Thursday, May 12, 2011

Business is Business

I know that there's been a lot of drama recently in the NERO world, around what is and what isn't legitimate requests for transparency. And I'm here to tell you this:

NERO is a business, running a NERO chapter is a business, and they do not need to, nor should they show you their business records or licenses.*

I understand that there is a real concern about where the money for national goes. But it's not a non-profit group (even though it should be if it's losing 20k a year). You are not a share owner of the company. You have no say in the day-to-day use of said finances.

And as a whole, the business never improves when customers see their finances. If the company is perceived as making too much (aka any profit), customers will whine about how much they pay for events and will want to pay less. On the other hand, if the business is losing money, few will actually opt to pay more at an event. The business has little to nothing to gain in this strategy.

People in general are not trained to interpret finances correctly. There's a lot of work and knowledge that goes into coming up with that magical profit number, and it takes years of higher education to understand a lot of those concepts. And no, being a scientist or engineer doesn't mean you can interpret those numbers. There are still concepts that you are not aware of unless you're trained in business/finance.

As for the contracts, stop asking for them too. It's more private business information. You don't know for a fact that there aren't terms in that contract that might affect future business if they became public. You don't know if part of the contract means that they cannot reveal the contract to the public. If they are in breach of their contract, it's not your place to get in the middle of that mess of crap.

NERO is not a club. Running a NERO chapter is not a club. They are businesses. They don't have to prove anything to you. Simply ask yourself if what you're getting is worth what you're paying. If yes, have fun.

But seriously, stop asking for private information.

*The exception would be a chapter that runs as a non-profit, but I'm not sure if that's allowed when the licenser is a for-profit business.

Note: IANAL - I am not a lawyer.

24 comments:

  1. I agree. The exception being the relationship between chapter and national. I do not think sharing total financial information is needed, nor is it required, but it is not an unreasonable request that the people that invest and operate under an organization ask to see basic financial information, just as the chapter owners are required to submit to audits and give over financial information to them.
    The chapter/national relationship is a business to business one, not customer to business and should be treated as such.

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  2. @Mike

    Agreed. It's perfectly acceptable for licensees to request basic financial information, as that information would help them decide if they would like to choose to continue with the license or to end the contract. National could tell them no, but that would, in theory, hurt their bottom line.

    It's more the public release that I was concerned with.

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  3. We are in complete agreement... Prepare to meet thy end, for surely this is a sign of great unbalance in the universe.

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  4. Soo... short version is "Sit down and STFU, you get nothing"... is what we're saying here?

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  5. @Stephen

    Yes and no. The complaints about what national is doing with the membership and wanting to know where the money goes are both legitimate. Asking for disclosure of financial documents and such, is not.

    If I eat at McDonalds, it doesn't entitle me to know how much it actually costs them to make the burger I ate.

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  6. Nah...I think the short version is, "Go play the game and let the owners pick back and forth at one another about contractual issues."

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  7. Actually, Bill, I can think of one instance that you could ask to see financial records (specifically receipts/and or policies)...if you believe a fraud has been committed. It isn't illegal to be an idiot and make poor business decisions. It is another issue entirely to claim to have spent money on an item that is being provided to players (say, for example, insurance), but then not actually do so. I'm not saying this has happened at any LARP I've attended, but I could see asking to see a record or receipt to be sure that you are, in fact, covered with insurance (that is the only case I could think of off the top of my head).

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  8. IANAL

    Even in the case of fraud it's not necessarily legitimate to go for financial information first. You wouldn't contact the business about the insurance, you would contact the insurance company about the insurance. If the insurance company has no records of it, then you may be able to take the business to court, where all the rules change (in regards to release of financial documents).

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  9. Fair enough and refreshingly honest.

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  10. An interesting question for you, what happens, legally when a for profit business asks for donations? Also not a lawyer but there are some interesting precedents.

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  11. I'll get on the bandwagon and say I'm not a lawyer, either, but I did google Tim's question. It "appears" that a for-profit business can 100% get donations, as long as they report it as income and NOT as a deduction (a non-profit can do it as a deduction).

    Jenn

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  12. Thats correct, all donations are reclassified as gifts and then taxed at the corporate rate. So NERO chapters that receive donations whether monetary or chattel pay taxes on those donations at the end of the year. Or at least, they are required to, if they classify themselves as a for profit entity. If they are classified as a not for profit entity then their financial documents are public record

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  13. That is correct. As a for profit business all of my assets- props, costumes, etc, that are donated are on my P&L statement and taxable, as are any and all cash donations.
    The items are I own, make, and buy are depreciated as well.
    I am not sure how the chapters that clam not for profit get away with it. According to my tax attorney the requirements for that are pretty stringent.

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  14. Well there you go, you are not required to share any information with anybody. Nero International is not actually required to either, I can see how you would want him to, because I want you to, but there is no requirement. Even suppliers and purchasers do not share corporate information with one another. However NERO International is also wrong to demand that you pay a fee that is not in your contract, he has no legal footing to stand on. There was actually one case that involved a for profit entity that subsisted on donations where the people who donated were reclassified as angel investors because the business was refusing to disclose information. But that case took place in Canada so it probably has no bearing on this discussion.

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  15. Well, let's be truthful here. NERO National isn't trying to make chapter owners pay a fee. They want the PLAYERS to pay a fee and are trying to make the chapter owners ENFORCE it.

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  16. But the players have NO contractual agreement with NERO International, so what are they supposed to be enforcing?

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  17. Bill,

    An excellent distinction, which I hadn't thought of before...

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  18. Once again, IANAL.

    No contract with the players means that National can pretty much do whatever they want, such as charging $15, $30, or hell, even $1000 to be a member. You can't go to a provider of goods or services and tell them that they can't raise prices on you because you DON'T have a contract with them.

    As has been mentioned before, chapters are licensees, not franchises. The contracts are mutually agreed upon and cannot be changed without consent from both parties. It protects the licensee as much as the licenser.

    So National can say whatever they want about membership. Since they don't really run games, they can't enforce it. It's up to the individual chapter owners.

    So unless there's a clause in the contract that says something along the lines of "only members of NERO national may play," there's no requirements for chapters to enforce it.

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  19. Bill, I am not consuming any service from national currently. I do consume a service from the local chapters.

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  20. @Bill: "Well, let's be truthful here. NERO National isn't trying to make chapter owners pay a fee. They want the PLAYERS to pay a fee and are trying to make the chapter owners ENFORCE it."

    Most chapter owners I know are players as well.

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  21. @Eric

    I know that owners are players. That's not the point. They are saying that PLAYER Eric has to join national (for $15) to play, and that OWNER Eric has to enforce it, which he may or may not be legally obligated to do, depending on the contract.

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  22. (As a Plot Lead for NERO Chicago, I must say up front I speak on this issue ONLY from a PERSONAL STANDPOINT. My writings do not reflect opinion or public policy for NERO Chicago, or the NERO National groups. I am only exercising my constitutionally guaranteed right to freedom of speech, and I thank in advance the blog managers for allowing this forum to us all.)

    Normally, I would be completely on the side as presented here. Businesses are private entities formed for the sole purpose of maximizing profit potential of their shareholders and as such are allowed basic privacies to their structure to those ends.

    HOWEVER;

    As has previously been noted in this blog, NERO on the (mitigated) whole, both at local AND National levels, has taken perverse pride in choosing which side of the "club/business" debate it falls on, depending on what is most expedient for them at the time. And that is where much of the grumbling sentiment, nee anger, lies.

    Virtually ALL the tools used by NERO in the last 17 years have been DONATED GOODS; The database and management of said same, the rule book designs, the racial packets, many of the local and national website hosting and management, the monster manuals, the tag templates and databases... all these modern tools that currently run NERO were DONATIONS for which people received in-game consideration ONLY. In fact, in the past, many good works were TURNED DOWN by National and the locals when the creators requested financial compensation.

    A for-profit business has no right asking "members" to donate time and materials to said business' bottom line, and receive no renumeration for it, save services that have no value outside of the organizational flow. And those businesses that DO accept said same MUST declare them as positive-side assets received during the course of the business year; every volunteer hour, every spell packet, every boffer, every donation of material goods and time.

    And THAT is why people get upset; year after year we are made to feel that "the NERO 'club' needs us to volunteer, to participate" in order to function, yet when the deeper questions get asked, the veil of "It's a BUSINESS" is enacted, thus cutting off further discussion and building to a slow simmer that eventually bubbles over into what I lovingly refer to as the Bender Effect (a la Futurama): "Well, screw it! I'm gonna go start my OWN NERO Chapter! With blackjack! And hookers!"

    At which point, National gleefully accepts another $4000 starting fee from another group (because that's where National makes their money; none of our chapters is so big that commissions alone from events is making bank; why do you think they want to tag us all another $15 a piece?).

    Openness and transparency makes for a happier community. NERO National now just needs to decide if they are a community or a business. AND STAY THAT WAY.

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