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Key Takeaways: What We Learned

Earned Operating Revenue

We studied the relationship between earned operating revenue and expenses for organizations by sector, by budget size, and by geographic market for the year 2018.

Image courtesy of SMU Meadows School of the Arts, Dallas, TX. From Dijon to Dallas Exhibition. Photo by Kim Leeson Photography (2019).

The average arts organization supports roughly half of its expenses with earned operating revenue and the other half with contributions.

This is a key trait that distinguishes nonprofit arts organizations from their commercial counterparts.  Contributions allow the organizations to keep prices accessible to a broader public.

 

Expenses Covered by Earned Revenue by Sector

  • Performing Arts Centers have the highest percentage of expenses covered by earned operating revenue at 69.5%. Arts Education organizations, which are reliant on tuition revenue, followed Performing Arts Centers (PACs) at 60.7%.
  • Earned operating revenue supported more than 50% of expenses for the Arts Education, Dance, PAC, Symphony Orchestra, Theater, and Other Museum sectors.
  • Art Museums, Music organizations, and Opera companies rely less on earned revenue compared to other sectors.

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Expenses Covered by Earned Revenue by Size

  • Large organizations cover more of their expenses with earned revenue and Medium organizations cover the least.
  • There was very little difference in the index for Small versus Medium budget organizations, whereas there was a big jump in the earned revenue index between Medium and Large organizations. This observation is similar to the one we see related to earned revenue from subscriptions and memberships relative to expenses.

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Expenses Covered by Earned Revenue by Geographic Market

  • At 59.9%, arts organizations in Small Markets have higher earned operating revenue as a percentage of than organizations in other markets, followed by Los Angeles at 57.9%. Both are quite similar on the underlying averages for earned operating revenue and total expenses.
  • Organizations in New York and Chicago are on the low end of the spectrum, with earned operating revenue supporting 44.5% and 44.9% of expenses on average.
  • The earned operating revenue index for organizations in most markets hovers just above 50%. It is interesting to note that organizations in DC and Very Small Markets are quite similar on this index even though DC organizations average nearly 4 times the level of earned operating revenue and expenses as their Very Small market counterparts.

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