gb fr

Are the arts compatible with the pursuit of profit?

The work of a new arts organisation may offer a new business model for the arts sector.  

In an age of austerity, it is common to read heartfelt laments about cuts to the arts, and the terrible damage that these are doing to the fabric of our society. Whether it is an exciting art initiative which does not get funded, a regional theatre which closes, or a peripatetic music service which is abolished, the stories nearly always centre on a desperate rear-guard action against Government cuts. This is a narrative that apparently suits everyone: the arts organisations which want their grant funding continued, the Grant funding bodies which want to demonstrate that they are ‘sharing the pain’ in hard times, and the media, for whom the story of ‘nice to have’ arts let down by philistinism is already written. But what if there is another story out there? What if these fixed attitudes to the arts are in fact constraining a whole world of arts enterprise, placing artificial obstacles in the way of the development of one of the most dynamic and exciting sectors of the British economy, and robbing us of the innovation and intelligence we need in order to be a successful knowledge economy the new digital age?

This is the position being taken by a new arts organisation, the Rimbaud and Verlaine Foundation (R&V), inspired by two badly behaved French poets, Arthur Rimbaud and Paul Verlaine, and founded to take advantage of the legacy gift of the Regency property in Camden where they once lived. Instead of setting out to be a small house museum, R&V has instead used the reputation of these poets for edginess and creativity to commission new art works in a wide variety of different fields ranging from theatre and jazz to opera and puppetry, and in the process has provided great opportunities for talented up-and-coming artists to make their mark. More importantly, this new organisation is challenging the entire basis on which the arts are funded in the UK, and is championing a new business model for the arts which, it believes, will allow the arts and culture to thrive commercially, to operate in a sustainable and resilient way, and to make their proper contribution to society.

Graham Henderson, the CEO of the organisation, is one of the UK’s most successful cultural entrepreneurs. His background is unusual. After a successful career as a City lawyer he was tempted, - against all sensible advice, he says - into founding Poet in the City, a new arts organisation, in 2006. Against the odds, over the next eight years he developed Poet in the City as a successful new arts brand, successfully reaching out to large new audiences for poetry. In 2012 Poet in the City attracted a capacity audience of 1,700 people to St Pauls Cathedral for a celebration of the poet John Donne, one of the largest live events forming part of the Cultural Olympiad. Graham showed the way in which a new and more streamlined arts organisation could succeed in making a dramatic contribution to an undervalued artform, and could succeed in attracting all sorts of new income to that art form, both in the form of corporate sponsorship and earned income. Poet in the City is now a National Portfolio organisation, receiving regular core funding from Arts Council England. The growth of this organisation from nothing to being a leading arts brand has been one of the most unusual success stories in the arts sector in the UK at a time when many organisations have been downscaling or losing their funding. Graham has now brought all the experience he gained to his new organisation, R&V, and is planning to make an even bigger contribution to the future fortunes of the arts in the UK. If he succeeds, we may see the end of the misery narrative, and the beginnings of a new golden age for the arts.

So, what is the answer to funding the arts? Graham believes that the answer has been staring us in the face all the time. We simply need to allow the arts to function in a more entrepreneurial fashion, empowering them to develop new shows, products and services capable of appealing to wider audiences, allowing them to earn money from these activities, and allowing them to reinvest these profits in the arts. He points to research showing a chronic lack of investment in the arts, and an almost total absence of micro-finance allowing arts organisations to develop and grow those areas of their activities capable of making a profit. Nor is it a case of arts organisations ‘selling out’ and becoming crude commercial operations. The last few decades have seen the evolution of far more sophisticated corporate vehicles including large and successful Not for Profit entities such as housing associations, capable both of delivering high value contracts worth many 100s of millions, and of still maintaining a charitable purpose. This kind of hybrid Not for Profit model provides a viable way forward for the arts, allowing it to both to pursue its purely artistic and educational objectives and to support these more effectively by creating earned income from those areas of its operations capable of earning a profit or surplus. At the moment only the ‘big beasts’ amongst arts organisations, such as the National Theatre, Tate and the Royal Opera House, are in a position to develop such earned income streams successfully. In a radical departure R&V is showing the way in which Small and Medium Enterprise arts organisations (SMEs) can also do so.

Graham has for some years argued that what is required to unlock the entrepreneurial potential of the arts and cultural sector is commercial investment. However, this cannot be the kind of investment provided by venture capitalists, chasing after high returns. The arts are quite capable of making a profit or surplus, but cannot be expected to generate the kinds of returns expected by the usual manifestations of venture capitalism. Fortunately, we already have a model suited to arts investment. That is investment which is made on a limited or capped return basis. Under this model, investors can expect to get their money back, and to make a return too, although the return will be limited or modest. In other words, the model requires the sort of responsible investor who is also interested in developing a more resilient business model for the arts, and in growing arts organisations into successful business enterprises. In fact, the kind of investment required is what might be described as old-fashioned philanthropic investment, even if it is quite possible that the new arts investment model could end up generating a higher and more reliable return than some of the speculative and supposedly high return ventures currently attracting private equity investment. It is ‘patient capital investment’. How much better to prefer the long-term growth of a solid and resilient arts sector over the high returns associated with more short-term enterprises of a purely commercial nature.

In fact, Graham has already been responsible for the creation of an arts investment fund. In 2010 he wrote a position paper for the Culture Forum, an elected group of arts leaders, calling for the creation of a Limited or Capped Return Arts Investment Fund, and played a leading part in campaigning for such a fund over the following four years. However, the fund which emerged from this campaign was (in his view) fatefully compromised by its insistence that any investment in the arts should also be able to demonstrate measurable ‘social outcomes’. As such, he believes that the arts investment fund took a wrong turn, failing to support genuine entrepreneurialism in the arts.

The investment criteria of the fund serve to lock its recipients into a narrow form of instrumentalism under which they are required not only to make money but also to achieve other social objectives at the same time. This approach massively distorts the work of the arts sector, distracting it from more straightforward activities and products which could earn money for the arts, and forcing it to deliver against arbitrary definitions of social impact. The arts are thus required to solve social ills which require other non-arts solutions, something they inevitably fail to achieve in many cases. This approach also considerably undervalues the contribution made by the arts and culture to society as a whole, and cannot serve as a model for most SME arts organisations. Believing that the arts should not be constrained in this way, Graham prefers to ask why they should not simply be allowed to make money like any other business from those areas of their work where it is possible for them to do so. He argues that you cannot both criticise the arts of being un-business-like on the one hand and then erect all sorts of institutional and ideological obstacles to them developing their moneymaking activities in a sustainable way.

In the absence of a proper arts investment fund, R&V has been forced to make the argument for mission-led limited profit investment by itself, directly to the investment community. Graham is currently engaged in a series of presentations to investors, wealth managers and Family Office contacts. His business plan and the business model that it has developed is increasingly winning the ears of both High Net Worths and their intermediaries. It is one that is based on successful pilots and on existing businesses, which demonstrates the way in which the know-how and the intellectual property built up within an arts organisation can be used to create sources of earned income for the organisation. For instance, when he was running Poet in the City, Graham developed a public art consultancy which drew on the ideas and knowledge present in the organisation, and worked in partnership with a leading architects practice to create Pope’s Urn, a permanent public sculpture situated on the banks of the River Thames at Twickenham. As well as celebrating poetry as an art form, and commemorating the life of the great poet Alexander Pope in the town where he used to live, this public art commission was also a commercial contract, and resulted in a surplus for the parent charity. This impressive public art commission represents a great example of how the arts can generate more income while retaining their authenticity and integrity, but does not fit into the prevailing narrative, and as a result has gone almost unacknowledged by Art Council England or by the art impact investment sector.

Whilst he was developing the public art consultancy, Graham also came across a number of design studio businesses functioning in the commercial environment, and was inspired to consider how this new type of business might be imitated in the arts. In a digital era these agencies are providing a much wider range of services, ranging from interior design and architectural landscaping through to brand development and virtual reality modelling. Despite employing many talented designers, and drawing on arts and cultural themes, this thriving digital design sector has virtually no point of contact with the conventional arts sector, and delivers its solutions without drawing on the ideas and inspiration present in this sector. R&V already works with a wide range of talented designers, artists and subcontractors in a wide range of fields, and produces world-class design work. It was but a short step to imagine it as a digital arts business, attracting profitable contracts from a range of different clients and partners.

The R&V model does not require the arts organisation to be an undervalued provider of subsidised art services, but effectively turns the whole model on its head. At the heart of its business is a design agency and rich content generation business capable of providing commercial services in a wide range of fields. Instead of these earned income strands being a mere add-on to the real business of the organisation, like a gift shop attached to a museum, the digital arts business itself is able to grow and develop on the basis of the amazing ideas, connections and know-how generated by the real existing arts organisation and its extended community of supporters. Graham believes this is a genuinely radical new approach to the arts, one that offers the arts not only a means of sustaining itself commercially, but also a way of connecting more actively with wider audiences, and reminding people from all backgrounds and walks of life that the arts have a vital part to play in their lives. Thus, business success and social objectives are both better achieved.

Private equity investors, with years of experience of hopeful start-up businesses failing to achieve profitability, naturally approach the question of arts investment with caution and scepticism. However, Graham has been increasingly winning hearts and minds by drawing on a range of real-world examples. The new business model being proposed by R&V is really a combination of two models whose potential success has already been demonstrated. Firstly, R&V is utilising a so-called ‘Angel investment’ model, designed to incubate and develop shows and rich content capable of making a profit. This model has been used effectively in the theatre sector and in the fine arts sector, and every week new ventures based on it are quietly emerging in both the UK and the US. In the theatre sector, the investor is making the calculation that out of (say) 10 shows developed at relatively modest cost, one will achieve significant commercial success, more than recouping the investment. Most famously, this is the model that underpinned the success of the National Theatre show ‘War Horse’, but in some ways this mega-success story is misleading. The Angel model also provides a more pedestrian route by which investors can achieve a limited return from investing in high-quality arts commissioning. All that is required is trust in the artistic and commercial judgement of the arts organisation. With its extensive network of connections with artists and other arts organisations, R&V knows that it has the ability to create world class content, and identify works that are also commercial winners.

Secondly, R&V is an earned income model, applying know-how and connections from the arts to the delivery of commercial products and services. These include corporate training, using the arts to deliver high quality programmes in the workplace, encouraging creative business thinking, good communication skills, and best practice, for instance in the area of LGBT diversity. They also include residency and educational products, designed to provide opportunities for people to participate both in the arts and in the digital arts community being developed by R&V. Finally, and most importantly, they involve bespoke design services, applying know-how and ideas from the arts to the creation of a range of products and services including such things as filmmaking, commercial interior design, and public art. All of these areas have been the subject of successful pilot schemes delivered by Graham. All of them are capable of generating profits for a new digital arts business. And, drawing on the ongoing IP and resources of the arts organisation, they represent potential bread-and-butter income that mitigates some of the risk associated with the Angel investment model. R&V knows that the model will work, because all the ingredients that make it up have been shown to work already. What has been missing is the overall vision to create a new digital arts business bringing together the different strands.

But doesn’t this new business model, with the pursuit of profit at its heart, fundamentally undermine the integrity of the arts? Graham believes that this is the wrong question. Instead he asks why the arts should not play a vital and integral part in the functioning of our society and economy. He does not accept that in order to be authentic a work of art needs to be necessarily unprofitable or to achieve non-arts related social outcomes. Nor does he accept that a work of art that makes money cannot make a vital and principled contribution to society and to social capital building. He points, for instance, to the fact that the original Globe theatre company (in which William Shakespeare himself was an equity partner) was a full-blooded commercial arts enterprise, and that all Shakespeare’s major plays emerged from this arts business. He also points out that some of the greatest works of art in history were produced for rich patrons and clients. The question of integrity and the arts is a complicated and nuanced one, not reducible to a simple duality between grant subsidy and private investment

In contrast, Graham argues that, if the investment exists for innovative and exciting new work, there is a much greater chance that this work will reach a wider audience, cover its costs, and make a profit. Perhaps the greatest merit of the R&V business model is that it is creating a ‘pipeline’ for great new arts content of this sort, enabling it to reach the market. In fact, far from being a cynical exercise in moneymaking, the R&V business model is committed to creating rich arts content across many different art forms and to developing platforms capable of reaching out to much wider audiences, including many people who do not presently regard themselves as interested in the arts and culture. It is not a model lacking in passion or in missionary zeal. For instance, the organisation’s current projects include Gunshot, a chamber opera commission with one of the UK’s most talented new composers, and Vagabonds, a rambunctious adult puppet show combining stand-up comedy, puppet theatre and topical social and political satire. Both shows are, in their own ways, highly commercial, and capable of reaching out to audiences who might never attend performances in either the opera house or a puppet theatre. Poetry House Live, the original theatre show it commissioned in 2016 has since then been translated into six other languages, and made into a film. R&V therefore remains true to its purpose of creating great art and promoting it to much wider audiences in a wide variety of media.

Graham does not underestimate the challenges involved in successfully developing this new business model. There are plenty of people embedded in the existing arts sector, or ideologically committed to a narrow definition of impact investing, who would be very happy for this new model to fail. However, he senses that opinion amongst potential investors is beginning to shift in favour of the ideas R&V is presenting. Many of the opinion formers he talks to regard the arts as far too important to be side-lined and labelled as either a luxury ‘nice to have’ extra or as something only valuable in achieving instrumental social outcomes for disadvantaged or deprived members of society. It is increasingly dawning on people that what society really needs is promiscuous creativity, new thinking and the re-articulation of democratic values, and that the arts and culture actually represent one of the brightest and most commercially successful elements in the UK economy. If we are to have a new Shakespearean age in the arts, we are going to need a new and more expansive approach to the relationship between the arts and moneymaking, and perhaps Graham Henderson and the remarkable new business model being championed by the Rimbaud and Verlaine Foundation show us the way in which it can be done?

Thomas Venning
Head of Books and Manuscripts at Christie’s and Chair of the Rimbaud and Verlaine Foundation