Exploring the Other: 2014 Edition

Burning Man requires its Regional Events to have transparent financials, donate to their charities, and obtain a license to use their trademarks. For themselves, the requirements are not so strict. Sure, they have to disclose the activities of their non-profits to the IRS. And they share numbers with us in their Afterburn reports. The Afterburn numbers are not audited as far as we can tell, and are not a complete financial statement. Significantly, Revenues are left out. Also significantly, very general category headings are used for expense items. We know that Decommodification, LLC, a private, for-profit company, owns all the rights to the trademarks, images, videos, soundtracks, fine art, and other intellectual property of the event. We believe that Black Rock City, LLC pays royalties to Decommodification, LLC, to call their event in the Nevada desert “Burning Man”. But there is no line item for this payment. How much are those royalties? That’s a secret.

cartoon_accounting_2In order to estimate it, some forensic accounting is required. It may not be perfect, but it’s better than nothing. And Burners.Me is the only site on the Internet that is even trying.

Last month, right before the event, Burning Man added a page to their site explaining “where does my ticket money go”. The page appears to be an “orphan”, which means it is not linked to by any other page there. The Reno Gazette-Journal somehow found this page, describing it as an “announcement”, and used it as a reference for their story “Where does your ticket money go?”. The Journal said:

Burning Man announced today where ticket sales money goes to shed light on why tickets cost what they do

We looked for the announcement on their web site, their press page, their blog, and in their JackRabbit speaks newsletter – couldn’t find it. Some claimed they posted it to Facebook, but it doesn’t appear in their official feed. The page seems like it was added to the site for the purpose of the RGJ story. It is filed under “What is Burning Man?”, but that page has no link to it.

Water please, he's got mud on his advertising!Was it really an announcement, designed to shed light? Or was it a ruse, designed to muddy the waters and confuse the language, figures, and facts used in public discussions of the event?

The story raised an issue with us here. Both Burning Man, and the RGJ, were claiming that “BLM fees were $4.5 million”. The entry in the Afterburn accounts says “BLM and Other”. So what is the Other? And how much are the payments to them?

We have speculated that “Other” is Decommodification, LLC. Payments to them may be lumped together in this figure, and may also be included in “Taxes and Other Licensing Fees”. We said:

the reason that the word “other” is significant in the original report is that in 2013, this category jumped from $1.8m to $4.5m – with no explanation given for the gigantic leap ($2,654,919 gain). “Taxes and Licenses” jumped from $154,994 to $1,021,851, also without explanation ($866,857 gain). At the same time, “Decommodification LLC owns the rights to everything” (or words to that effect) is now on all the tickets. Coincidence? Well the fact that BMOrg is trying to gloss over it by using increasingly vague language makes that seem even less likely.

…What is interesting here is the subtle use of language to mask truth. The carefully chosen words “BLM and Other Usage Fees” are repeated and slightly distorted, through a technique sometimes called “Chinese whispers”, to become “BLM manages the event…2013 fees”.

The distorted information has been picked up and repeated by many other sites: Las Vegas Sun, High Country NewsRedditRon’s Log, Yahoo Finance, the Black Rock Beacon.

So who is correct? Burning Man themselves? Mainstream media newspapers? Or little ‘ole us, puny and pesky “social media bloggers”?

It’s us, of course. RGJ is wrong, and BMOrg are either misleading us (accidentally or deliberately), outright lying, or (to be charitable) are merely ignorant and the left hand doesn’t know what the right hand is doing.

How do we know? Because we went to the source. The Federal Bureau of Land Management.

Here’s what BMOrg said:

The Black Rock Desert is public land, but we don’t get to use it for free. It also takes a lot of equipment and hours of labor to put things together out there. The following are just a few highlights of costs we incurred in 2013:

  • The space we use is managed by the Bureau of Land Management (BLM) and our 2013 fees to them totaled $4,522,952.

Here’s what the RGJ said:

The following are some of the costs Burning Man said it incurred in 2013:

Bureau of Land Management (BLM) manages the land the event is held on: 2013 fees totaled $4,522,952;

Here’s what Gene Seidlitz, chief of the Winnemucca-based Black Rock Field Office of the BLM, and the guy responsible for the Burning Man permit, said in response to our enquiries:

Burning Man is required to pay fees and costs to the Bureau of Land Management (BLM) as part of a Special Recreation Permit (SRP) issued by BLM to Burning Man each year.  Fees are set by Congress and are currently 3% of revenue related to the SRP.  For Burning Man this includes 3% of ticket sales, ice & coffee sales and other miscellaneous revenue.  The funds go toward BLM’s overall program management within the Winnemucca District with a priority in the Black Rock Field Office.

Burning Man also reimburses (cost recovery) BLM for all reasonable and justifiable costs related to BLM’s administration of the SRP.   Processing includes, but not be limited to, the following: coordination, administration and approval of any necessary NEPA compliance; consultation with appropriate Federal, State, Tribal, and local officials; preparation of the administrative record and resolving any protests, appeals and litigation that might result from the proposal, preparation of all decisions and authorizations resulting from those decisions, monitoring the construction, operation and termination of any resultant authorization; and other necessary processing actions consistent with a final decision.

It seems that those costs jumped, big time, between 2012 and 2013:

In 2012 BLM did a comprehensive analysis of the 2011 operations after the event and determined the BLM needed and would enhance the BLM planning and implementation in 2013 to ensure public health and safety for an event of 70,000 participants in a remote environment was adequately addressed.  As a result BLM’s costs increased from $1.2 million to $2.8 million that year. This was the largest jump in BLM’s costs in the history of Burning Man. Before and since the cost increases have been more incremental and were the result to inflation, growth of the event, etc.

So did the BLM charge Burning Man $4.5 million in 2013, or less?

BLM charged BRC approximately $2.8 M  for costs and approximately $685,000 were the 3% revenue for 2013

Did the BLM do anything to enforce the Vehicle Pass restrictions, or was this something Burning Man came up with?

BRC instituted the vehicle pass program.  This was not something that BLM enforced.

We wondered if the 35,000 vehicle passes were counted in any way by the authorities. It appears not, so it was up to BMOrg to issue them and regulate itself. If they sold more than the stated limit of 35,000, their punishment would be to have more profit forced upon them. If enterprising BMOrg insiders wanted to make some cash on the side, all they needed to do was sell a few vehicle passes on the black secondary market. From the moment they were released, they were for sale for 4-5x face value on Stubhub, and remained at a premium right up until the week of the event. We’ve heard no stories of people being rejected at the Gayte for not having vehicle passes, so I think we can safely assume that they sold more there to whoever required them. Whether or not the new vehicle tax did anything about the environmental footprint of the event (which we were told was the reason for the initiative) is unknown; it definitely was a nice $1.4m+ cash drop to the bottom line for BMOrg (which we speculated was the reason for the initiative).

2014 vehicle pass pricesComing back to the BLM figures, we have:

Costs: $2,800,000

Revenue share: $685,000

At 3%, this means the event revenues were $22,833,000.

We said:

According to the official numbers, in 2013 there were 61,000 tickets sold ($23.23 million). This includes a last minute release of 3000 “OMG” tickets, when the BLM approved a population cap increase. Also according to the official numbers, 69,613 attended the event. What gives? Did anyone at BMOrg make money from the unexpected 8,613 extra people (ticket value: $3.3 million)? Or were these tickets handed out for free to volunteers, who sold them on Stubhub or STEP for personal gain? How much was made from gate sales?

At the time, we were pooh-poohed, “there are no gate sales”. Of course there are, and it has now come out from independent sources that they are called Exception tickets.

In theory, the BLM revenue share should also include sales from ice, coffee, gasoline, propane, Plug-n-Play camps, and any of the other things for sale on the Playa – in 2013, there were 44 licensed vendor permits issued for Burning Man. We have estimated ice and coffee sales as above $1 million annually.

Either BMOrg gave out 1000+ free tickets that they were supposed to sell, in addition to the 8,613 free tickets from the population cap…or there is some discrepancy in the revenues being reported to the BLM.

Could the discrepancy come from the 3000 “Holiday tickets” ($650 – this year, sold at the end of January), and 4000 Low Income tickets ($190)? Back in the day, there was a suggestion that Burners paying the enhanced price were subsidizing the low income Burners. If you count the $650 tickets as $380 (the difference being a donation off-Playa to BMP, perhaps), and keep the Low Income at $190, you get $22,420,000 – which allows for a further $413,000 of additional on-Playa revenues. It seems like ice and coffee alone would be more, and the BLM is supposed to get a share of gross revenues, not net.

In a speech in Tokyo earlier this year, BMOrg CEO Marian Goodell said their revenues were $30 million a year. If she was referring to 2013 – and why wouldn’t she be, since 2014 hadn’t happened yet – then there is $8,167,000 that BMOrg makes off-Playa, in addition to the annual Black Rock desert event. Where does this money come from? It’s hard to imagine it’s from donations, since according to the Burning Man Project’s IRS Form 990, their funding for 2012 was $591,672.

The true figure for “BLM fees” in 2013 is $3,485,000.

Which means “other” is $1,037,952.

Where does this money go?

We have no direct proof that it is to Decommodification, LLC, but I can’t think of any other candidates. The State of Nevada imposes a 5% “live entertainment tax”, but Burning Man and EDC are exempt as outdoor festivals. There are separate line items for taxes, anyway. “Taxes and Licenses” also made a massive, unexplained leap: from $154,994 (2012) to $1,021,851 (2013) – an $866,857 gain. Possibly, some or all of this increase could be going to license the trademark in addition to the Mysterious Other. We know now that Decommodification, LLC permits them to call their 30-year old party “Burning Man”, by licensing “their” intellectual property back to Black Rock City LLC. It seems strange that BMOrg would mis-state their own figures by 23%, and the way the Where Does My Ticket Money Go “announcement” was made is suspicious.

To put the Mysterious Other in context, it is more than the payments for art ($830,280) and donations to local charities ($199,329) combined.

As always, if anyone has any further information, explanation, or details, please share.

30 comments on “Exploring the Other: 2014 Edition

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  5. What rubbish, the BMOrg posted again the Where Does My Ticket Money Go? today in support of their 2015 ticket prices. The sole changes to the document are changing the $380 ticket cost and $40 vehicle pass cost of 2014, to $390 and $50 of 2015, while the document intentionally hides, from donors of art, cash, stock, and labour, the cash, from the ticket money, that goes towards the large cash out paid towards the six of them, whom are on the 501(c)3 Burning Man Project board, and with some in firm executive control of the Project and of the Burning Man event. Might a lawyer state to us how in bloody hell might actively hiding large amounts of cash directed towards themselves be legal within California 501(c)3 law?

    a) ‘The space we use is managed by the Bureau of Land Management
    BLM) and our 2013 fees to them totaled $4,522,952. No, the BLM stated they received $3.5 million, not $4.5 million. Where is the missing $1 million? I estimated this was a licence levy for usage of the Burning Man(TM) name and trademarks from their for profit Decommodification LLC in due of the afterburn ledger item was ‘BLM and other usage fees‘ and in due of this lie. I have not termed it a lie prior, but knowingly repeating false information is a lie.

    b) This document is intentionally misleading, a main cost from the ticket prices is their estimated large cash out. While the document does state ‘These are just some of the specific needs that your ticket money covers’, the title ‘Where Does My Ticket Money Go?’, and, within the document ‘… and we’d like to let you know where your ticket money goes’ directly implies of the large costs of the event will be stated within the document, but, their large cash out is not stated. The term, in common usage, for this is lie of omission.

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    • I will post these comments again on the new tickets post.

      Apologies, I believed the tickets might rise to $420, gaining a bit more cash, but they must not be in as much of a cash crunch as I believed. 69,000 tickets are for paid participants in 2015, and near to 3,000 for volunteers and employees, whom do not count towards the 70,000 population cap. It is good they raised the directed sale to 20,000, from 15,000 in 2014, and from 10,000 in 2012 and 2013, this permits a bit of continuity of the Burner community. It might be 30,000 newbies on the playa again in 2015, it might have been a higher number otherwise.

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    • I notice it was parroted as fact by Burn After Reading magazine as well.

      If the extra guest list tickets go to participants like you suggest, great; if they go to Commodification Camp safari tourists, not so good.

      Like

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    • Kudos for your awesome efforts for the burns, and for the Burning Man community.

      Cash paid towards Pershing County is on a separate line of the ledger of the afterburn reports, it is not within the $4,522,952 on the ‘BLM and other usage fees’ line, of which, $3.5 million was paid towards the BLM, in despite of the BMOrg stating $4,522,952 was paid towards the BLM. The afterburn report of 2013 stated ‘Local Agencies (County law enforcement, Paiute Nation, Nevada Highway Patrol) $301,660’

      I know the answer of this query, but solely a verification, what is the manner upon which temporary event labourers are paid? Those whom are of sufficient fortune to be paid. A 1099 form from BRC LLC, a W2 form from BRC LLC, or a form from a separate company? Is this different in recent burns? Much obliged.

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    • The lawsuit started because Pershing wanted to increase the amount BMOrg pays them for their “services”, with a $1.50/head surcharge. BMOrg objected, and sued on free speech grounds. The parties then agreed a settlement out of court.
      In terms of money paid, it is my belief that BMOrg did not pay a lump sum to Pershing, but rather agreed to their terms of reimbursement for the event – meaning, the money gets paid every year in the form of increased charges.
      As ABP pointed out, there is a separate line item for county authorities, and also for legal expenses.

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  16. Awesome post, burnersxxx. I’m attempting to update the cash out post, with all knowledge gained after the post in May, it is much labour to pen a post and to supply the numerous links of support. Kudos.

    Might you desire to wager the $2.8 million, that BLM gains as a ‘cost recovery fee’, is $2,837,952, leaving an nice round $1,000,000 for ‘other usage fees’? You stated this very delicately, my belief is the BMOrg must explicitly state the rationale of the missing $1 million of ‘BLM fees’. Any rags whom published statements as ‘Bureau of Land Management (BLM) manages the land the event is held on: 2013 fees totaled $4,522,952’ must query the BMOrg as to this, and must publish a correction, including of ‘where the missing $1 million of ‘BLM fees’, in actuality, goes.’

    Kudos.

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    • Thanks ABP, yep that makes perfect sense to me. And probably means it is $1 million for 2014 and next year too. Establishing Decommodification LLC as being worth (say) $10 million may result in $10 million worth of tax deduction to the Founders if they Gift it back to the Burning Man Project in 2017. I’m not an expert in US tax accounting, but I’ve definitely seen deals structured like that before.

      Cheers for putting your time into updating the cash out post, let me know if there’s anything I can do to help you with the reference links. It does take a very long time, they’re almost never clicked, and still people accuse us of making things up, misinformation, clickbait etc. Meanwhile BMOrg can throw out whatever figures they feel like to the media and they get repeated around everywhere by the press with no fact checking.

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      • Much obliged, burnersxxx. I’m working, with a few of my mates, penning the update of the cash out post. My, or our, maths differ a tad from your maths, we are of the belief, supported upon the BMOrg’s prior statements, of they donated the BRC LLC, to the Project, purposed towards a big tax deduction, perchance, 1x sales, $30 million, thus, they do not desire another deduction upon their taxes. Larry stated in 2011, in regards of the trademarks, they will be ‘paid for their value’, in six years of time.

        Much obliged, brilliant comment, we will use the $1 million number for licence of the trademarks in 2014, and 2015, and 2016, in due of the number supported upon the missing $1 million of ‘BLM fees’.

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        • Before they donated BRC to BMP, they transferred out the trademarks to Decom (fact).
          They may have been able to claim one deduction for the value of BRC now, and a future one again for the value of Decom (speculation).
          Decom transfers the trademarks back to BMP unless the directors vote otherwise, in 2017 which meets the 6 years (fact). They wouldn’t be able to claim a tax deduction today, for something that has not happened yet and is subject to a future vote (fact).
          If it went down that way then the value of BRC this year would be based on its revenues/profits/accumulated cash; they would argue that the trademarks didn’t have much value because the royalty revenues were low, so that Decom didn’t get a Gift tax bill; then, firing up the royalties in Decom for a few years, suddenly it could justify its value in this future transfer (speculation). If it made $3 million in 3 years, then its present value in 2017 would be higher because it would be based on future cashflows (fact).
          One commenter has mentioned in another post that they turned down an offer from Robert Siller for $100m – since trademark royalties have been historically low, they could make a case that the value behind the offer was for the cash-cow festival (ie, BRC LLC). Donating the festival could be a $100m deduction… (speculation)

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          • Much obliged, burnersxxx. This is confusing to me, I will discuss it, this evening, with a brilliant mate, whom is familiar with subjects as this, purposed towards obtaining her view.

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    • My maths differ a tad from your maths, burnersxxx. I am of the belief, within 2013, the ‘3% commercial use fee’, was 3% of stated ticket sales + ice sales + coffee sales minus, an adjustment, of the $2.8 million ‘cost recovery fee’. This permits near to $26 million of sales of tickets, and of ice, and of coffee within 2013. I do not comprehend the statements, within the permit, and of the change of the statements, upon 3% of ‘outside services’.

      Within the ‘Founders Speak’ talk in New York in 2013 autumn, I am of the belief it was John Perry Barlow, whom stated, in response to Larry, a statement of near to ‘the BLM fees did rise within 2013, power, within a bureaucratic government ministry is in due of the amount of budget obtained, thus, this is the rationale of the increase of BLM fees.’ An advert was penned for a BLM manager for Burning Man, it is within one of your prior posts within 2014, and, upon consideration of each manager must have people to manage, thusly, the rise of the ‘BLM cost recovery fee’ from $1.2 million, towards $2.8 million, and a fee, towards the BLM, of $3.5 million, near to 12 per cent of the revenues of Burning Man, near to the cash of sales of 9,000 tickets.

      But, the big query, towards the BMOrg, is ‘where is the missing $1 million of BLM fees?’

      Liked by 1 person

      • I think you are correct. Vendors get separate permits from the BLM, and pay 3% fees in addition to BMOrg. Which means BMOrg probably don’t get a cut of this revenue – at least, not officially. Selling $650 tickets to Safari campers would be one way for them to share the booty of P-n-P.

        “The Proposed Action would result in BLM issuing Special Recreation Permit(s) (SRP), allowing Recreational Vehicles vendors (RVs and trailers), Air Carrier vendors, and Camp Service vendors to operate at the Burning Man event on public lands in Pershing County, Nevada. ”

        Here’s the Camp Services permit: https://www.blm.gov/epl-front-office/projects/nepa/39377/48289/52452/2014_CS_Stipulations.pdf

        I wonder what “misc revenue” is in addition to the ice and coffee. Gasoline and propane, maybe?

        Like

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