Proposed DCI Reorganization

[danielray]

As Requested...

Proposed DCI Reorganization

Update: DCI Restructure II - Electric Boogaloo

Edited October 20, 2011 by danielray

[garfield]

Your first slide contains an excepted (EDIT: for bad grammar) accepted truth that, generally, Delaware's incorporation laws are very tight.

But is that a feature or a benefit? It sounds as though you're referencing a potential problem that probably doesn't exist in order to justify the reorganization of the entity to attain other goals you have.

Has DCI experienced the kind of exposure that could bring down the whole organization? I'm not aware of any lawsuits brought against DCI that exposed the Indiana structure as ineffective and/or weak.

What types of exposure jeopardizes the org? A fan falling out of the stands? A MM breaking a leg? Perhaps if you iterated an actual situation where this liability has stressed the org's structure.

Finally, in your vision, a very significant portion of the DCI's revenues would land in the coffers of a group of corps, nearly emptying the pockets of DCI each year. It would be rare for a sharp-witted attorney to attack the org when the deep pockets would lie with each corps. What, then, is the point of such a re-org?

Your second slide deals with the "Congress" and raises several points.

Your version puts the foxes directly in the hen house and exposes the, greatest point of contention among the fan base (and DCP base); the corps control the judging. All contracts and compensation come from the corps? Really? You don't see the conflict of interest here? There is an even greater potential for "fixing" the contests when the judged are compensating and negotiating with the judges. Eventually, is easy to visualize the competitive structure of the activity being watered down to in-effective and leaving the activity as entertainment only. A "G7-type" of coup within the Congress "shareholder" base could, again, sacrifice the weaker for the stronger. And with the Congress ruled by no "calm heads" to squelch such a power-play there would be nothing to stop it.

You don't describe where the Congress falls in the the overall structure except to say that it's a new non-profit. Is there any outside oversight over the judging system? What changes from how the Rules Congress is now set up?

Your third slide is the real "meat" that you're trying to attain; capture the cash flow from Media and Merchandising (M&M) for the exclusive benefit of the individual corps and remove it from the use of the Org to promote the general activity.

Let me guess: "Shareholders" here, too, are exclusively the member corps, right? Are all shareholders equal owners? If not, how is the number of "shares" distributed (it's presumed that share ownership determines votes in Holding's business decisions, right)? By which corps bring the biggest gate draw? By evaluating the core competencies of each member corps and giving credit accordingly?

Holdings, LLC "negotiates" "Internal Agreements with DCI Congress"? But congress is also made up of corps directors, so wouldn't they be negotiating with themselves? One set of directors in Congress negotiates with another set of directors (with possible overlay) who make up Holdings? What legal protections and clarity does this provide? They're negotiating with themselves, so who's being protected? And if that "protection" covers only a select group of member corps at the expense of others, how does this promote unity among the performing corps?

Your last slide is the best [/sarcasm].

The CEO gets only one vote? The same as advertisers, who will gang up to slant the board towards their benefit? You haven't talked about "DCI Event"; who makes that up? Is this the current staff of DCI? They are responsible only for events? Who makes up the definition of "key" sponsors? Is it money only? Is it also longevity of support? "Similar revenue generation opportunities"? In other words, each does only one thing; Events does shows and Holdings does media & merchandising (M&M), right? But shows don't support themselves, Dan. Gate receipts have rarely paid for an arts event, and DCI is no exception. M&M is profitable in itslef. So Events will always be a drag on the overall P&L won't they? Doesn't that give a lot of power to the other divisions to change the show programming (you may envision this)? Doesn't this overall structure give overwhelming power to the commercial aspects of the activity at the expense of the creative? In other words, show programming would be directed by the commercial interests, wouldn't it?

I appreciate the time and thought that went into your vision, Dan, but it's seems full of holes. It's also obvious to me that this is a wholesale "structural" change that is designed to neuter the current DCI structure and empower the most formidable corps along with the commercial interests to guide the activity in a direction that lines their pockets and, eventually, drives out the "unwanted" or "unproductive" or "non-contributing" corps.

In other words, it's a fancier way of reintroducing the G7, cloaked in a legal "restructuring" and sold based upon the new structure's supposed better legal "protection".

In my business we call this "Look over here, not over there."

Oh, and BTW, I noticed that you never once mentioned the impact on the fan base. Are paying fans not so important in your vision as to exclude them entirely?

Edited October 17, 2011 by garfield

[glory]

It might help us to understand the proposed structure if we understood specifically what ills it proposes to cure. Absent that or other explanation, I'm with Garfield in seeing more questions than answers. I'm seconding in particular his concern about board membership for sponsors and similar such stakeholders who might have voting interests other than DCI's.

HH

[Michael Boo]

As Requested...

Proposed DCI Reorganization

Thank you for making this its own thread. Whether I agree or disagree with any or all of your ideas, I'm glad you're expressing them (and others expressing their opinions as well) in a stand-alone thread.

[danielray]

Traveling today, about ready to head out... but will address a couple of points briefly..

Your first slide contains an excepted (EDIT: for bad grammar) accepted truth that, generally, Delaware's incorporation laws are very tight.

But is that a feature or a benefit? It sounds as though you're referencing a potential problem that probably doesn't exist in order to justify the reorganization of the entity to attain other goals you have.

First issue is not really about Indiana vs. Delaware.. it is about breaking out business units in a more logical and flexible way (see part about each unit exploring revenue generation opportunities OUTSIDE of drum corps). In order to better facilitate additional EXTERNAL revenue generation opportunities (professional services, sponsorships, etc.) an LLC is a much more flexible and defensible structure for this, Delaware is most ideal.

Again, understand I suggest that new opportunities be explored where each unit is generating up to 30-40% of revenues OUTSIDE of drum corps (or marching band or winterguard... but from other activities). While there is a great potential for upside in this, there is an increased potential for legal exposure from these activities.

Has DCI experienced the kind of exposure that could bring down the whole organization? I'm not aware of any lawsuits brought against DCI that exposed the Indiana structure as ineffective and/or weak.

What types of exposure jeopardizes the org? A fan falling out of the stands? A MM breaking a leg? Perhaps if you iterated an actual situation where this liability has stressed the org's structure.

See above.

Finally, in your vision, a very significant portion of the DCI's revenues would land in the coffers of a group of corps, nearly emptying the pockets of DCI each year. It would be rare for a sharp-witted attorney to attack the org when the deep pockets would lie with each corps. What, then, is the point of such a re-org?

No. Individual corps, their management or representatives are 100% out of the business aspects of the activity and participate only in the rules congress. No corps directors should be on the board of DCI or their subsidiaries.

Your second slide deals with the "Congress" and raises several points.

Your version puts the foxes directly in the hen house and exposes the, greatest point of contention among the fan base (and DCP base); the corps control the judging. All contracts and compensation come from the corps? Really? You don't see the conflict of interest here? There is an even greater potential for "fixing" the contests when the judged are compensating and negotiating with the judges. Eventually, is easy to visualize the competitive structure of the activity being watered down to in-effective and leaving the activity as entertainment only. A "G7-type" of coup within the Congress "shareholder" base could, again, sacrifice the weaker for the stronger. And with the Congress ruled by no "calm heads" to squelch such a power-play there would be nothing to stop it.

The structure of the congress would not be determined by the business aspects of DCI. They would choose for themselves how they would be structured and would operate. I have really no opinion on this.

You don't describe where the Congress falls in the the overall structure except to say that it's a new non-profit. Is there any outside oversight over the judging system? What changes from how the Rules Congress is now set up?

The oversight to the judging system would be judges continuing to be hired by the organization that is a consortia that is representative of all competitive organizations of all levels. This is about judging and how the performance is structure, only... not about payments or revenue shares, etc.

Your third slide is the real "meat" that you're trying to attain; capture the cash flow from Media and Merchandising (M&M) for the exclusive benefit of the individual corps and remove it from the use of the Org to promote the general activity.

No. There would be a single agreement between Holdings and Congress that sets out conditions for revenues paid to ALL organizations that have signed agreements with Congress that Holdings would receive revenues for. The conditions and mechanics of distribution of these revenues is up to Congress based on their own internal agreements. This gets the media producer completely out of the equation... and allows the corps to sort this out with themselves.

Let me guess: "Shareholders" here, too, are exclusively the member corps, right? Are all shareholders equal owners? If not, how is the number of "shares" distributed (it's presumed that share ownership determines votes in Holding's business decisions, right)? By which corps bring the biggest gate draw? By evaluating the core competencies of each member corps and giving credit accordingly?

Congress should not have individual shareholders... revenues should be distributed based on agreements, not shareholder distribution. They would have a separate board comprised of individual corps management team representatives.

Holdings, LLC "negotiates" "Internal Agreements with DCI Congress"? But congress is also made up of corps directors, so wouldn't they be negotiating with themselves? One set of directors in Congress negotiates with another set of directors (with possible overlay) who make up Holdings? What legal protections and clarity does this provide? They're negotiating with themselves, so who's being protected? And if that "protection" covers only a select group of member corps at the expense of others, how does this promote unity among the performing corps?

No corps director or representative of any corps would be on the board of DCI or a shareholder of Holdings or Events (which would be wholly-owned subsidiaries).

The CEO gets only one vote? The same as advertisers, who will gang up to slant the board towards their benefit? You haven't talked about "DCI Event"; who makes that up? Is this the current staff of DCI? They are responsible only for events? Who makes up the definition of "key" sponsors? Is it money only? Is it also longevity of support? "Similar revenue generation opportunities"? In other words, each does only one thing; Events does shows and Holdings does media & merchandising (M&M), right? But shows don't support themselves, Dan. Gate receipts have rarely paid for an arts event, and DCI is no exception. M&M is profitable in itslef. So Events will always be a drag on the overall P&L won't they? Doesn't that give a lot of power to the other divisions to change the show programming (you may envision this)? Doesn't this overall structure give overwhelming power to the commercial aspects of the activity at the expense of the creative? In other words, show programming would be directed by the commercial interests, wouldn't it?

Need to answer more of this later.... need to head out... but some of previous answers should give an idea toward the direction. Again, this separates church and state and completely removes corps directors from direct involvement with DCI on an operational level (there are good and bad sides to this... of course).

[mobrien]

Honestly Daniel, there's not enough money in the DCI system to warrant this large of a reorganization. The total budget for the entire org is a fraction of what some local charities spend in a year. A simpler proposal would be to modify DCI in the following ways;

• A Board of 7 members, with one appointee representing the Open Class corps, two reps from World Class corps, the DCI Exec Director, and three outside directors with business and marketing experience. Stagger the terms so that the Board is refreshed regularly without being completely changed in a single season. The primary focus of the new Board would be to grow DCI's revenues and participation at all levels of the activity, and they would have flexibility to look at a number of options in pursuit of those goals, including acquisition of like-minded organizations (like WGI) that can be used to increase the activity's footprint and expand avenues for participation.
  
• Eradication of the annual rules congress in favor of having rules congresses just once every five years. No mature sport changes their rules as often as DCI does, and the frequency of the rules conventions allows for a mindset that sees changes as being cheap and easy.
  
• A requirement that any rules changes that would require capital outlays for new equipment for the competing corps be paid for by DCI, which would make it less attractive for those corps with means and/or sponsorship deals to just assume that they can push through changes for everyone else without seeing some personal hit via reduced disbursements from the general fund.
  

Once DCI is in the range of $20 million a year, then there's enough money to start splitting into more focused areas of concern, but they're a long ways off at this point. The focus now should be on expanding the pool of participation - when you do that, you expand the pool of available dollars and increase the fan base commensurately.

[Kamarag]

[*]Eradication of the annual rules congress in favor of having rules congresses just once every five years. No mature sport changes their rules as often as DCI does, and the frequency of the rules conventions allows for a mindset that sees changes as being cheap and easy.

Not true. The NFL, NHL, NASCAR, Formula 1, all have rules reviews, updates, and changes annually (in the case of NASCAR and F1, during the season if necessary). Even MLB reviews rules annually, even if they don't make a change.

DCI holds rules congress every other year. Sometimes rules change, sometimes they don't.

Edited October 17, 2011 by Kamarag

[Jeff Ream]

Your first slide contains an excepted (EDIT: for bad grammar) accepted truth that, generally, Delaware's incorporation laws are very tight.

But is that a feature or a benefit? It sounds as though you're referencing a potential problem that probably doesn't exist in order to justify the reorganization of the entity to attain other goals you have.

Has DCI experienced the kind of exposure that could bring down the whole organization? I'm not aware of any lawsuits brought against DCI that exposed the Indiana structure as ineffective and/or weak.

What types of exposure jeopardizes the org? A fan falling out of the stands? A MM breaking a leg? Perhaps if you iterated an actual situation where this liability has stressed the org's structure.

Finally, in your vision, a very significant portion of the DCI's revenues would land in the coffers of a group of corps, nearly emptying the pockets of DCI each year. It would be rare for a sharp-witted attorney to attack the org when the deep pockets would lie with each corps. What, then, is the point of such a re-org?

Your second slide deals with the "Congress" and raises several points.

Your version puts the foxes directly in the hen house and exposes the, greatest point of contention among the fan base (and DCP base); the corps control the judging. All contracts and compensation come from the corps? Really? You don't see the conflict of interest here? There is an even greater potential for "fixing" the contests when the judged are compensating and negotiating with the judges. Eventually, is easy to visualize the competitive structure of the activity being watered down to in-effective and leaving the activity as entertainment only. A "G7-type" of coup within the Congress "shareholder" base could, again, sacrifice the weaker for the stronger. And with the Congress ruled by no "calm heads" to squelch such a power-play there would be nothing to stop it.

You don't describe where the Congress falls in the the overall structure except to say that it's a new non-profit. Is there any outside oversight over the judging system? What changes from how the Rules Congress is now set up?

Your third slide is the real "meat" that you're trying to attain; capture the cash flow from Media and Merchandising (M&M) for the exclusive benefit of the individual corps and remove it from the use of the Org to promote the general activity.

Let me guess: "Shareholders" here, too, are exclusively the member corps, right? Are all shareholders equal owners? If not, how is the number of "shares" distributed (it's presumed that share ownership determines votes in Holding's business decisions, right)? By which corps bring the biggest gate draw? By evaluating the core competencies of each member corps and giving credit accordingly?

Holdings, LLC "negotiates" "Internal Agreements with DCI Congress"? But congress is also made up of corps directors, so wouldn't they be negotiating with themselves? One set of directors in Congress negotiates with another set of directors (with possible overlay) who make up Holdings? What legal protections and clarity does this provide? They're negotiating with themselves, so who's being protected? And if that "protection" covers only a select group of member corps at the expense of others, how does this promote unity among the performing corps?

Your last slide is the best [/sarcasm].

The CEO gets only one vote? The same as advertisers, who will gang up to slant the board towards their benefit? You haven't talked about "DCI Event"; who makes that up? Is this the current staff of DCI? They are responsible only for events? Who makes up the definition of "key" sponsors? Is it money only? Is it also longevity of support? "Similar revenue generation opportunities"? In other words, each does only one thing; Events does shows and Holdings does media & merchandising (M&M), right? But shows don't support themselves, Dan. Gate receipts have rarely paid for an arts event, and DCI is no exception. M&M is profitable in itslef. So Events will always be a drag on the overall P&L won't they? Doesn't that give a lot of power to the other divisions to change the show programming (you may envision this)? Doesn't this overall structure give overwhelming power to the commercial aspects of the activity at the expense of the creative? In other words, show programming would be directed by the commercial interests, wouldn't it?

I appreciate the time and thought that went into your vision, Dan, but it's seems full of holes. It's also obvious to me that this is a wholesale "structural" change that is designed to neuter the current DCI structure and empower the most formidable corps along with the commercial interests to guide the activity in a direction that lines their pockets and, eventually, drives out the "unwanted" or "unproductive" or "non-contributing" corps.

In other words, it's a fancier way of reintroducing the G7, cloaked in a legal "restructuring" and sold based upon the new structure's supposed better legal "protection".

In my business we call this "Look over here, not over there."

Oh, and BTW, I noticed that you never once mentioned the impact on the fan base. Are paying fans not so important in your vision as to exclude them entirely?

[Tom Brace]

Well, let me be of help here.

1. Paying fans are contributors to one of most corps' chief fundraising efforts...their show.

2. Daniel Ray has all the earmarks of a troll. She/he is searching for that topic where she/he can be the anti-christ of drum corps to incite highly charged discussions.

3. It's still...October.

[Lance]

thanks for the interesting conversation starter, daniel.

indeed it is october, and there's nothing wrong with civil discussion about this, IMO.