The purpose of this article is to provide a broadly economic perspective on what has become an increasingly prominent debate within the cultural community: how best to ensure a vital organized arts sector in a period of prolonged economic malaise. It seeks to adopt a position between unquestioning boosterism and dismissive philistinism. Engaging sensitively with the possibility that the nonprofit arts sector may be overextended is often difficult. The sector’s skill at advocacy and its can-do optimism and determination — qualities that keep it going against the odds — have not prepared it well for a chapter in which forensic analysis and explicit prioritization and consolidation — and all that euphemism implies — may be required. The proposition in this article is that what got us here, unfortunately, may not get us there.
The key issue is not how big the sector is in terms of dollars but, rather, how those dollars are allocated. In 2010, Grantmakers in the Arts reopened, or rejoined, a long-running discussion about how funders’ approaches to grantmaking can have a profound effect on the underlying viability of grantees — because of how they give, not just how much they give. The discussion was precipitated by the awareness that while the sector has grown, it has not necessarily strengthened over the past few decades; and that the economic collapse of 2007–8 revealed how weak the collective balance sheet — and hand-to-mouth the existence — of the 501(c)(3) arts sector really is. GIA has subsequently disseminated a Common Set of Practices that is designed to encourage funding bodies to do what they can to encourage consolidation.1
This debate was cranked up a notch in January 2011, when Rocco Landesman, the chair of the National Endowment for the Arts, posited that supply exceeds demand in regional theater in the United States. He made it clear that he hoped his remarks would “spark a conversation” that he had been wanting to have “for over a year now.”
The basic premise of Landesman’s comments was that there is a mismatch between the scale and expectations of the cultural sector and society’s wider capacity and needs, or at least wants; that this mismatch is causing financial and organizational stress; and that the cultural sector needs to face this dilemma more directly and honestly and seek to resolve it.
The comments did spark a discussion; but until Landesman laid down the gauntlet, the conversation he joined had been inhibited for three reasons, all of which are threads running through the debate he has triggered.
First, the arts community is often constrained by a fear of offending donors who may have been “cultivated” for and support projects that history subsequently judges as unwise; and we hate making value judgments about what is good and what is not artistically — a process that is central to decisions about the allocation of resources in all policy areas, but that in our policy area is often deemed either elitist or subjective. This means that discussions about the merit of project, program, or organization can be opaque, and any discussion of the relationship between quantity and quality is difficult to get off the ground.
The second inhibiting thread is the wide perception within the arts community that supply and demand is a dangerous subject: that the risk of providing ammunition to those who are hostile to public spending on — and tax breaks for — the arts by talking about “oversupply” outweighs the risk that the absence of debate encourages an unexamined and potentially faulty basis for policy making.
The reluctance to address the possibility of oversupply in turn suggests a basic lack of confidence both in Socratic debate as a route to understanding and informed public action, and in the idea that analysis should inform advocacy, rather than simply support it.
Third, many in the arts view the language of economics as fundamentally inappropriate to cultural discourse: money is not the measure of all things, so why does an economic perspective trump an aesthetic one? Getting and spending, we do indeed lay waste our powers, in Wordsworth’s resonant put-down of trade and commerce. The very concepts of supply and demand suggest a separation between event supplied (e.g., a concert) and the audience (and indeed between one audience member and another), a separation that is anathema to aesthetic involvement. Successful art breaks down those barriers between performers and audience members — and between one audience member and another — creating a shared experience. Aesthetic satisfaction involves the dissolution of the very duality of consumer and product or service on which economic analysis is predicated and without which it has no explanatory traction; and the clunky, alienating conceptual apparatus of economics cannot, it is argued, delineate or illuminate the sublime.
The problem with this line of argument is that it seeks to sidestep the fact that the economic perspective is not intended to illuminate or inform the content of aesthetic experiences but simply to examine their context. And the context is inescapably one in which many people seek those experiences (a.k.a. demand) and others seek the resources to create those experiences (a.k.a. supply). Supply and demand meet when one group charges another for participating in an immersive cultural experience that they have created, just as they meet in other more pedestrian exchanges at a supermarket checkout.
There are forms of arts participation (e.g., Sunday painting, garage bands, a family playing chamber music together) in which people may try to create and satisfy an aesthetic impulse alone and unaided, and demand is a secondary consideration. But the debate over the optimal allocation of scarce public and philanthropic resources in hard times is focused overwhelmingly on those 501(c)(3) institutions that still commandeer the lion’s share of resources, for good or ill: museums, performing arts centers and orchestras, theater and opera companies . . .
Those not-for-profit arts organizations have been through an extended period of expansion. The current period of growth began in the mid-1970s, and it is multifaceted: growth in the number of organizations; in the volume of activities undertaken, including a significant expansion in educational programming; in their geographic reach; and in the professionalization and expansion of support functions such as marketing, financial management, and fund-raising.
Generalizations are risky. But the picture sketched out below is intended to capture a set of dynamic relationships and causal links relating to supply and demand in the organized arts sector, the precise applicability of which may differ according to community, to art form, to size of organization, and to that organization’s capacity to generate earned and contributed income. Nevertheless, it is not difficult to connect the dots, whether you are thinking about a repertory theater in Philadelphia or an art museum in Seattle.
The sketch presents a picture of systemic, long-term (i.e., noncyclical) problems caused by the fact that supply and demand are partly interdependent and partly independent and that supply is insensitive to changes in demand. The problems are not related fundamentally to where we are in the current business cycle (at this writing, December 2011, in a faltering upturn), beyond the challenges, physical and psychological, involved in responding to a precipitous drop in earned and contributed income. When stressed arts administrators say, “It’s the economy, stupid!” they mean, “Hang in there, this too shall pass,” and this is because they cannot see, or prefer not to see, the longer-term forest through the cyclical trees. The map of the woods indicates that supply has overshot demand and failed to stimulate demand sufficiently for it to catch up.
This growth in the organized arts sector has not only been a response to increased demand for what these organizations do. The overall trend has been growth of demand but, importantly, smaller than the growth in the size of the sector itself. That growth has also been driven by:
There is substance to these arguments for investment in the arts, and the fact that they do not apply equally in all the contexts in which they have been employed does not mean they do not apply in any. That claims have been exaggerated or misapplied in the hunt for funding does not vitiate them. But neither does it mean their accuracy in any given context is synonymous with their efficacy in securing resources in that same context: analysis can serve advocacy better than advocacy can serve analysis.
There are specific reasons why what works for advocacy does not always work in analysis:
There is also an asymmetry in the way in which arts organizations respond to pressures for contraction compared with opportunities for growth that has become increasingly relevant as supply has grown independently of effective demand. Ian David Moss of Fractured Atlas recently put it more bluntly: “Whatever the merits might be of reducing supply, there is virtually nothing anyone — funders included — can do to actually make it happen.”5
On the one hand there are few barriers to entry; and on the other, few incentives to exit.
“Nothing” may be an exaggeration, but it underscores the inflexibilities in the sector. The managed reduction of supply to ensure a more vital relationship between provision and levels of contributed and earned income is difficult to secure for a number of reasons.
First, cultural facilities are bespoke and difficult to repurpose or resize; programs can be reduced more easily. But this often involves loss of earmarked funding associated with them, which means that the cost savings bring with them a reduction in earmarked grants: the result is a parallel reduction of income and expenditure, no increase in budgetary breathing room, and a loss of impact and political “face.” And in reduced circumstances, fixed overhead is spread over a smaller programmatic base, increasing the cost per program. Where demand shifts — say, between art forms or geographic areas — it is difficult to reallocate resources within the sector.
Even setting institutional politics aside, reduction in capacity through mergers of organizations with highly specific missions; a high level of commitment to those missions; and infrastructure tailored to the fulfillment of the missions (e.g., venue size and configuration) have so far proved difficult. Reduction in capacity is made more difficult by the fact that the contingent, restricted, and nonfungible nature of many funding agreements and sources means a change of focus or location can only be achieved at considerable financial cost. Consequently, there have been very few mergers.
Second, these inflexibilities are exacerbated by certain practices of organized labor (e.g., stagehands and musicians) that are legally protected and designed to impede adaptation to changes in market conditions. Meanwhile, boards and management tend to approach the impact of reductions in demand caused by external factors (such as changes in funding patterns or in the demographic base) as more within their control than they actually are. Our sector, led by can-do social entrepreneurs, tends to believe that willpower conquers all and that “what got you here will get you there.” In other words, there is a belief that rational retrenchment in the face of reduced demand is defeatism.
Third, there is no equivalent to the private sector’s unified, liquid capital market. In the absence of a shareholder class, whose pursuit of return on capital invested may lead to closure or consolidation, inefficiencies in capital allocation can endure for prolonged periods. There are many good reasons why we have 501(c)(3) organizations without shareholders, but this is one downside.
Fourth, many larger arts projects came about through enormous civic effort and required an extraordinary level of sacrifice, commitment, ingenuity, and inspired leadership from those who made them happen. Those leaders and the people who honor and respect their efforts are often reluctant to subject those projects, once completed, to the sort of dismal, bloodless exercise that is represented by an attempt to recalibrate supply and demand. Systemic optimism was required to create the projects, and abandoning that optimism often involves a radically revised and, some would argue, defeatist perspective.
Fifth, there is a “logic of collective action” problem. If the problem is an overall mismatch between supply and demand, then why should any one organization make the supreme self-sacrifice rather than lobby hard for itself? Why not hang on until another organization goes under? The incentive to act collectively for the good of the community is not as powerful as the incentive to act selfishly, even if the latter option is ultimately self-defeating.6
So on the supply side at least, we are nearer the topsy-turvy world of freakonomics (the fashionable name for the application of social choice theory to nonmarket situations) than we are to the perfect markets of neoclassical theory. How then, does the demand side look?
Demand has stalled because the stimulative effects of increased supply have been more than offset by exogenous changes in the conditions that create demand for the live place-based experiences that remain central to mainstream institutionally based arts provision. These are:
The NEA’s 2008 Survey of Public Participation in the Arts and the more recent analysis of and commentary on the data paint a picture of demand that at the headline level is relatively straightforward. The situation with respect to the performing arts is especially challenging. Attendance at live arts performances produced by 501(c)(3) organizations as measured by the percentage of population has been declining at an accelerating rate for about twenty-five years. This decline was obscured by increases in the absolute population up until 2002. Audiences are graying faster than the general population. The median age for classical music attendance, for example, has risen steadily, from forty in 1982 to forty-nine in 2008. During the same period, the median age for the US adult population rose less, from thirty-nine to forty-five. The picture for visual arts is a little better; after topping 26 percent in 1992 and 2002, art museum attendance (defined as the percentage of the total population who visited an art museum at least once in the past year) slipped to 23 percent in 2008, around the 1982 level.8
Amateur participation in cultural activity, broadly and narrowly defined, is reported to be increasing, although hard data about trends are tough to track down. There has been a significant upswing in the purchase of musical instruments in the past ten years; both acoustic and amplified stringed instrument purchases, for example, are up more than 300 percent in volume.9
It is also clear that the rapid reduction in the cost of, and increases in the functionality of, film and photography production and distribution and recording technologies have had a significant impact on amateur participation.10
Technologies affording free access, such as sites like YouTube, have provided a fulcrum for amateurs at the highest as well as the lowest level. Social commentators see these technologies stimulating a golden age of amateur creativity taking place wholly outside the organized arts sector.11
John Kreidler argued in a prescient 1995 analysis of trends that the professionalized arts sector has historically sought to distance itself from those amateurs who now appear to be thriving happily without them.12
Many within the arts are now preoccupied with how to bring these activities into the world of the organized arts sector, and so we are starting to see “get your chops back” amateur orchestras and similar initiatives.
The net impact of the general migration from live to online forms of entertainment remains slightly unclear: it is not understood whether the trend is exacerbating the decline in live participation and attendance or simply moving independently upward. And of course those who are committed to live performance and the uniqueness of the authentic object are trying to model a third possibility — that of technologically intermediated experiences stimulating appetite for live performance. This has become rich terrain for speculation concerning the extent to which the future of live performance and exhibition attendance is as a complement to, and a generator of, content for digital distribution — such as the Metropolitan Opera’s and National Theatre’s presenting of performances in cinemas internationally over the past four seasons, the Berlin Philharmonic Orchestra’s Digital Concert Hall, and the expansion of digital, online museum collections.
It is still difficult to draw robust conclusions, other than to say:
As with many other areas of digital distribution, business models have not caught up with technological innovation. The digital world has yet to provide a business model for the arts that is directly relevant and applicable to all but a handful of organizations. For the foreseeable future, most arts organizations’ investment in digital technology has the character of a coerced exchange, that is, one that you are financially better off taking part in than not, but one that does not necessarily make you better off than you were before.13
The absence of compelling business models does not diminish the potential of the digital world either to expand the mission of an organization or to generate new ways of fulfilling an existing mission, whether educational, civic, or artistic. It simply means that this territory is unlikely to generate black ink on a significant scale.
So one is left, overall, with a picture of:
These are, in a sense, the results for arts participation trends nationally — what is happening, but not why participation is stalling despite capacity to meet increases in demand. The broad causal patterns are clear. Those who have had more arts education are more likely to attend arts performances. This relationship is about four times stronger than that of any other factor, including social class, educational attainment, other leisure activities, or ethnicity or race.14
The reduction in arts education over a thirty-year period internationally (both in arts appreciation and participation); its removal from standards-based core curricula in schools; and its partial replacement with fee-based after-school activities have resulted in several generations whose basic curiosity about, or sense of the intrinsic worth of, cultural participation has been heavily eroded. This is also evidenced in attitudinal data concerning the ostensible irrelevance of arts education to developing the skills necessary for high-fuctioning social and economic participation.15
Leisure time has increased significantly over the past forty years — up to eight hours per week between 1965 and 2005 — although the distribution of increases is unequal, with those at the top and the bottom of income distribution seeing fewer gains.16
However, competition for leisure time and the expenditures associated with it has also increased dramatically over that period. Today, the arts are not just competing with one another or with TV, family time, bowling (together), and the movies. They are now competing with these along with the entire online world, a plethora of technologically mediated options (TiVo, streaming video, social networking, gaming, music via multiple media), cooking and dining out, sports, health and fitness, shopping, vacationing . . . The most remote rural community has at its disposal technologically supported access to a wider range of entertainment than most cities at any other time in human history.
Most of these options have behind them highly focused and competitive industries that segment and target each demographic and psychodemographic. Some indicative statistics:
Most of these industries are vertically integrated and show a high degree of market concentration. The live music/concert sector, for example, in 2008 reported revenues of $19.4 billion worldwide ($8.5 billion in North America), and reflects a high degree of vertical and horizontal concentration internationally.18
That is, every aspect — marketing, sales, food and beverage, ticketing, venue management, concert production and merchandising, recording and broadcasting — is integrated within either a single company or a tightly coordinated coalition. In the United States, the Federal Communications Commission and other regulatory bodies have approved mergers and acquisitions that have culminated in this integration on the grounds that it permits a strong national base for international competition.
Nonprofit arts organizations — even the largest — are, by comparison, microbusinesses with very low levels of concentration and limited scope for economies of scale. Their capacity to compete for leisure time and dollars is necessarily modest, and the terms on which they compete are structurally highly unequal. They may be helped by the falling costs of social networking techniques for marketing and constituency building, but the structural disadvantages they face are intimidating.
Significantly, too, leisure time is increasingly fragmented and working hours are more varied, as technology has allowed (and, some would argue, mandated) work patterns that are less rigid. Postindustrial work processes and patterns have replaced the more uniform patterning of work by hour, day, and week of manufacturing. This has meant greater variation in working hours and a commensurate demand for flexible leisure activities. TiVo, on-demand cable, online videos, and dining out all afford an accessibility that arts performances with fixed start and end times do not.
It has also been argued (although we do not have an evidential base) that time spent online and multitasking, and the prolific use of droids, iPhones, and other devices, lead to fragmentation of focus. This, in turn, militates against “long form” arts attendance (concerts, plays, ballets, operas) that requires undivided attention — or at least the appearance of it.
The fact that museums and galleries provide flexibility with respect to starting and finishing times and that the art itself may be secondary to ancillary activities that take place there (shopping, eating, socializing, people watching, cruising, reflective decompression) accounts significantly for museums’ and galleries’ relatively better attendance trends than the performing arts.19
The economic downturn that followed the financial crisis beginning in 2007 hit the organized arts sector at a time of vulnerability: a sector that had expanded considerably was weakened financially by the challenges of accessing the increased operating income required to flourish with an expanded capital base, and at a time when longer-term societal patterns and educational agendas are adversely influencing demand.
This circumstance has in turn triggered a series of responses within the arts sector:
The national picture for 501(c)(3) arts organizations in broadly traditional areas is therefore part of a series of long-term challenges all related one way or another to a mismatch between the scale and nature of current provision and the scale of demand for that configuration of provision; and the longer-term impact is likely to be an erosion of organizational balance sheets, combined with increasing need for contributed income to replace shortfalls in earned income at a time when philanthropic support of the arts has leveled off.
There are and will continue to be outliers in this process. At one end of the spectrum are organizations that have found and nurtured a constituency of support; have developed a vital and engaged relationship with their communities; have the confidence to say “no” as readily as “yes”; are exploiting new technologies and techniques to realize their mission in more far-reaching and cost-effective ways; and are able to secure contributed income to feed their programmatic goals from constituencies that believe in their work and wish to be associated with their successes — a virtuous circle. Sarah Lutman has recently codified some of these elements pithily in the context of the Saint Paul Chamber Orchestra. At the other end of the spectrum will be organizations in which a combination of mismanagement and solipsism, overambitious and ill-conceived capital projects, and high labor costs compounds the challenges of an already difficult operating environment — the death spiral.
In the middle of the bell curve, there is the risk of a seeping of vitality from the sector, as the preoccupation with organizational survival and the short-term exigencies of cash flow overtake the programmatic agenda — zombie organizations in which survival itself becomes the mission. The condition is more likely to be chronic than acute. In cities that have experienced prolonged economic decline, such as Detroit or Cleveland, these trends are already clearly in evidence.
If the origins of the mismatch between supply and demand have been correctly identified — in changes in the education system, in demographics, in the uses of leisure time, and so on — then it is unlikely that aggregate demand will significantly increase in the long term unless there are changes in the drivers underpinning that decline. It may well be that the growth in supply will taper off — the building boom in the arts, for example, is slowing down dramatically, and the scaling back, delaying, or canceling of capital projects is a constant refrain within the cultural community. This would appear to be a rational, mature reaction to circumstance.
These dilemmas are coming to the fore as national arts leaders — funders, intermediary bodies, commentators, and indeed boards of directors and managers — grapple with the contours of an landscape in which winners and losers are ever more sharply delineated. They are also aware that the vitality of the next generation of arts organizations and their leadership, particularly those smaller organizations designed to meet community needs, is in part dependent upon their being able to commandeer resources that are currently being absorbed by larger organizations grappling with stabilization.
There are several reasons for anticipating better health of the midsized and smaller organizations:
This is a difficult problem for a community to sort through — and there is possibly a temptation for funders to wish a “pox on all their houses” (i.e., to withdraw from arts funding altogether). But it is also a problem that it is irresponsible to ignore: a vital arts ecology, with appropriate opportunities for attendance and participation, for education and enjoyment, is a fundamental attribute of a rich civic life. It is not just that vitality and volume are no longer synonymous; they are, in this analysis, actually antithetical to each other.
If the predicted challenges become more acute over the coming years — a corollary of this analysis — then demands in support of the status quo by organizations facing systemic problems of high fixed costs and sinking contributed and earned income will increase; and the overall time, political resources, media attention, and emotional reserves absorbed by attempting to meet these challenges are also likely to increase.
One can also anticipate an extended period of “political” responses to the challenges faced by the boards and staffs of those organizations in financial difficulty and their funding partners. One danger of this scenario — of significance to those who care about the overall cultural ecology — is that better-connected (often larger) organizations will preempt increasingly limited resources, often to the detriment of more vibrant, smaller organizations that cannot create the same sense of urgency among funders and opinion formers.
It is wholly unlikely that there is a single approach to the challenges that will work: we are like Tolstoy’s unhappy families, each with our own unique story. But understanding the underlying dynamics, and specifically the increasingly divergent drivers of supply and demand, will help to give the sector the confidence to develop radical solutions to what are, axiomatically, radical problems.