What if...?

[Lance]

for people to make much money off of dci, it would have to be completely different. it wouldn't resemble what it is now, and much less what it was like in past decades.

[Todd Tanji]

What if there was an offer to buy DCI, convert it from a non-profit consortia, to an independent for-profit event management business?

It would be a straight-forward deal where the organization is sold for 3 times EBITDA, distributed to the individual shareholder organizations (corps would basically get a one time payout of a good chunk of cash that could help to stabilize each organization).

The deal would then be structured in a way that individual corps would be locked into a minimum performance fee, but would also receive bonuses based on caption and overall rankings for their performances in individual shows. Corps could choose to take their performance payments on an advance schedule in exchange for a % of reduction in fees. Bonuses would be distributed post event.

There would, of course, be a lot more to this... but... to take an non-profit entertainment-based organization that has reasonably predictable cashflow of around $10M/year, but is not reaching full potential due to the current organizational structure as a consortia.... this could be a compelling opportunity for the right investors, and could provide greater stability to individual corps (who would retain participation in a separate consortia managing regulatory aspects of the competitive circuit).

Because DCI would then become a for profit activity... there will be a much different motivation to increase profits and greater flexibility to develop external partnerships and corporate sponsorships.

Anyway, something to possibly think about...

I don't know if adding the profit motive is necessary, or even sufficient, to solve the economic incentive problems in DCI. To see why it is important to understand current corps economics.

The single largest source of revenue for most corps is member fees. The math is simple: $3,000 x 150 members = $450,000. Right now the majority share holders are the members, which is good. Corps compete to give their members the best experience possible with quality instruction, show design, performances, and overall experience.

Other sources of revenue are considerably smaller but not insignificant: performance money, merchandise sales, donations, and other fundraising.

DCI, on the other hand, gets most of its revenue from tickets sales. From their perspective it is the fans who truly matter. But DCI does not control the content of the shows, the individual corps do, and that is a problem.

Say you have a corps show with 12 different corps and the fans don't like it and they aren't coming back. Who is responsible? The corps are but each of them only bear 1/12 of the responsibility for it AND they all get paid the same amount of money regardless of what they do. Furthermore, they answer foremost to their members who care a lot about their competitive status. So the individual corps care considerably more about how they score than if the crowd is satisfied.

So we have a situation where if we lose fans the parent organization is the first to suffer, not the corps who control the show content. Not good.

Mind you, I am not saying that the corps don't care about the fans. Everyone in the performing arts wants audience response. But the way the current economics work, corps are not rewarded enough for pleasing the fans and aren't punished at all for not pleasing the fans.

So to fix the system we have to somehow create economic incentive for pleasing fans. That means somehow forming as direct a link as possible from the money fans pay to the money corps receive. That means not everyone should be paid the same. That also means that the money paid out needs to be more comparable to the money corps make in member fees.

[SFZFAN]

I love waffles by the way.

[MelloHorn13]

I love waffles by the way.

YUM! maple or honey syrup?

[NR_Ohiobando]

It's times like these that I remember that Detroit Symphony Orchestra strike...and all the other struggling orchestras in the US.

[BOBSMYTH]

Very confused as to why DCI didn't give his views more credence at the time.

Never a good thing when emotions and politics trump solid business sense.

There is one very good reason why the corps directors did not sell DCI to Bill Cook.

They didn't want to.

It isn't about the money, it's about the mission. It's a non-profit thing.

[Jeff Ream]

A) Nothing much changes from the perspective of the performer, except costs could hopefully come down a bit over time.

B) Tax deduction is not really a strong motivation for potential sponsors of DCI. Motivation is to potentially increase sales by either improving brand/product awareness or improving top-of-mind

C) Nothing else changes. A draft doesn't fit with the model of drum corps, as it is as much a creative as it is competitive activity. Organizations have personalities and approaches that are more personal. This is why orchestras or the ballet have auditions instead of drafts.

I think the target type of potential investors would be more like an individual or small group of individuals, not an organization or corporation.

ok so you want a for profit corporation yet the performers have to pay to be in it, not get paid.

Explain to me how this works.

[danielray]

I don't know if adding the profit motive is necessary, or even sufficient, to solve the economic incentive problems in DCI. To see why it is important to understand current corps economics.

The single largest source of revenue for most corps is member fees. The math is simple: $3,000 x 150 members = $450,000. Right now the majority share holders are the members, which is good. Corps compete to give their members the best experience possible with quality instruction, show design, performances, and overall experience.

Other sources of revenue are considerably smaller but not insignificant: performance money, merchandise sales, donations, and other fundraising.

DCI, on the other hand, gets most of its revenue from tickets sales. From their perspective it is the fans who truly matter. But DCI does not control the content of the shows, the individual corps do, and that is a problem.

Say you have a corps show with 12 different corps and the fans don't like it and they aren't coming back. Who is responsible? The corps are but each of them only bear 1/12 of the responsibility for it AND they all get paid the same amount of money regardless of what they do. Furthermore, they answer foremost to their members who care a lot about their competitive status. So the individual corps care considerably more about how they score than if the crowd is satisfied.

So we have a situation where if we lose fans the parent organization is the first to suffer, not the corps who control the show content. Not good.

Mind you, I am not saying that the corps don't care about the fans. Everyone in the performing arts wants audience response. But the way the current economics work, corps are not rewarded enough for pleasing the fans and aren't punished at all for not pleasing the fans.

So to fix the system we have to somehow create economic incentive for pleasing fans. That means somehow forming as direct a link as possible from the money fans pay to the money corps receive. That means not everyone should be paid the same. That also means that the money paid out needs to be more comparable to the money corps make in member fees.

You make a very great point.

I am absolutely for rewarding organizations proportionate to contribution. At the end of the day it is their draw that counts... so, maybe compensation based on placement is not the most effective way to do this. There needs to be some other performance-based metric to determine individual unit compensation, one that is directly tied to revenue contribution.

Any thoughts on a solid way to measure individual corps' contribution to event revenues?

BTW - I suggested a conversion to a for-profit entity for a couple of reasons...

First, it is easier to put together the cash to make an effective transition, one that would give corps a bit of a bump in the process, from private investors that have some expectation of eventual return compared to private donors. Finding donors on that scale is considerably more difficult.

Also, as a for-profit entity, it is much easier to attract corporate sponsorship, in that you can tap directly into lower-level budgets of a corporation (say the brand manager for Tostitos inside Pepsico could directly sign off on a sponsorship that falls within their budget and objectives). For a non-profit entity, that exact same type of sponsorship would require higher-level approval of Pepsico corporate and need to go through a vetting process, as it would be necessary to ensure that the various activities of the organization match the priorities and tone of the corporation as a whole, etc. rather than it just being seen as a marketing opportunity for the brand. You'd have to involve their community relations people, and you would then be compared to the various non-profit organizations the company is associated with, rather than it just being tapping into a marketing budget of an individual brand.

This is also due in part to the way the corporation would have to book it themselves. The amount of money they can book as a sponsorship of a non-profit organization across the entire corporation is limited in comparison to less-restricted marketing dollars of the individual brands of the corporation.

Edited April 22, 2011 by danielray

[danielray]

It's times like these that I remember that Detroit Symphony Orchestra strike...and all the other struggling orchestras in the US.

Arts organizations like symphony orchestras, ballets, operas, etc. have struggled because they thought that the quality of the product they produced would be enough to ensure that they would remain viable.

They didn't take the right steps to cultivate more regular engagement with audiences and cradle-to-grave loyalty of each generation.

This is a US-specific problem that is, more or less, due to complacency and emphasis on higher margins of ticket sales, rather than higher volumes.

In a lot of places around the world, these types of organizations aren't struggling. The ones that aren't have much lower ticket prices and much higher attendance figures because they are more embedded in the communities they serve. Regular family-friendly programs and family ticket prices are essential to this type of stability, as it seeds habits of each generation. Integration with schools is also essential.

A sort of mini Blast-type organization that is geared toward nation-wide performances for public school students (would not perform at schools...but local venues where kids from a number of schools would attend) could be a creative sort of investment on the part of DCI in seeding the next generation of participants.

[danielray]

ok so you want a for profit corporation yet the performers have to pay to be in it, not get paid.

Explain to me how this works.

I don't see how these two points are connected.

But... I like the idea of boosting revenues to the point where performers eventually no longer need to pay to participate. This can be done.