THE PERFORMING ARTS AS AN INDUSTRY

If you are contemplating a career in the performing arts or have already begun one, you should be aware of some basic facts about the performing arts as an industry. This is true of anyone who is interested in a career in a particular area. You need to know how your chosen industry functions. It would be no different if you had a passion for steelmaking, for example. Every aspiring steelmaker should understand that the steel industry is capital-intensive (that is, it requires a great deal of money to produce its products), highly concentrated (with a few large companies), noisy and dirty, technologically mature, and subject to foreign competition. The performing arts business is quite different: It’s labor-intensive (that is, it requires a large number of workers or a great amount of work), fragmented (with many small to medium-size organizations), nearly immune from foreign competition, currently buffeted by revolutions in content generation and distribution, and faced with discretionary demand. Products like steel can be sourced from foreign competitors; services like musical performances (or things like haircuts) cannot, save for occasional foreign groups performing on tour. Discretionary demand means that when people are financially pinched, some of the first expenses they jettison are theater tickets or donations to their local symphony. In contrast, a car is a necessity for many of us, which means that demand for steel continues pretty much unabated during hard times. We have to replace our cars when they wear out.

We understand that performing artists live for their art—to play, sing, act, or dance. We also understand that artists tend to banish the world of money and finance to a dark corner of their minds. It needn’t be that way and it shouldn’t be. Isn’t it obvious that artists must make their way and earn a living in this world just like everyone else? And artists must be especially careful not to fall victim to those who would take advantage of them financially. A little time spent learning the business side of the arts can pay off handsomely, laying the groundwork for surviving and prospering as a performing artist. The performing arts are a unique and special calling, to be sure, but one that operates as an industry within the larger economy just like almost all other forms of human activity. Thinking of it this way can be both clarifying and empowering.

To that end, let’s look at some basic facts about the performing arts, remembering that this book does not cover popular or mass-media entertainment forms such as rock concerts. We will examine briefly how companies are organized and financed, who supports them (both as audiences and as donors), who is employed, and how they are paid.

PERFORMING ARTS ORGANIZATIONS: NOT-FOR-PROFIT AND FOR-PROFIT

Nearly half of all performing arts companies are organized as either not-for-profit (a.k.a. nonprofit) companies or for-profit corporations. Many people are confused about the differences between the two kinds of organizations. Those differences are not as clear-cut as the labels suggest. The National Football League (whose commissioner’s annual compensation is more than $40 million) and the American Automobile Association, for example, are nonprofit organizations, even though they may appear to casual observers to operate just like for-profit companies.

While it is true that nonprofits do not seek profits, that doesn’t mean they can’t earn profits, which are an excess of revenues over expenses over the course of a given year. Like profit-oriented companies, nonprofits must avoid sustained losses lest they use up all their reserves and be driven into bankruptcy (relief from debt) or liquidation (dissolution of the organization). The difference is that any profits that a nonprofit earns must be retained in the organization and used to further its mission because there are no shareholders to lay claim to those profits. In contrast, the shareholders of for-profit corporations expect them to earn profits and, at least eventually, provide returns in the form of dividends (surpluses paid to shareholders).

A nonprofit organization must be guided by an explicit public service mission, whereas for-profit companies aim to reward shareholders for risking their savings by investing in the business. For-profit companies may have a mission statement that proclaims a public service mission, but whether they have such a statement or not, competitive forces in free markets exert strong pressure on companies to serve the public, as explained by none other than the father of modern economics, Adam Smith, in his seminal work The Wealth of Nations. To earn profits, for-profit companies must attempt to anticipate and satisfy customer demands, be they crass or sublime. In contrast, nonprofits are supposed to educate and lead the public rather than follow the popular whims of the day. The San Francisco Symphony, for example, regularly presents forward-thinking, experimental music and performances with unusual collaborators such as the heavy-metal band Metallica, but the Symphony can’t get too far ahead of audiences. To help this medicine go down, the Symphony must also provide plenty of “sugar” from the standard classical repertoire. Heavy-hitting supporters, for the most part, want the classics.

Nonprofit performance organizations rely on donations to cover a large part of their expenses. Ticket sales, even when added to ancillary revenues from food service and gift shops, hardly cover the operating costs of symphony, opera, or dance companies. Nor do ticket sales cover major capital investments like new performance halls. Davies Symphony Hall in San Francisco, for example, where the San Francisco Symphony plays, was financed in large part by a wealthy donor and is owned and operated by the city of San Francisco; the Symphony is a tenant.

Both for-profit and nonprofit organizations are governed by boards of directors. Boards of for-profit companies are at least nominally accountable to shareholders. They are paid for their efforts and are expected to own shares of the company stock. Nonprofit boards are accountable to their donors, to the public at large, and to the Internal Revenue Service, which judges their eligibility for tax breaks. These board members are not compensated and in fact are usually expected to donate generously from their personal funds and often to engage directly in fundraising activities as well.

Nonprofit organizations, provided they meet certain IRS criteria and file the necessary paperwork, are exempt from corporate income tax and (usually) from paying sales taxes on their purchases. More important, donors to nonprofits can deduct their donation amounts from their taxable income.

Further blurring the distinction between the for-profit and nonprofit worlds, large corporations often donate to local arts groups, especially those located in their headquarters city. It is difficult to say whether they are motivated by genuine charitable impulses or by public relations considerations. It is safe to say that most of the time, both motives are at work. A recent program book of the San Francisco Symphony, for example, shows the Chevron Corporation and Wells Fargo & Company as providers of major long-term funding, with dozens of other corporations and corporate foundations as lesser donors.

Large for-profit corporations typically pay their executives handsomely, but some nonprofits also pay surprisingly well. Thus, a recent IRS filing reported in the New York Times revealed that Peter Gelb, the general manager of the Metropolitan Opera, had taken home $1.8 million in pay and benefits in 2012.¹ This disclosure came at an inopportune time, as the Met had been asking its workers to accept reduced pay and benefits. (The Met said Gelb had taken a 10 percent pay cut for 2013.) A salary of this magnitude may rub some donors and ticket buyers the wrong way. On the other hand, the very few individuals who are qualified for such a complex and demanding managerial job as Gelb’s can typically earn much more in the for-profit sector. For nonprofits, it is important to be as transparent as possible with compensation decisions.

Not just managers but employees of nonprofits sometimes do very well. The same New York Times article mentioned above notes three union stagehands at the Met who, with overtime, took in more than $450,000 in one year. During a brief strike by the San Francisco Symphony players in 2013, it came to light that the average salary there was about $140,000.² We do not judge the merit of this figure but simply note that there was little public support for the strike, and it ended soon.

When it comes to worrying about how salaries will be perceived by people both within your organization and outside it, there are two guiding principles: transparency and context. Making it difficult to find out how much people at your nonprofit organization make will likely be seen as an attempt to hide something, which never looks good. People expect nonprofits to be as open and honest as possible about how they operate. If your board has trouble standing by its compensation decisions, it is probably a sign that the board needs to reevaluate them or needs to be prepared to educate the public and the media about the context for those decisions.

INDUSTRY DATA

Some facts and figures can help you understand the performing arts viewed as an industry. We confine our analysis here to the United States and exclude rock concerts and other popular fare.

With a few exceptions, as when major companies go on tour or appear on national television, performing arts organizations serve local, not national, audiences. The result is that the performing arts as an “industry” is highly fragmented. In 2012, the Census Bureau counted 9,073 companies nationwide, 44 percent of them organized as nonprofits.³ The combined annual revenue of these companies is about $14 billion, which is about one-fifth of the annual revenue of a single commercial media company, Comcast. Of those performing arts companies that operate year-round, about two-thirds generate annual revenues of less than $500,000, about half of what a typical convenience store takes in. One-third of the companies are located in either California or New York, states that account for about 19 percent of the U.S. population.

Nationwide, the Census Bureau counts about 3,000 theater companies, 850 symphonies, 600 dance companies, and 200 opera companies as of 2012. About one-fourth of the dance companies, nearly half of the theater companies, and two-thirds of the musical organizations are nonprofit.

The finances of nonprofit arts groups are of particular interest. As Figure 3-1 shows, earned income (primarily ticket sales but also profits from food service and gift shops) covers, on average, only a little more than half of expenses. Shortfalls are made up from voluntary donations, most of which come from individuals (with some from corporations and foundations) and from government agencies (with roughly equal amounts from local, state, and federal agencies). The “voluntary” nature of individual donations is sometimes stretched to the limit. Subscribers to major symphony orchestras or opera companies, for example, find a “suggested” donation amount added to their bills. Box seats at the major symphony and opera companies come with a hefty and nearly ironclad donation expectation. It’s not legally binding, because if it were, it would be part of the ticket price and not a tax-deductible contribution. It’s just the thing to do.

Even among commercial, for-profit performance organizations, ticket sales cover only about two-thirds of expenses. These organizations, of course, do not receive donations; the rest of their income comes from ancillary sources such as food service, gift shop receipts, and advertising in program books.

The proportions of revenue earned by nonprofit companies vary considerably. Among dance companies, 85 percent of the revenue is received by nonprofits. For theater companies and dinner theaters, the figure is 44 percent; for musical groups and artists, 38 percent; and for other performing arts companies, 5 percent.⁴

Figure 3-1. Performing arts revenues.

Total private funding to the arts, adjusted for inflation, rose from $9.24 billion in 1999 to $13.67 billion in 2007, fell back during the Great Recession, and has since recovered almost to 2007 levels.⁵ These levels of giving have held steady at about 4.5 percent of total philanthropy, which seems rather low until we remember that the bulk of philanthropic donations goes to educational, religious, and health-related organizations.

Government funding of the arts fell during the Great Recession, from about $850 million in 2008 to $700 million as of 2013. The budget of the National Endowment for the Arts was cut during 1995–1996 and has only now recovered to its 1992 level, without adjusting for inflation.

WHO ATTENDS THE PERFORMANCES?

The arts attract small audiences in comparison to major sporting events or rock concerts. The percentages of adults who attended various types of performances at least once during 2008 ranged from 20.8 percent for performing arts festivals to just 9.3 percent for classical music performances, 2.9 percent for ballet, and 2.1 percent for opera (Figure 3-2). Likewise, classical music radio stations have suffered declining audiences and revenues, which has prompted many stations such as those in New York, Cleveland, and San Francisco to convert to nonprofit status, seeking donations on-air. Yet the Internet has made classical music more accessible than ever.

Figure 3-2. Audience participation at different types of performances.

As is evident to anyone who attends such performances—and as Figure 3-3 shows—audiences are disproportionately white, older, affluent, and highly educated. This should be no surprise if we reflect on the fact that young people acquire an interest in the performing arts, or in any of the fine arts for that matter, primarily from their parents. In this age of slashed education budgets, schools don’t play the role they once did in creating a future performing arts audience. (For contrast, consider that two of the authors of this book attended the same public high school in the 1950s in Cleveland, which offered student choruses, a symphony orchestra, symphonic and marching bands, and annual musical theater productions. Very few public schools are willing to fund such extensive opportunities today.) Children exposed to music and dance in the home are far more likely to become lovers of those art forms, and such families are preponderantly white, well educated, and affluent.

Figure 3-3. Audience demographics for the performing arts.

Organizations are well aware of these facts, and most are making concerted efforts to attract younger and more diverse audiences. Symphonies have offered pops concerts for many years and are now experimenting with multimedia productions featuring video projections and collaborations with popular groups. Some have tried 6:30 pm concerts to catch professionals on their way home from work. The New York Philharmonic and the San Francisco Symphony, among others, offer free concerts in park settings. They offer these concerts as a public service, but they must also be thinking about attracting new audiences. (See Chapter 6 to learn what American Ballet Theatre, Carnegie Hall, and the Metropolitan Opera are doing to help solve the problem of dwindling audiences.)

EMPLOYMENT AND COMPENSATION IN THE PERFORMING ARTS

Figure 3-4 shows a breakdown of employment in the arts into four broad categories. Most jobs are found in theater companies, including dinner theaters, and among musical groups. Smaller numbers are found in dance companies and other arts groups. Employment totals in these areas shrank somewhat during the Great Recession and are expected to rebound modestly going forward to 2018.⁶

Hourly compensation is higher in musical groups than in dance or theater. When contemplating hourly wages, we need to remember the capital investments that artists must make. They must amass a great deal of human capital—performing skills—through long years of study and practice. Like most capital assets, human capital depreciates over time. This is a special worry for singers and dancers because (as previously stated) their bodies are their instruments. Instrumental musicians usually have to purchase their own instruments, which can be very expensive: a Stradivarius viola recently fetched $45 million at auction. But instruments generally don’t depreciate.

Figure 3-4. Employment and compensation breakdown for the performing arts.

Arts organizations require extensive support staffs. A breakdown by occupation shows that about 41 percent of arts employees actually make the music, compose the music, dance the dances, or choreograph the dances. The other 59 percent take care of makeup, wardrobe, scores, finances, accounting, sales, transportation, security, facilities maintenance, food preparation and service, and a host of other ancillary chores.⁷

Not just in the arts but in the economy generally, labor is becoming more expensive relative to capital. Organizations are under constant pressure to control costs, which very often means reducing head counts. Although recorded music did not eliminate the demand for live musicians as was feared 100 years ago, it has put constant pressure on that demand. Live musical theater still uses live musicians, but far fewer than it once did. A single player is expected to double on clarinet and sax, for example, and there may be only one or two violins. While symphony orchestras have generally retained a full complement of musicians, an orchestra that accompanies a major choral work may be considerably smaller. Ludicrous as it may sound, someone in authority may someday point out the obvious redundancies in symphony orchestras. Why, one might ask, is it necessary to have ten violinists playing one part and ten more playing another? Why not one of each, suitably amplified? Knowing firsthand the magic of live performance, especially when a group gels into a single instrument, we shudder at the thought of such cost-saving measures, but we cannot rule them out.

KEYNOTES

Questions to Ask Yourself

• •Can my arts organization play a greater role in exposing more people in my community to the performing arts? What about parts of my community that aren’t traditionally part of the performing arts audience?
• •Does knowing the size and salaries of my industry change my desired career path? (Don’t answer this question too quickly. We know it can be daunting to realize how small the performing arts industry is, and how low some of the salaries are. This information is included in this chapter to inform you, not to scare you away. Let the information presented here sink in before you rush to conclusions about your career path. Whatever choice you make, you deserve to have all the facts before you make it.)

Tips

• •If you’re already working for a not-for-profit arts organization, look up your company’s financial statements. (See Chapter 5 for more information on financial statements.) You will be able to see whether or not things are going well. If they are, you can let go of any nagging doubts about job security and focus on your work. If they’re not going well, you can take action to fix the problem or begin preparations to find work elsewhere.
• • People working in other industries, like finance, law, or technology, regularly pay attention to business reporting about their respective professions. Despite the relative smallness of the industry, the performing arts receive a lot of coverage from top media brands like the New York Times, the New Yorker, and Bloomberg Business. Check in on these major sources of news from time to time or develop the habit of reading them regularly to stay abreast of trends and to see how the public perceives your industry.

Exercises

• •Is there an ensemble, company, or institution you dream of working at? Get in touch with somebody there and see if there are any opportunities (and we mean any) to get in the door. Anything from an informational interview to an internship making coffee will start a relationship with that organization and give you priceless knowledge about how it works and where you might fit in. It will also put you on the radar of the people who work there. Start with the group’s website and see if there is a list of contacts. Especially if you are a student, don’t be afraid to email the person in charge and ask for a meeting. Students have a special status in the larger world, and people in every station of life are usually willing to help them out.
• •Spend a few moments thinking about the financial, administrative, and managerial side of your career. Imagine yourself balancing the books, making phone calls, sending emails to contacts, or doing other nonartistic activities. What feelings come up? Write down a list of words to describe how you feel. Are the words primarily positive or negative?
  • −If thinking about the business side of your career fills you with negative emotions like fear and anxiety, don’t worry. You’re not alone. Many performing artists, even ones with flourishing careers, get nervous about business. But it is important to realize that negative feelings about this necessary part of your work can block you from taking action and being as innovative as you could be. Every job—even that of an artist—has certain aspects that are going to be uncomfortable, seemingly overwhelming, or boring. When you find yourself feeling negative emotions, do your best to let go of them by remembering that you’re working in the service of your artistic calling. Instead of fighting against the business side of your career, embrace it and give it the attention and effort it deserves. It won’t be half as bad as you think, once you get going. And you’ll be amazed at the positive results.
  • −If thinking about these actions fills you with positive feelings like hope, excitement, and a burst of creative ideas, then you’re in good shape. Stay positive about the business side of your career! It can only make your art stronger.