Cultural Alliance President Maud Lyon's 2015 Portfolio: Cultural Across Communities Presentation

2015 Portfolio: Culture Across Communities Presentation by Maud Lyon

I first heard about the Alliance because of its research, with the 2006 release of the first Portfolio report. Since then, the Alliance has established itself as a national leader in research on arts and culture--examining this region’s cultural health, its economic impact, larger trends in audience behavior and major issues in cultural policy.  The Alliance has provided data-driven insight in all of these critical areas, to inform the cultural sector and civic leaders. I know this from personal experience, because I have used Alliance research for the past ten years to inform my work in Detroit.  

Tonight, it is my privilege to present the Alliance’s latest research, and our first national report, the 2015 Portfolio: Culture Across Communities.

Thanks to lead support from the Doris Duke Charitable Foundation, and additional support from The Pew Charitable Trust and the William Penn Foundation, we are now able to place Philadelphia in a national context. Culture Across Communities uses information from the Cultural Data Project to evaluate the health of arts and culture nationally, providing perspective for cultural groups around the country, but particularly here at home.

We took a look at eleven metro areas: on the east coast, Boston, New York, Philadelphia and Washington DC; moving inland, Pittsburgh, Cleveland, Chicago and the Twin Cities; and in the west the the Bay Area,  Los Angeles, and Phoenix. Within those 11 communities we analyzed 5,502 organizations--which, by the way, is a third of the records in CDP’s national database.  Collectively, these cultural organizations spend over $13 Billion each year and reach over 210 million people annually. The total population of these eleven metro areas is about 24% of the US population. It’s a comprehensive dataset. 

For trend data, ten metro areas had nearly 3,000 organizations with profiles from 2009 to 2012.  (The Twin Cities did not, so they are not in the trend analysis.)

Our goal was to understand the distinctive and shared attributes of the cultural communities across every region and within 11 distinct disciplines. Are communities recovering from the Great Recession? Where are the pressure points for the sector? How are the metro regions distinctive? And most importantly, what trends are impacting the longterm health of all cultural nonprofits?

We learned a lot.  Each of you will receive a copy when you leave, so you can delve into it on your own. Right now I will share with you the big takeaways, what we think it means for the field, and what we plan to do to respond to the findings in this report.
 
First, the good news. The report reveals that, overall, cultural communities across the country are on the road to recovery from the Great Recession. Revenue, net assets and surpluses all increased from 2009-2012. Attendance was also up, particularly paid attendance, with overall increases in 6 of the 11 disciplines, and 7 of the 10 trend regions.  

Across metro regions, only Los Angeles and Washington DC had very small net deficits in the most recent fiscal year. 

It is heartening to see these positive indicators. Our sector is rebounding from the recession, and is rising with the country’s economic recovery.

Earned income drove the sector’s recovery. It is increasingly being relied on to cover a majority of operations. Across the 11 regions, earned revenue is up a dramatic 25%.  Earned revenue makes up 53 cents of every dollar raised by arts and culture nonprofits. While a large part of earned income was realized gains on investments, which is not on this chart, we are pleased to see that memberships, tickets, admissions and tuitions--key indicators of public value--all went up, as did rental income.

In fact, the only major budget line for earned income that did not increase was subscription revenue, which is probably not a surprise for many in this room. Subscriptions have been on a downward trend for many years and many groups have already begun adapting to this trend.

But bottom line, arts and culture nonprofits are succeeding in building earned revenue across every metro region we examined, self-generating more income from operations and investments.

Underlying these positive numbers, unfortunately, is the truth that many organizations continue to struggle. Aggregate numbers don’t reveal the full story. A significant proportion of nonprofits, 2 out of 5, reported deficits in the most recent fiscal year, with 1 in 5 reporting significant deficits greater than 10%. This finding was consistent across every community and every discipline. We have seen this pattern locally in Philadelphia in every single report we have done since 2006.

Deficits are a serious ongoing challenge to the long-term health of the field.  TDC’s recent reports highlight this in Philadelphia. They point out that without the ability to generate regular surpluses, nonprofit arts and culture organizations will not be able to build up the necessary capital needed to survive in this increasingly competitive environment for nonprofits. 

One of the most significant outcomes of the struggle to balance budgets has been an increased reliance on part-time employment. From 2009-2012, growth in full-time employment was virtually flat, while part-time employment grew.  Many groups reduced labor expenses by hiring part-time positions.  Clearly, one of our sector’s challenges is the ability to provide competitive compensation to attract the best staff.

Overall spending was also flat, actually declining 1.6% in aggregate over 3 years, which means that our sector is not keeping up with inflation. This hampers our ability to sustain and expand our impact. 

So, if earned revenue is up, and our sector is holding the line on costs, why are so many organizations in deficit?

In the three years after the recession, contributed revenue actually declined 3.5% across the 11 metro regions. To put this into perspective, every additional dollar spent on operations requires us to raise 46 cents in new contributed revenue. For small organizations that is 64 cents on every dollar. While board giving went up significantly, 20%, and foundation giving increased 9.2%, every other source of contributed support declined. Corporate funding, which remains consistently low, declined 7%. Most troubling, individual giving, as important as foundation funding, declined almost 10%. 

There were also steep drops in government funding with local, state and federal funding all declined at double-digit levels and across every metro region. You may remember Vice President of Research & Communications John McInerney making these points last year when we released Philadelphia data, but it is even more troubling when you see these trends are consistent across multiple communities. 

Now many of you are probably also curious about how your particular discipline performed. The report looks at key metrics by disciplines across all regions. You can read the details, but let me point out a couple of the larger trends. 

The Museums Meta Category--which includes Museums, Science & Nature, and History--generated half of total attendance. These groups also had double-digit increases in attendance, and the three highest gains in earned revenue. The Museums and Science & Nature disciplines were big drivers for much of the positive trends in the report’s audience and revenue indicators. 

History organizations are another story.  While increasing audiences and net assets overall, and gains in earned income, the History discipline had the second highest drop in contributed revenue of any discipline--down 23%. It also had the highest proportion of groups reporting significant deficits. 1 in 3 history organizations had deficits greater than 10%.

On the performing arts side, the recovery was more mixed. While there were overall increases in revenue for Music and Theater groups, Dance groups were the only category that saw gains in both total attendance and subscribers. 

Community Arts & Culture and Education groups, which are mostly  smaller, community focused organizations, saw increases in earned revenue, but declines in contributed support, which drove an overall modest decline in total revenue.  

Each discipline has its distinctive challenges and notable victories.  You can see them in the published report.  This coming year, the Alliance will share these findings in more detail here and across the country,  presenting to national service groups like AFTA, the Theater Communications Group, Dance USA, the American Alliance of Museums and others.  Culture Across Communities will help them all to support the arts and culture sector.  

We know that you are curious to know how Greater Philadelphia stacks up against the ten other cities in this study.  

While net assets and endowments increased at rates similar to the national numbers, our performance in revenue was a bit muted. Total revenue increased 3.4% in Philadelphia, less than half of the 7.0% increase nationally. Our earned income increased 9%, much less than the national gain of 25%. 

Conversely, we did slightly better on contributed income than in the report as a whole.  In Philadelphia, contributed income remained virtually stable, while it declined 3.5% nationally.  However,we saw a greater decline in individual giving,  13%, vs 10% nationally. While foundation giving increased, the increase was about half the rate of the increase in foundation giving nationally.  But it is also important to note that here in Philadelphia, Foundations make up a larger portion of our overall revenue than the national average--they are a larger slice of our revenue pie.

In general, our performance was consistent with the field overall, but our lows were a bit lower and our highs were not as dramatic. 

So, what does all of this mean? 

In analyzing the data collected in Culture Across Communities, we see four  four top takeaways.

One: Individuals are key. If you add together what individuals buy – our earned revenue from memberships, tickets, admissions – and what individuals contribute, we see that 45% of every dollar generated comes directly from individuals. The sustainability of arts and culture depends upon our relationships with people.

Two: We need to build the next generation of donors. This will require some dramatically different approaches. The lack of arts education and the new entertainment options brought by technology have eroded public interest in the arts. In addition, donors are shifting their priorities.  By 2020, 1 in 3 adult Americans will be a millennial and 70% of them already define themselves as social activists. Both millennials and Gen X’ers (don’t forget them!) are more focused on value and impact than previous generations of Americans, who were more likely to give to institutions. They will only give if they they see the arts as an effective and inspiring resource for a socially responsible world. Arts and culture has to frame our value differently to compete for contributions from individuals--and for that matter, from foundations.

Third: Cultural experiences need to be technically sophisticated and socially relevant. When we produce new work, we often take creative risks in an effort to produce art and exhibitions that are transformative (like Nightscapes in Longwood Gardens). That creativity and risk should be extended to all aspects of the experience--the issues we address, the messaging we use, the physical environment, the way the audience interacts with the work. (This is PCCY’s School Play.) On the positive side, there is an emerging tech sector in our community that is hungry for collaboration, an influx of young culturally active kids, and a level of energy and optimism to this region that we have never seen before. We need to leap on that opportunity to create exhibitions, performances and programs that are exciting and compelling.

Four: To respond to these issues effectively, organizations must embrace knowledge-centric practices. We live in the era of data. Better data collection and information-driven decision making is critical for your organization to keep up with the accelerating pace of change in the world. One advantage to our increasingly digital world is that virtual activity is measurable. We can know a lot more about our audiences, and our impact. The challenge is dedicating resources to collecting, analyzing and using information. 

Culture Across Communities would not be possible without the excellent, dedicated staff team of the Alliance, who produced it.  I want to recognize John McInerney, Morgan Findley, and Theresa DeAngelis in particular, and also our partner, Metro Metrics.  Please thank them for this wonderful resource!

Data tells us where we’ve been.  It measures performance and indicates trends.  But what data can’t do is to predict the future.  As a great philosopher once said, the only thing that is constant is change. While we often can’t control change, we can control how we respond to it, what we anticipate, and how we adapt.