Decommodification, Incorporated

The Burning Man Project made a long-awaited big announcement this week:

It’s been a long time coming: we’re excited to announce that Burning Man achieved an historic milestone in January with the successful transition of the 24-year-old organization to a non-profit organization! The process has taken nearly three years, and now more than ever we’re positioned to support the global cultivation of art and community based on the 10 Principles.

“After 24 years of tending our garden in the desert, we now have the means to cultivate its culture worldwide,” said founder Larry Harvey. “Sometimes things just pop and this is one of those moments.”

In the late 1990s the founders needed to form a corporation to run the event and opted to create a Limited Liability Company (LLC) – Black Rock City LLC — because it made the best sense at the time. But an LLC is not designed to meet the needs of our growing culture and it wouldn’t survive beyond the founders’ lifetime. Our mission has always been to serve the community, and a non-profit public benefit corporation is the most socially responsible option to ensure and protect the future of Burning Man.

The non-profit Burning Man Project was created in August 2011 and received its 501(c)3 status in May 2012. On December 27, 2013, the Burning Man Project Board of Directors voted to make Black Rock City LLC a subsidiary and is now the sole shareholder of the LLC, which will continue to manage the event in the desert. The transition became official January 1, 2014

The Burning Man Project is now the sole shareholder of Black Rock City, LLC. What is Black Rock City, LLC? A for-profit business that puts on the annual Burning Man event.

Marian Goodell shared her future hopes with the Huffington Post:

“We’ll be taking the momentum people were getting from their experience at Burning Man and working to manifest it in our own communities,” Marian Goodell, who will oversee the new nonprofit, told The Huffington Post. “There are opportunities for people to do what they’ve learned at Burning Man outside Burning Man. We’ll help them tap into each other.”

Goodell said she hopes the larger nonprofit will become a portal that connects regional Burning Man groups around the globe, providing funding for certain projects and receiving funding from others. “We’ll be a philosophical center and a network node, connecting individuals and groups to one another,” she said.

“In our more exciting moments, any one of us who has been to Burning Man thinks it can change the world,” she added. “It brings people hope, and it makes people less afraid of others. It transcends religion and politics. It’s worth it to expose others to what we’ve learned from this cultural experience.”

I’m still struggling to understand how BMOrg, a quarter century into their hundred-year plan, can take this rave and ritual effigy burn and use it to change the world and bring people hope. BMOrg inventing a new vehicle tax? The world didn’t even blink. Taking a UFO to Vegas? Probably not going to be #1 on TripAdvisor any time soon. The Founders, Speaking? Bear giving TEDx talks? Billionaires  handing out pancakes? I mean, I get what Marco Cochrane is trying to do, and I see how the message he wants his art to convey inspires people and transcends religion and politics. That’s how Burners can change the world. Lightning in a Bottle are teaching a message of empowerment through the Lucent Temple of Consciousness. Burning Man has a “Hug Deli”, and camps where you can be water-boarded or tasered. Envision Festival in Costa Rica is showcasing local talent as well as international acts. Burning Man don’t support the music industry in any way, and are still hating on sound camps – 300 Watts and 90 decibels is all you’re allowed in the city. That’s about the same as a lawnmower, why are we driving hundreds of miles away from civilization just to live in Suburbia? Why is nudity good, and music bad?

Larry Harvey added some further insights in the comments on the official blog:

The truth is that the Burning Man Project now employs all but one of the former owners of Black Rock City LLC.

This means we have surrendered all rights of ownership. Formerly, as owners of a private business, my partners and I possessed the unhindered right to do whatever we chose to do with revenues generated by our enterprise, but this is no longer the case. As employees of the new non-profit, we are now subject to federal standards regarding private inurement. And this means, among other things, that we have no right to pocket profits garnered by our former business, which, given the event’s potential for growth, could amount to a great deal of money. Furthermore, any future salaries we receive as employees of the Burning Man Project must be commensurate with compensation received by employees who work for similar non-profits. To put this even more bluntly: if we expect anything further once this transfer is completed, we must sing for our supper; our days as capitalists will be over.

I know there are some persons, who chose to think that we were retiring, but the former owners of Burning Man have never asserted this. The truth, in fact, is that some of us have nearly doubled our workload. We will continue to sit on the executive board that directs the Burning Man event. This alone could be considered to be a full-time occupation. But we will do this as volunteers without compensation, and it is our intention, once the complex task of fully integrating these two operations is completed, to transfer the running of the Burning Man event into the capable hands of those employees we have worked with all these years. But even as we strive to do this, my colleagues and I also intend to serve the Project as leaders of a movement that will carry Burning Man’s culture out into the world— and it is clear to me that this will be as time consuming and as challenging as all that came before it.

So wait – does this mean the Founders have stepped back and given everything to charity? Well, not quite. It sounds nice, and Larry calls it “the truth”, but unfortunately, it ain’t “the truth, the whole truth, and nothing but the truth”.

The value in this conglomerate of for-profit and tax-exempt businesses is in its intangible assets. The brands and trademarks, which are key to future licensing revenues. And who owns the IP – the Intellectual Property? Well, that is another company again – a privately held company formed in 2010 called Decommodification, LLC.

Larry Harvey, Marian Goodell, and former aerobics instructor Harley Dubois are the public officers of this secretive company, which appears to be totally independent from the Burning Man Project. Black Rock City, LLC pays royalties to Decommodification, LLC to license their trademarks.

From the new ticket terms and conditions:

“I acknowledge that the name “Burning Man” is a trademark owned by Decommodification LLC and licensed to BRC, and that BRC LLC has been given the sole right to license and enforce that trademark, and that all of Burning Man’s logos, trademarks or other intellectual property are owned by Decommodification LLC and licensed to BRC, and I understand that these two organizations control all rights regarding the licensing and reproduction of any imagery recorded at the Event. I agree that I will not use the mark “Burning Man,” the logos of Decommodification LLC or BRC LLC, or the likeness, drawings or representations of the Man or of the Black Rock City map, or any other trademark of Decommodification LLR or BRC”

This means that control of the Burning Man brand, and the lucrative revenue streams attached to that year round, is even more firmly in the hands of the founders than before. It is a convenient vehicle for them to pull money out of the party, without the Burners and volunteer workers who contribute to it knowing what’s really going on.

Who gets the $150k from Vogue photo shoots? Is this a tax deduction for Vogue? It doesn’t look that way. It looks like that’s “brand licensing”, not “event”, which means they’d be dealing with the brand owners: Decommodification, LLC. Who sends out the IP-related lawsuits? Looks like that’s Decommodification – they’ve already been involved in a Federal Court trademark dispute.

BMOrg say:

The immediate logistical priority is to migrate aspects of the [Black Rock City] LLC operations into the Burning Man Project and rework the internal business processes so they are adaptable to the regulations that govern non-profits. As we will attain success and experience challenges in specific areas we will endeavor to communicate what’s going on as often and as transparently as possible.

The Burning Man Project is a public benefit organization, and our intention is to build the network of connectivity through relationships with individuals, organizations and government entities. We have great ambitions for what we sometimes refer to at HQ as a “100 year plan.” We’re a little over a quarter century into that plan… and our best days are still ahead.

The Burning Man Project is a public benefit organization, but Decommodification, LLC is not. It’s a privately held cash cow. Some indication of what “Decommodification” means to the owners can be found in the trademarks they’ve filed:

Decommodification, LLC owns the trademarks “Burning Man”, “Decommodification”, and “Burning Man Brew” – yes, a beer. Ah, the irony!

Here’s a more detailed list of the trademarks they own:

Burning Man Design Mark: Organizing community festivals featuring art exhibits; conducting entertainment exhibitions in the nature of art festivals, entertainment in the nature of art festivals . First used 4/8/1995. Transferred from Michael Mikel.

Burning Man Brew: Beer; Beer, ale, lager, stout and porter; Brewed malt-based alcoholic beverage in the nature of a beer. First used in commerce 8/11/2012. Transferred from Erin Hawn (Washington DC).

Decommodification: Commercial administration and quality control over the exploitation and licensing of intellectual property by others. 

Decommodification, LLC licenses the trademarks to Black Rock City, LLC – a for-profit subsidiary of the Burning Man Project. The licensing terms are not known, in the 2012 Afterburn Report there are 3 expense items that might cover this payment:

BLM and other usage fees

$1,868,033

Fees, Agency permits, royalties, Damages & Losses

$57,075

Tax and Licenses (state and federal, payroll, misc)

$154,994

Note that the Afterburn Reports are not a public set of accounts. It is an unaudited list of expenses, we have to take their word for it that they’re complete and accurate – remember, they “forgot to count” $1.3 million a couple of years back. The Afterburns only apply to the event, and other revenue captured through licensing, royalties, and merchandise is not accounted for at all in these reports.

Bottom line? Non-profits don’t have to pay any tax, but they can’t distribute profits to the owners. However, they can pay license fees to private companies that the owners control. Decommodification, LLC seems to have much less transparency than Black Rock City, LLC ever did, or than the Burning Man Project will be required to have as a registered tax-exempt non-profit. Bait-n-switch indeed.