National Nonprofit Arts & Culture Sector Recovering from Recession Despite Declines in Contributed Income

Across 11 major metro regions, cultural attendance increased 3% from 2009 to 2012, reaching 210 million people annually. Overall revenues for arts and culture increased 7%, but contributed revenue, a critical source of support, declined 3.5% due to drops in individual, government and corporate support.

Philadelphia, October 26, 2015--Cultural groups continue to recover from the Great Recession, with revenue increasing 7% and attendance up 3% from 2009 to 2012. This is despite significant drops in most sources of contributed support, according to 2015 Portfolio: Culture Across Communities, a new eleven-city report on the cultural sector released today by the Greater Philadelphia Cultural Alliance.

“There are clear signs that the arts, museums, and the broad spectrum of cultural nonprofits have been able to navigate past the recession—increasing audiences and building revenues,” said Maud Lyon, President, Greater Philadelphia Cultural Alliance. “But progress is fragile. To remain relevant and viable, it is clear we need to engage the next generation of donors and audiences.”

Cultural Across Communities is the Alliance’s first national report, covering the activities of 5,502 organizations in 11 metros: Bay Area, Boston, Chicago, Cleveland, Los Angeles, New York, Philadelphia, Phoenix, Pittsburgh, Twin Cities, and Washington DC. Collectively, these communities employ 906,000 paid and volunteer positions and spend $13 billion annually. The communities examined had a collective population of over 75 million residents, or 23.7% of the total population of the country. The report, which follows up and expands on the Alliance’s 2014 Portfolio research on the financial health of the arts and culture sector in Philadelphia, relies on data from the Cultural Data Project and  is supported by a grant from the Doris Duke Charitable Foundation.

The report reveals that, overall, cultural regions across the country are on the road to recovery from the Great Recession, with revenue, attendance and net assets all increasing from 2009-2012. Nonprofit arts and culture organizations were also able to rebuild savings and investments, increasing net assets 7.6% and endowments 13.7%. Profit margins in aggregate were also positive, with a slim aggregate surplus of 3.2% in the most recent fiscal year of the report (2012).

Earned income is increasingly being relied on to cover a majority of expenses, showing an increase of 25.4% from 2009-2012. Admissions, ticket sales and tuitions continue to be the most important source of operations income overall, and increased 5.0%.The only significant decline in earned income was in subscriptions sales, with subscription revenue dropping 13.1%.

However, contributed income declined 3.5%. While board and foundation giving increased (up 20% and 9.2% respectively), it was not enough to counter declines in individual giving (down 9.7%); all sources of government income (dropping in aggregate 27.9%), and a 7% drop in corporate funding .(See attached Graph #6.)

Additionally, despite the sector’s overall recovery, many individual groups continue to struggle. One in 5 organizations (18.7%) had deficits greater than 10%, and 2 in 5 groups overall did not report a profit (surplus) in the most recent fiscal year of the report. Overall spending was also virtually flat, declining 1.6% overall. The only increases in employment came from part-time labor, which increased 4.5%.

“In Boston, we had the strongest overall gain in revenue and a notable increase in attendance, which is great news” said Catherine Peterson, Executive Director, ArtsBoston. “We also have a better understanding of our challenges, particularly in the context of what groups across the country are also facing, which is invaluable as we work to expand access to the arts throughout Boston. The national context is particularly valuable to have following the release of ArtsBoston’s 2014 The Arts Factor report which focused on Greater Boston. ”

In analyzing the data collected in 2015 Portfolio: Culture Across Communities, the Cultural Alliance has come away with four key implications for the future of the sector:

• Individuals are key. Over 45% of all revenue comes from individuals, with additional support in the form of employees and volunteers. Engaging the next generation of cultural consumers, audiences and professionals will be key in reversing the trends of decline.

• We need to build the next generation of donors. Broader societal trends are impacting individual giving, such as declines in arts education and lack of exposure to the arts. Nonprofit cultural groups must embrace new strategies, and they must do a better job of communicating the social significance and impact of their work.

• Cultural experiences need to be technically sophisticated and socially relevant. Cultural participation is just as likely to occur online or in an informal setting as it is in traditional venues. The core nonprofit cultural sector has struggled to respond to these shifts in cultural consumption, which are particularly challenging for small organizations. The cultural sector must think about audience development and engagement as a collective issue.

• Successful organizations embrace knowledge-centric practices. Better data collection, strong analysis and information-driven decision making can be instrumental in helping cultural organizations adapt to changes in the environment on every level.

Metro Region Findings

In addition to the overall cross-regional comparison, Culture Across Communities also offers a look at the specific performance of each individual metro, calling out distinctive trends for each:

Bay Area: The Bay Area (San Francisco and San Jose) was noted for its strong gains in revenue (+25.9%) and the highest increase in contributed revenue of any region (+39.7%). It is second only to Boston in its high proportion of dance groups (13%). Despite its success in generating contributed revenue (one of only two metro regions that had generated more revenue from contributions than earned income), individual giving dropped 20.9%.  Nonetheless, the Bay Area had the highest per capita individual giving and attendance.

Boston: Despite having the second highest number of groups reporting at a deficit (45%), Boston had the highest increase in earned revenue (+52.0%) of any other metro, and its very supportive foundation community helped drive a 22.8% gain in contributed revenue. Attendance also increased significantly (+17.9%), at a rate second only to Los Angeles.

Chicago: Chicago’s diverse cultural sector is second only to New York in total revenue and spending, and has the highest proportion of theaters of any other metro region. Chicago had a strong increase in earned income, at 31.5% (driven primarily by increases in investments realized). Despite declines in individual giving (-11.1%), Chicago’s giving is still strong compared to other metros, second only to the Bay Area.

Cleveland: Cleveland has the highest proportion of revenue generated from earned income (59.3%), primarily driven by strong Investments. It is also has the largest increase in paid employment, 8.8%, even though its total spending declined 7.4%, the steepest spending decline of any of the metro regions. Cleveland was also notable for strong gains in individual giving (+64.1%) and corporate funding (+38.2%), and for having the fewest organizations in deficit (34.7%).

Los Angeles: Los Angeles saw strong growth in attendance, up 18.8% from 2009 to 2012, the highest increase of any metro region. Despite a 5.3% increase in foundation giving, LA saw a 12% decline in contributed support. It also had the second highest increase in job growth, 5.9%, despite a decline in overall spending of 4.2%. Smaller organizations performed well in aggregate, with budgets under $10 million having an aggregate surplus of 19.0%, the second highest of any region.

New York: New York’s nonprofit cultural sector is significantly larger than all other metros, generating 41.5% of the study’s total spending and representing 27.8% of the total organizations in the report. However, New York also had the highest percentage of organizations reporting a deficit, at 45.9%. Attendance was extremely robust in New York—at 69 million, it had the highest of any metro region—but it was not the highest on a per capita basis and attendance was flat at 0.7%. Spending per capita and government contributed income per capita were both the highest in the study.

Philadelphia: Philadelphia is the fourth largest cultural sector in terms of revenue. It had a strong increase in earned income, up 9.3%. Revenue growth from memberships was particularly strong, up 23.4%, two and a half times greater than the next highest increase, in Pittsburgh. However, contributed income was basically flat (-0.2%). In particular, individual giving decreased 12.7%. Despite those declines, foundation funding, an important source of funding at 11.9% of total revenue, increased 5.6%.

Phoenix: Phoenix achieved the highest increase in tuition revenue, up 43.8%. Phoenix also had strong overall gains in earned Income, up 17.1%. But its contributed income, as with many other metro regions, dropped significantly, with a 19.3% drop in individual giving and overall contributed revenue down 36.8%, pushing total revenue into the negative. However, overall margins were positive at 4.1%, employment was also up 3.9%, and it was one of only 4 cities where spending is up 1.3%.

Pittsburgh: Unlike most communities, Pittsburgh saw a strong increase in total subscribers (+16.0%), corporate funding (+17.6%), and contributed income (+14.3%), helping to drive a 7.5% increase in total revenue. This was despite the second highest drop in individual giving revenue (-20.5%). Foundation revenue is at a higher proportion of community funding in Pittsburgh than any other metro region, and Pittsburgh had the second highest increase of foundation revenue, up 35.0%.

Twin Cities: Twin Cities organizations were overall at break-even with a 0.5% aggregate margin. Contributed revenue was the major source of funding for Twin Cities cultural organizations, and along with the Bay Area, it was one of only two metro regions that generated more than 50% of its revenue from contributed sources. Notable was the high proportion of government funding (17.4% and also the second-highest per capita), driven by strong state funding, which at 12.8%, was dramatically higher than the 1.5%  for all metro regions. The Twin Cities also has the highest proportion of corporate funding, at 5.5%. (There was not enough longitudinal data to calculate trend indicators for the Twin Cities).

Washington DC: While earned income in Washington DC increased 3.0% due to the strongest increase in ticket revenue of any other region, contributed income dropped 19.7%, driven by the second largest decline in foundation support (-47.5%), as well as declines in government and corporate support. Spending and employment also declined, with a 6.5% decline in spending and a 3.1% drop in paid employment, the largest drop of any region. However, attendance grew 5.4%. If Smithsonian attendance were included the total, at over 40 million, would make Washington DC second only to New York in total attendance. (As the nation’s capital, Washington DC has a strong nonprofit cultural sector, but it also has the country’s largest federally run cultural sector, which was outside the scope of this report. Most federally-run cultural institutions do not participate in the Cultural Data Project.)

For more data on individual metro regions, see the Metro Snapshots & Profiles. 

Discipline Findings (see attached: Graph 37)
The report also examines key indicators in disciplines, categorized into 11 groups under 4 meta-disciplines: Community Arts and Education (Community Arts & Culture; Education & Instruction); Museums (Media Arts; Museums, Galleries & Visual Arts; Science & Nature; History); Performing Arts (Dance, Music, Theater, Other Performing Arts); and Support and Other (Councils, Services & Support; Other).

The Museums, Visual Art, Historic, & Scientific meta-discipline demonstrated some of the strongest gains in attendance and revenue. Museums Galleries & Visual Arts, Science & Nature, and History, had the highest total attendance levels (46 Million/+11.7%, 37 Million/+12.1%, and 21 Million/+15.4%, respectively). The Science & Nature discipline, in particular, had strong indicators of health with double-digit surpluses and almost a 20% increase in total revenue. The Museums meta-discipline was also the largest driver of memberships, and while the total amount of members in the study declined 1.6%, revenue increased 4.2%.

Other disciplines saw strong performances as well,  Education & Instruction organizations had a 23.9% increase in  attendance, the second highest attendance gain of any discipline. It also had the highest proportion of children’s attendance (28.1%).

Performing Arts fared less well on some key indicators: 3 out of 4 disciplines (Music, Theater, and Other Performing Arts) saw drops in attendance as well as drops in revenue from subscribers.  However, Theater had the highest increase in net assets (+20.4%). Dance, while the smallest performing arts segment, had the only gains in attendance (+7.3%) and total subscribers (+25%).

2015 Portfolio: Culture Across Communities is the result of the collective efforts of Cultural Alliance staff, the Cultural Data Project, Metro Metrics, and the 11 metro regions and 5,502 organizations which contributed data.  The Doris Duke Charitable Foundation provided the core support for the report, with additional support provided by The Pew Charitable Trusts and the William Penn Foundation.

For more information, please contact Alison Zeidman at alisonz@philaculture.org or 215-805-5737. To download a copy of 2015 Portfolio: Culture Across Communities, please visit philaculture.org/2015portfolio.

ABOUT THE GREATER PHILADELPHIA CULTURAL ALLIANCE
Established in 1972, the Greater Philadelphia Cultural Alliance is the region’s leading arts and cultural advocacy, research and marketing organization. Our mission is to “lead, strengthen and give voice to a diverse cultural sector that is making Philadelphia a world-class region to live, work, and play.”  Our membership includes over 400 organizations ranging from museums and dance companies to community art centers, historic sites, music ensembles and zoos. Our members, as well as the cultural community as a whole, count on the Alliance for signature research reports on the health and growth of the sector; grantmaking in partnership with the Pennsylvania Council on the Arts; robust professional development and membership services; marketing and audience development through our signature consumer marketing programs, Phillyfunguide.com and Funsavers; and leadership in policy and community engagement through our GroundSwell advocacy initiative and STAMP teen program. For more information on the Cultural Alliance, please visit www.philaculture.org.