ACT’s Gian-Carlo Scandiuzzi on How to Reinvent Your Theatre

In early February, Seattle’s Intiman Theatre announced publicly what had been the subject of widespread rumor before, that the 39-year-old theatre needed to raise $1 million by September 2011 or they’d be forced to close. That’s $1 million over and above their usual fundraising for the season, and in a difficult economic climate.

Those pessimistic about the Intiman’s chances said, At least we’ve still got ACT, referring to A Contemporary Theatre’s revival from a near-death experience in 2003. But not so quick. “We’ve turned the boat around,” ACT’s executive director Gian-Carlo Scandiuzzi told me on the phone, “but we haven’t gotten it back to the dock yet.” ACT hopes to close this year with its second balanced budget in a row, but the theatre owes some $2.7 million in debt obligations. It’s in the third year of a five-year plan to repay part of that debt.

The unpleasant truth is that multi-million-dollar deficits are far from infrequent in Seattle non-profit circles, no matter how well-established and -funded. In part, the problem seems to be structural; the volatility of larger economic booms and busts have wreaked havoc on the best-laid budgets at non-profits across the city as, under-financed and under-staffed, arts groups find it difficult to react to swift changes in the economic climate.

In 2003, 38-year-old ACT went public with a demand for $1.5 million, due to a crisis in cash flow. The circumstances made the Seattle Weekly‘s Roger Downey pull his hair out, as it were, on the page:

According to the Times, “[Sheena] Aebig, a Seattle bankruptcy attorney who became an ACT trustee in July, said she did not know how broke the theater was until Jan. 4, when ACT staffers told the board the organization had run out of money.” Considering that Aebig is not just a trustee of ACT but the co-chair of its board, such ignorance is astonishing. Surely a bankruptcy attorney, of all people, is aware of the meaning of the term “fiduciary responsibility”?

Later some decided that it was all the fault of a spendthrift artistic director from out of town who hired “big out-of-town names,” even though artistic directors do not typically get to approve their own budgets (if they even create them to begin with).

Ironically, the Seattle Times carried this quote:

“I am stunned,” says Laura Penn, general manager of Seattle’s Intiman Theatre. “The complexity of these organizations is underestimated and the tide can turn very quickly.”

Susan Trapnell, a former ACT managing director, stepped back in to save ACT Theatre during its cash flow crisis, taking over as managing director from 2003 to 2007. “They looked at production costs, and went very, very bare bones, and still managed to create some very interesting and powerful pieces,” said Scandiuzzi, of that time.

With ACT’s debt down to $600,000 as Trapnell left the building a second time, it must have seemed like safe harbor was just minutes away. Then the recession arrived. By 2008, ACT’s debt had ballooned to just over $2 million, even without a spendthrift out-of-town director hiring big, out-of-town names.

Big changes had already been made, including shifting ACT’s season, laying off staff, and cutting costs in ways that didn’t impact the perceived production value. Rather than put on rose-colored glasses and hope for the best, the administration adopted a rule of assessing the company’s average income, and budgeting for slightly below that.

To raise cash, ACT had been renting space to any interested party, but since 2007, when Scandiuzzi first came aboard to run the newly created Central Heating Lab (“ACT is a reef – A vertical ecosystem of artistic practice”), ACT has been trying to change its business model to adapt to its new circumstances.

A graduate of the École supérieure d’art dramatique de Genève, Scandiuzzi has a varied résumé that includes acting on stage and in film, and music and movie production. That suited him for the Central Heating Lab project, which invites artistic collaborators into ACT’s home in the old Eagles Hall downtown. The Lab’s first year it added about 20 shows to ACT’s production slate (last year, that increased to around 30 shows).

By the time Gian-Carlo Scandiuzzi rose to the executive director position in 2008, ACT had refocused on its identity as a mainstage employer and cultivater of local artists (performers and playwrights), and as a “second-stage” incubator of an even wider variety of local artistic enterprises. ACT shares risk with its Central Heating Lab partners, typically splitting box office receipts so that it receives around 30 percent in addition to a heavily discounted rental fee for the space.

In 2010, the company says, Central Heating audiences nearly doubled. Partner productions included the debut of new work from KT Niehoff, the RAWSTOCK short film festival, New Century Theatre Company, and new programs such as the lecture series, InterACTions.

“That is what saved us,” said Scandiuzzi. “We brought a lot of 25-to-45-year-olds, a younger generation, back to the theatre, and that has also translated into more people coming to the mainstage shows. We also did something quite innovative, which was to start the ACTPass or membership.”

The ACTPass monthly membership program is a fundamental change from the subscription program that many theatres rely upon. Passholders get “all you can see” access to all shows at ACT and the Heating Lab for only $25 a month–not just all shows, but as many visits as the passholder wants. It’s a startling bargain, given all the shows at ACT, and has been growing by leaps and bounds (January 2011 began with 618 total passholders and the total today is nearer 800, compared to ACT’s over 5,000 subscribers).

The “grand plan,” explained Scandiuzzi, “is to eliminate cash flow issues.” The passholders are billed monthly unless they cancel (so far, Scandiuzzi said, they’ve had just four cancellations). Previously, ACT sold subscriptions in advance of the season, and then had to live off that income until the next season’s subscription sales. The ACTPass provides them with a stable monthly income.

Scandiuzzi hopes to migrate many more of his subscribers to a membership plan; even if current subscribers are happy where they are, in “their” seats, they too can purchase a charter membership that allows them entrée to the ACT buffet. And there are levels of membership yet to be implemented that would build back in the seat reservation of a subscription while also providing the flexibility of a membership.

“As far as we know,” said Scandiuzzi, “we are the only theatre in the U.S. that has adopted this type of membership. This is fundamentally more of a Netflix model,” where the customer pays a set amount per month, and sees whatever they’re interested in. Its success, of course, is keyed to the variety of shows ACT can offer as part of its partnerships with Heating Lab participants.

A lot hinges on this business model shift. So far, Scandiuzzi’s turnaround act is producing good results. This year, ACT gained 365 new donors, a 17 percent increase, and individual gifts bumped up by 26 percent.

Once a crushing white elephant, Kreielsheimer Place, which is ACT’s home, makes much of this possible. This year ACT will take full possession of rights to 85 percent of the building. With free and clear ownership, ACT is in a unique position to make the most of its space as a producer.

ACT ended 2009 with about a $100,000 surplus, used to pay down a little more of their debt, but their 2009 audit contained sobering commentary on ACT’s “negative current ratio,” saying that if the situation didn’t improve the auditors had “substantial doubts about the Theatre’s ability to continue as a going concern.”

Scandiuzzi believes that having established that ACT can balance its budget again–even without an economic recovery–trust has begun to be rebuilt, and the company can more aggressively mount campaigns to retire its accumulated debt, make improvements to their building, and build working capital as both a reserve and a resource for developing new works.

Meanwhile, per the Seattle Times: “From 1998 to 2009, Intiman ended seven years in the red, according to tax records.” (In hindsight, this Seattle P-I article on the arrival of Scandiuzzi at the helm of ACT and Brian Colburn at Intiman has a Dickensian “tale of two managing directors” feel to it.)

Colburn departed the Intiman suddenly under mysterious circumstances last fall, and rumors began to swirl about the Intiman’s poor financial health. It took until this February, though, for the Intiman to make its public plea:

“Since the departure of our former Managing Director last fall, the board of trustees has unearthed a series of missteps and management failings. Inflated budget projections, unpaid bills and a complete lack of financial and accounting oversight,” read the open letter by Board President Kim Anderson, and it was this revelation–more than the size of the debt–that shook Seattle’s theatre community.

It’s not hard for a non-profit to slide incrementally deeper into debt over the course of several very lean years, but for the Board to be blithely unaware of multiple, unauthorized transfers from the endowment smacks of incompetence or a failure of diligence. As it happened, an out-of-town artistic director who hired big, out-of-town names could also be scapegoated.

Still, supporters have not decided, apparently, to punish Intiman the institution for the failures of its leadership. Intiman had asked for $500,000 by the end of March, and they raised $450,000 (thanks to a last-minute $100,000 challenge grant), which turns out to be close enough. Scandiuzzi himself donated $22,000, and the ACT rescue squad didn’t stop there.

The Intiman recently announced they have retained Susan Trapnell, a senior consultant with the national arts and culture management consulting firm, Arts Consulting Group, Inc. (ACG), as the Management Consultant for the theatre.

Scandiuzzi clearly hopes that ACT’s trial by fire can be of use to the Intiman, and other theatres. While the Intiman only leases its space from the Seattle Center, Scandiuzzi noted that they’re hosting in their studio the magician (“delusionist”) Joey Pipia, who has sold out two of his three nights so far. (Tickets still available for tonight.) And Intiman has already announced a partnership with one of Seattle’s hottest new dance companies, Olivier Wevers’ Whim W’Him.

As for the harder lessons of oversight and transparency, and the incremental work of rebuilding trust, I will add, the Intiman needs to do much better. The company has been happy to trumpet the results of its emergency fundraising (even Microsoft pitched in with a gift of software, inspiring a round of leftover Vista jokes), while basic questions remain unanswered about what precisely went wrong, who bears responsibility, and what will prevent the situation from repeating itself. For the moment, our tale of two theatres continues.