Friday, January 22, 2010

Lagging indicator

Support for the performing arts is, in the parlance of economists, a lagging indicator.

When household budgets are stressed, tickets to concerts, theatrical and dance events are among the first discretionary purchases that most people forgo. When unemployment rates hit double digits and people are losing their homes, charitable giving gravitates toward food banks and family services, and away from the arts.

Even among the most committed and affluent arts patrons, a drop in net worth and lower returns on investments usually translate to buying fewer or cheaper seats and making smaller contributions. That effect is compounded by reduced income from endowments, not just for the few arts groups that have endowments but for the many that receive support from foundations whose grants are funded by endowment income. And when corporate profits shrink, or local firms are absorbed in mergers, corporate donations decline.

The U.S. economy may have begun recovering from the 2008-09 crash; but it’s going to be some time before indices of personal wealth – salaries, home prices, the values of investment portfolios – regain lost ground; and even longer before income from savings and investments rebound. (I saw an ad the other day promoting "1.84 percent!" on a 12-month certificate of deposit – ! indeed.)

Performing-arts groups also face sharp reductions or elimination of grants and fees for educational and community services from state and local governments, which are reeling from budget shortfalls. (Currently, the Richmond Symphony receives about $300,000 – 8 percent of its operating budget – from the Virginia Commission for the Arts and local governments, says David Fisk, the orchestra’s executive director.)

The financial stress that arts organizations are enduring will continue for several years after the economy turns around. The recession that followed the Sept. 11, 2001 terrorist attacks was over by 2003; but, Fisk observes, arts groups did not see contributions and grants return to pre-9/11 levels until 2005-06.

The current "Great Recession" is deeper and broader, and promises to have more long-term impact on the arts.

The advocacy group Americans for the Arts publishes a National Arts Index, tracking trends in attendance, contributions and other measures of the health of arts organizations. Its latest report, incorporating data from 2008, shows a decline of 4.2 points from the 2007 level, 7.1 points since 1999:

The index reinforces the National Endowment for the Arts’ 2008 study, "Public Participation in the Arts," reporting declining attendance and aging audiences for the performing arts:

The NEA study was conducted before the current recession. The latest National Arts Index reflects early effects of the downturn, and predicts that declines in attendance and contributions will continue at least until 2011.

The index’s researchers find that "demand for the arts lags capacity" – i.e., there are more arts groups, performances and venues than the existing and likely future market can bear – and that patronage of the arts is not keeping up with "other uses of audience members’ time, donor and funder commitment." They also report that more people are manifesting their interest in the arts as at-home practitioners, while fewer are behaving as consumers, buying tickets to performances or purchasing works of art.

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From these and other studies, and from ongoing, generally negative budgetary reports by arts groups, we can draw these inferences:

* There will be fewer performing-arts groups, especially those employing professional artists, in the future than there have been in the recent past.

* Professional performance organizations, especially those with high overhead such as orchestras and opera companies, will merge; or groups will broaden their geographical base to fill voids left when other groups go under.

* The number of resident, salaried professional artists will decline and more groups will employ free-lancers. More classical instrumentalists will work as actors, opera singers and jazz musicians do, taking gigs when and where they can find them, depending more on teaching or non-artistic work for steady income.

* Performing-arts groups will stage fewer and less ambitious productions, and will perform to smaller audiences. Patrons of "high" art forms such as symphony and opera will be older and more conservative in their tastes.

* A greater share of arts groups’ budgets will come from "earned revenue" – ticket sales, fees for classes and workshops. Ticket prices will rise, especially for professional-level productions.

* Government grants for arts groups, especially at state and local levels, will decline sharply or disappear altogether. Big corporate donations will be harder to come by, especially in communities whose large firms are based elsewhere. Foundation grants already have gravitated away from general-operating support and toward specific ends, notably education; that trend will become more pronounced. Arts groups will be more dependent than ever on individual contributions.

* "Long-distance" spending on performing arts – buying tickets for the Metropolitan Opera's telecasts in movie theaters, subscribing to online streaming of concerts by major orchestras such as the Berlin Philharmonic – will increase, often replacing purchases of tickets to local performances.

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This region is a good place to watch these trends at work.

A couple of professional troupes – the Baltimore Opera, the Mill Mountain Theatre in Roanoke – have already shut down. The two largest arts groups in Hampton Roads, the Virginia Opera and Virginia Symphony, are in bad shape financially. The Washington National Opera has pared its 2010-11 season to five productions (down from seven in 2008-09) and is taking fewer chances with repertory; its plan to stage Wagner’s "Ring" cycle has been put off indefinitely.

Two questions (among many others that could be posed): Five or 10 years from now, will there be one professional opera company performing in Maryland, D.C. and Virginia? Will both the Richmond Symphony and Virginia Symphony continue to be professional orchestras with salaried musicians who live in Central Virginia and Hampton Roads?

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POSTSCRIPT 1: Writing for The Wall Street Journal, Andrew Manshel, an attorney working with nonprofit organizations, discusses the financial viability of U.S. symphony orchestras. Manshel focuses on the Cleveland Orchestra's situation. His bottom line: The salaries of musicians and staff are too high to be sustained:

POSTSCRIPT 2: The Philadelphia Inquirer's Peter Dobrin sounds out leaders of the Philadelphia Orchestra on the ways it may address its financial woes. Among the options, bankruptcy reorganization: