Monday, February 17, 2014

Monday Musings: What Price Nonprofit?

Today's brief musing was prompted by an article this past Saturday in the New York Times: 

It May be a Nonprofit Theater, but the Tickets Look For-Profit

It lists the ways in which nonprofit theaters in New York are acting more and more like their for-profit brethren: raising ticket prices, partnering with commercial producers to mount sure-fire hits, renting out space, rotating in established blockbusters and hiring star actors. 

The article summarizes the justification for nonprofit theaters as places where "new works with homegrown actors are produced, where challenging Pulitzer Prize-winning plays are introduced, and where, until recently, ticket prices where low." But clearly, activities focused on these ends alone are not paying the bills.

All of which raises a disturbing prospect of how long theaters can flirt with having their tax-exempt cake and eating it, too. I find this story disturbingly reminiscent of the way in which nonprofit hospitals (among the largest recipients of charitable donations) are increasingly coming into question for behaving in ways indistinguishable from for-profit hospitals. This has led to practical consequences such as the City of Pittsburgh challenging the tax-exempt status of the University of Pittsburgh Medical Center, which in turn prompted legislation currently waiting voter approval that would give Pennsylvania the power to determine tax status, shielding nonpos from cash-strapped municipalities scrambling to find funds. 

The theater story leaves me (and museums) with the following questions:

  • How far can nonprofits pursue "business-like" income opportunities without erasing the distinction, in the public eye, between their operations and those of a straight-up for-profit enterprise?
  • How much public benefit does a nonprofit have to offer to justify public tax support? The NYT article cites the span of nonprofit ticket prices as being from $25 to the new high of $162, and that of for-profit Broadway shows as typically being $200-$477. But last minute and student discount tickets to Broadway shows are often available for $20-$30. At what point does public subsidy of nonprofit status cease to make art substantially more creative, or more accessible?
  • There are already segments of the museum field (notably aquariums) that have successful for-profit counterparts. The nonprofit Georgia Aquarium has already been accused of trying to import and exhibit Beluga whales for their entertainment value, rather than benefits to research and conservation. How long before we see an article in the NYT or the Nonprofit Quarterly is examining the basis behind the nonprofit for-profit distinction for aquariums? And how will we, as a sector, respond?


cdilly said...

I think it's interesting how much push-back we often have to the fact that nonprofits are increasingly competing directly with for-profits for supporters/visitors and I worry if this is setting us back and keeping museums from evolving in order to survive. Fortunately, there is data to suggest that folks, when given the choice between two products or experiences, will choose the one that benefits a cause - price being equal. (Cone Millennial Case Study says 89% of Generation Y, but others studies say that this is how the market at large is making decisions and valuing brands. Unfortunately, the market is increasingly "sector agnostic" (again, especially millennials) meaning that being a nonprofit doesn't necessarily always give a brand extra points or mean that that organization is doing more social good than a for-profit company. Visitor-serving organizations that highlight their missions outperform organizations that market primarily as attractions. Here's the data:

In regard to the mention of aquariums and also theater and performing arts organizations, these two types of visitor-serving organizations generally receive the least financial support from the government and thus have a dire need to appeal to the market in oder to survive. All museums need to do this in order to remain relevant- but like for-profits, it's more imperative for these kinds of organizations. Thus, it makes sense that these types of organizations may be best primed to compete. Here's the data regarding types of VSOs and earned revenue contribution as a percentage of annual operating revenues:

Related: I am confused by the inclusion and also the wording of the part about the beluga case. (They were not "accused" of trying to import belugas. They actually publicly made the case for importing the belugas.) The word "accused" is a bit loaded with the author's personal perspective. It's worth mentioning that there are SEVERAL nonprofit organizations that make cases for things upon which some people do not agree. Why should one case represent a sub-industry's perspective or even it's social value? Here are two cases in which aquariums, in particular, are utilizing their need to engage the market by both inspiring audiences AND contributing to conservation of the ocean (one of the biggest missions among VSOs.):

The Alliance's Center for the Future of Museums said...

Thanks for weighing in Colleen, and for the links to relevant research.

Regarding the bit about whales, the article I link to talks about animal rights activists alleging that the principle motivation behind the Georgia Aquarium's request to import Belugas was entertainment (and accompanying ticket sales from displaying charismatic megafauna), rather than research and conservation, as the aquarium stated in its permit applications. I think that PETA and its allies' language did constitute an "accusation." The relevance, for the purpose of this musing, is whether the Georgia Aquarium' proposal was perceived by opponents as being driven by commercial considerations more than by concerns related to conservation.

Debra Kerr said...

Colleen and Elizabeth, in fact, the animal activists have for years been accusing aquariums of using animals to "make money." That's an easy fall-back stance for those who don't believe zoos and aquariums should exist--that the role of these organizations as ambassadors for nature and conservation organizations doesn't justify their existence. But it's not new; aquariums have been working to overcome this accusation for more than 20 years, at least, based on my own career. However, when we show the care our staff give our animals, the engagement of our guests and the motivation it provides for enthusiastic teens (just as I saw at Shedd Aquarium's teen learning lab a week ago, as 76 teens registered to learn more about animal careers from world-renowned trainer Ken Ramirez), we turn the criticism into an opportunity to show our positive impacts. However, Elizabeth's point remains. The museum community can never rest. We have to continually be more engaged in our communities and their needs, so we are perceived as relevant, in touch and essential.