Exercises: Local cultural and artistic sectors

Name four cultural or artistic sectors and give a real-life example from your local area (town, city, or province) for each one: a band, a theatre, a design studio, a publishing house, a festival, a video game team...

Who can support a youth cultural project? Make a list of five possible stakeholders (local council, associations, school, shops, crowdfunding platforms...) and explain in one sentence what each one can provide: money, venue, publicity, materials, or contacts.

The figure shows the support network for the charity concert organised by the school band, but one of the stakeholders is covered with a question mark.

1. a) Think about which stakeholder is missing from the network (someone who can record, broadcast, or amplify the concert) and justify your proposal.
2. b) Explain what each stakeholder in the network provides and what they can receive in return.

Explain what a cultural industry is (artistic activities that are also a business) and name three examples from your surroundings. For one of them, state who pays, what they pay for and what jobs it directly generates.

Distinguish between a ticket (you pay to attend), the box office (the total takings) and sponsorship (a company pays to appear). Apply it to the school concert: $80$ tickets at $3\ \text{€}$ and a stationer's contributing $50\ \text{€}$ in exchange for appearing on the poster. Calculate the total revenue.

Name four professions involved in producing a school short film (besides the actors) and explain in one sentence what each one contributes. Why is it said that culture generates employment 'along a chain'?

Explain what patronage is and how it differs from buying a ticket. Give one simple historical example (a painter with a patron) and one current one (a platform where anyone supports a comic with $10\ \text{€}$).

Your class is organising a photography exhibition at the community centre. List four expenses the event will have (printing, frames, refreshments for the opening, posters) and two possible sources of income or support without charging entry (selling the odd copy, sponsorship from the neighbourhood print shop, a council grant).

The town festival concert fills the square with $800$ people. The bars sell three times as much that night, the car park fills up, and two shops stay open late. Explain what the indirect economic value of culture is and calculate: if each attendee spends an average of $5\ \text{€}$ in the neighbourhood, how much money does the concert generate outside the venue itself?

The school drama club wants to perform a play, charging an admission fee of $3\ \text{€}$ to finance the costumes. They expect $120$ audience members across two performances. The expenses are: play rights ($80\ \text{€}$), costumes and props ($150\ \text{€}$), and posters ($20\ \text{€}$).

1. a) Calculate the expected revenue, the expenses, and the financial result of the project.
2. b) If only $60$ audience members came, what would happen? Propose two ways to cover that risk before starting.

A local youth publishing house is funding its first comic through crowdfunding: it is asking for $2.000\ \text{€}$ and each backer contributes as much as they wish.

1. a) If the average contribution is $25\ \text{€}$, how many backers does it need? What if the contributions were $50\ \text{€}$?
2. b) Explain what backers usually receive in return and how crowdfunding differs from a loan.

The school drama club is budgeting its performance: $90$ tickets at $4\ \text{€}$. Expenses: play rights $60\ \text{€}$, costumes and props $110\ \text{€}$, make-up $30\ \text{€}$, printed programmes $20\ \text{€}$.

1. a) Calculate revenue, expenses and the final result. If the profit is split between buying new spotlights and the end-of-year trip, propose a split and justify it.
2. b) Calculate how many tickets they must sell to cover costs and explain what you would do if, one week before, you had only sold $30$.

A neighbourhood music festival wants to pay the bands fairly without going broke. Data: $400$ expected attendees, tickets at $6\ \text{€}$, fixed costs of $1.500\ \text{€}$ (sound, licences, security) and $3$ bands.

1. a) Calculate how much is left to share among the bands if everything goes as planned.
2. b) Propose two ways of splitting it (equal shares, by fee according to drawing power, a fixed amount plus a percentage) and defend the one you think is fairest, explaining what each one encourages.

The school radio station wants to fund itself without aggressive advertising. Analyse four sources: club members' fees, sponsorship from the neighbourhood bookshop (a mention at the start and end), crowdfunding to buy a microphone, and collaboration with the council (lending out the technician in exchange for broadcasting announcements). For each one, state what it gives, what it receives and one risk to the programme's independence.

A village of $5.000$ inhabitants is losing its only cinema; the nearest one is $25$ km away. A group of residents wants to set up a film club in the assembly hall with monthly screenings. Design the model: membership fee or ticket, expenses (film licences, projector, premises), the minimum number of attendees to be viable, and two ideas to keep the village audience coming back.

The comic club's publishing house sells its fanzine at $2\ \text{€}$. Printing $50$ copies costs $40\ \text{€}$ and printing $100$ costs $65\ \text{€}$.

1. a) Calculate the cost per copy in each print run and the profit if they sell everything at $2\ \text{€}$ a copy.
2. b) Explain why printing more lowers the cost per copy (fixed versus variable costs) and what risk the club runs if it prints $100$ and only sells $40$. What middle strategy would you propose?

A group of students wants to organize a charity festival at the municipal sports centre (maximum capacity: 300 people). They have fixed costs of $600\ \text{€}$ ($420\ \text{€}$ for sound and lighting rental and $180\ \text{€}$ for public liability insurance) and a variable cost of $1,50\ \text{€}$ per attendee (wristband and a basic drink). In addition, the copyright management organization (SGAE) requires $10\ \%$ of the total revenue from ticket sales.

1. a) If they set the ticket price at $6\ \text{€}$, calculate how many tickets they need to sell to reach the break-even point. What percentage of the total capacity does this represent and what is its margin of safety relative to full capacity?
2. b) The treasurer proposes lowering the ticket price to $3\ \text{€}$, claiming that "since it's so cheap, we will definitely fill all 300 spots and make a higher net profit." Prove mathematically whether her claim about profit is true or false and justify the financial risk the group would take with that decision.

A youth music band has invested 800\ \text{€}$ in recording their first EP and is debating their business model. One member proposes selling digital downloads for 5\ \text{€}$ exclusively on their website. Another argues for releasing the songs openly and for free on streaming platforms, monetizing solely through the sale of official T-shirts (unit manufacturing cost: 7\ \text{€}$, selling price: 17\ \text{€}$) and concert tickets (price of 6\ \text{€}$ with a variable cost per attendee of 1\ \text{€}$).

1. a) Using the economic concepts of "non-rival good", "marginal cost of digital distribution", and "network effects", justify why setting a price of 5\\ \\text{€}$ for digital downloads can drastically reduce the band's total revenue in the medium term compared to the open-access model.
2. b) If they choose the open model and estimate that 3\\ \\%$ of unique listeners buy a concert ticket and 1,5\ \%$ buy a T-shirt, calculate how many unique listeners they need to reach to break even on the 800\\ \\text{€}$ recording cost. Design a pricing or complementary product strategy to reduce the required number of listeners without restricting free access to the songs.

Your class wants to organize a community photography exhibition on the neighborhood's historical memory with an initial budget of 0\ \text{€}$. The project requires four essential elements: an exhibition space prepared for two weeks, professional printing of 25 rigid display boards (market cost: 400\ \text{€}$), catering for the opening event (estimated at 150\ \text{€}$), and publicity among the neighbors.

1. a) Design a network of alliances with four local stakeholders (for example, community center, local businesses, neighborhood association, and PTA/AMPA): specify what in-kind resource (not money) you would request from each, what real-value non-monetary return you would offer them so that the partnership is a positive-sum game (win-win), and justify which stakeholder must confirm first so that the others agree to participate.
2. b) A local fast-food franchise offers to fully finance the 400\\ \\text{€}$ for printing in exchange for placing their large logo on the front of each display board and handing out commercial flyers at the opening event. Evaluate the ethical and economic dilemma posed by this offer compared to seeking micro-donations from neighbors, and defend your final decision with reasoned arguments.

The city council of a municipality must implement a cut of 20.000\ \text{€}$ in its culture budget due to a drop in revenue. The finance committee proposes completely eliminating one of these two activities: - Option A: Eliminate evening and weekend opening hours at the municipal library (savings: 20.000\ \text{€}$ per year; this involves laying off two part-time staff and leaving 150 daily users without a study room or book lending service, most of whom are students and elderly people).

• Option B: Cancel the annual street theater festival (cost: 20.000\ \text{€}$; it takes place one weekend a year, brings together 3.000 attendees, and generates an estimated 60.000\ \text{€}$ in spending at local restaurants, hotels, and shops, of which the city council recovers approximately 7\ \%$ in local indirect taxes and fees).

1. a) Evaluate the opportunity cost of each option, distinguishing direct fiscal return, the economic impact on the local community, and the positive social and educational externalities that are not reflected in the market.
2. b) As a local development officer, design an alternative proposal that avoids completely shutting down either of the two services and achieves the 20.000\\ \\text{€}$ in savings through financial co-responsibility measures (public fees, public-private partnerships, or temporary scheduling adjustments), justifying the feasibility and limits of your proposal.

Your amateur theatre group wants to premiere a play and needs 900\ \text{€}$ net to pay for the venue rental and the set design. You decide to fund it through a crowdfunding campaign (rewards-based crowdfunding) on a digital platform that charges a 6\ \%$ fee on total funds raised, plus a 2\ \%$ bank gateway fee and an estimated 12\ \%$ for tax withholding and administrative expenses (total deductions: 20\ \%$ of the money raised).

1. a) You design two reward tiers:

• Basic Tier (10\ \text{€}$): Digital thank you and admission to the dress rehearsal (unit management cost: 1\ \text{€}$).

• Supporter Tier (30\ \text{€}$): Numbered seat ticket to the premiere and a signed printed booklet (unit production cost: 9\ \text{€}$).

Calculate the net margin in euros left to the group for each contribution received in each tier after deducting the 20\ \%$ in fees/taxes and the direct cost of the reward.

1. b) If it is expected that 60\\ \\%$ of the contributions will be for the Basic Tier and 40\ \%$ for the Supporter Tier, calculate the minimum total fundraising target you must set on the platform to ensure you are left with 900\\ \\text{€}$ clear. Explain what would happen to the project and the funds raised if the "all-or-nothing" rule applies and you only reach 85\ \%$ of that target.

A team of three computer science students launched a free mobile video game with ads: they achieved 15.000 downloads and generated 450\ \text{€}$ in advertising revenue (an average ad revenue of 0,03\ \text{€}$ per download).

For their second game, they are considering dropping advertising and choosing between two commercialisation models:

• Premium Model: Sale of the full game at a price of 2,50\ \text{€}$. The app store (App Store / Google Play) keeps a 30\ \%$ commission and the applicable VAT is 21\ \%$ included in the final price.

• Freemium Model: Free download with in-game microtransactions (an expansion pack at 1,50\ \text{€}$, with the same 30\ \%$ commission and 21\ \%$ VAT).

1. a) In the Premium Model, calculate the unit net revenue the team receives per sale after deducting VAT and commissions. Determine how many paid downloads they need to match the 450\\ \\text{€}$ from the first game and what conversion percentage over the original 15.000 downloads this would represent.
2. b) If in the Freemium Model they manage to replicate the 15.000 free downloads and 3,5\ \%$ of the players purchase the expansion pack, calculate the total net revenue obtained. Based on your calculations, justify which model you would recommend considering the price elasticity of demand in the mobile app industry.

In a debate on public cultural policies, two speakers defend opposing stances:

• Speaker 1: "Culture must be a free, publicly provided good financed $100\ \%$ through taxes, because the market only produces what is commercially profitable, destroying cultural diversity and excluding low-income earners."

• Speaker 2: "Financing culture through taxes is regressive, since low-income earners pay taxes to subsidize shows that are mostly attended by middle and upper classes with purchasing power. If a work has value, the public should pay for their ticket."

1. a) Interpret both arguments using rigorously the economic concepts of "merit good", "market failure", and "tax regressivity".
2. b) Design a funding proposal for the municipal cultural auditorium that resolves the contradiction between both positions: establish a mixed tariff structure (combining selective free access, social prices, and market prices) and an objective criterion to decide which shows should receive public support and which should be fully self-financed.

The school council tasks you with managing the budget for the school's Youth Creativity Week. You have an initial municipal grant of $350\ \text{€}$ and the following planned fixed costs:

• Rental of technical equipment for the band concert: $260\ \text{€}$.

• Performance fee and rights for the guest theatre company: $200\ \text{€}$.

• Consumable materials for silkscreen printing and fanzine workshops: $90\ \text{€}$.

Maximum capacities available: Assembly hall (concert and theatre): 120 people. Multipurpose room (workshops): 20 people per session (2 sessions are offered).

1. a) Design a financial plan that achieves budget balance (net profit $\ge 0\ \text{€}$) by applying the concept of "cross-subsidization": decide which activities will be paid and which free, set ticket prices, and calculate the minimum occupancy rate (percentage of capacity) you need to reach in paid activities to cover all costs.
2. b) Formulate two key performance indicators (KPIs), one for financial return and another for social impact or inclusion, to measure the success of the event once it ends. In addition, design an early financial contingency measure in case ticket sales fall $30\ \%$ below forecast.