28 February 2016

New Diorama Theatre 2015

The New Diorama Theatre was built as a Section 106 planning requirement, a mechanism that makes a development proposal acceptable, in planning terms, that would otherwise be deemed unacceptable. Following consultation with residents regarding the redevelopment of Regent's Place, British Land added to the community's infrastructure by building the 80 seat New Diorama Theatre in 2010. The NDT's 2014 accounts were notable because of the lack of reliance on ACE (only 12% of the NDT's ~£270k income came from ACE in 2014). The 2015 accounts show another very solid year for the New Diorama, who continue to demonstrate that "sometimes it pays not to be funded".

Interestingly, 'lack of core ACE funding' has been removed from the 'major risks' section of the annual accounts. In the financial statement below, it's worth focusing on the Project Specific Funding line (where the NDT's ACE funding shows up) and keeping in mind that the New Diorama received only £25,863 from ACE in 2015. Of that income, £11,994 was specifically for captioned performances via StageText and £12,549 was a GFTA award that is being administered by the NDT to ensure it is spent and allocated correctly. The final £1,320 was the remainder of an organisational development grant received in 2014.

The most significant change in the NDT's 2015 Incoming Resources is the £29,121 growth in Voluntary Income. Several key relationships remained in place for 2015, with British Land increasing their support from £25,000 to £27,145 and Santander/Carat maintaining their combined season sponsorship of £20,000. However, Fundraising/Donations/Individual giving actually dropped from a combined total of £30,747 in 2014 to £24,472 in 2015. The substantial overall increase in Voluntary Income results from the NDT successfully securing a larger number of one-off grants from a variety of sources, none of which are over £15,000. A total of £64,166 was raised through these funding relationships in 2015, compared to £30,915 in 2014.

The fundraising success of 2015 should certainly be celebrated but could prove to be a double-edged sword in 2016. Funders often make only one annual grant to applicants so the relationships themselves need to be carefully managed. In practice this generally emerges as a 'one year on, one year off' rotation. The surplus shown in this year's account may also make it harder for the New Diorama to fundraise. The NDT are building on 2015's fundraising success by offering a fundraising masterclass. The demand for this masterclass of course resulting from the increasingly competitive funding environment in which organisations find themselves, which will in turn be heightened by the masterclass itself.

Such a competitive environment could potentially prove particularly problematic for the New Diorama and the nearby Camden People's Theatre. Due to their similar size and geographical proximity, funders could conceivably limit awards as they look to balance their investment (assuming both organisations will be approaching the same funders in the years to come). A textbook game theory problem (if only one organisation applies, their success percentage is higher than if both organisations apply; as a result, both parties will likely apply at every opportunity and reduce the overall funds received by both organisations), the optimal solution for both parties would come through rigorous collaboration.

Theatrical Income very much remains driven by venue hire (£62,214 in 2015, down from £77,060 in 2014), with the cafe/bar making an important contribution as well (up to £36,877 in 2015 from £30,000 in 2014). There was a £7,944 increase in fees/box office, up to a combined total of £32,343 in 2015 from £24,399 in 2014. It's important to note that the box office receipts only represent funds received for NDT's in-house productions, not for any of their 0/100% box office splits with artists. In those instances, the money doesn't actually flow through NDT and consequently isn't shown in the accounts (it would be fascinating to see annual receipts for all the work that flows through NDT and one must suspect it would put some larger venues figures to shame).

This highlights the central principle behind how NDT operate and why they're worthy of analysis. the organisation is incredibly lightweight; only 3 full-time staff members with total salary costs of £84,303, office overheads of  £68,778, some admin costs and some governance costs that total ~£20k.  This sets a relatively low platform from which to start presenting work. By working hard to fundraise to this level, NDT can then leverage their operations and their space to really benefit theatre makers. This has been formalised in the new Artist Development Programme.

2015's surplus of £44,510 seems an excellent result for the New Diorama but it should be noted that a large amount of deferred income was released in this accounting period (£63,400) and only £31,003 was carried forward (deferred income relates to box office and performance fees received in advance). Coupled with the administration of a £12,549 GFTA award, the surplus starts to look a little less spectacular but examination of the balance sheet shows that the New Diorama will be operating from a much stronger financial base in 2016:

The significant reduction in creditors is due to the previously mentioned reduction in deferred income and also 'Other creditors' falling from a liability of £30,851 in 2014 to £1,033 in 2015. This puts the New Diorama in an excellent position in terms of total assets less current liabilities. The depreciation of the fixed assets is also worth considering, particularly since the NDT do not appear to have made substantial additions to their equipment over the last few years. Given their new Artist Development Programme, we could expect to see capital additions over the next few years as the space will have to meet the expectations of the artists.

Additional consideration must be given to the New Diorama's Artist Development Programme and the possible implications. Given how the NDT is set up (lightweight, allowing work to flow through it), the programme shouldn't be particularly expensive to offer. However, given the attention garnered (25,000+ downloads and 'possibly the most exciting artist development scheme Britain has ever seen') it seems likely that the NDT will attract a huge number of applications. In turn, these will give way to relationships that need to be managed. Coupled with the addition of new space and the previously mentioned possible capital additions, the really tough question is going to be working out how much of a time sink the development programme will be to administer for such a lightweight organisation.

The 'Cash Flow Fund' strand of the NDT's Artist Development Programme has been lauded as a 'Bank for theatre companies' which might make for a catchy headline but is incorrect. The core idea of a bank is that it is licensed to hold customer's deposits; those deposits are then leveraged in various ways (the old 'savings + loan' model where customers took risk by depositing with the bank and in return the bank would pay out interest on those deposits). Since the NDT hold nothing on deposit, they cannot be called a bank and doing so does them a disservice given the reputation of the banking industry. This is not a banking model because it is an entirely one sided risk proposition (can you see a small arts organisation calling in the bailiffs to recoup funds?). NDT's 'Cash Flow Fund' is something very different, something much more humane. It's a formalisation of what venues have been doing informally for years: providing liquidity to emerging artists to reap artistic rewards rather than financial ones. Maybe this is 'social lending' and perhaps NDT's formalisation will eventually pave the way for something as radical as a large scale peer-to-peer social lending platform where 'investors' look for cultural or social returns rather than cash.

The New Diorama Theatre are implementing some fascinating strategies under the leadership of Artistic Director David Byrne. Some of them, such as the Cash Flow Fund, seemingly provide little benefit (or indeed, obvious cost) to the NDT in the short term but much very substantial benefits to artists. However, in the long term the New Diorama stands to make massive gains: is there an emerging artist in the country that wouldn't want to work with a theatre whose development programme has a clear trajectory, is financially transparent, provides a vibrant environment where artists outnumber administrators, attracts their peers and actively takes risks on their behalf?

With a solid financial base, a board that are clearly open to innovation and the Artist Development Programme likely attracting an array of exciting artists (and presumably, as a result, additional funding), the real challenges for the New Diorama will likely come from implementing the artistic development programme and ensuring that the organisation is not put under additional strain from an intensive approach to fundraising. One solution could be to look for additional commitment from a major funding partner: British Land finding a way to lower overhead costs or increasing their annual grant of ~£25k would certainly seem to make sense for both parties (property prices around successful theatres are notably higher so there's plenty of incentive for British Land). This would also be in line with similar arrangements between Wandsworth Council and BAC or the National Theatre and ACE.

An alternative, of course, might be to consider a NPO application.