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Do You Love Opera For It’s Economic Impact?

In addition to responding to comments he makes on the blog, I have had some email exchanges with artist Carter Gillies. Many times in the course of our correspondence, he will say “I think we are talking about the same thing, just in different words.” I am not always sure that we are, but I often get the impression he is operating a few steps ahead of me.

That feeling of disconnect is actually a central feature of a guest post he wrote nearly a month ago for Diane Ragsdale’s Jumper blog.

Since it was a long piece, I bookmarked it for later reading. I am somewhat embarrassed it has taken me close to a month to read it, but I encourage everyone to do so, even if it means coming back to your bookmark a couple months hence. Having read it, a lot of what he was trying to get at in our correspondence became clearer to me.

What Carter does is take a really deep look into the way we define the value of the arts. In doing so, he bolsters the argument that we should avoid talking about the value of the arts in relation to economic, social, educational, developmental etc., benefits.

To heavily summarize what he says, he notes that people in the arts have a clear sense of the value of the arts. People who are not aware of this value and even perceive the arts as valueless, do not share the same language and metrics for evaluating the arts. Communicating the value is therefore as difficult as the challenge of describing a color to a person who in unable to perceive that color. (my emphasis)

The way we mostly talk to these people is we have found that our ends, the things we value in themselves, can be the means to their own ends. They value the economy? Well, the arts are good for the economy! They think that cognitive development is important? Well, the arts are good for cognitive development! We make our own ends the means to their ends.

But this never teaches them why we value the arts. It is not a conversation that discusses the arts the way we feel about them. Its not a picture of the intrinsic value of the arts, because in talking about instrumentality we always make the arts subservient. That’s never only what they are to us. Sometimes we just have to make the case for a lesser value as the expedient means to secure funding or policy decisions. It’s better than not making any sense at all.

I don’t wake up excited to go to work to stimulate the economy. I am not eager to go to a museum opening so I can have my cognitive abilities developed. In this context, it almost sounds ridiculous.

This illustrates the disconnect between shared metrics and terminology. As an arts person, I can understand the argument that I need to pay taxes to help stimulate the economy and contribute to the cognitive development of others, but I can’t convince the government to provide funding for the arts based on why I value the arts. I get them, but they don’t get me. I need to talk about economy and cognitive development to be able to receive that tax money.

Of course, this doesn’t just apply to the arts. When we talk about why we love our parents and siblings, we may talk about how well they treat us but that doesn’t truly explain why we love them. The reasons are just external metrics we know others can understand and identify. The real reasons are ineffable. There will be people with whom you become romantically involved who may treat you much better by those same standards than your family ever did, but you will never love them the way you love your bratty sibling.

Citing Archimedes famous quote, “Give me a lever long enough and a fulcrum on which to place it and I shall move the world,” Carter notes:

In the arts we have thrown facts together, constructing the longest possible lever, but have seemingly forgotten we also need somewhere to place it. Those facts need to rest on values that can act as a fulcrum. The facts without value, or the wrong value, will simply have no leverage. They will fail to motivate.

He suggests what is needed is a change of perspective rather than trying to change minds. While this might be accomplished via the proposal to create public will for the arts that I often cite, Carter also notes that the arts community needs to change its perspective as well.

The confusion we are mired in is thinking that our difficulty is practical when in fact the impediment is structural. We need to better understand this to make appreciable headway. We can celebrate both the good art does and the good art is, a structural difference, the lever and the fulcrum. That is the value of intrinsic value for the arts.

I should note, whether you agree with the practice or not, use of taxes for economic development and education weren’t foregone conclusions. It required a change in perspective to implement both.

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Can You Pursue The Intrinsic Value of Arts Alone?

There was a post by KCET columnist Corbett Barklie last fall that has had me thinking and wondering if there hasn’t been enough conversation about this topic.

In short, Barklie feels that arts organizations are sacrificing a focus on the intrinsic value of art in the pursuit of “social service” related activities. (my emphasis)

Arts groups exist to interpret the past, elucidate the present, and imagine the future. To borrow from Dewitt H. Parker’s The Principles of Aesthetics, “The intrinsic value of art must be unique, for it is the value of a unique activity — the free expression of experience in a form delightful and permanent, mediating communication.”

Nonprofit arts groups and the artists that run them are not reactionary entities. They are visionary entities.

You may be thinking, “But what about art groups who work in schools? Artists who work in hospitals?” In my opinion, those are arts service organizations — a rarely made but critical distinction. Arts service organizations exist to create and provide ancillary programs that help fulfill the missions of social service nonprofits such as schools, community centers, hospitals, etc…

[…]

Because no distinction has been made between arts groups and arts service organizations, the general arts and arts policy conversation (set by funders and designated leaders) is getting more and more muddled. And artists who exist in organizations that are only concerned with artistic excellence are beginning to feel marginalized.

[…]

Unless and until arts groups find their voice of disagreement and set aside fear of funding or political ramifications long enough to speak up for themselves, the conversation will continue to focus less and less on challenges facing arts groups that are committed solely to artistic excellence. Eventually these arts groups will fade from view completely.

My first thought was, but isn’t an educational component the way it is supposed to be? Most non-profit organizations are organized under the aegis of the education part of 501 (c) 3. In a time when there is less arts education in schools, isn’t it in our best long term interest to be providing educational services? But then again, by Barklie’s definition, I have been working for arts service organizations for the last 20 odd years so this is the normal for me.

So my question to my larger audience; is it as Barklie suggests (and most recently echoed by Diane Ragsdale), have funders and others lead the arts in this direction?

After all, at one time, art was presented for arts sake and there wasn’t any efforts to supplement the efforts of education and health care.

Is this an improvement or a dilution of our effort? It can be argued that pursuing education programs helps put arts organizations in touch with their and constituencies, helping to remove ivory tower mentality and acculturate the community.

But there is also the issue of diverting resources from the core competency and mission of the company. For profit businesses aren’t expected to do this. Many get immense tax breaks with no expectation that they serve the public good.

Is it the new normal that arts organizations must split their focus in order to maintain their existence? Is there an egotism inherent to believing you should be able to pursue the intrinsic value of art alone?

Shaping oneself as an arts service organization seems about the only option for garnering foundation funding and mollifying governmental entities who want something more than pursuit of artistic excellence as a justification for being.

Thoughts?

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What Pricing Is Right?

Back in June the MIT Sloan Management Review had an article in pricing strategies. The bulk of the article discusses research on practices of companies that have sales forces that goes out to solicit business and has some degree of control over the pricing.

However, the research found some basic elements of price setting that are common regardless of industry and geography. (my emphasis)

1. Cost-based pricing. Here, pricing decisions are influenced primarily by accounting data, with the objective of getting a certain return on investment or a certain markup on costs. Typical examples of cost-based pricing approaches are cost-plus pricing, target return pricing, markup pricing or break-even pricing. The main weakness of cost-based pricing is that aspects related to demand (willingness to pay, price elasticity) and competition (competitive price levels) are ignored. The main advantage of this approach is that the data you need to set prices are usually easy to find.

To a certain extent, this is the pricing strategy used by many non-profit organizations–and their critics. I say it is used by critics of non-profits because one of the common refrains one hears is that if non-profits can’t make enough to support themselves, they should be left to fail rather than supported by government funding.

Non profits use this approach to determine what level of revenue they need to cover their costs in the context whatever other funding sources (donations/sponsors) exist. But as the authors say, it can ignore the level of demand that may exist potentially increasing the revenue stream if the price were set higher (or perhaps ignoring the lack of demand and setting the price too high.)

2. Competition-based pricing. This approach uses data on competitive price levels or on anticipated or observed actions of actual or potential competitors as a primary source to determine appropriate price levels. The main advantage of this approach is that the competitive situation is taken into account, and the main disadvantage is that aspects related to the demand function are again ignored. In addition, a strong competitive focus in setting prices can exacerbate the risk of a price war.

I am not aware of too many price wars among arts organizations, but it can be a mistake to taking your pricing cues from competitors. For one thing, just because you perceive your product to be of equal value to your competitor’s doesn’t mean your customers necessarily do.

3. Customer value-based pricing. This approach, which is also often called “value-based pricing,” uses data on the perceived customer value of the product as the main factor for determining the final selling price. Instead of asking, “How can we realize higher prices despite intense competition?” customer value-based pricing asks, “How can we create additional customer value and increase customer willingness to pay, despite intense competition?” The subjective and quantified value of a purchase offering to actual and potential customers is the primary driver in setting prices. Customer value-based pricing approaches are driven by a deep understanding of customer needs, of customer perceptions of value, of price elasticity and of customers’ willingness to pay.

The advantage of customer value-driven pricing approaches is their direct link to the needs of the one constituency paying for the respective goods or services: the customer. The big disadvantage of such approaches is that data on customer preferences, willingness to pay, price elasticity and size of different market segments are usually hard to find and interpret. Furthermore, customer value-based pricing approaches may lead to relatively high prices, especially for unique products. Though that may seem optimal in the short run, these pricing approaches may spur market entry by new entrants or create a risk-free zone for competitors offering comparable products at slightly lower prices. Finally, it is important to note that it is an error to assume that customers will immediately recognize and pay for a truly innovative and superior product. Marketers must educate customers and communicate superior value to customers before linking price to value. Customers must first recognize value in order to be willing to pay for value rather than base their purchase decision solely on price.

Despite these shortcomings, many pricing scholars consider customer value-based pricing to often be the most preferable way to set new product prices or to adjust prices for existing products

Now I don’t have any real evidence that non-profit arts organizations use customer values as the basis of their pricing decisions, but damned if the language the authors use doesn’t match the language being used in discussions of arts management issues: increasing value and customer willingness to pay for it; the necessity of understanding needs of customers/community; high prices for unique products (unique at least from the NP org point of view); audiences not recognizing truly innovative and superior product; need to educate customers/community about the superior value of the artistic product.

Factor in movies/internet/video games as competitors offering what is perceived to be comparable product with lower monetary/social/time, etc. costs and it sounds like they are describing a the situation facing the non-profit arts and culture industries.

Except that these factors are rarely connected with discussions of pricing for non profit arts organizations. While creating the perception of value in audiences does often enter the discussion, I don’t know that it is necessarily accompanied with a “deep understanding of the customer needs, of customer perceptions of value, of price elasticity and of customers’ willingness to pay,” but rather with hopes and assumptions. How many pricing decisions arts and cultural organizations make every year are based on this understanding?

This may be due to lack of will as much as lack of funds to conduct the research necessary to achieve the deep understanding. Since customer value-based pricing seems to be recognized as the best approach, perhaps research into the intrinsic value of the arts should include a greater focus on pricing to see how value and pricing are connected.

Though I am not sure if the knowledge will be of practical use to a significant number of organizations. The authors point out the information is difficult to gather and interpret. I imagine the results will probably be specific to an organization or geographic region.

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Intrinsic Value As A General Value

Recently there has been a sentiment that the arts community shouldn’t use economic benefits as an argument for supporting the arts. I agree with this because there are a lot of problems with the argument which can weaken your position. The difficulty is that in trying to reframe the argument in other terms, you are fighting a sort of cultural inertia.

Arts Alliance Illinois Executive Director, Ra Joy retweeted lobbyist Dan Johnson who wrote “Instead of using the phrase “I’m a taxpayer” to legitimize a comment about government, we should use the universal phrase “I’m a citizen'”

We have a consumerist mentality which leads us to feel we get a say in how all our money is used and should expect a certain level of satisfaction. Businesses we make purchases from extend money back guarantees to assure our satisfaction so there is a tendency to apply a similar outlook to other areas of our lives. In addition to those addressing concerns to the government, students often use the my taxes/tuition pays your salary argument with their teachers.

The problem is, people often over estimate how much of the cost their share actually covers. Hamilton College recently launched a campaign at their students showing that after February 23, someone else was paying for their education. As most of us in the arts world know, a taxpayer’s share of the National Endowment for the Arts funding is below fifty cents.

And, of course, in many cases the price of a ticket to a performance at a non-profit organization only covers about 1/3 of the cost of the production.

Johnson’s suggestion to use “I’m a citizen” is essentially the argument for the intrinsic value of the arts. It harkens back to the social compact theories of Hobbes, Locke and Rousseau that influenced the Founding Fathers of the United States. (My first major was Political Science.) It is an argument that the government owes us based on the intrinsic nature of our relationship rather than our dutiful payment of taxes.

The influence of money which drives the concerns over the Citizens United decision and those of the Occupy Movement illustrate the problem of equating economic influence with general worth and merit. It is probably time to emphasize intrinsic value in general and not solely in the arts.

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