Transaction Costs and Organization in the World of Music
During my Freshman year and most of my Sophomore year, I was part of a music RSO which will henceforth be referred to under the pseudonym 'Rockappella'. For some background, this group was composed of a tight-nit group of arts students eager to entertain both strangers and each other. It had a very simple structure, with merely a president (who was referred to as "Benevolent Leader", as per Rockappella tradition) and a treasurer (nicknamed "Dollars" - also tradition), the only two positions an RSO is required to have. The group was very self-contained, and all decisions made regarding Rockappella's policies were put to a simple majority vote and everyone liked it that way, as we all feared that any actual power structure would lead to chaos. We did, however, coordinate with the network of the dozens of other choirs, bands, and a cappella groups on campus, so as not to set conflicting performance dates or reserve the same space. Without going into too much detail, there was some deep-seated animosity between the various groups, but that will come into play later.
To cut to the chase, we were very low on money. With so many groups for audiences to look to, the ticket sales were spread thin between the ever-growing number of music RSOs on campus. We'd already had to switch to a cheaper performance venue than the one the group had been using for the previous 10 years (minus one mishap), and it was starting to look like we might have had to switch again. As an accounting student (at the time) I realized that something wasn't adding up. Sure, our audiences weren't huge, but after doing some rough estimates I realized that we were easily making more in ticket sales than the performance venues were charging us. We weren't paying for any lighting or fancy sound equipment. We weren't paying the performers. We (unofficially) weren't paying for the rights to the music. So why didn't we have any money?
Well, suddenly our "lack of a power dynamic" began to ring untrue. I asked our brand new treasurer for a list of Rockapella's RSO account transactions, and was met his hesitant resistance. A few years ago, a member of another group essentially hijacked our account and messed with our space reservations, ruining our semester and almost destroying our relationship with one of the venues. Naturally, flashing our finances around was not something that Rockappella was going to do any time soon. So I went to Benevolent Leader with a humble request and hoped she would trust me. She didn't. And neither of them wanted to look into the finances themselves. So I've officially reached the end of my power to affect this organization...
Except not. Turns out, our new treasurer was not yet officially our treasurer, at least according to the RSO registry. Our old treasurer (who had left the group after breaking up with the new treasurer) was still listed on there. I contacted her so I could help switch the name over to the new person. But since she did not want to even talk to her ex boyfriend, I convinced her to just switch it over to my name so I could switch it to him myself. And while I had access to the RSO account, I decided to do some snooping. And what I found was astounding.
We were spending one hundred dollars per semester on our online ticket service. Turns out, the service we were using took a small cut of every ticket sold, and if we didn't sell enough tickets to meet their quota, we received a $25 charge. With four shows per semester, that's $100. So at the next meeting we threw around ideas on what to do (after I told everyone the old treasurer had been the one to discover this). Ultimately, this was still the cheapest service that anyone knew of, although I'm not sure if anyone did any research into alternative services. And then it hit us: we were actually better off not using any service at all. We were never going to get close to selling out a venue, so why bother having people buy their tickets in advance? Just let them buy at the door and we pocket all of the profits.
In the end, this transaction cost had been eating up all of our money, and after eliminating it we were able to afford our old venue and begin paying for music rights. And no one knows that I technically violated some major rules to diagnose the problem. But that's what pseudonyms are for, right?
To cut to the chase, we were very low on money. With so many groups for audiences to look to, the ticket sales were spread thin between the ever-growing number of music RSOs on campus. We'd already had to switch to a cheaper performance venue than the one the group had been using for the previous 10 years (minus one mishap), and it was starting to look like we might have had to switch again. As an accounting student (at the time) I realized that something wasn't adding up. Sure, our audiences weren't huge, but after doing some rough estimates I realized that we were easily making more in ticket sales than the performance venues were charging us. We weren't paying for any lighting or fancy sound equipment. We weren't paying the performers. We (unofficially) weren't paying for the rights to the music. So why didn't we have any money?
Well, suddenly our "lack of a power dynamic" began to ring untrue. I asked our brand new treasurer for a list of Rockapella's RSO account transactions, and was met his hesitant resistance. A few years ago, a member of another group essentially hijacked our account and messed with our space reservations, ruining our semester and almost destroying our relationship with one of the venues. Naturally, flashing our finances around was not something that Rockappella was going to do any time soon. So I went to Benevolent Leader with a humble request and hoped she would trust me. She didn't. And neither of them wanted to look into the finances themselves. So I've officially reached the end of my power to affect this organization...
Except not. Turns out, our new treasurer was not yet officially our treasurer, at least according to the RSO registry. Our old treasurer (who had left the group after breaking up with the new treasurer) was still listed on there. I contacted her so I could help switch the name over to the new person. But since she did not want to even talk to her ex boyfriend, I convinced her to just switch it over to my name so I could switch it to him myself. And while I had access to the RSO account, I decided to do some snooping. And what I found was astounding.
We were spending one hundred dollars per semester on our online ticket service. Turns out, the service we were using took a small cut of every ticket sold, and if we didn't sell enough tickets to meet their quota, we received a $25 charge. With four shows per semester, that's $100. So at the next meeting we threw around ideas on what to do (after I told everyone the old treasurer had been the one to discover this). Ultimately, this was still the cheapest service that anyone knew of, although I'm not sure if anyone did any research into alternative services. And then it hit us: we were actually better off not using any service at all. We were never going to get close to selling out a venue, so why bother having people buy their tickets in advance? Just let them buy at the door and we pocket all of the profits.
In the end, this transaction cost had been eating up all of our money, and after eliminating it we were able to afford our old venue and begin paying for music rights. And no one knows that I technically violated some major rules to diagnose the problem. But that's what pseudonyms are for, right?
It's an interesting story, though in the middle I thought you might be saying that the President and/or Treasurer were embezzling the money.
ReplyDeleteI was never part of a musical group and I don't know as much about RSOs as I might, having students write about them the last several years for Econ 490 blog posts. What I don't get at all is why the group is an RSO. What benefits does being an RSO convey? Perhaps the ability to recruit new members or something like that, but I'm just guessing. Also, purely on the performance end of things, if this is a singing group doesn't it need to right voices and the appropriate numbers of each type? Or does everyone who joins the group get to perform?
You also might discussed other functions of the group. You said things are decided by majority rule, but you didn't say what sort of things are done this way. Are rehearsal times set by tradition or by vote? What about the material that you perform? Has the group ever recorded any of its music and distributed it online? How else does the group promote itself?
These other details would have helped with the story you told and whether the money was merely incidental or if it was a big deal. I couldn't get that from what you wrote.
There are many benefits to being an RSO, most of which involve the ability to market your organization. Perhaps the most visible benefit is Quad Day. Only official RSOs are allowed a booth at Quad Day, and this is (at least in my opinion) the easiest way to advertise your group due to the fact that all Freshmen are dragged to it by default, giving you the ability to physically interact with roughly one quarter of the student population. There is also a built-in RSO database (UofIConnections) that the university provides so people can find your group. For example, anyone searching in the "Performing Arts" category would find us among a large list of similar RSOs, and from there we can try to advertise to the specific type of performers we are looking for.
DeleteThe recruitment process varies from group to group. Obviously an all-female A Capella group is probably not interested in baritones. Our group's goal was to just get as big of a group of decent singers possible and get them singing songs they enjoyed. Since people are always graduating, there was never really a need for a quota of voice types. We would also make sure that performances were "balanced" across the semester. For example, if a song features a lot of low alto and mezzo in the ensemble, the soprano singers would get solos.
The votes were done for all the "businessy stuff" as we called it. This included performances dates, rehearsal schedules, and of course the songs, but it also included special events like singing on the quad or wintertime Christmas caroling. Unfortunately, recording music was not really possible because we had neither the rights to the music nor the money to rent a recording studio. But it was also a fun thing to talk about.
For context re: money, many of our performance spaces cost around $100-$150, so wasting $100 a month is equivalent to losing an entire performance, and we usually only did four per semester. It was a big deal.