stories without disproportionately favoring the wealthy on both the telling and listening ends.

I’m not entirely confident we can do these things, but I think we can, and I think it’s worth trying.

Ready for some brainstorming? Great. Here we go.

On Profit

Must theaters be non-profit? How far away is the current theatrical model from representing a successful for-profit business? I have no first-hand knowledge of the balance sheets in Baltimore, but I do have a lot of friends who work in the theater. So I started asking around: “How much of your income is from ticket sales?”

Wait, just ticket sales?

For the moment, yes, let’s just focus on tickets. If you prune out the non-profit-y things like grants and donations, what primarily remains is ticket sales.

My informal inquiries suggest that theaters both large and small in the Baltimore/DC area see only about 25-40% of their income in the form of ticket sales. Anything in this range is considered pretty healthy. One venue had, at one point, hit 70%. This was generally agreed, in the circle where I inquired, to be surprisingly high.

Pretty challenging numbers. But they don’t even capture the half of it.

Don’t forget the unpaid labor

Consider my favorite theater company in Baltimore. Last year they were selected as the best new theater company in the city. This year they dropped the qualifier, and boasted the best actress in Baltimore to boot. This band of ten young artists is attacking the creation of a new company with intelligence, vigor, rigor, and moxie. (Moxie!) Every one of these highly educated folks must serve both an artistic and a business development role in their theater. They’re exploring new ways of marketing, they’re drumming up subscriptions, they’re selling out entire runs of shows. They pour their lives into this company, and their rapid success is widely and justly considered astonishing.

This young company has also publicly disclosed that they work under a yearly budget in the low six figures.

The math is sobering: ten extremely talented full-time employees, over several years of effort, have managed to build a company that grosses little more than ten thousand dollars per employee. Before any costs. And this is regarded an astonishing success.

Fight that Sinking Feeling. Fight It!

Okay, so we’re clearly not talking about a field where a hop, skip, and a jump will take us into the land of profits and honey. Ticket sales apparently don’t provide remotely enough funds to make theater. Fair enough. Well, that means we’re back to being a non-profit, with all those extra funding sources. But what kind of non-profit, and what exactly is our funding structure? Oh, neat, they’ve classified them for us. Looks like it’s some form of Beneficiary Builder, wherein the total cost of delivering the benefit (theater) is not covered by the fees we charge the beneficiaries (ticket prices). Get the rich beneficiaries to help subsidize the cost for others, mix in a little old fashioned advertising, grab a government grant with an argument about your benefit to society, and look: we’ve got a theater!

Great, now we have our funding model, right?

No. I do not accept that we wind up where we started. Where we started is not working. I do not accept that this is the best we can do. If this is the best we can do, we suck.

Throw Your Business Models In The Air Like You Just Don’t Care

You know what annoys me a little bit? Theaters may fit inside a non-profit structure, but they share a lot of territory with for-profit companies. Any non-profit that fits inside the Beneficiary Builder model shares huge swaths of territory with for-profit companies. Unlike other non-profits, their beneficiaries are their customers. And from where I stand, it can look like an awfully fuzzy line between a great non-profit company providing a service their customers can’t afford…and a crappy for-profit company that can’t make their service affordable.

So you know what? Forget I ever said theaters should be non-profits. I hate that idea. It might be true, but just forget it. For the purposes of this conversation, that idea is a crutch and I am kicking that crutch out from under you RIGHT NOW.

You only get the crutches back if you do something creative and new with them.

Frantically Searching for the Beat

We’re all trying to find the beat. We can hear the music changing. We don’t recognize the new song yet, but we know something is going on. Witness:

• Actors Equity behaves like your grandparents by clamping down on things they don’t understand.
• Younger, hipper companies not under the stranglehold of Equity start taking advantage of new media channels, by live-streaming their productions, or posting daily rehearsal photos on Twitter.
• Older, bigger companies try out Twitter too, but don’t really get it.
• Consortiums of nervous organizations begin trying to build new tools to find new audiences. They don’t know what they want to build, but they know the want to build something.

Throw a stone and you’ll hit an organization trying to find its bearing in a new culture.

Which means?

Which means I don’t know the answer either. It would be presumptuous to claim I do. But I do have a proposal, and if you’ll stick with me for a few more moments I’ll do my best to sketch it for you.

Back to basics

Let’s get back to basics for a minute. Remember: we’re working under the assumption that our theater must survive as a small for-profit business. To that end, let’s look again at tickets.

Let’s say I’ve got a 100 seat theater. Let’s say I’ve got 10 people in my company. Let’s say I want to pay them each 50K a year. Let’s say I run shows Thursday, Friday, Saturday, and Sunday, that each show I produce runs a month, and that I do six shows a year. A solid schedule. That makes 96 days a year I’m opening my door, or 9600 seats I can possibly sell. If I sell every single one of those seats, I’d have to sell them at over fifty bucks a ticket to pay my company members, and I’d have nothing left for rent, production costs, or anything else.

Clearly, the numbers stink. This is why our non-profit theaters subsidize ticket prices with charitable donations from individuals, governments, and organizations. But we don’t have those tools right now, remember? We have our product: theater. We have our customers: the audience. Those are our tools. I can add more seats, I can add more shows, I can cut my (generous?) paychecks, but try to wiggle any of these numbers and I hit the limits real fast. How many more seats can I add? 100? 400? 600? When does that transform the product you’re making into something you don’t want to make? How full can you keep all those seats? How many shows can you physically make in one year? The system is against us.

And aside from the fact that the economics of ticket sales are so sobering, there are other arguments against focusing too much on ticket sales. For example:

• Don’t tickets represent a dying transaction model from the industrial age?
• Wouldn’t a theater funded fully by ticket sales experience pressure to reduce artistic risks?
• If we pay undue attention to commercial metrics like ticket sales, aren’t we missing the point of our mission as a theater?
• Doesn’t the entire concept of tickets inherently damage the arts, by dividing us into art producers and art consumers?

I get it, I get it, selling tickets sucks.

And that’s where I disagree.

Wait, what?

This poo-pooing of ticket sales as the foundation of revenue: I don’t like it.

But! But!

Yeah, I know the economics look bleak, but I’ve got some ideas about that.

And the other stuff?

First off, I don’t believe exchanging money for an artistic experience damages the arts. To be sure, it would be unhealthy to think this experience captured the whole value of the art. I strongly support Scott Walter’s work on the CRADLE project (formerly the “<100K Project”). But I want access to the art I cannot make myself, which is, oh, most of it. Exchanging money for art is a way to complete my artistic life, not damage it. That’s what money is for: translating what I can make into what you can make, and vice versa.

Second, it is not a bad thing for me to measure how many people experience my art. How often each one is engaged with my artwork. Whether or not they bring their friends and family to see it too. Tickets are not a bad approximation to these things about which I care very much. The metric can be based on tickets and still be about the mission.

Third, I think it is exactly the wrong idea that you should buffer your artistic risks by disconnecting from your audience. That logic leads you to producing edgy, grant-funded work to an empty room. Your artistic risks should be buffered by the strength of your connection to your audience, not by your financial independence from them.

But the money!?

Right. We can’t make enough money from tickets. But I think giving up on tickets as a basic economic engine is throwing in the towel too soon. They’re not working great, but they’re not completely broken, either.

We don’t need to kill tickets. We need to reinvent them.

Byproducts

One thing a successful company will do is find a way to sell their byproducts. The lumber industry sells their sawdust. American Apparel sells their fabric scraps. It’s a common strategy of successful companies.

But byproducts are the bonus, not the bones. Bones keep you standing up. Byproducts give you a Christmas bonus.

And here’s the problem:

You, my friend, are selling sawdust.

And you’re throwing away the wood.

Bull.

Not bull, and you know it. You’ve said it. You have said, at some point in your artistic life, a sentence very much like this one: “Art is about the process.” You sagely observed to a student that “it’s really all about the process”, or “my work is about a process of [fill in the blank]“.

You’ve said it. Admit it. And then after you said it, you went and sold someone a ticket to the final product. The thing your art is only fractionally about.

The process is the product.

There is a moment in the production of every play when the set designer presents her work to the actors. She reveals the world her imagination has built, she pulls the drape from the model, and the whole team sits in rapt attention.

There is another moment when the costume designer passes his painted designs around the table. You pour over his work. You become excited.

There is a moment when an actor tries a new choice, and the room erupts in laughter.

There is a moment when an artistic director chooses a play the company will embody. He feels a surge of anticipation.

There are hundreds of these moments. And your customers are missing all of them.

But…so much of the process is so boring.

I don’t deny it. Recognizing your product is not the same as packaging it.

But “packaging” isn’t quite the right word. I don’t want you to wrap a little plastic around the surface of your process. I want you to design it around accessibility. I want you to aerate it. The process won’t be exactly the same anymore. It will need to loosen up and let a little sunshine in. Because the surface area of your company determines the depth of its relationships. And what you need more than anything else is really good relationships.

Relationships and their Consequences

Building your revenue around relationships instead of tickets has important consequences. But one of them is not that you get rid of tickets. Ten years from now, there will still be tickets. True, our theaters can’t just churn out a bunch of ticketing transactions. Tickets alone don’t get us there. But that doesn’t mean you kill tickets. It means tickets transform from an artifact of a transaction into an artifact of a relationship.

But what does that mean?

It means you only sell tickets as a last resort. It means people pay you money for something other than tickets, even though they do get tickets as part of the deal.

It means you sell memberships, not tickets. It means that if I pay you ten bucks a month, I get access. I can visit every rehearsal. I get a guaranteed ticket to every show you do. I get unlimited empty seat passes after I use my guaranteed ticket. When a guest artists comes to do a Suzuki workshop with your acting company? I get a chance to sign up too. For free. When you have some down time, your company members teach a class, and I get to come. For free. It means that instead of throwing your unused costumes and props in the dump, you throw a souvenir party. I get to come take home a souvenir. For free. Because I am a supporter, and that special-purpose prop is just more sawdust to you. Could you sell these things in other ways? Sure. You could do a prop auction. You could sell seats in a summer acting workshop. You can sell individual tickets. But I don’t think that’s the best way to sell the sawdust. Remember: we’re trying to stay away from simple transactions. We’re trying to concentrate our value into a long-term relationship. Don’t encourage your customers to track dollar-for-dollar what they get out of every transaction. Encourage them to understand that theater is a process. A process that costs money, but produces hundreds of wonderful results. Let them invest in the process, and then let them reap the results.

Use technology to increase your surface area. Live stream your shows. Post daily rehearsal photos on Twitter. Invest in a qualified videographer, and use the hell out of them. Build a living production document of every show online. Let your audience see how a scene is evolving from rehearsal to rehearsal with a quality video record of the evolution. Annotate each clip with a description of the director’s instructions, of the actor’s new choices, of the salient theatrical choices that made this version of the scene different from the last version. Put them up in a timeline. Let us see the process unfold, even when we can’t be in the room. Let me see how a scene is taken from a written blueprint to a live performance. Edit out the boring stuff.

It bears repeating: Use technology to increase your surface area. Give me a chance to be your dramaturg. Create a Wiki for every production. Let me talk to you about what you’re doing. And then actually listen to what I say. If I come up with a great idea for your production? Use it! And then make it clear you did! Let me influence your work. Give me a chance to become a real part of the process. Can I vote on which set I would most like to see for this new production? Can I tell you what stories I most want to hear? I’m not saying you should run your theater by popular vote, I’m saying give your audience a chance to affect what you do. Find ways to channel their creativity and interest. Don’t hoard the process to yourself unless you want to fund it yourself. Don’t think a few after-show talkbacks count as “opening up a healthy dialog” with the audience. Give them more than that, and I believe they will give you more in return.

As your relationships develop, so will your opportunities. When there is a production you want to fund, you will be able to come to me first, not last. Once our relationship is real, you don’t have to play this stupid guessing game: “People loved the last show, but will anyone care about the next show?” Don’t wait until the end to hope I care about what you’re doing. Let me show that I care up front. I’ll do it if I trust you. I’ll do it if I’m excited about the process.

Focusing on relationships over transactions splits your risks into smaller pieces. Focusing on relationships over transactions means you’re making money on the work you do 365 days a year. Not the work you do 96 nights a year.

Explore the model.

So what does the model buy us? Well, instead of selling 9600 tickets at 52 bucks a pop just so we can cover salary, we get to focus on signing up 4200 members at 10 bucks a month for the same result. We’re asking a lot fewer people for a little more money, and we’re giving them a lot more art in return.

Now let’s refine the structure: use tiers. Figure out what you will give away for free. Make it significant. Good relationships start with an offer, not a demand. After the free tier, build a low-cost tier. Then build the tier for your deepest relationships. Give me a path into the deep relationship, but don’t over-complicate it. Keep it simple. No more than a few options. Ask me to make a choice among a few fair alternatives. Add too many tiers and it feels like you’re just trying to play me. If you create a complex sliding scale I start thinking about our relationship as a negotiation for money. Respect me enough to make it about the relationship, not about the money. When it’s about the money you give me 20 different “membership levels”. When it’s about the relationship, you ask me to choose between “I’m just curious“, “I’m exploring“, or “YES. I’m on board.”

And now that we’ve got a solid revenue structure, give yourself the option to add back the crutches. But don’t do it automatically. The time you spend applying for grants is time you can’t spend developing your relationships.

Winds of Change

Facets of this new model have already appeared on the landscape. But it’s not an easy change to make. The institutions of theater give every sign of being opposed to it. For example, the institutions tend to see technology as the enemy. They think YouTube, Twitter, Flickr, and basically the entire Internet is a tool to steal transactions, instead of a tool to increase surface area. And if you are one of the unlucky theaters to be working under the backward-looking constraints of the institutions, I extend my condolences. But all you little companies are free. You’re free to show the world a new way to make theater. You’re free to build a company that won’t burn you to a crisp. You’re free to show the bigger, older companies a better way. You’re free to lead, instead of follow.

Making the Move

What I’ve just described is neither easy, nor complete. I’ve sketched out a plan of action, not a complete and proven result. But I deeply believe in the principles of this plan. And I’m not just saying that. My company, Figure 53, is spending our hard-earned money to build tools based on these principles. Tools that we think will support companies as they make the transition from transactions to relationships. As a software engineer, that’s one way I can help nudge the theater world in a healthier direction. I want to nudge it as an actor and a theater maker too, but I have less leverage there. So until I start a theater company of my own, you get a long blog post and the promise of tools to come. And if you live in Baltimore, you get a neighbor who wants to help. Because I have too many friends killing themselves trying to make a living in theater. I want to see you beautiful people living a more stable life. We’ve got a chance to try. Let’s try.