THE BLOG

Where Is Earned Income Growth?

03/09/2015 09:06 am ET | Updated May 09, 2015

I recently read an article in Slate that extolled how cheap it was to purchase classical music and dance and theater in many American cities. The thesis of the story was that arts institutions in many large American cities could boast of long histories of important service to their communities but were so desperate for new audiences that they offered deals on tickets that were too good to pass up. While the author acknowledged feeling a bit guilty about getting so much value for so little, he didn't linger on this. Nor did he speculate on what cheaper ticket prices might mean for the sustainability of the institutions he frequented.

The article reinforced an observation I have made about dozens of arts institutions I have studied over the past few years: These organizations have not increased earned income at all this century.

We have experienced moderate inflation in the economy during this period, and ticket prices for most organizations have increased, but it is a sad fact that of life that most arts institutions I have observed are selling about the same dollar value of tickets now as they did 15 years ago. This means real earned income has fallen rather steeply.

Why is earned income not growing? And what does this mean?

Earned income has been challenged by the consistent erosion of subscription revenue, by cutbacks in productions by many organizations, by reduced demand and by the myriad of other, cheaper forms of entertainment available online and in our movie theaters. (Imagine how many people are paying $25 or less to see movie theater broadcasts from the Metropolitan Opera, the National Theatre in London or the Bolshoi Ballet, instead of paying two or three times as much to attend their local arts institutions.)

Why does this matter?

Because lack of growth of earned income has placed increasing pressure on fundraising activities, has forced those organizations unable to build contributed income to reduce the amount and ambitiousness of their programming and has led to growing deficits for many institutions.

While earned income isn't growing, many arts institutions are also having a harder time raising money than ever before since, as audiences erode, there are fewer natural development prospects. What brings us our most passionate donors is the quantity and quality of our art -- if fewer people are coming to our performances, then fewer people are likely to be moved to contribute to us. This has to be a factor in the reduction in interest of many corporations in underwriting the arts. Corporations are looking to create visibility for their products and services; if our attendance is falling, we do not appear to be a very strong vehicle for their own marketing efforts.

To make matters worse, our individual donor base is aging; if we do not build audiences today, who will be our donors tomorrow?

With stagnant earned and contributed revenue, it will be difficult for most arts organizations to see any option but to cut back even further on their programmatic ambitions.

This will reduce our audiences even further leading to a vicious cycle that will be very difficult to overcome.