Examining The Groupmuse Business Model Part 2

In Part 1, we examined the revenue end of Groupmuse’s business plan but on the other side of the balance sheet are expenses and when it comes to live classical music, the dominant expense typically involves artistic labor costs. But this is where Groupmuse is different; simply put, they don’t pay the musicians at all for their house party events.

Adaptistration People 175Groupmuse’s primary service offering is organizing classical music house parties that feature live musicians, so the relationship between Groupmuse and its musicians is not unlike that within traditional classical music organizations in that without the musicians, there’s no Groupmuse. Likewise, without Groupmuse, there are no organized house parties.

Nonetheless, that is where the similarities end.

Instead of providing minimum payments, Groupmuse requires musicians to ask party attendees for cash payments directly at each event. Attendees are under no obligation to pay the musicians but Groupmuse recommends that each attendee pay $10.

How Much Do Musicians Earn?

One of Groupmuse’s most common talking points is that they’ve “raised more than $300,000 for young musicians” but hard data was nowhere to be found on their website nor their Kickstarter campaign page. During my interview with Groupmuse founder, Sam Bodkin, he said most events use a quartet of musicians and attendees pay anywhere from $150 to $300, or $37.50 to $75 per musician for a time commitment of 90 minutes (one hour performing, 30 min intermission).

Bodkin sent along revised payment figures via email following our interview.

“We’ve been disorganized about managing the data we’ve collected about musician pay, which is why I haven’t been able to get this information to you sooner,” says Bodkin. “But, FYI, for 2015 the mean pay per musician was $99, the median was $83, and it’s only about 20% of the time the players make less than $50.”

Adaptistration People 123To be clear, although Groupmuse borrows heavily from nonprofit nomenclature, such as using the term “raised” when talking about musician income, there is no active soliciting for unearned income that is directed and/or allocated to musicians. But beyond having a Groupmuse representative or the party host remind attendees about the recommended $10 payment, the musicians are directly responsible for gathering those cash payments.

Bodkin did say that Groupmuse recently started offering a way for attendees to pay using a credit card via Square Cash, but he declined to provide details about whether his company uses the personal or business accounts, how they disburse those funds to musicians, and whether any transaction or service fees are deducted.

Currently, Groupmuse maintains no written policy regarding how musicians are paid or their employment status.

Being Selected To Perform At Parties

In order to be considered to perform at a Groupmuse party, a musician must first create a performer profile. Musicians are required to upload photos, video or audio files, and a list of available repertoire. A Groupmuse administrator then determines if the profile will be approved and if so, the musician may be considered to perform at one of their house parties.

Adaptistration People 125In addition to the lack of written payment policy mentioned above, Groupmuse does not maintain any equal opportunity, age discrimination, or related ethical standards policies related to approving profiles and selecting musicians to perform.

As for the process used to select musicians, this is another area of ambiguity.

An 8/14/15 Seattle Times article by Tom Keogh interviewed Groupmuse’s Seattle regional coordinator, Emma Rose Lynn, and this is how she described the process.

“Musicians can bid on events,” says Lynn. “Depending on the size of the group or the host’s requests, I’ll assign what I think are the appropriate musicians.”

The article does not provide any additional information on what Lynn described as bidding on events and Bodkin did not elaborate during our interview. But the one item that was very clear is Groupmuse controls which musicians are accepted into their pool and tapped for parties.

Bodkin mentioned that Groupmuse hosts are able to select musicians directly but their site doesn’t provide a way for party hosts to browse existing musician profiles, so the only way to connect with a musician is either from previous interaction or having Groupmuse make that connection. In both instances, a Groupmuse representative serves as a gatekeeper between host and performer.

When asked about any sort of written criteria Groupmuse uses to pair musicians, Bodkin said that they do not maintain anything along those lines. Likewise, he was not able to provide details or expand on the selection process Groupmuse’s Seattle regional coordinator eluded to in her interview.

No Kickstarter Funds Go To Musicians

Adaptistration Guy Chasing The MoneyAlthough Groupmuse’s Kickstarter goal is $100,000, Bodkin confirmed that none of those funds will go to musicians and instead, it will be directed to administrative compensation and operational expenses. That’s not a surprise given that Groupmuse offloads musician payments directly to party attendees. But the genuinely surprising part came during my conversation with Bodkin about whether or not they planned to use any of those funds as a cash reserve so as to begin offering musicians a guaranteed minimum payment.
Bodkin emphasized that Groupmuse has been transparent over the fact that none of the Kickstarter funds were being allocated toward musicians.

“As we’ve tried to make clear to our users and donors, the money we’re raising on Kickstarter will fund our operations and allow us to manage the community in more cities,” says Bodkin.

Indeed, their Kickstarter page clearly states that funds will be used to expand services to a new city and fund “[their] next year in Boson, New York City, and San Francisco” but there is never any mention about what those expenses entail.

Likewise, there is nothing clearly explaining that funds will go to administrative compensation and operational expenses while none of the funds will be directed toward musicians. At the same time, the Kickstarter page does include call-out language highlighting their “raised more than $300,000 for young musicians” talking point.

When combined with the lack of expense details, it isn’t difficult to see how potential backers could infer a portion of their pledges will go to the musicians. As a result, the razor thin line between misrepresentation and selective omission is worth noting.

The Cost Of Minimum Payments

While discussing the potential for using part of the Kickstarter funds as a cash reserve to provide musicians with a modest minimum payment of $50 each per party, Bodkin confirmed that he had not considered using a portion of the funds for that purpose.

At the end of the conversation, he said he wanted to consider the idea but needed to solicit input for the other Groupmuse administrators to determine a consensus, and if I could delay the article to provide him the necessary time. I agreed and after conferring with his colleagues, Bodkin promptly replied to confirm they “decided that we don’t yet have any money with which to guarantee musicians minimum pay.” He also provided another set of revised figures related to musician earnings.

“…it’s only about 20% of the time the players make less than $50,” says Bodkin. “Compare that to the 40% of the time that they make more than $100!”

Adaptistration People 036That data, combined with an average of “over 300 events” per year (we’ll round up to 400 to accommodate expanded 2016 activity), and an average of four musicians per event indicates Groupmuse would need to maintain a cash reserve of $16,000 to cover as much as twenty percent of events generating zero musician payments.

That’s a mere 16 percent of the Kickstarter goal to provide a guaranteed minimum $50 payment but if that is too much for Groupmuse’s administrators to allocate, they could lower that amount by enacting quarterly or semi-annual average minimum earning thresholds; meaning, if a musician earns an average of more than $50 per party over the course of the measurement period, then there would be no need for a minimum payment disbursement.

If nothing else, this would move Groupmuse closer to a shared risk model as opposed to offloading 100 percent of the risk on musicians.

In effect, and based on details Bodkin provided, the amount of measurable risk absorbed by Groupmuse would be far below the 16 percent figure calculated above.

“While we don’t guarantee a minimum of $50 for events produced through our network, we do know from the data I gave you above that musicians making less than that is comparatively rare,” says Bodkin. “When it does happen, it’s usually because the musicians formed a large ensemble – a quintet or more. Musicians who use our platform know that getting a big group together means less money per player, and are always free to play smaller gigs and average higher per-person pay.”

Nonetheless, and even after quantifying the extraordinarily low level of risk, Groupmuse made the decision against providing minimum event payments of $50 per musician.

In order to develop a frame of reference for just how modest this figure is for a New York City area musician, the Associated Musicians Of Greater New York, Local 802 American Federation of Musicians’ 2013-2014 chamber music scale for 14 or fewer musicians is $299.04 per hour, nearly six times more than the potential minimum payment and still more then than 2.5 times more than the high end of what Bodkin reported musicians earn.

The Groupmuse payments become comparatively smaller when factoring in Local 802’s schedule for ancillary payments such as principle and contractor fees along with mileage or cartage (additional payments for musicians with large and difficult to transport instruments, such as double bass players who earn an additional $36/hr for cartage).

Bodkin framed Groupmuse’s relationship in terms borrowed heavily from shared economy nomenclature in that working with Groupmuse and their role is better defined as a facilitator.

“Use of our platform is a choice, but we want it to be a good choice,” says Bodkin. “It can be tough to conceptualize Groupmuse’s relationship with musicians because we’re much more of a platform than a presenter — although we’re both. We connect musicians to audiences, but we don’t produce or program the house party-concerts. When we do hire musicians directly, we pay an absolute minimum of $100 and usually more. Thanks in part to your questions, we’ve decided to make these figures about musician pay public and update them quarterly so that our community can hold us accountable. Look for that soon at www.groupmuse.com/values/.”

Ultimately, musicians serve as the draw and they give Groupmuse something to sell in the form of house parties which, in turn, they use to leverage support for $100,000 Kickstarter campaigns; but even in light of stated values, it can become difficult to reconcile those positions with loosely defined business practices and risk allocation.

Let’s Talk About The “E-Word”

As my conversation with Bodkin made its way into the topic of minimum musician pay, he became increasingly anxious about projecting an image of exploitation and made it clear that he did not want to talk about the musicians’ union.

“I want to be clear that we exist for the musicians,” says Bodkin. “Wedding gigs are an utterly lifeless way [for musicians] to put their talents to use and they find our experiences rewarding.”

Adaptistration People 120Bodkin continued by describing that when musicians perform at Groupmuse parties and maintain a profile at their site, the fundamental value is in the form of exposure and developing potential connections down the road for selling recordings or getting hired for non-Groupmuse private performances.

This is similar in nature to the content provider relationship championed by Huffington Post where instead of paying writers, the outlet provides exposure. Actor and writer Wil Wheaton recently wrote about this system in a post from 10/27/2015 describing it as exploitation masquerading as exposure.

In Wheaton’s article he writes that if Huffington Post editors find his writing worthwhile to publish, it’s worth paying for.

And that’s where we come back full circle; Groupmuse’s existing model of screening, moderating, and selecting performers means they effectively control which musicians are able to earn money and which ones don’t. If Groupmuse provided a platform that connected party hosts with musicians in a completely unfiltered way, allowing both parties to determine if they are a good fit without any initial screening or placements, it would be difficult to argue that the system wasn’t an entirely independent contractor driven service.

If that’s how it functioned, it would more like a jobs board driven by Groupmuse’s laudable inspiration for going into business (which we examined in Part 1).

The Gulf Between Ideals And Implementation

If nothing else, Groupmuse is a fascinating case study. On one hand, there are clearly defined and attractive sentiments related to a desire for helping live classical music events become more accessible by facilitating chamber music house parties.

Adaptistration People 136At the same time, there is a clear disconnect rooted in leveraging that goal to raise nearly a quarter of a million dollars in initial and crowdsourced funding, but failing to see a need for allocating as much as a dime to the artists that make the dream a reality.

In the Groupmuse model, musicians absorb 100 percent of the financial risk related to their primary offering. Musicians rehearse, reserve their time, pay for parking, etc. but if some of the attendees don’t show or there are an unusual number of cheapskates in attendance, that means less money for the musicians. But Groupmuse’s bottom line is untouched.

But when that same measurement is applied to Groupmuse administrators, the standards change and the company finds traditional salary structure a necessity. Sharing even a single digit percentage of unearned income outside of administrator compensation and operational expenses in order to provide musicians with a modest $50 minimum payment for their talents and services becomes a line in the sand unworthy of crossing.

And although it is clear that there hasn’t been any indication this was the intent, a double standard emerges. Left unchecked, it stands a good chance it will become internalized as standard operating procedure.

At the time this article was written, Groupmuse has raised $4,721 over their initial $100,000 goal.

Provided that current backers do not withdraw their support before the Kickstarter project’s December 22nd deadline, Groupmuse administrator’s will be assured a full year of salary larger than what they earned for 2015. As of now, there have been no stretch goals announced to provide for minimum musician payments, instead, the company decided to use overfunding to pay for Massivemuse events (the ones that pay musicians approximately $100 for all rehearsal and performance time, or nearly five times less than NYC union wages guidelines).

Moving forward, although this series was originally designed as a two-part installment, there are some additional points of value to continue exploring. Having said that, 4000+ words over two articles is plenty to digest for the time being so we’ll revisit this again next week.

Until then, I’m curious to know your thoughts and I encourage you to submit a comment here or strike up a discussion thread at your social media platform of choice.

About Drew McManus

"I hear that every time you show up to work with an orchestra, people get fired." Those were the first words out of an executive's mouth after her board chair introduced us. That executive is now a dear colleague and friend but the day that consulting contract began with her orchestra, she was convinced I was a hatchet-man brought in by the board to clean house.

I understand where the trepidation comes from as a great deal of my consulting and technology provider work for arts organizations involves due diligence, separating fact from fiction, interpreting spin, as well as performance review and oversight. So yes, sometimes that work results in one or two individuals "aggressively embracing career change" but far more often than not, it reinforces and clarifies exactly what works and why.

In short, it doesn't matter if you know where all the bodies are buried if you can't keep your own clients out of the ground, and I'm fortunate enough to say that for more than 15 years, I've done exactly that for groups of all budget size from Qatar to Kathmandu.

For fun, I write a daily blog about the orchestra business, provide a platform for arts insiders to speak their mind, keep track of what people in this business get paid, help write a satirical cartoon about orchestra life, hack the arts, and love a good coffee drink.

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10 thoughts on “Examining The Groupmuse Business Model Part 2

  1. I find it interesting that someone is trying something new and using a for profit model to launch. It’s undertstandable that the administrators and founders want to keep the money they raise. Given that they are ones creating the platform, doing the bookings, and marketing the services, they should be able to keep as much funds as they want (given the for-profit model).

    So here are the things that musicians have to consider (in my opinion) regarding pay scales vs AFM rates:
    > They do not have to accept the jobs (my guess is that the majority of these ensembles are student groups)
    > There is no real barrier to entry to do this on one’s own (any group can create a web site and start marketing their services)
    > How long this can be sustained and if it is really scalable will be interesting. Obviously the wages are not living wages but I know that many startup ensembles play concerts for free or very reduced rates while they build up a book of repertoire.

    That GROUPMUSE has met and surpassed their Kickstarter goal is quite amazing (assuming it goes beyond family and friends). It would imply that they have an audience that supports them and will want to attend popup house concerts.

    Thanks for writing such an indepth analysis of this organization. I was not aware of it.

    Dileep

  2. I think you’re heading in a good direction with those points. Your observation about being the platform owner is entirely valid and the extension of that is it only becomes justifiable when they adopt the responsibilities of an employer, which is exactly what they have been attempting to avoid. It’s this juncture where the discussion becomes a “have your cake and eat it too” discussion.

    Simply put, absorbing the rewards and maintaining control while offloading risk and responsibilities that would otherwise be required is, at best, a questionable business model.

    Add to this, the consistent company message that they exist to “save classical music” and are musician focused makes the decision against providing the minimum guaranteed payment that much more curious when the actual risk and capitalization levels are remarkably low.

    I’m especially glad to see that you mentioned the student connection. One aspect that sticks out is the use of language that Groupmuse exists for young musicians; as it is, that precise phrase is often used. This not only runs the risk of crossing the line for age discrimination scrutiny but it reinforces the notion of using talent at a time when it is most vulnerable and desperate.

    I’ll be curious to see if the existing Kickstarter backers will reconsider their support in light of the increased transparency in Groupmuse’s business model and hiring practices.

  3. Drew, I think the concern you are addressing is that the musicians are prone to be exploited with the current payment system and no guaranteed minimum (which is indeed a valid concern).

    What I think is most interesting is that Groupmuse is trying to create a market for Classical music without the traditional form of funding (contributed income through tax incentives).

    Historically, composers of all eras (Beethoven, Handel, Lizst) have attempted to produce their own concerts for commercial gain. So it can be done but it has always been risky business.

    Not sure that the current nonprofit model is really that different in that administrators, soloists, and conductors often get salaries that are much larger and disproportionate to what the rank and file musicians get.

    For this to work long term however, they will have to come up with a pool of reliable musicians who want to participate on a regular basis and if they feel that they are being exploited or if their human capital value is better spent in another activity, this model will not be sustainable esp if the artistic product is inferior to alternatives in regular concert halls.

  4. Dear Drew,

    Thanks for this exploration into an alternative business structure in classical music. Definitely an interesting case study. You mentioned in part one about L3Cs. I was suprised that Groupmuse had not heard of that structure, although I believe L3Cs are still only allowed in a small number of states (http://www.intersectorl3c.com/l3c_tally.html).

    I just checked out their Kickstarter and they exceeded the goal and now have a stretch goal of $125K (https://www.kickstarter.com/projects/156872836/lets-save-classical-music-and-our-social-lives). I was surprised the campaign was successful, given that when you wrote your article they were only at $4K.

    Thanks again for this series – I hope there can be more on alternative business models.

    Amy

  5. You do a wonderful job at making points I hope readers will chime in with; in this instance, it’s the observation about creating a market without traditional form of funding.

    In this instance, it isn’t new at all; instead, it relies on the very same unearned revenue stream that traditional nonprofit performing arts orgs use.

    Using Kickstarter isn’t in and of itself a declaration of a new business model, although it does incorporate an expanded element of those looking for funding to start up a business that has a firm business plan to generate a profit high enough to become a self-sustaining business.

    It also allows content creators to use an individual donor model for a series of one-off projects (just take a look at the comic book and graphic novel offerings).

    But to your comparison with the current nonprofit model and what Groupmuse is doing, there is a critical difference in that the existing nonprofit model operates within a system that provides minimum compensation guarantees, workplace protections (everything from safety to discrimination), and transparency.

    Lastly, your observation about sustainability and labor pool is spot on and that’s where the group begins to wade heavily into exploitation waters. Focusing to such a large degree on current and recent academic graduates provides a seemingly endless stream of meat for the grinder so to speak.

    Discussions about problems related to conservatories and schools of music turning out far, far more graduates than a system can hope to employ only highlights the need for measures to reaffirm that these musicians are not taken advantage.

    A good example of this is New World Symphony. When it was launched, it had similar identify problems with how exactly the musicians were classified and as a result of conflicts between musicians, music director, and administrators, the organization did the right thing and converted to its status to educational institution. This ushered in better defined goals, clarified the musicians’ relationship, and contributed to mission legitimacy.

  6. The key with the L3C model is that it is a Federally recognized business entity, which opens the door to making it much easier to organize a business in states that have official adopted the structure.

    And per the $4k amount, I think you may have misread the sentence, which reads “$4,721 over their initial $100,000 goal.”

    And on that note, it might be interesting for readers to get a broader perspective on the article timeline.

    My interview with Sam Bodkin took place a week prior to them reaching their Kickstarter goal. During our conversation he expressed concern that some of the topics we discussed (in particular, the min musician payment guarantees) would be inferred by readers in such a way that would impact their ability to reach the goal.

    Although Bodkin confirmed that he conferred with his fellow administrators the same day as our interview, he continued to take the full week before official replying and even then, only did after following up with him and when they were within a few dollars of reaching their goal.

    This is why I included mention of the additional time provided before writing and publishing the articles but the initial draft was longer and contained some of this info. It ended up being edited out to help reduce what was an already long piece.

    Consequently, thanks for bringing it up here as this is a good place to provide that added info.

  7. The main sticking point for me as I continue to think about all this is the “for profit” distinction. Why not embrace non-profit status? You can do that and STILL be an exciting, new, outside-the-box platform for classical music, and a more honestly positioned one at that. The idea is good enough that it seems sustainable through private donors, foundation/government grant support, and Kickstarter-type campaigns. Sure, he has some stuff to figure out as far as musician compensation, data metrics, and all the other things Drew points to, but proceeding from non-profit status would, I think, remove that how-will-we-turn-a-profit elephant from the room, and allow him to focus getting everything else just right. I feel like a lot of the trouble here comes from Groupmuse being in existential crisis: it wants to be something that, patently, it’s not.

    Drew, did you press him on why he is so wedded to the for-profit status?

  8. Thanks for that clarifying that – I did indeed mis-read that sentence. Appreciate the added info about the article timeline. Again, I thank you for this interesting series.

  9. I can say that forming a 501(c)3 is anything but a straightforward process and compared to for-profit models, much more time consuming and complex to maintain. so from that perspective alone, there are a number of good reasons to consider options other than non-profit.

    Having said that, this is one reason the L3C model is a very good solution in cases like this and a good part of my conversation with Sam Bodkin focused on this.

    In the end, the direction you’re going is very much what I have in mind for the upcoming Part 3 installment.

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