Midsize Performing-Arts Organizations Face Financial Threats, Pew Trusts’ Study Finds

Midsize theaters, symphonies, and opera and dance companies are struggling to survive in the face of rising costs, shrinking audiences, and declining revenue, a new report says.

Large and small arts groups, however, are managing to succeed, says the report, which was prepared for the Pew Charitable Trusts by RAND, a nonprofit research organization. Many big groups have adopted strategies used by for-profit companies, including hiring high-profile stars and selling merchandise that displays the groups’ names and logos, the report says.

Many small groups, meanwhile, are flourishing by concentrating on low-budget productions that appeal to niche audiences, it says.

Midsize groups are neither big enough to attract or pay for stars, nor small enough to subsist on limited audiences, according to the report. As a result, many midsize groups will have to position themselves as regional leaders, become smaller to survive, or go out of business, the report says.

Colleges and universities may increasingly step into the breach to present performing-arts events in midsize localities, according to the Pew report. Such changes have implications for artists as well as consumers looking for innovative art, it says. Artists could lose opportunities to hone their crafts and thus find it harder to win roles in larger productions. And, the report says, the need to produce money-making shows may induce groups to offer mainstream fare that presents little artistic challenge to audiences.

Growth of Organizations

The number of nonprofit performing-arts organizations increased 81 percent from 1982 to 1997, but revenue for those groups declined by an average of 7 percent during that period, after adjusting for inflation, according to the study conducted for Pew.

Opera was the only category whose revenue grew, rising slightly less than 2 percent, the report says.

The size of performing-arts audiences expanded over the past two decades because of population growth and rising education levels, not because of an increase in the percentage of Americans who attend performances, says the report. The proportion of income from ticket sales, gifts, and government support for performing-arts organizations changed little from 1977 to 1997, the report says.

Ticket sales, business activities, and other sources of earned income accounted for 30 to 60 percent of the revenue of performing-arts groups, with dance companies reporting the lower figure and theater groups the higher one, the report says.

Ticket sales have not grown as a proportion of total income, however, and many performing-arts groups could be in danger of relying too much on donations from individuals, corporations, and foundations as a source of revenue, the report says.

Such gifts make up about 35 percent of the budgets of performing-arts groups, according to the report. The amount of those donations more than tripled, with donations from individuals roughly quadrupling, from 1977 to 1997.

But the growth in gifts has had drawbacks, the report notes. The rise in giving has stemmed mainly from small donations from individuals, which require arts groups to spend heavily on fund raising, it says. What’s more, corporate donations have tended to be earmarked for specific purposes rather than general operations.

Government support for performing-arts groups remained steady at about 5 percent of total budgets, according to 1997 data, says the report. Federal support has waned, especially since the early 1990’s, but state and local grants have generally made up the difference, according to the report.

Business Techniques

Nonprofit groups have adopted several approaches to stay afloat, including emulating for-profit business approaches and focusing on smaller audiences, the report says. Commercial groups have long employed the strategy of hiring stars, and now large nonprofit arts groups are following suit, making it hard to distinguish between for-profit and nonprofit entertainment, it says. To minimize the financial risks of star-driven productions, arts groups sometimes turn to less-adventuresome programming, the report also says.

In addition, some large nonprofit groups, following professional sports models, have entered into corporate-sponsorship deals. For example, the Roundabout Theatre Company, in New York, named its new home American Airlines Theatre. The airline donated $8.5-million to help underwrite the theater’s $25-million renovation, says the report.

Small nonprofit and volunteer groups, the report says, are concentrating on serving select audiences interested in specialized entertainment. Because many performers and other personnel in those groups are paid little or nothing, the financial risks stay low. The report predicts that such groups will increasingly become the major source of entertainment for small and midsize cities.

“There are many people in this country whose contact with the arts is primarily through grass-roots participation,” says Marian A. Godfrey, director of the culture program at Pew. “The healthy future of the arts will depend on a lot of people engaging in the arts as participants, not just as consumers.”

But attracting those participants will be a challenge unless arts groups of all kinds change their approach, says another report done by RAND and paid for by the Wallace-Reader’s Digest Funds. Instead of focusing only on such characteristics as education and income to determine whether individuals are interested in cultural events, performing-arts groups should also look at people’s general attitudes toward the arts, their desire to attend performances, and whether they find particular performances rewarding.

The Pew report, “The Performing Arts in a New Era,” is available at http://pewtrusts.com. To order a print copy, write to RAND Distribution Services, 1700 Main Street, Santa Monica, Calif. 90407; (877) 584-8642; fax (310) 451-6915; or e-mail order@rand.org. The cost of the print report is $20.

The Wallace-Reader’s Digest report, “A New Framework for Building Participation in the Arts,” is available at http://arts4allpeople.org. Copies of the print report, which cost $15 each, may be ordered from RAND.