Business Models

Info You Can Use: Let’s Play Find The Exploitative Clause

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About a month ago, I wrote about webcomic Penny Arcade’s online reality competition Strip Search which is aimed at finding the next great webcomic artist. (By the way, both the comic and the show are often NSFW)

I had mentioned that it seemed like the aim of the show was to use the Penny Arcade fame to help advance the careers of these artists.

I think their most recent episode of Strip Search provides a model for teaching arts students of all stripes about contracts.

Penny Arcade has famously signed away the rights to their intellectual property at least twice and only regained it by dumb luck. This is a topic near and dear to their hearts. I have seen the creators, Mike Krahulik and Jerry Holkins, and their business manager, Robert Khoo, talk about it in interviews and convention panels a number of times.

Khoo is probably the only business manager in the gaming world to achieve hero status for saving Krahulik and Holkins from themselves and helping to grow their company.

In this episode they have the contestants read through an exploitative contract and then go in and talk to Khoo about what they want struck or changed. Khoo basically plays a bumbling idiot in the negotiations because the whole point was to get the artists to evaluate the contract rather than necessarily deal with a combative negotiation environment.

Also, because it was a contest they only had a set amount of time to evaluate the contract and conduct negotiations. In real life situations everybody acknowledges the importance of investing all due care reading contracts and consulting with an attorney.

After the contestants spoke with him, Khoo mentioned that there were two basic approaches to the contract they could have taken. Either decided what their core values were and question whether the contract achieved or impeded those values or go through line by line analyzing each condition (or obviously a hybrid of both).

Because a classroom setting is similar to the contest environment with only a limited time to evaluate a contract (even if a student gets to take it home over the weekend), having a similar opportunity to look at a contract with many elements not in the artist or organization’s best interest and then roleplay a negotiation could certainly be helpful to arts students.

One of the things I never thought I got enough of in grad school was contracts. We got to look at a few contracts to see the sort of things that went into them and I got to read all the Actors Equity handbooks I wanted.

There really wasn’t a discussion about the type of things you would want to change because it wasn’t in your best interest.

Many people may be under the impression that a contract is something that you need to comply with as best you can if you want to do business with them at all. I think there is a basic assumption that the other party is acting in completely good faith and little acknowledgment of the possibility that the other guy may be trying to fleece you to the fullest extent possible.

Most people acting good faith with a reasonable bias toward themselves, but you had still better read the contract every single time it gets set before you.

Business Plans Enhanced By Creative Mediuum

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I was really happy to see that MIT required the projects submitted to their annual $100K Entrepreneurship Competition to have the arts at the core.

The impetus for making this a requirement:

“came to Magee when he was sitting in on business pitches and noticed that many of them could have used an artist’s touch. “This isn’t just about businesses that need a graphic designer or have a beautiful website,” he says. “It’s about businesses with arts at their core.”

The committee for the competition received 40 submissions, but only half met the requirement of having arts at their core.

This reminded me about a post I did on the competition that University of Toronto’s Rotman School of Management held last year where the teams including design students offered a more compelling and engaging pitch than the MBA students.

It reinforces the value those with creative degrees bring to business and points to the necessity to train creatives how to bring that value to businesses.

The winner of the MIT contest was a site called Mediuum and described as “a sort of iTunes for art, providing access to digitized art works for the masses.”

According to the team’s project page,

The art market is a $40 billion annual market, but is riddled with problems that alienate its largest potential consumer base. Digital consumers are habituated to the instant access and gratification they enjoy with other cultural content, like music and movies. By comparison, finding art they like is expensive and time consuming, and there is no digital solution.

Enter Mediuum:

Mediuum lets people discover, display and enjoy the art they love most, on digital screens. We combine an online marketplace of exceptionally high quality work by the world’s most talented artists with a platform that allows people to display that art on any screen. Our solution is creating a new online market for art discovery and consumption.

I visited the site and was a little disappointed. The only way to get on is the request an invitation. My first thought was that this was a reflection of the elitism that everyone accused the arts of perpetuating and an aspect of the alienation the project page referenced. The only way to access the art is to meet the approval of a gatekeeper.

I submitted a request for invitation and received a message that they would get back to me. Over 24 hours later, I still haven’t received a reply.

Now that being said, there have been many new online services that have required you to receive an invitation during the early stages. This has been the case with many Google products, including Gmail. In time, Mediuum may be easily available to all.

Or it could just be taking the problems of bricks and mortar establishments to the Internet.

Before There Was Rocco..

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…there was Anthony Radich.

Looking back at some of my old entries, I was surprised to find I had forgotten that five years before Rocco Landesman uttered his infamous blasphemy/straight talk about there being too much art, Western Arts Federation Executive Director, Anthony Radich had suggested killing off arts organizations.

So let’s euthanize some arts organizations. Let’s pull some of the nonprofit arts programming off the arts-production line and free up funding and talent for reallocation to stronger efforts–especially to new efforts tilted toward engaging the public. Let’s return to the concept of offering seed money for organizations that, over a period of years, need to attract enough of an audience and develop enough of a stable financial base to survive and not structure them to live eternally on the dole. Let’s find a way to extinguish those very large groups that are out of audience-building momentum and running on inertia. Instead of locking arts funders into a cycle of limited choices, let’s free up some venture capital for new arts efforts that share the arts in new ways with the public.

I guess everybody takes note of the director of the National Endowment for the Arts, but forgets about what the head of an equally important regional arts service organization says.

As with Rocco, the issue is much more nuanced than at first glance. I wrote about it and there was some good discussion on Andrew Taylor’s blog at the time.

Info You Can Use: Kickstarting Your Taxes

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Salon has an important article to read if you are an artist trying to use Kickstarter to fund a project. Apparently people don’t realize the money they receive via Kickstarter is considered taxable income by the IRS.

In short, money raised from Kickstarter and other crowdfunding platforms is considered to be taxable income. Amazon Payments, which handles the credit card transactions for Kickstarter, disburses the funds to the project creator and sends them a 1099-K, a tax form that reports “Merchant Card and Third Party Network Payments” to the IRS. In this particular case, a pledge made by a fan to a project would be considered a third-party network payment.

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“Although musicians may not necessarily be selling something via Kickstarter, they are still entering into a transaction with their backers,” he noted. “If they reach their goal of ‘X’ amount of dollars, they have certain conditions they’ve agreed to make. They should consider the money as income because the IRS defines gross income from ‘whatever source derived,’ unless specially excluded.”

The article also notes that artists often underestimate the cost and logistics of making good on their promises. One woman promised her supporters tickets to a show so when she exceeded her allocation of comp tickets, she had to buy the rest herself. Another ended up spending $10,000 in postage mailing out the items she promised.

Kickstarter also brings an issue artists have faced with their patrons since time immemorial–their desire to be involved in all the decisions.

The issue for Dawn was intensified by her raising five times the amount of her set goal. Suddenly, fans were complaining that she didn’t really need the whole $104,000 to record the album. Dawn countered by noting that not only did she use all of her Kickstarter funds, but she also opened four separate credit cards and dipped into her life savings to cover the difference.

One of those interviewed for the article suggested that anyone thinking of launching a campaign consult with an accountant or business manager first to plan for the tax liabilities and expenses the campaign will entail.