Douglas McLennan: March 2009 Archives

The latest newspaper to teeter to the edge of existence is the Chicago Sun-Times, which has just filed for bankruptcy, joining a half dozen other major papers:

The company has one significant creditor -- the Internal Revenue Service. The IRS has said Sun-Times Media Group owes up to $608 million in back taxes and penalties from past business practices by its former controlling owner, Conrad Black, now imprisoned for theft from corporate coffers.

Unlike other newspaper owners that have filed for bankruptcy amid steep dropoffs in advertising, including Chicago-based Tribune Co., Sun-Times Media Group has no bank debt. But its IRS debt thwarted efforts to raise new capital.

Today we're happy to launch Dalouge Smith's new blog on arts advocacy. It's called Dog Days. Dalouge runs the San Diego Youth Symphony, and we met last summer in Chicago while I was writing a story on new thinking in how to run orchestras. Why a blog on arts advocacy? There's an awful lot of talking about the state of the arts, about the survival of the arts, and about the place of the arts in the broader culture. I've been looking for someone to focus not just on the issues that affect the arts, but in how we argue those issues, both inside and outside of the arts. Check him out.

Where are all those laid off journalists going? Why to TV of course...

Interactivity has been redefined in the past few years. Newspapers used to think they were interactive because they ran letters to the editor. Rarely did they respond to the letters (unless those letters demanded a correction), but "hearing from the readers" became a mantra for the focus-group-driven news organization.

Arts organizations have also prided themselves for being interactive. Applause, of course, is the first-line of that interaction. But the state of one's box office sales also helps focus the attention of a presenter.

When websites started allowing readers to comment on content, newspapers weren't sure they liked the idea. But once they saw how popular comments were, most papers began letting readers weigh in online. Many newspapers now also run email addresses of reporters so readers can contact the writer directly.

A few (not many) arts organizations have allowed audiences to leave comments on their websites. Most are afraid that some commenters will say negative things. So mostly commenting isn't allowed. Can you blame the artists? Check out the comments section of your local newspaper, and you can see how quickly most comment threads degenerate to the lowest common denominator.

And yet, there are comments sections that are terrific. When we do short issue-based group blogs on ArtsJournal, invevitably the reader comments are as good as if not better than those of the official bloggers. I've come to think of the bloggers in these events more as discussion leaders rather than panelists who merely dump information and depart. Look in the comments section of blogs like PostClassic or Sandow and you'll see smart interesting people discussing things they care about.

But the two-way commenting interaction is the old interactivity. Successful web projects these days think of themselves less as producers of content than they do infrastructure that allows a community to talk to one another. They're not after the two-way interactivity of producer-to-receiver; they want to create many-to-many interactivity, with themselves in the middle of it all. They act more like leaders of a community rather than owners of it. They aren't afraid of the community criticizing what they do; they depend on that community to give them a sense of what works. And what doesn't.

It isn't all about the community leader's project. People are drawn to the community out of shared interest. Those interests extend out. If you're a publisher and running a site built around your trashy romance novels, it's far more powerful to be THE place where people come to check out romance novels in general rather than just your books.

Arts organizations share a problem with news organizations. News is expensive to produce, and competition to get stories is fierce. When a newspaper owned its market, it had a captive audience. Now the news consumer has exponentially greater choice, and increasingly the news junky turns to people or services that scan through all the dreck and deliver a picture of the world that makes some sort of sense. Bad news if you're the local paper. You've been reduced to being canned peas on the grocery story shelf. Fine if the shopper wants peas, but not so good the next time when he decides to try the beets instead.

The point is: if all you mean to your audience is a consumer transaction, a box office sale, then you're one product among an increasingly crowded shelf. If there are 800 things to do, the chances you'll be the first choice even once in a while is slim. No matter how good you are. This is why Starbuck's sells the "experience" at its stores as much as it does the coffee. Starbuck's wants to be that place where a community can interact so you'll keep coming back. How many arts organizations are still working in a consumer model when the world has passed on to an experience economy?

One thing you hear about the current economic mess is that some banks and companies are "too big to fail." This is the idea that if a mega-corporation like AIG goes down, the repercussions are so enormous that other companies will fall in its wake and the whole financial system might fall apart. Thus an argument for tax-payer bailouts.

That got me thinking about the culture of failure. Science is built on failure. Make observations, posit solutions, try them out, fail, learn from your failure and try again until you find a solution. Scientific breakthroughs wouldn't be possible without failure. Funding for research is predicated on extremely high rates of failure. Ask a successful person what they learned on the way up and they'll likely talk about how they dealt with their failures, not their success.

The hippest, most interesting and successful arts programmer I ever knew told me once that the secret to his success was failure. "If more than 10 percent of the things I do are successful (he was, after all, a programmer of new work), I feel like I'm not doing my job," he said. What he meant was that without trying many things that didn't work, he couldn't be open to the possibility of greatness. It was only his willingness to learn from mistakes and embrace failure that produced transcendent success. 

Yet why does it so often seem that the goal of arts organizations is to neutralize failure or deny it? If AIG was "too big to fail" maybe it stopped learning from failure and found itself in trouble only after it was too late. In the 90s the arts economy expanded and many arts organizations got bigger and more institutional. With growth and soaring expenses, the cost of failing [read: the capacity to fail safely] often got priced out. And how many arts organizations, when they do do something that fails, rush to deny that it failed? Like admitting failure is a bad thing.

Arts funders have tended to want more and more assurances that the things they fund are successes. One manifestation of this trend is the way so much arts funding has become project-based. Funders prefer to have projects they can point to for tangible, measurable results.So it's much easier to raise money for a new building than it is for operational support to keep the doors open. And it's much easier to fund programs in multiculturalism or arts education than it is a new play or symphony.

As a result, we have a system set up to reward expansion of buildings and the building of infrastructure [a real estate bubble?] which then must be sustained in ways that make failure not an option. That is: guess wrong and you might put your organization in danger, so don't guess wrong. And so we have arts organizations who are thought to be "too big to fail" even as they 1. get safer and safer in the artistic choices they make. and/or 2. get into bigger and bigger trouble because they can't afford the little failures along the way that they could learn from.

The situation in the arts then, would seem to be exactly opposite of what we understand to be best practice in science. Funding for science is at a whole different level than funding for the arts, and yet, it seems to me that being good at funding the right kinds of failures in the arts might lead to a much healthier arts community.

Vastine Stabler makes a case that changing the tax code to reduce the the top rate of deduction for charitable giving from 35% to 28% will have an enormous impact on giving to the arts:

It may be shocking to learn that the level of federal support for the arts in the United States is most likely the highest in the world. To understand why you need to know how non-profit arts are funded in the United States. Approximately 50% of the financial support for the arts comes from earned income and another 10 % comes from non-federal government support. The final 40% of arts funding comes from private donations. It is this 40% where the US government makes its true impact on the arts. Depending on the donor's tax bracket, up to 35% of individual donations are funds diverted from the US Treasury to the arts through tax deductions. This amounts to a multi-billion dollar investment by the federal government each year. While many are unaware of the largess of Uncle Sam via these deductions, the fact has not escaped our current administration.

He makes the point that support for the arts in the US is "incentivized" giving. That is, the government helps to reward the private sector for supporting charities. If you buy in to this reasoning, then changing the incentive to give will make a big impact:

Currently, someone who is in the 35% tax bracket can deduct 35% of their donations to officially designated non-profits. In the current bill the most donors can deduct is 28%. This differential will make monumental changes to the giving patterns of our largest donors.

President Obama addressed the issue at his press conference Tuesday night:

QUESTION: Are you reconsidering your plan to cut the [deduction for charitable contributions]?

OBAMA: No...I think it's the right thing to do, we've got to make some difficult choices....What we've said is: Let's go back to the rate that existed under Ronald Reagan. People are still going to be able to make charitable contributions. It just means, if you give $100 and you're in this tax bracket, at a certain point, instead of being able to write off 36% or 39%, you're writing off 28%. Now, if it's really a charitable contribution, I'm assuming that that shouldn't be the determining factor as to whether you're giving that $100 to the homeless shelter down the street.... I think it is a realistic way for us to raise some revenue from people who've benefited enormously over the last several years. It's not going to cripple them. They'll still be well-to-do....

QUESTION: It's not the well-to-do people. It's the charities. Given what you've just said, are you confident the charities are wrong when they contend that this would discourage giving?

OBAMA: Yes, I am. I mean, if you look at the evidence, there's very little evidence that this has a significant impact on charitable giving. I'll tell you what has a significant impact on charitable giving, is a financial crisis and an economy that's contracting. And so the most important thing that I can do for charitable giving is to fix the economy, to get banks lending again, to get businesses opening their doors again, to get people back to work again. Then I think charities will do just fine.

On the issue of overall fairness, this argument make sense, but from a practical matter the question is what percentage of charitable contributions are motivated by the tax break and how much of a motivation that extra seven percent is.

ArtsJournal has been a bit depressing lately. Day after day, there's news of cuts in public funding  arts organizations cutting back, retrenching, or going out of business. Growing numbers of unemployed artists. These links from just the past week or so.

And yet, I keep hearing other stories arts organizations holding fund-raisers and raising more money than ever. And other stories of artists finding new opportunities. The impact of the recession seems to be mixed. A recent report [pdf here] on how the arts are being affected in Seattle reports that:

Cultural organizations interviewed appear to fall into three general categories - those who are proactively addressing the situation and are actually energized by the challenge; those who are informed but more cautious in their responses; and those who seem to be in denial, reluctant to make any changes without further confirmation of the need to do so.

One could see contraction of the newspaper industry as the end of journalism as we know it. Or one could see it as an opportunity for a better version of journalism to emerge. The death of a local opera company might be terrible. But maybe its passing allows a better version to take its place. Perhaps recession is an opportunity to push over some things that haven't worked for a while. So then where are the new opportunities?

The Washington Post reports this morning that NPR's audience has grown about 47 percent in this decade. A pretty nice bump. But NPR is still having to cut as its income declines in the recession. As for longer-term prospects, NPR stands in a pretty interesting space. While audiences for mass-media outlets have declined precipitously in the Online Age, NPR has done very well. But it's current business model as a member-station organization faces some major challenges. I've delved in to some of the numbers over here at the NAJP's ARTicles blog.

Newspapers aren't the only ones contemplating a digital future. The University of Michigan Press says it will move from paper to pixels:

Michigan officials say that their move reflects a belief that it's time to stop trying to make the old economics of scholarly publishing work. "I have been increasingly convinced that the business model based on printed monograph was not merely failing but broken," said Phil Pochoda, director of the Michigan press. "Why try to fight your way through this? Why try to remain in territory you know is doomed? Scholarly presses will be primarily digital in a decade. Why not seize the opportunity to do it now?"

It's a recognition of the inefficiencies of paper. Recently it was reported that it costs $10 per copy just to deliver the San Francisco Chronicle Sunday edition to subscribers. And then there's this story from back in January:

...it costs the [New York] Times about twice as much money to print and deliver the newspaper over a year as it would cost to send each of its subscribers a brand new Amazon Kindle instead.

A Taiwanese study of people using online dating sites finds that "the more our brains have to search through, the more difficult it also becomes to ignore irrelevant information. A person is also more likely to be distracted (or attracted to) attributes that were not initially relevant or pertinent to their original search."

This is the classic consumer conundrum. Too much choice can be paralyzing. Sociologists report that the amount of leisure time we have today is about the same as we had 20 years ago. Yet ask people if they have more or less, and they overwhelmingly report they have less. Why? One theory is that because there were fewer choices 20 years ago, it was relatively easy to decide what you wanted to do with your free time.

Now we have so many choices competing for our time that the act of deciding what you want to do can be anxiety-producing. Infinite choice, it turns out, makes it more difficult to decide what is important to you. We need ways of organizing information into an understandable framework. That's what matchmakers do. That's what journalists do. That's what artists do.

Ticketmaster announces a billion-dollar loss, blaming "declining ticket sales, costs associated with layoffs and a massive impairment charge."

The loss is real (in a 2009-paper-losses, bank-accounting kind of way), of course. But:

The bulk of Ticketmaster's loss was because of a $1.1 billion charge the company took because of a precipitous decline in its share price since being spun off from IAC/InterActiveCorp last year.

In fact, TM's business is up. "For the full year, Ticketmaster reported revenue of nearly $1.5 billion, a 17% increase from 2007, thanks to its acquisitions of Front Line Management, resale service TicketsNow and Paciolan, a college-sports ticketing company."

Okay - so the loss is real (sorta), but expansion has increased business revenue. Here's the real marker: "The company said its revenue from ticketing amounted to about $1.4 billion, for 141.9 million tickets sold -- an average of 3% more per ticket than it reaped in 2007." Ticketmaster earned more fees per ticket than the previous year. So business is better, not worse and "declining ticket sales" and "costs associated with layoffs" had nothing/little to do with the loss.

Why would the company want to portray its finances in more negative light? Maybe because of its proposed takeover of   merger with Live Nation and concerns about the deal that TM will be a monopoly. In fact, TM has been in acquisition mode  for a while, in the past year picking up Front Line Management, resale service TicketsNow and Paciolan, a college-sports ticketing company.

Congress has been inquiring into the Live Nation merger:
 

Sen. Schumer aggressively questioned Ticketmaster's chief executive, Irving Azoff, during a hearing last month on the merger. The deal would create an unprecedented music-industry powerhouse, dominant in ticket sales, concert promotion, venue operation and artist management. That has created a controversy, with competitors and others in the business complaining that the company would have too much power.

TM's fees are exorbitantly high not because it costs so much to process ticket orders, but because the company kicks back money to venues in return for exclusive deals to sell tickets. These payments can run into the hundreds of thousands of dollars, and the company recoups them by charging the consumer higher fees on ticket transactions, claiming the kickbacks as a cost of doing business. The practice effectively cuts out competitors from  selling at these venues. The company defends the practice saying it provides added revenue to concert facilities. The practice has ensured that TM maintains its hold on the ticket sale business.

Ticketmaster has also earned the ire of concert fans recently when it was revealed that the company has become involved in the secondary ticket market, where prices are often much much higher than the face value of a ticket.

Should the Live Nation/Ticketmaster "merger" go through? Probably doesn't matter in the larger monopolistic scheme of things for the concert business (though I can't imagine TM's dominance is good for the business). But I'll certainly continue to curse every time I have to pay that $2.50 "fee" to print out my own ticket at home. With my own paper. With my own ink. Geesh.

Yesterday on CNBC, host Mark Haines said that Wall Street could not possibly be run well by people making $250,000. Here's the transcript:

Let's get back to what I regard as a fundamental issue here. I know it's politically unpopular, politically incorrect. I know it goes against all of the populist indignation that's out there right now. But you can't really, it seems to me, expect that these Wall Street companies are going to be run well by a bunch of people who don't make more than $250,000.

Here's the video:



Uh huh.I'm trying to make a connection here between how much you're paid and how good you are at your job. I'm trying to make a connection here between what would seem to be considered "poverty" pay for a reckless banking industry and what for a salary in the arts would be considered king's riches. Nothing's coming to mind...

Americans for the Arts has warned arts organizations to plan scenarios for 40% cuts in their budgets as the economy gets worse. And the group says that 10,000 arts organizations could go out of business in this recession.

Some have been saying for some time that the arts were overbuilt in the boom of the 90s when America built some $25 billion worth of new theaters, concert halls and museums (the 90s were the largest expansion of the arts in American history). So maybe a little market adjustment is in the making for the arts. The recession could cost us some of our oldest and most venerable arts organizations. And most certainly, the arts' middle class will take the biggest hit. Mid-size arts organizations always have the toughest time; they're too small to have the deep-pocket resources of large institutions, and too big to be able to cut to nothing as the small groups can often do.

So people cheered when $50 million for the arts was included in Congress' recent stimulus package (first it was in, then it was out, then back in again). But it turns out that the $50 million for the NEA wasn't the only arts money in the bill. The estimable Robert Lynch from Americans for the Arts says eight other provisions in the bill help artists:

• $50m in additional appropriations for the National Endowment for the Arts;

• $130m for the US Department of Agriculture for rural community facilities, including cultural facilities;

• $160m for the Corporation for National and Community Service where an innovative "Artists Corps" could be initiated;

• $150m for the Department of Commerce's Economic Development Administration, which could support grants to enhance cultural district planning and the creative economy;

• A portion of the $589m in funding for the National Park Service to preserve, repair and rehabilitate will support workers in the trades and with skills in the arts;

• $1bn for federal Community Development Block Grants, which provide "bricks and mortar" funding for state and local projects including some in the arts;

• $3.9bn for the Labour Department's worker training and employment services, including the creative sector;

• Extending access to unemployment insurance and healthcare benefits, which are important to artists in non-traditional careers.

when the most committed owners of newspapers start selling off their shares:

Donald Graham, the chairman and chief executive officer of Washington Post Co.has sold tens of millions of dollars worth of stock in the past year through a series of trusts he oversees for his relatives. In the process he has decreased his control of the company's publicly traded class B shares to 3.2 million shares, or 33.8%, from 3.4 million shares, or 35.2%, last February.

Is there anything ironic about National Public Radio canceling its newspaper subscriptions? This is, after all, the member organization that often fund-raises with the line "The news isn't free."

A ridiculous question, sure. The National Endowment for the Arts is the channel through which the federal government invests money in the arts. And though it's not much money, compared to what other countries invest, it's something. Besides giving money, the NEA also has the value of drawing attention or legitimacy to the things it supports. Good things.

But some of the recent debates about whether the arts ought to get cabinet-level prominence in the Obama administration seemed to me to be missing something. Sure it would be nice if the feds supported the arts a bit more. And culture ought to be featured more prominently on the national stage. But these are not the best reasons to think about a new Arts Department.

The NEA has been a great supporter of the arts. But on matters of culture, it has had little or no voice on important issues of the day. Where was the NEA when media ownership rules were being discussed by the FCC? Where was the NEA when Disney and the recording and movie industries were largely shaping copyright law? Where was the NEA in speaking for artists when the stimulus package was being written?

The answer is that they weren't. The NEA wasn't set up to work on cultural policy. Sure, groups like Americans for the Arts advocate for the arts. But that's different than being in the room where the policy on cultural issues is made. Sure, "a great nation deserves great art," and supporting worthwhile arts projects is important. But the dribble of financial support for art is almost insignificant next to the impact on the arts of important legislation being shaped elsewhere in the capital without the input of artists.

I love the NEA. I do. But in larger public policy terms, maybe it's a bit of a subterfuge. It allows the feds to claim support for the arts while making decisions on cultural policy without the arts' participation. Think that doesn't matter? The copyright lockdown of the Digital Millenium Copyright Act affects the ability of every artist to build on work of other artists. Attempts to change how information flows over the internet - the so-called net neutrality laws - will affect any artist delivering work over the internet. Right now, these issues are largely decided by corporate America. How do you think that's working out?

I've been using this blog mostly as a place to put administrative posts about AJ. But I've decided to take up blogging myself. First, a couple more administrative notes. We've been adding more blogs to AJ in recent weeks. Former NYTimes reporter Judith Dobrzynski's Real Clear Arts debuted last week with a bang, and she's been breaking news almost daily, so check her out.

Today is a sad day. The Seattle Post-Intelligencer is going out of business tomorrow after almost 150 years on the beat. Once upon a time I worked at the P-I, as a music critic and as an arts reporter and arts columnist, and I'm sad to see it go. With its closing, some friends will lose their jobs. I have mixed feelings, because the P-I's demise has allowed AJ to pick up one of the nation's best art critics, Regina Hackett.

Regina has been at the P-I since the early 80s, and in the past two years has written an entertaining blog Art to Go, which has been something of an online classroom in how she looks at visual culture. Tomorrow (Tuesday) she re-emerges on AJ on her new blog Another Bouncing Ball.

In the next few weeks, we'll be launching a number of other blogs as well, so stay tuned.