SMU DataArts - Cultural Data Profile

After three months of stay-at-home orders and finding innovative ways to stay connected with members and general audiences, many arts organizations across the nation are preparing to reopen doors while facing a whole new set of challenges – from the economic and operational impacts of taking necessary safety precautions to program changes and a refocus on issues of equality brought about by civil unrest – all with possibly less staff and resources than normal or ideal.

According to research co-authored by SMU DataArts and TRG Arts, it’s estimated that the average arts organization may incur a deficit equivalent to 26% of its expenses over the course of the year due to effects of the pandemic – which could mean tens of thousands of dollars that, frankly, most arts organizations cannot afford to lose.

Due to social distancing and stay-at-home measures, earned revenue tied to provisions of mission-related services, such as in-person attendance, education program revenue, and membership and subscription revenue, is likely to take the biggest hit. Drawing on surveys of roughly 35,000 nonprofit arts organizations with budgets over $50,000, the report estimates an aggregate impact of $5.4 billion in losses based on the assumption that organizations across the nation will reopen by October 1, 2020.  

Researcher Colleen Dillenschneider has been tracking measures of “intent to visit” throughout the course of the pandemic to help cultural organizations gauge public intention of visiting in the next week, in the next six months, up to two years. Overall, intentions to visit in one week and one month have been the most volatile – presumably relating mostly to the information about effects of the pandemic that has had us all on an emotional rollercoaster for weeks now – but the main message here is, yes, when cultural organizations open doors and resume programming, surveys show that visitors intend to be there.

Still, getting attendance rates back to where they were is going to be a long several months or potentially even years-long journey.

Most cultural organizations operate with a membership or subscription program that provides a source of revenue as well as a familiar cohort of valuable patrons who show particular interest in the mission. When we looked at pre-pandemic data, we found that earned relational revenue (from memberships and subscriptions) covers an average of 6.6% of annual expenses overall. However, the robustness of this source varies not only between sectors but also among various organizational budget sizes within each sector, and in some cases, may be earning the organization nearly double the overall average.

During “normal times,” having a member base that generates enough revenue to cover a good portion of annual expenses sounds great, but what about during times when membership acquisition and renewals are severely impacted by an outside force, such as the pandemic? What does it look like for organizations to lose a large portion of their member base due to our current circumstances?

The loss from earned relational revenue that organizations are potentially witnessing may vary just as greatly as the pre-pandemic earnings did, but what we can identify now are the types of organizations that are at most risk if they cannot reopen and boost earned relational revenue back to a healthy level. According to our data, Opera, Theatre, and Symphony Orchestra organizations rely the most on this source of revenue to cover annual operating expenses.  

From a wide angle, the business models of these three types of organizations may appear fairly similar while also largely catering to long-established audiences. Although these three types of organizations have maintained the highest levels of relational earnings, all have seen membership and subscription revenue fall since 2016 and the bulk of this problem could be due to weak acquisition rates.

For many organizations, and particularly organizations that are witnessing a drop in relational revenue due to low acquisitions, there has likely been a lot of conversation about how to not only attract but also retain new, younger and more diverse audiences to ensure a more sustainable future. Facing rapid growth in technology and shifts in social consciousness, art organizations have had to rewrite strategies for how the public consumes art as well as re-evaluate artistic choices to avoid perpetuating the problematic white, male, heteronormative narrative within the cultural sector. In order to do this, many have made changes to hiring processes, formed ad-hoc committees, and adopted statements, plans or policies to help guide more equitable, diverse and inclusive practices, internally as well as externally, to stay relevant and competitive in the field.

As younger generations tend to more cause-oriented in their philanthropic choices, the burgeoning revolution against systemic racism will play a key role in your patrons’ evaluation of cultural experiences as well as which organizations they choose to support. It is becoming increasingly more important for cultural employees, throughout the organization, to have the necessary skills to effectively assess and navigate diversity resistance within the organization. Equity, diversity, and inclusion initiatives should not simply be passive statements or only reserved for prescribed aspects of operations, but should touch all aspects to make true, holistic, and observable impact.

Evidence-based research shows that 62% of an organization’s ability to generate relational revenue is attributable to the expertise of leadership and staff to foster and maintain relationships with its member base. While life teaches us that relationships built on a foundation of disingenuous, superficial motives are inherently weak. Relationships with your supporters aren't any different. An organization's programming, policies, and plans should align with the goals that the public demands to serve as a foundation for thriving, meaningful relationships that benefits both parties.