Trends for Expenses Covered by Earned Revenue from Memberships and Subscriptions

The subscription and membership model is not dead.

Earned revenue from subscriptions and memberships remained consistent relative to expenses over time from 2016 to 2018.

Consistently, Theatre, Opera, and Orchestras cover more expenses with revenue from subscriptions and memberships whereas Arts Education and Community organizations have the lowest earned relational revenue index annually.
The earned relational revenue index is quite consistent year over year for most sectors, as reflected by the relatively flat trend lines. Only three sectors saw more than a 1% change over the three-year period: declines for Theatre and Symphony Orchestras and an increase for General Performing Arts organizations.

General Performing Arts, PACs, and Community-based organizations saw growth in subscription and membership revenue that outpaced inflation over time. General Performing Arts had the highest growth in relational revenue at 36%. One organization in that sector skewed average relational revenue and expenses high, but eliminating it from the analyses does not substantially change the direction or magnitude of the trend.
Subscription and membership revenue declined over time in the Art Museum, Music, Orchestra, and Theatre sectors. Symphony Orchestras had the largest drop in relational revenue at 11.4%.
Earned relational revenue growth fell short of inflation in the Arts Education, Dance, Opera, and Other Museums sectors.
In inflation-adjusted figures, all sectors saw growth in total expenses except Symphony Orchestras, Art Museums, Other Museums, and General Performing Arts organizations.
For Art Museums, the drop in relational revenue was met with a higher drop in total expenses leading to the positive growth in earned relational revenue index. One organization in that sector skewed average relational revenue and expenses high, but eliminating it from the analyses does not substantially change the direction or magnitude of the trend.

On an annual basis, Large organizations cover more of their expenses with earned revenue from subscribers and members than do Medium organizations, and Medium organizations cover more than do Small organizations.
Large organizations had a spike in 2017 due to the dip in expenses that year rather than an increase in earned relational revenue. They actually had 3 consecutive years of decreases in earned relational revenue.
Small and Medium organizations had more robust relational revenue relative to expenses in 2016 than in later years. These organizations had their lowest index value in 2018.

All size organizations had decreases in both relational earned revenue and total expenses over time after adjusting for inflation. The decline in total relational revenue from memberships and subscriptions is much more than the decline in total expenses both Small and Medium organizations, leading to a slump in relational earned revenue index for all organizations.
Medium organizations saw the highest decline in index value at 0.6%, followed by Small organizations at 0.3%.
In inflation-adjusted figures, Large organizations had the largest dip in total expenses over time which helped to offset the decline in relational revenue leading to the minor loss in the index value by 0.1% compared to that of Small and Medium organizations.

Organizations in Small markets tend to earn more relational revenue as a percent of expenses annually, whereas organizations in San Francisco earn less relational revenue to cover their expenses.
The earned relational revenue index was quite consistent year over year across markets, as reflected by the relatively flat trend lines. L.A. was the only market where organizations saw slightly more than a 1% change over time, and it was driven by high inflation adjusted increase in average annual expenses.

Growth in subscription and membership revenue lagged inflation for all except Small markets, which increased 9.1% above inflation
The biggest deterioration of subscription and membership revenue was in Large markets at -7.8%, followed by NY, L.A, Chicago, and San Francisco, all of which saw declines exceeding 6%.
The average organization in all markets increased their total expenses above inflation except New York and Chicago.
In D.C., Medium, and Very Small markets, earned relational revenue growth fell short of inflation.