Burning Man is partly the story of a half-dozen eccentrics—an unemployed landscaper (Larry Harvey), an art model (Crimson Rose), a struggling photographer (Will Roger Peterson), a dot-com PR gal (Marian Goodell), an aerobics instructor (Harley Dubois), and a signmaker (Michael Mikel)—who made good. Less charitably, it’s the tale of a group of slackers who grabbed hold of the one thing that brought them notice—and, eventually, a paycheck—and have ruthlessly ridden it for all it’s worth. The truth contains elements of both, of course, but one thing’s for sure: it’s never boring.

…so said Brad Wieners in the excellent Oral History of Burning Man at Outside Online.
Let’s say that you’re the dirty half-dozen mentioned above. You’re a partner in an LLC, a corporate structure designed to distribute profits to the partners over many years. You’ve been running this LLC for nearly 20 years, and the event it owns the rights and permits to has grown to one of the biggest and most famous in the world. The contract you signed with the LLC says that you’re on the Board of Directors, and if you ever leave – voluntarily or involuntarily – you will get only $20,000 – or a share of the profits. Whichever is lesser, which gives you an idea of the sort of profits they were looking at when this contract was drafted. [see agreement at the end of this post]

Of course, you’re not going to leave. It’s worth more than 20 grand. It makes $30 million a year, it’s gotta be worth at least 1x sales. Bloomberg called it “Silicon Valley’s Hottest Startup”, maybe it’s worth $100 million. Whatever, the growth is capped in the near term, unless you can monetize the Regionals, or increase the ARPU – Average Revenue Per User, or how many things you can clip the ticket on selling to the people. When the population is capped, your options for revenue growth are limited to raising ticket prices, and finding new things to sell. Vehicle passes, coffee, ice, gas, scarves, DVDs and soundtracks, and whatever other revenue streams the owners can come up with – 44 licensed vendors in 2013.

is that an ironic ATM I see behind the ironic suit guy?

The event is clearly immensely popular, demand is growing and so is global awareness. They are pimping the thing out like crazy in the media, with Presidential candidates and political pundits and all manner of journalists and tech stars and celebrities.

This festival of Giving and Self-Expression has become the Selfie Destination for the Selfish Generation. It’s about as radical as Malcolm in the Middle, CNBC and Taco Bell.

Here are our profit estimates for the past couple of years:

We’ve highlighted just some of the expenses to show you how much money goes to the Art and charitable donations, versus how much goes to BMOrg’s 6 Directors. If you want to see the full list of expenses, and how we calculate the profit estimates used above, see our detailed analysis for 2013 and 2012. Every expense number is taken from Burning Man’s Afterburn reports; if there are hidden expenses not listed there that would make the profit figure lower, we’re not aware of them. There are definitely revenue streams that would make it higher (like gas, exception tickets, and merchandise sales), but it is hard to estimate those. BMOrg do not officially disclose their revenues, they’ve never explained to us why. The 2013 revenue number came from a TEDx talk CEO Marian Goodell gave in Tokyo this year. The 2012 estimate is from ticket sales + ice, there could well be more sales and therefore more profits.

In the last 5 years (2009, 2010, 2011, 2012, 2013) the total amount spent on art was $2,918,210. 5 incarnations of the Man cost $1,068,636. Call it $4 million for both.

In the last 5 years BMOrg have spent $6.6 million on lawyers and accountants – $1.1 million for each director. This is clearly more than the profits they are taking out. To make an investment like that, they must have something bigger in mind. Something worth more than saving up 5 years of profits.

When they announced their “transition to a non-profit” in March this year, we also found out about Decommodification, LLC – a company set up to earn royalties from the Burning Man name, licensing of the logo, and the intellectual property – which includes every photo and video ever taken by a Burner, which they can license without having to share the money with the original owner of the copyright. All the images and videos and other intellectual property that we assign them the rights to when we attend the event. The 6 directors also own Decommodification, LLC. We can estimate the size of the royalty payment by the difference in payments to BLM and “Other” from 2013 to 2012.

2012: $1.9 million

2013: $4.5 million

Difference:  $2.6 million

Per director: $442,486

That’s assuming they split it evenly.

Putting two and two together, adding the royalties to the profits, we get about $1 million a year per director – PLUS salaries, travel, and costumes.

We know the directors are getting a bit old for a rave EDM festival. They’ve been doing this for 30 years, and they’re looking to retire. They’re thinking about the legacy they’re going to leave for the future, and the “Golden Parachutes” they’re going to take for themselves when they bail out of this thing.

As it stands, over 5 years, they might get $5 million each. A nice little package, enough to retire on, but these days, with San Francisco Real Estate prices, hardly a fortune. Paris Hilton makes that DJing in Ibiza in about a week.

But what if they could sell it? What if someone wanted to buy it?

If it was worth 1x sales, $30 million, they’d still get the $5 million – but straight away. They don’t have to wait for years, and risk that something could go wrong to fuck up their cash cow. Something like a Virus Outbreak or a Child Predator or Weather Closing the Event.

If someone wanted to pay more, though, maybe it could be worth $10 million per director. Maybe the Directors could draw out the sale, transition the community into it, and pull a few million extra out for themselves along the way.

How could someone just buy it? Wouldn’t all the Burners leave, pack up and go, fuck off out of protest at the Founders “selling out” their event? Wouldn’t people who’ve spent more than 10 years slaving away in the hot sun for months at a time to make this happen – DPW who actually do the work to build the city instead of doing the panel discussions and entertaining of dignitaries –  wouldn’t they walk out in protest if they saw the 6 who took over the event taking the money and running, while they get left with no pension plan, no savings, and fewer prospects for involvement in the future?

It certainly would’ve been a risk – in the old Burning Man structure, circa 2009.

Looking at it now – after they spent that $6.6 million on accountants and lawyers and created new non-profit and for-profit companies and merged bank accounts and transferred assets amongst them, and enabled plug-n-play camps with VIP wristbands and paid servants – That Thing In The Desert is a very different beast.

Today, you could buy Decommodification LLC, and thus own the value of the event – the brand, and the royalty streams from monetizing the intellectual property. You could buy Black Rock City, LLC – the operating company of the event. If someone did that “The Burning Man Project”, the charity, would still exist, doing unspecified, vaguely Burner-ish things with a “Philosophy Center” and Larry hanging around as Chief Philosophy Officer. The Burner cult would still be there, drinking the Kool Aid and spouting the Principles as Rules like good little Burnier-Than-Thous. Paying for the $650 tickets and thinking it’s not scalping because it’s from BMOrg and “the money supports charities and the artists”. The only thing that would change from a legal basis would be the ownership of the shares

The “network of Regionals” could be something of great value to an acquirer, if they were in the events business and looking to develop new markets around the globe.

the first hotel on the Playa, Ashram Galactica, was ironic. Now non-profit and for-profit hotels are both there, a whole category of theme camps. Some preserve the irony, some sell rooms and keep the riff-raff out

2014 has proved to potential acquirers that BMOrg can introduce new things for sale, change the box office, ticket mailing can be fucked, they can screw around with STEP, Will Call can be a total cluster fuck, the gate can even close for 2 days, and still Burners will come. In droves. The event will be sold out, and covered worldwide by mainstream media. The potential to monetize the event has now been carefully crafted to be the strongest it has ever been, with AirBnB selling rooms in camps (ironically, of course) and Billionaire Burners bringing 120 guests to commodification camps with $13,000 camp dues and fully-stocked, camp-only private bars.

New things can be sold, hell you can put a gas station out there if you want. Merchandise can be sold year round.

Looking back at the last few years through this lens, with this perspective, a lot of the decisions seem to make sense. Why do you need a massive media blitz, when you’re already sold out? Why mess around with the ticketing so much? Why such a strong focus on Virgins, on bringing new people in to the event? Why bring aboard Directors from the worlds of hospitality, hospitals, and home shopping? Why spend so much more on accountants and lawyers than on the art?

It seems like, compared to 2009, the event now is less counter-culture and much more mainstream. It has been packaged nicely for a sale, wrapped up in a neat little bow, just waiting for someone to come along, snap it up, and give the Founders a Golden Parachute they can really retire in style on – as well as a global network of festivals they can travel to, probably still on the *cough* non-profit’s dime.

Who would want to buy Burning Man?

Now we get into the realm of speculation. Where we have to consider some clues. This I cover in Part II  – Who Could It Be Now?

2012’s Burn Wall Street featured bank tellers and ironic advertising for Bank of (un)America, Chaos Manhattan, and Goldman Sucks. There was a report online that a JP Morgan exec wrote a $100k check for the installation, which distracted a couple of hundred occupiers for months and had a budget over $200,000. Hard to substantiate, but JP Morgan’s name was not mocked. Photo: Curious Josh

Hilarious? photo: Hiker Carl

from Burningman.com (note: our commenter A Balanced Perspective has pointed out that this agreement was superseded in 2011. If anyone has a link to the current one please post)

Black Rock City LLC Operating Agreement

The below owners and incorporators of Black Rock City LLC, a Nevada Limited Liability Corporation, hereby declare this as their operating agreement. This agreement shall take effect as soon as signed by all owners.

MEMBERSHIP
There are 6 owners of Black Rock City LLC (hereafter referred to as the “LLC”). Each shall have an equal interest in the LLC. All initial owners of the LLC shall sit on the Town Council on and are referred to as Managers, one of whom is also the Director. Additional owners may be admitted by a unanimous vote of the Town Council on such terms and conditions as unanimously agreed. Unless otherwise agreed at the time of admission, all subsequent owners admitted by managers of the LLC shall have an equal interest in the LLC and the right to sit as Managers on the Town Council.

GOVERNING BODY
The management of the affairs of the LLC shall be by and through the Town Council which shall function as a board of directors. The Town Council shall consist of all the managers one of whom shall be called t he Director of the LLC. Meetings of the Town Council shall be called and presided over by the Director or his designee. The initial Director shall be Larry Harvey. All Managers must agree to any subsequent Director of the LLC.

The Town Council shall have and exercise all management rights, powers, and authority over the business, affairs and operations of the LLC. Such powers shall include without limitation all powers which may be exercised by the directors of an LLC including: the making of expenditures; borrowing money or guaranteeing indebtedness and other liabilities; conducting and compromising litigation; the acquisition or disposition of the assets of the LLC; the negotiation of contracts binding on the LLC, the selection and dismissal of employees, volunteers and independent contractors, with and without cause.

The Town Council shall indemnify and hold harmless the Director and Managers, for all liability they may incur as a result of their involvement in the LLC except for intentional tortious or fraudulent conduct. The Town Council may indemnify and hold harmless employees agents, independent contractors or volunteers for any liability they incur as a result of their involvement in the LLC except for intentional tortious or fraudulent conduct. Only the Town Council acting unanimously may dissolve the LLC, distribute assets, dividends, earnings or property to owners.

Compensation of Managers and employees of the LLC shall be as set by the Town Council.

Members of the Town Council may not be removed from office except for cause. Cause for removal must consist of either a breach of fiduciary duty, intentional tortious misconduct, or being inactive in the operation of the LLC for a significant period of time. In the event of removal or resignation of a member of the Town Council, the LLC must redeem the ownership interest of an owner and the owner must surrender his ownership interest as provided in this agreement. The Town Council shall meet periodically to manage the affairs of the LLC. One Manager shall keep a record of all decisions of the Town Council. The books and records of the LLC shall be kept at its corporate office and each member of the Town Council shall have the unlimited right to inspect and copy such books and records. Decisions of the Town Council shall be made by consensus. In the event of a deadlock, the Director of the LLC may call for a vote of two thirds of managers when in his discretion a vote is necessary for the LLC to operate.

PROPERTY OF THE LLC
Title to all of the LLC’s property, assets, and accounts are to be held in the name of the LLC and no owner, manager, employee, or volunteer can claim any interest in the property, assets, or accounts of the LLC. The Town Council may designate one of its managers to sign such documents necessary to purchase, transfer, or encumber real or personal property.

OWNERS INTERESTS ARE NOT TRANSFERABLE
Except as provided herein, no manager, the director or owner of the LLC may transfer his interest in the LLC. Any attempted transfer shall be void ab initio. To the extent the law requires the managers and LLC to recognize any involuntary transfer — such as an attachment, seizure, lien, garnishment or court order, etc.– the transferee’s rights shall be limited as provided herein and to the full extent of NRS 86.351.

No transferee of an interest in the LLC shall have the right to participate in the Town Council or management unless all other managers, the director, and owners have consented in writing and the transferee has agreed in writing to be bound by this agreement.

All owners of an interest in the LLC agree that their ownership interest may only be transferred to the LLC which may purchase the interest of an owner. In the event of an involuntary transfer, death of an owner, resignation of a manager, or a manager’s termination by the Town Council for cause, the holder of an interest shall immediately transfer the interest to the LLC pursuant to this operating agreement.

The interest of all owners of the LLC shall be valued at $20,000 plus 10% a year after 2000, or the average book value of the owner’s interest in the LLC measured over a 12 month period, whichever is less. If the pro rata average book value of the LLC is negative, the value of the member’s interest shall be $1.00. In the event of a voluntary or involuntary termination of any manager or the director, the LLC shall promptly purchase the interest from the holder. No other form of transfer, redemption, or cancellation shall be valid.

DISSOLUTION
In the event of the dissolution of the LLC all remaining owners of the LLC agree that debts and obligations of the LLC shall be determined and satisfied prior to any assets being distributed to any manager or owner, further unless unanimously agreed by the managers in writing, any remaining assets shall be utilized to further artistic expression and community formation.

FINAL AGREEMENT
This agreement replaces and supersedes all prior written or oral agreements of the owners on subjects covered by this agreement. This agreement is binding on all successors, heirs of owners of an interest in the LLC. Each party to this agreement agrees to execute such additional documents as may be necessary to carry out the terms of this agreement. This agreement may not be amended except by the unanimous written consent of all the owners of the LLC. This agreement shall be governed by the law of the State of Nevada. Dated 5/19/00.