2014 Portfolio Report Reveals Beginnings of Recovery for Arts and Culture Sector

On Monday, October 20th, the Greater Philadelphia Cultural Alliance will release the 2014 Portfolio, its latest research report on the health of the region’s arts and culture sector. The 2014 Portfolio is the Alliance’s largest analysis of the sector to date, covering the activities of 473 cultural groups in the most recent fiscal year and trend data from 298 organizations covering 2009 to 2012.

The report uncovers new evidence of the significant impact arts and culture has in driving the local economy. In 2013, the nonprofit cultural sector attracted 17 million visits for 33,000 productions, films and other works, generating over $1.1 billion in direct spending and involving over 65,000 paid and volunteer employees. 

In the last Portfolio report in 2011, it was evident that cultural organizations were not immune to the effects of the Great Recession, with revenue dropping significantly from 2007 to 2009 (-43%). The 2014 Portfolio reveals the beginnings of recovery: Over a period when the regional economy grew modestly at 2.2%, from 2009 to 2012, cultural organization revenues increased 3%, endowments increased 12% and Net Assets increased 7%. Attendance also increased by 3%, and earned income increased by 9%. Children’s attendance also grew significantly, up 17% since 2009 and now with over 3 million visits annually.

While overall recovery has been slow, Portfolio also identified and tracked the performance of a distinct set of Growth Organizations, which have both expanded operations since 2009 and had positive margins in 2012. These groups tended to be not the smallest or largest organizations, but mid-sized organizations between $250k and $1Million in annual expenditures. They also tended to be more evenly distributed throughout the region and were relatively younger than groups as a whole. It is also interesting to note that these growth organizations spent more on fundraising and marketing on average, tended to rely more on paid attendance, and increasied paid attendance at almost twice the rate of non-growth groups (4.3% vs 2.4%).

Conversely, while the total groups in deficit declined slightly since the last report in 2011, 43% of the groups reported deficits in the most recent fiscal year and half of those had deficits greater than 10%. 

“Unfortunately, there remain many groups that struggle to maintain balanced budgets despite the economy and the sector’s modest recovery.” says John McInerney, Cultural Alliance Vice President of Marketing & Communications. “That is why the performance of these growth groups is so notable. Their ability to navigate the aftermath of the recession while increasing paid attendance, expanding spending and balancing budgets merits closer scrutiny.” 

The sector’s improvement in strengthening earned income and increasing attendance is notable and of great import for long-term recovery. Portfolio indicates that collectively, earned income generates the majority of income for the sector, with 55% of all funding coming from direct earnings. Of those, admissions, tickets and tuitions are the most important, at almost 20% of all revenue (25% with memberships and subscription revenue), followed closely by investment income. Membership income, generated primarily by Museums, Media Arts, Science and Nature organizations, was up 24% and admissions were up 10%. The only downside on the earned side was subscriptions. Whereas the number of subscriptions appeared to remain relatively stable, the revenue from subscriptions declined 20%, probably not a surprise to many, reflecting consumers’ demands for more flexible and affordable subscriptions that generate less revenue but appeal to wider audience.  

On the contributed side, there were modest increases in Board and Foundation income. Foundation funding remains an important source of income for the region’s non-profits, with Foundation funding the largest source of revenue for organizations with budgets under $1 million, which make up four out of five groups in the study. However, overall contributed income has remained flat since the recession, with significant declines in local, state, individual and corporate funding. Local funding declined 64%, State Government funding declined 26% and Individual giving, which was a highlight of the 2011 Portfolio, declined 12%. Corporate giving, which has declined in every Portfolio since 2008, declined 23%. Corporate giving is now at just 2.2% for our region, compared to 8.4% of funding nationwide.

“In this new philanthropic environment, people want to invest in organizations that have direct community impact,” says Michael Norris, Cultural Alliance Interim Executive Director. “We believe part of the stagnation in contributed income is due to a misperception of what we do as arts organizations. The Alliance is committed to bringing the sector’s valuable contributions to the forefront, and making the case for the power of the arts in connection to larger education, community revitalization and social equity issues.”

To this effect, during its 2014 Annual Membership Meeting at The Franklin Institute on Monday, October 20th, the Alliance will also share plans for increasing accessibility to arts and culture organizations. Planned initiatives include the continuation of the STAMP teen program, which provides Philadelphia high school aged students with free access to the city’s top museums and cultural attractions; the launch of a new arts loyalty rewards card program in connection with Phillyfunguide.com and Funsavers in Spring 2015 (Phillyfunpass); and a series of meet-ups to invite members of the community to discuss some of the issues that have been raised by the report.

Portfolio 2014 is the result of the collective efforts of Cultural Alliance staff, 473 organizations which contributed data through their participation in the Cultural Data Project, research from Metro Metricx, and core funders The Pew Charitable Trusts, William Penn Foundation and PNC.

“We are pleased to support the fourth edition of this landmark study,” said Paula K. Fryland, PNC regional president in Greater Philadelphia and Southern New Jersey. “The arts and culture are powerful drivers for strengthening our economy, improving education and enhancing the quality of life in the city. We are excited to be working with the Greater Philadelphia Cultural Alliance, and with organizations across Philadelphia’s cultural community, to make a difference in the neighborhoods where we live and work.”

For more information, please contact Alison Zeidman at alisonz@philaculture.org or 215-805-5737. To download a copy of the 2014 Portfolio please visit www.philaculture.org/research/2014-portfolio.

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.

The work of the Greater Philadelphia Cultural Alliance is made possible through the generous support of committed individuals and institutions.