NCAR Press Kit: NCAR Report Highlights

8/13/2019 NCAR Press Kit: NCAR Report Highlights

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differences in operating models between some arts and cultural disciplines. Other disciplines

are surprisingly similar: performing arts centers and symphony orchestras had very similar

averages on this measure, as did art museums and theater companies.

The average arts and cultural organization spends $4.11 in marketing expenditures, inclusive ofmarketing staff compensation, to bring in each attendee.

o The average opera company invested nearly ten times the marketing expenses to bring in onepatron as did community organizations: $11.72 versus $1.42, respectively.

o Community organizations and museums of all kinds bring in more people for every dollarinvested in marketing than other sectors.

While opera companies have a higher marketing spend for each attendee, they also earn higherprogram revenue per attendee. Taken together, the net effect is $42 per person of earned revenueafter accounting for the marketing costs to attract that person ($53.72-$11.72), the highest of any

sector. At the same time, opera companies cover 60% of their expenses with contributions, an

identical level to that of other museums (e.g., nature, history, science, or childrens museums),

which bring in only $11.31 per attendee but attract nearly 5 times the number of attendees annually

than opera companies.

Symphony orchestras, arts education organizations (i.e., arts schools), and dance companies havenearly identical net program revenue per attendee of roughly $30.70. These represent a very

different operating model than that of community-based organizations, which net $2.68 in earned

revenue per attendee and support 73% of their expenses with contributed revenue. Similar to

community-based organizations, music organizations (e.g., bands, ensembles, choruses) also have

comparatively low net earned revenue per attendee of $6.66 (the difference between their program

revenue less marketing expenses per person) and rely on contributions to cover 64% of expenses.

EXPENSES

Every dollar of payment to artists and other program personnel (including curators, artistic programcoordinators, arts educators, collections and production staff, etc.) relates to $2.24 of revenue for

$33.54

$27.59

$4.10

$39.57

$9.22

$53.72

$36.21

$36.80

$28.77

$13.15

$16.89

$2.70

$2.24

$1.42

$8.65

$2.56

$11.72

$6.55

$6.31

$8.03

$1.84

$6.02

$- $10.00 $20.00 $30.00 $40.00 $50.00 $60.00

Arts Education

Art Museums

Community

Dance

Music

Opera

Performing Arts Centers

Symphony Orchestras

TheaterOther Museums

Other Performing Arts

Earned Income and Marketing Index Averages by Sector

Program

Revenue/In-

person

Attendance

Marketing

Expenses/In-

person

Attendance


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the average arts and cultural organization. This translates to 45% of all operating revenue going to

payment of artists and other program personnel.

o Symphony orchestras and opera companies spend the highest levels of their total operatingrevenue on artist and program personnel compensation: 63% and 60%, respectively. By

contrast, community-based organizations and art museums have operating models where 31%

and 37% of operating revenue, respectively, goes to program personnel payment.

BOTTOM LINE AND WORKING CAPITAL

The average organization had an operating deficit in 2012. On average, bottom lines became 6.8%worse when depreciation was taken into account, going from -4.9% of expenses before depreciation

to -11.7% of expenses after depreciation.

In each of the past 5 years, the average organization had 2-3 months of working capital, inclusive ofcurrent unrestricted investments and marketable securities. All sectors except general performing

arts had positive working capital.

o Arts education was the only sector to end 2012 with an average net surplus regardless ofwhether depreciation was in the calculation.

o Art museums and other museums averaged the highest operating deficits before depreciation.Museums relatively high fixed assets are reflected in their high depreciation expenses, which

drive deficits into even more negative territory when taken into account. At the same time, art

museums had 4.3 months of working capital (the highest of all sectors) and other museums had

2.3 months. Our bottom line analysis focused solely on operating revenue and expenses while

our working capital assessment included current investments aside from board-designated

funds. Museums investments play a key role in their overall financial health.

48%

37%

31%

54%

43%

60%

46%

63%

46%44%

48%

0% 10% 20% 30% 40% 50% 60% 70%

Arts Education

Art Museums

Community

Dance

Music

Opera

Performing Arts Centers

Symphony Orchestras

TheaterOther Museums

Other Performing Arts

Expense Index Average by Sector

Artist &

Program

Personnel

Exps./Operating

Revenue


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COMMUNITY ENGAGEMENT AND PROGRAM ACTIVITY

The average arts and cultural organization engaged the equivalent of 10.3% of its local population asattendees, donors, volunteers, artists, staff, and virtual audiences.

Arts and cultural organizations brought in an average of $33,205 in total revenue for each programthey offered in 2012, including productions, exhibitions, lectures, education programs, films, etc.

In 2012, Averages for arts and cultural organizations by size:

The larger the organization, the higher the percentage of its operating revenue that goes to pay forartistic and program personnel compensation.

The smaller the organization, the higher the level of expenses it covers with contributed revenue. The larger the organization, the more it spends on marketing to bring in each attendee and the

more program revenue it earns per attendee, with the spread between the two increasing as

organizational size increases. The combined effect is that large organizations earn a net average of

$25.76 per attendee, medium organizations $10.21, and small organizations $2.57.

The smaller the organization, the more likely it is to run an operating surplus. Organizations of all sizes averaged positive working capital, with medium organizations having the

lowest level and small organizations the highest.

7%

-12%

3%

-6%

-2%

-6%

-2%

-10%

-0.2%

-10%

2%2%

-21%

-1%

-9%

-4%

-9% -10%

-13%

-5%

-21%

0%

-25.0%

-20.0%

-15.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%Bottom Line Index Averages by Sector

Operating

surplus/Expenses

(before depr.)

Operating

surplus/Expenses

(after depr.)


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In 2012, Averages for arts and cultural organizations by market cluster:

We let the data tell us which markets are similar to one another based on population, density of artsorganizations in each sector, level of state arts funding in the market, and median income. Five major

markets stand alone: New York, Los Angeles, Chicago, San Francisco, and D.C. In addition, there are

clusters of Large, Medium, Small, and Very Small markets covering 185 MSAs1. These titles relate to

population more so than other characteristics. For example, the Large market cluster cities have a lower

density of arts and cultural organizations in each sector than do the Medium market cluster cities.

San Francisco had the highest arts and culture dollar activity per capita$895followed by NewYork and D.C. at roughly $610 each. San Francisco also had the most arts organizations per 100,000

people. Medium markets had higher A&C dollar activity per capita than the Los Angeles market

$163 versus $155, respectively.

D.C.s arts organizations have the largest average operating budget and the highest proportionallevel of federal arts funding.

Very Small and Small markets both average 21 arts organizations per 100,000 people. Chicago andMedium cluster cities average 26.

Organizations in the Los Angeles area have the highest levels of unrestricted contributed revenuecovering total expenses, the highest program revenue per attendee, and spend more in marketing

expenses to bring in each attendee than other clusters, while Chicago organizations spend the

lowest amount to bring in every attendee, followed by New York.

Los Angeles and Chicago organizations spend a low of 38% of their operating revenue on programpersonnel compensation while New York and Small markets spend a relatively high ratio of 47%.

To varying degrees, all clusters averaged a negative bottom line after depreciation. Organizations in the New York City area had the lowest bottom line averages both before and after

depreciation. Organizations in the Large market cluster had the highest operating surplus levelsbefore depreciation but not after, perhaps reflecting more recent investments in buildings, land and

equipment for organizations in these markets in recent years.

Organizations in Very Small markets averaged the highest levels of working capital, followed bythose in San Francisco.

1Clustering based on number of arts and cultural organizations in each sector, population, median income in

the market, and state arts funding per capita.

$3.48

$13.25

$31.11

$0.91

$3.04

$5.35

$- $20.00 $40.00

Small

Medium

Large

Earned Revenue and Marketing Impact

Index Averages by Organization Size

Program

revenue/

Total In-person

Attendance

Marketing

Expenses/Total

In-person

Attendance

3%

3%

-7%

2%

-1%

14%

15.0% -5.0% 5.0%

Small

Medium

Large

Bottom Line Index Averages by

Organization Size

Operating

Surplus/Expenses(before depr.)

Operating

Surplus/Expenses

(after depr.)


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What We Have Learned: Highlights of What Drives Performance?

Here we share findings on what drives the performance outcomes we reported on in the Averages

section above: our Driving Force Factors. We break it down by the questions we posed and highlight

findings that emerged.

What organizational characteristics affect this performance?

Organizational age and size (total expenses) boost performance in every case. More local, national, or world premieres all lead to higher attendance and higher levels of total

engagement, or the broader number of people engaged in the organizations activities (e.g.

attendees, donors, volunteers, artists, employees, etc.). World premieres lead to higher total

expenses while local and national premieres drive higher marketing expenses. Funders appear to

prefer giving money for national premieres but not for local premieres.

An organizations total square footage was positively related to higher attendance and engagementand more total program offerings, indicative of more supply as well as more demand. Presumably,

these large organizations provide a wide array of offerings that both draw audiences and involve

high levels of community engagement.

More working capital led to higher program salaries but fewer total offerings. Organizations that target either young adults or African Americans tend to have a smaller footprint.

They have higher levels of contributed revenue but lower program revenue, lower program

personnel compensation levels and marketing expenses, lower attendance and engagement levels,

and fewer total offerings.

Space ownership elevates operating revenue and expenses, as well as total engagement, totalofferings, and both current assets and current liabilities.

Organizations with larger staffs and those that spend more on fundraising have higher contributedrevenue and operating revenue; they also offer more programming and engage more people.

Organizations that target kids (preK-12) have a larger footprint. They tend to offer more programsand have higher operating revenue and expenses, more attendance, and more total engagement.

Current assets, current liabilities, and operating revenue are lower for organizations that targetAsian Americans.

Organizations that spend more on fundraising (including personnel) and marketing (excludingpersonnel) have higher current assets.

How do socio-demographic community characteristics affect performance?

Population has a positive effect on operating revenue, expenses, and total offerings. However,population size has a negative relationship with attendance and total engagement and it drives

down current assets and increases current liabilities, leading to limited working capital.

Higher median income in the community positively affects program revenue and current assets. Households with annual income above $200,000 tend to provide more contributed revenue to local

arts and cultural organizations and they drive up expenses, but they have no effect on eitherattendance or program revenue and they drive down total engagement. These results are

consistent with the idea that this demographic may be more likely to support many interests but

have time constraints that prohibit them from attending all but a few.

Communities with a high concentration of Asian Americans tend to have arts organizations with asmaller footprint on numerous outcome measures whereas those with a high concentration of

Hispanics tend to have higher attendance, total engagement, and budget size.

Longer commute times in a community bring down performance on nearly every outcome.


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Attendance is lower when there is a high proportion of the population under 25. It also is lower asmedian age in the market increases. It appears that attendance is driven more by those in the lower

end of the 25-64 range.

Performance on most outcomes is lower when there is a higher concentration of people in thecommunity with a graduate degree. Perhaps the high levels of education land people in careers that

leave little time outside of work.

The higher the median age in the market, the lower all performance outcomes except programsalaries and total offerings; this includes lower attendance and lower total engagement, which

contradicts general observations about the strength of greying audiences.

A higher percentage of single-mother households tend to boost performance outcomes whereasmore single-father households tend to negatively influence performance.

How do the number of and type of competitorscomplements and substitutesin the community

affect performance?

Having more hotels in the market led to higher performance on nearly every measure. Hotels bringin visitors to the city and a stronger arts scene may be part of the draw.

Cities with more parks are fertile ground for fostering arts and cultural organizations with more totalexpenses, operating revenue, program revenue and total offerings.

When there are more sports teams or zoos in the community and they have a significant link tosome measure of performance, the link is always negative. Evidently, these entities compete with

arts and cultural organizations for attention and resources. The same is true for cinemas except that

arts and cultural organizations provide more program offerings when there are lots of cinemas,

perhaps in an effort to compete for audiences.

Higher concentrations of larger corporations in the community boost marketing expenses, physicalattendance, total expenses, and program salaries. There is a big company effect that impacts arts

and culture.

Higher numbers of public radio and television stations drive lower attendance and fewer programofferings. Despite the promotion of arts and cultural events by these stations, there is evidently a

substitution effect as some viewers or listeners opt to stay home for the broadcasts. For nearly every sector, the more arts and cultural organizations there are in a market per capita,

the smaller the budgets of organizations in that sector and the fewer programs offered by each

organization in the sector. Competition also decreases the contributed revenue and total operating

revenue of organizations in the sector.

Aggregate operating revenue of sector competitors per capita is a boost to all performanceoutcomes for organizations in that sector.

What impact does cultural policy have on performance?

The number of NEA and/or IMLS grants an organization receives has a positive effect on everyperformance outcome.

Organizations that receive relatively higher proportions of their budget from state grants tend tohave smaller budgets, lower contributed revenue, lower marketing expenses, and lower operatingrevenue but they provide more total offerings.

Local funding as a portion of an organizations budget has the same relationship with outcomes asstate funding with one exception: they differ in that local funding boosts attendance and total

engagement.


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What We Have Learned: Highlights of High Performance and KIPIs

The Drivers of Performance explored above explain some level of variation in the various performance

measures. The higher the variation explained, the more the predictors are actually predicting

performance. This step is critical because it creates a level playing field for all organizations. Before we

can determine if an organization is truly performing poorly or well on some outcome, we have to takeinto account the organizations sector, its size, its location, its community characteristics, the local

cultural policy conditions, and everything else we can think of that might affect its situation. Once we

have done so, only then can we ask, All else being equal, is this organizations performance better or

worse than that of other organizations on a given outcome?

One reason performance may be better is simply that the managing and/or artistic leader makes good

decisions. This likely grows out of years of experience, learning, and developed expertise that forms an

intangible yet essential ingredient. It is difficult to observe and measure but not impossible. We capture

this as a Key Intangible Performance Indicator (KIPI). Knowing what an organizations performance is on

a particular outcome, we can account for all of the easy-to-observe-and-measure characteristics and

then ascertain the extent to which good decision-making, expertise, strong reputation, and high quality

offerings played a role (see the chart below). We cant account for 100% of an organizationsperformancethere are still some random reasons that neither the driving forces nor KIPIs can explain

but we can come close. We report on the effect that KIPIs have on each of the indices. Managerial

and artistic expertise and good decision-making manifests itself differently given the inherently different

sector and community characteristics, but it exists in all sectors and communities nonetheless.

KIPIs are most valuable as a tool in examining an individual organizations performance on different

outcomes relative to the rest of the field, all else being equal. As a service to arts and cultural leaders,

we are working with IBM to create an online dashboard that will allow any arts and cultural organization

to access or generate its own KIPIs. In the meantime, we can share the extent to which we are able to

account for performance on a variety of measures.

Explained Variation and Unexplained Variation Attributable to KIPI and Random Variation

***Reports will be published online each quarter. For more information, contact Zannie Voss, NCAR

Director, [email protected] 214-768-3466, or visit www.smu.edu/artsresearch.

30%37%

22% 25%

15%

21%

37%

21%

14% 15% 11%

56% 60% 74%43%

35%

41%

56% 52%

25% 37% 25%

14%3% 4%

32%

50%38%

7%

27%

61%48%

64%

0%10%

20%

30%

40%

50%

60%

70%

80%

90%

100%% of Variation

that is Random

% of Variation

Attributable to

KIPI

% of Variation

Explained by

Driving Force

Factors
mailto:[email protected]:[email protected]:[email protected]:[email protected]

NCAR Press Kit: NCAR Report Highlights

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