Building a Sustainable Theater: How to Remove Gatekeepers and Take Control of Your Artistic Career

Chapter 10: For Profit or Not For Profit (That’s a Pretty Easy Question)

If you’ve been at all persuaded by my arguments thus far about artists taking control of the means of production through the purchase of shares in a company, you’ve figured out that there is really only one answer to the question “for profit or not for profit?” that matches up with the values I’ve expressed: for profit. A nonprofit model doesn’t allow for the distribution of profits to company members, and so you end up budgeting a salary, which means that company members are no longer directly impacted by their artistic and business decisions.

I know this goes against conventional wisdom that has developed over the past fifty years since William J. Baumol and William G. Bowen published their 1966 report Performing arts, the economic dilemma; a study of problems common to theater, opera, music, and dance, in which they made the case that the arts required government and foundation support because there was simply no way for the arts to be self-sustaining in a contemporary economy.

To summarize Baumol’s and Bowen’s argument: the arts can’t take advantage of efficiencies created by technology in the same way other industries can, they said, because today it still takes the same number of actors to perform Hamlet that it did in 1601, and the same number of musicians today to perform Beethoven’s Fifth Symphony as it did in 1808. All those people need to be paid. In addition, the number of audience members can only be increased a certain amount without affecting the spectator’s ability to enjoy the performance (doing The Glass Menagerie in a basketball arena just isn't workable). So in order to cover costs, ticket prices would have to be raised so high that only the wealthiest and most committed citizens could afford them. In a democracy, this is unacceptable.

Their arguments were persuasive at the time, and still are to some extent, and they gave added support to the necessity of the newly-established National Endowment for the Arts as well as encouragement to foundations and private donors to pull out their checkbooks. This was the time when the Ford Foundation and the Rockefeller Foundation were throwing around money like confetti, and the administration of John F. Kennedy had made the arts cool.

That’s no longer the case today. As I mentioned earlier, the NEA and state arts budgets haven’t kept up with inflation by any stretch of the imagination. If the amount of money Congress originally allotted to the NEA in 1965 had kept up with inflation, the current budget would be about $559 million dollars; it’s actual budget? $180 million. Pathetic.

I have spent fifty years hearing theater artists of every generation looking wistfully toward the state-subsidized European theaters and, like Vladimir and Estragon in Beckett’s play, waiting year after year for Godot and the Doris Duke Charitable Foundation (whichever came first) to arrive bearing a big a sack of gold. It’s not going to happen; it’s time to get let go of that pipe dream, Eugene. (As I write this, a group led by Lin-Manuel Miranda and Phylicia Rashad got Senate Majority Leader Chuck Schumer to allow them to make their case to Congress for a 5-year, $2.5 billion grant to the regional theaters in the United States to help them recover from the effects of the pandemic. Predictably, there were three Senators present, and media coverage was almost non-existent. I could be proven wrong, but this seems like yet another exercise in futility.)

To make matters worse, while government arts funding has declined precipitously, foundations and individual donors are shifting their focus to other pressing social problems, so the pursuit of unearned income is getting more and more difficult for arts organizations, and whatever available to the arts are usually project-based and can’t be used for operating expenses. So increasingly, arts organizations desperate to receive funding will twist their mission and their focus in order to qualify for a grant tied to a social need (e.g., touring shows to rural areas, performances for school children, etc.). The grant will often provide them with half of what they need while expecting the same outcomes. Arts organizations will then cut costs by staffing the grant tasks with interns and part-timers at low salaries while using the rest to cover administrative costs (i.e., operating costs).

A Big Ol' Tangent: Arts Funding and Wealth Concentration

I guess you could skip this, but I don’t recommend it because most artists simply have no idea about the realities of nonprofit arts funding, and so they think that being able to apply for grants and give tax deductions to individual donors is the Yellow Brick Road to sustainability. It’s not. So brace yourself—this is gonna hurt a little.

You may remember back in September of 2011, the Occupy Wall Street movement started talking about income inequality and the 1%. At that time, they declared that the top 1% of Americans take home roughly 25% of the nation's total income, a shocking statistic that is very difficult to justify morally or politically and one that has gotten worse in the ensuing decade. To make this less abstract, let’s break it down differently: if there were 100 people dividing a million dollars, an equal distribution would result in each person receiving $10,000. Using the OWS statistics to determine distribution, however, it would look like this:Of course, this isn't how it works out in reality. The amount given to the 99% would not be evenly distributed—some would get more, some much less. But for the sake of simplicity, we'll use this model as a comparison. The OWS movement, and now all the similar movements across the nation and the world, has effectively changed the narrative in discussions about the American and global economy—suddenly, we are all part of the 99% (and if you’re not, why the heck are you reading this book???)—and artists and non-profits have, overall, been strongly supportive.

But are the arts really any different?

A 1% of Our Very Own

Interestingly, one month after the occupation of Zucotti Park by Occupy Wall Street, the National Committee for Responsive Philanthropy issued a report entitled Fusing Arts, Culture and Social Change. (It is definitely worth reading.) Holly Sidford, the report’s lead author, researched philanthropic giving to arts organization across the United States. What she discovered is as disturbing as the Occupy Wall Street facts about income disparity.

Sidford found that nonprofits in the arts with budgets over $5M, which she says represents just 2% of all arts nonprofits, receive 55% of contributions, gifts and grants. Let's break this out in the same way we did with national income above. If there were 100 nonprofit arts organizations dividing a million dollars, it would look like this:In other words, the income disparity between nonprofit arts institutions is nearly twice as bad as the income disparity in the economy as a whole.


In addition to the income gap, the Occupy Wall Street protesters also discussed the wealth gap. Income is what people make from work, yes, but also from dividends, interest, and any rents or royalties that are paid to them on properties they own—in other words, it's the money you earn over the course of a year. Wealth, on the other hand, is the value of marketable assets, such as real estate, stocks, and bonds—in other words, it's the value of the stuff you own. 

In America in 2011 (again, worse now), the top 1% possessed over 40% of the wealth in the country. Going back to our imaginary 100 people splitting a million dollars:Which made me curious: how does this shake out in the theater? Thanks to the Theatre Communications Group’s Theatre Facts report for 2010, we can start to get a sense. TCG analyzed data from 171 member theaters. They analyzed the data as a whole, but they also compared data for theaters according to their annual budgets. They had six categories, the top category was comprised of 27 theaters with budgets over $10 million, and the bottom of the 14 theaters with budgets under a half million. To be clear: these categories reflect income, not wealth.

Near the very end of the report, they compare "average total net assets" (i.e., wealth) for each income category, focusing on land, buildings, equipment, investments and other assets. The theaters with budgets of $5M or more (representing 34% of the total) possessed 80% of the total average wealth. Again, using the model of a hundred arts organizations dividing a million dollars:The wealth comparison came out better than the income comparison (phew!), but this is mostly attributable to the fact that I switched data sets. The TCG membership isn't representative of the nonprofit arts scene as a whole. Of the 160 theaters who were included in the TCG Theatre Facts roundup, only 14 of them (8.75%) had annual budgets under $500,000, whereas, according to Fusing Arts, Culture and Social Change, "three quarters of all cultural groups have budgets under $250,000." In other words, the TCG membership is a rather rarified group, and comparing the wealth gap amongst them is sort of like comparing the wealth gap among residents of a gated community—you're bound to come off looking a little better than comparing yourself to the city as a whole. Still, it was illustrative: even in that privileged group, the top 35% possessed 80% of the wealth.

One might make the argument that this disparity is OK because the larger theaters employ more people. Valid—they do indeed. The problem with that argument is that it is circular: large theaters employ more people because they receive a lot more philanthropic contributions (and more government grants as well), and so...they should be receive more money. Following this logic, if the foundations gave all their money to a single organization, they would employee a lot more people. But I doubt that it would be good for the arts or the country. 

The point is that we in the nonprofit arts world have created a system even more unbalanced than the overall economy. We have a lot of work to do here, and acknowledging that there is a serious problem is the first necessary step. The second step is to understand how the problem negatively impacts what is most important about our work.


Many artists are committed to diversity and inclusion. They want to tell a variety of stories that are created by theater artists of diverse backgrounds and viewpoints. So how does the pattern of arts funding affect this?

Back to Holly Sidford and Fusing Arts, Culture and Social Change:

Every year, approximately 11 percent of foundation giving—more than $2.3 billion in 2009—is awarded to nonprofit arts and culture. At present, the vast majority of that funding supports cultural organizations whose work is based in the elite segment of the Western European cultural tradition—commonly called the canon—and whose audiences are predominantly white and upper class....This pronounced imbalance restricts the expressive life of millions of people, thus constraining our creativity as a nation. But it is problematic for many other reasons, as well. It is a problem because it means that—in the arts—philanthropy is using its tax-exempt status primarily to benefit wealthier, more privileged institutions and populations. It is a problem because our artistic and cultural landscape includes an increasingly diverse range of practices, many of which are based in the history and experience of lower-income and non-white people, and philanthropy is not keeping pace with these developments. 

Artists often believe that Americans (and especially American politicians) just don't value the arts. I would argue that whatever hostility there it to public funding of the arts is at least partly tied to the fact that the money doesn't serve huge swatchs of the population. Sidford pointedly makes this argument later in the report:

"The economics of cultural philanthropy are extremely skewed and this restricts the ability of thousands of artists and smaller cultural organizations to advance their practice and contribute substantively to their communities. This includes most groups that serve lower-income communities; rural communities; communities of color; gay, lesbian and transgender communities and other underserved populations, broadly defined....The [economic] asymmetry disdvantages all of us by restricting the types of cultural expressions we experience, and thus our understanding of what our culture is becoming."

Back in 1996, August Wilson delivered his justly famous speech, The Ground On Which I Stand, at the Theatre Communication Group National Conference. He was angry. "I speak about economics and privilege," he said:

“and if you will look at one significant fact that affects us all in the American is that of the 66 LORT theaters [League of Resident Theatres, most of which are included in the TCG report] there is only one that can be considered black. From this it could be falsely assumed that there aren't sufficient numbers of blacks working in the American theater to sustain and support more theaters. If you do not know, I will tell you that Black Theater in America is is is just isn't funded. Black Theater doesn't share in the economics that would allow it to support its artists and supply them with meaningful avenues to develop their talent and broadcast and disseminate ideas crucial to its growth. The economics are reserved as privilege to the overwhelming abundance of institutions that preserve, promote, and perpetuate white culture.”

He continued, in words that foreshadow those of Sidford's report:

“We do not need colorblind casting. We need some theaters to develop our playwrights. We need those misguided financial resources to be put to a better use. We cannot develop our playwrights with the meager resources at our disposal. Why is it difficult to imagine 9 black theaters but not 66 white ones? Without theaters we cannot develop our talents. If we cannot develop our talents, then everyone suffers. Our writers. The theater. The audience. Actors are deprived of material, our communities are deprived of jobs in support of the art: the company manager, the press coordinator, the electricians, the carpenters, the concessionaires, the people that work in the wardrobe, the box office staff, the ushers, the janitors. We need some theaters. We cannot continue like this. We have only one life to develop our talent, to fulfill our potential as artists. One life and it is short, and the lack of means to develop our talent is an encumbrance on that life.”

Why include an attack on colorblind casting as a preface to his demand for more black theaters? Because colorblind casting didn't change the system. The mainstream white theaters could continue to do the classics and throw in a little colorblind casting, maybe add a February Black History Month production of A Raisin in the Sun or Fences, and keep all the money they were getting before and maybe a little extra because they were making an effort. Wilson, on the other hand, wanted to redistribute wealth in order to put "those misguided financial a better use." 

In addition to "black" in the above quotation, include "LGBTQ," “transgender,” "poor," "people of color," "rural," or any other marginalized group and you see that Wilson makes a case for the importance of a truly diverse theater scene that can only come through a more equitable distribution of funding.

In summary, I will quote Sidford again:

"Every ecological system requires diversity of living forms, and its multiple parts must all be healthy if the system as a whole is to thrive. The components of an ecosystem may compete for resources, but they are interdependent and symbiotic. Biodiversity ensures resilience in the entire system, and gives it greater capacity to respond to change. For the most part, the smaller organisms exist on the edges of an ecosystem, and this is where the greatest experimentation occurs. The diversity feeds and refreshes the system and without the innovation an experimentation that takes place at the margins, the larger community loses its vitality. The cultural sector is an ecosystem, and the vibrancy and resilience of all its parts—especially those at the margins—are important to the viability of the whole. We need healthy biodiversity—robust and well-functioning entities in all parts of the system."

As August Wilson said, we cannot continue like this.

Back to the Argument for a For-Profit Model

As you see, the nonprofit model, like the New York theater scene, is rigged against you as a small startup theater. The likelihood is you might get a few thousand dollars now and then, but nothing sustainable, and nothing before you’ve been on the scene for at least a couple years.

Nevertheless, Baumol and Bowen’s arguments continue to form the foundation for nonprofit management and fundraising. So am I simply being contrary by going in another direction? You be the judge, but here are a few more reasons for preferring the for-profit choice for theater startups.
  1. A nonprofit is led by a Board of Directors who “do not have any financial ownership of the organization.”
    • So when an organization assumes nonprofit designation, the artists once again become employees, not owners. They don’t directly benefit financially (i.e., profit is not distributed to shareholders) from any of their artistic efforts, and thus the immediate connection between artistic decisions and financial outcomes is severed. Artists collect their paychecks and leave. I sincerely doubt that Shakespeare would have written three plays in 1599 if he was going to get the same salary for writing two.
  2. The Board of Directors can fire anyone in the organization, including the founders and artistic director.
    • Essentially, the artists work for the Board—that’s the nature of being an employee. Let me give an example of how this worked in real life. In 1980, the Guthrie Theater hired internationally-acclaimed Romanian director Livieu Ciulei to be their Artistic Director, resulting in a great deal of glowing media excitement. Five years later, after a conflict with the Board, he resigned (likely before being fired). Guthrie Board member David Speer was quoted as saying, “When you go to theater in Bucharest or Prague you are looking for some nuance or comment you can transfer to what goes on around you….In this country, you read outrageous things in the paper and see them on television, so you go to the theater for escapism.” Even today, the self-confident ignorance displayed in that statement takes my breath away, but it isn’t uncommon in the least. It is rarely the case that Board members bring any professional knowledge to their position; rather, they are often chosen because they either have money themselves or know a lot of people who do. These people often believe that their business acumen can be directly applied to the running of the theater: “Give the customer what they want.” DO YOU WANT TO WORK FOR THESE PEOPLE?
  3. A nonprofit does not distribute profits to its owners, but rather puts any profit back into the organization.
    • Again, I think artists should benefit from their own successes, and be pinched by their failures. I think it is healthy for artists to learn how to balance artistic and business considerations, because it keeps them in an honest relationship with their audience, rather than with their donors. 
  4. Nonprofit status too often creates institutions.
    • I’m suspicious of institutions. They tend toward sprawl and stagnation. Eventually, someone involved in the leadership of an institution will justify not making a change by intoning, “Well, you can’t turn a battleship easily.” I think arts organizations ought to be lean and agile in order to quickly respond to new developments in the art and in their audience.
While I prefer the for-profit model, that doesn’t mean you can’t create a company with a so-called “triple bottom line” that commits the organization to considering more than just profit when making decisions as long as you aren't publicly owned. You can do that without creating bylaws and boards and all the nonprofit rigamarole. You just agree as owners.

But what about the main reason for being a nonprofit: being able to offer tax deductions for contributions? Well, that’s true—you have to find your money through your own funds, loans, investors, Patreon, whatever. You can’t rely on tax deductible gifts. But as I’ve shown above, this source of income is shrinking and unevenly distributed.

Finally, what a pain creating a nonprofit is. There are all these governmental hoops and reporting requirements, and grant applications requiring page after page of facts and figures and narratives. And you don’t actually get tax-exempt status for donations or grants until you’ve been in existence for a couple years, unless you can get another nonprofit to provide fiscal sponsorship… I dunno, don’t you just want to get to work?

However, if you’re attracted to the nonprofit model despite it all, you can learn a LOT from the website Fractured Atlas, who “help individual artists and arts organizations at every level of the cultural ecosystem, in every creative medium by providing fundraising tools, educational resources, and personalized support.” I remand you to their knowledgeable care.

In this book, though, we’re looking at partnerships.

While I’m in the neighborhood, I also need to point out that the company I have been describing will need to exist outside of the various unions. To my knowledge, there are no Actors Equity provisions for actors who are also owners, and whose income will be based on a distribution of profits and not a set salary, and this is likely true of any other professional and craft unions.

I am a supporter of unions—I grew up in a union family, and was a member of one while I was still in high school. As you already know, Actors Equity Association was founded after World War I to oppose the growing power of the Producing Managers’ Association (who had replaced the Theatrical Syndicate, led by many of the same people). AEA represented a necessary and heroic resistance to a situation that was leaving actors increasingly vulnerable and powerless. But at the same time, like any other union, the tacit assumption is that the members are employees who band together in negotiations with the owners. Unions set working conditions: minimum salaries, specific rehearsal times and rules, the maximum number of performances per week, benefits, and so forth.

And those rules do not provide the flexibility necessary for a company based on the ownership model. The goal, of course, is to exceed union minimums as quickly as possible, but a company in the startup phase will likely be unable to meet those goals immediately.

As with the decision to not become a nonprofit, not being unionized is also part of the ownership model.

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