Report Measures Industry Health by Sector, Organizational Size, and Geographic Location and Examines What Drives Performance

DALLAS (SMU), December 4, 2014 – The National Center for Arts Research (NCAR) at Southern Methodist University unveiled its second major report that examines the financial, operating, engagement and staffing health of the nonprofit arts industry. The report is available online at smu.edu/artsresearch. 

The Center, the first of its kind in the nation, investigates important issues in arts management and patronage, making its findings available to arts leaders, funders, policymakers, researchers and the general public. Driven by its mission to act as a catalyst for the transformation and sustainability of the national arts and cultural community, NCAR develops annual reports based on a uniquely comprehensive set of arts organizations’ data, integrating organizational and market-level data. It assesses the industry from multiple perspectives, including sector/art form, geography, and size of the organization, and it determines what drives health from the organization’s conditions and its community’s characteristics.

“We don’t want to only report on ‘what the performance of the industry was,’ we want to examine what practices and decisions by arts leaders drive performance. We’ve also taken it one step further to explore the community and cultural policy factors that impact the health of the industry,” said Dr. Zannie Voss, director of NCAR and chair and professor of arts management and arts entrepreneurship in SMU’s Meadows School of the Arts and Cox School of Business. “Doing this is a first step in helping organizations understand how they compare to others in the industry given their community and organizational characteristics and identify particular areas of respective strengths and concerns.”    

With input from the field, NCAR researchers have identified 184 performance indices that provide insight into the financial, operational, and engagement health of an arts and culture organization; data for 128 of these indices has already been gathered. These performance indices fall into nine general areas: contributed revenue, earned revenue, expenses, marketing impact, bottom line, balance sheet, community engagement, program activity and staffing.  The second report takes a deep dive on 26 of the 128 indices, presenting many as comparative measures (e.g., operating bottom line with and without depreciation). Each performance index answers a specific question, such as:

• What is fundraising’s return on investment?
• To what extent do unrestricted contributions cover expenses?
• What is program revenue per attendee?
• What is the total cost of serving each participant?
• How much total marketing investment does it take to bring in one person, first considering all marketing costs, then only non-staff costs?
• Is the organization breaking even or better, considering operating activity only, calculated first before depreciation then after depreciation?
• How many months of working capital does the organization have?
• What is the reach of our community engagement, first looking at in-person and virtual participation, then at in-person engagement only?
• What is the amount of total unrestricted operating revenue generated per program offering?

For each of the 26 indices, the report provides 2012 results for: 1) the average for all arts and cultural organizations, 2) the average by arts and cultural sector, and 3) the average by organizational size (measured by total operating budget).  The report also provides the index average by geographic market cluster and provides some additional traits of these clusters.  It then looks at how different operating conditions and community characteristics affect each measure of performance.

NCAR is partnering with IBM to create an online “dashboard,” which will be accessible to arts organizations nationwide. Arts leaders will be able to see how they compare to the highest performance standards for similar organizations in areas such as community engagement, earned and contributed revenue, and balance sheet health. The customized dashboard application is expected to be ready for use in early 2015.
For more information, please visit smu.edu/artsresearch.

Highlights of the Second Report:

• There appears to be a ceiling on the amount of dollars that can be raised for each dollar spent on fundraising ($7.80).
• There is relative consistency in return on marketing: $4.15 earned for every dollar spent on marketing.
• The receipt of an NEA or IMLS grant has a positive effect on nearly all performance outcomes.
• Arts sectors that are heavily into digital distribution of their programs (podcasts, virtual tours, high-def broadcasts, etc.) engage far more people, through virtual attendance, than sectors that rely solely on live, in-person attendance. Operas and symphonies lead all other sectors in attendance at digital programming. 
• Art museums and “other” museums average negative bottom lines but have the highest levels of available cash. By contrast, multidisciplinary performing arts organizations experience tight cash flows and limited financial flexibility.
• In terms of organizational size, the larger organizations become in terms of budget size, the more diversified their contributed revenue sources become.  They tend to become increasingly strategic about raising money now for projects in future years, ensuring that they will be able plan and execute them.
• Larger organizations are also more likely to have a lower return on fundraising and are more likely to run a deficit.
• Among the top geographic-related findings is that individual contributions cover the highest proportion of expenses in San Francisco.
• Organizations in Chicago have the highest return on program revenue per dollar spent on marketing.
• It costs more in marketing dollars to attract one attendee in Los Angeles than any of the other geographic clusters.
• New York organizations tend to have a negative bottom line – the most negative bottom line of any of the geographic market clusters.
• Higher socioeconomic level in the community is associated with lower physical attendance and engagement – likely reflecting increased access to other leisure opportunities like travel – but positively associated with contributions from trustees, other individuals and corporations.
• The higher the median age in the community, the lower attendance and engagement tend to be.

About the Meadows School of the Arts

The Meadows School of the Arts, formally established in 1969 at Southern Methodist University in Dallas, is one of the foremost arts education institutions in the United States. The Meadows School offers undergraduate and graduate degrees in advertising, art, art history, arts management and arts entrepreneurship, communication studies, creative computing, dance, film and media arts, journalism, music and theatre. The goal of the Meadows School of the Arts, as a comprehensive educational institution, is to prepare students to meet the demands of professional careers. The Meadows School is a leader in developing innovative outreach and community engagement programs, challenging its students to make a difference locally and globally by developing connections between art, entrepreneurship and change. 

The Meadows School of the Arts is also a convener for the arts in North Texas, serving as a catalyst for new collaborations and providing critical industry research. For more information, visit www.smu.edu/meadows.

About the Cox School of Business

SMU's Cox School of Business, originally established in 1920 and named in honor of benefactor Edwin L. Cox in 1978, offers a full range of undergraduate and graduate business education programs.  Among them:  BBA, Full-Time MBA, Professional MBA (PMBA), Executive MBA (EMBA), Master of Science in Accounting, Master of Science in Business Analytics, Master of Science in Entrepreneurship, Master of Science in Finance, Master of Science in Management, Master of Science in Sport Management and Executive Education. The school also offers a number of unique resources and activities for students, ranging from its Business Leadership Center, Caruth Institute for Entrepreneurship, Folsom Institute for Real Estate, Latino Leadership Initiative, Maguire Energy Institute and Global Leadership Program to its Associate Board Executive Mentoring Program and an international alumni network with chapters in more than 20 countries.