Friday, March 18, 2011

Downsized and Merged - Trend 1 of 7 for the Future of the Arts

This is part two in an ongoing series of posts on 7 Trends for the Future of the Arts. Originally published (and partially reprinted here with permission of the publisher) in the book: 20 Under 40: Reinventing the Arts and Arts Education for the 21st Century. I'm presenting selections from each trend, and you can follow the whole post series from here. If you are interested in these arguments, check out and think about purchasing the book here.

Trend One: Downsized and Merged

The economy continues to bring bad news to the arts sector, but the real news is that is isn’t going to get better. The budget battles we see now in the US are only just beginning (and are spreading globally, but that’s another conversation). Already, state governments, and the IRS, in search of increased revenues are contemplating vast changes to the benefits of nonprofit status, and many foundations have had to curb support for such supposedly “non-essential” activities as arts and culture due to declines in their endowments. While many may agree that such cuts wouldn’t be necessary if it weren’t for specific policies being pushed to shrink government (such as tax cuts to the wealthiest few), the fact remains that such cuts are likely to continue.

In addition, digital technology fundamentally changes business practices, and is downsizing once large industries rapidly. Craigslist upended the entire business model of the newspaper industry, effectively downsizing an entire $1 billion sector to one $100-million company. We are seeing this now in other cultural industries, and we’re also seeing more companies avoiding state taxes by being entirely web based. The resultant decline in tax revenues from these shrinking sectors will greatly limit the ability of government to maintain minimum service levels, much less support the arts (regardless of whether this is the correct argument, it is what will be used), and foundations will look to pick up the slack from government – also at the expense of the arts.

As government and foundation revenue shrinks, arts institutions will increasingly look to earned income, but fundamental shifts in consumer behavior make this a challenging arena as well. Consumers have less overall spending power, and more options for their cultural and entertainment experiences. As consumers increasingly find their content online, they expect to find yours there as well, watching your performance online instead of attending it live. While this itself can be a revenue stream, it is also one where consumers expectations are for free and/or cheaper access, meaning online profit margins will likely be lower than any reduction in overhead costs. As these stresses combine, the nonprofit arts sector will likely have to rethink business practices, and contend with radically different economics.

Unfortunately, it’s not a stretch to say the nonprofit arts sector looks like a field of zombies—undead, potentially harmful shells of their former selves, haunting the landscape, unable to live or to die. Quite simply, funders, board members, and leaders in the arts need to take a hard look at reality and make some painful decisions. More organizations need to merge to save costs, end duplicative services, and achieve greater impact. Many more organizations need to be shut down entirely, having either served their mission well or having long ago abandoned any real hope of having a meaningful impact. These conversations aren’t easy, but they need to be had on a field-wide level. Even those organizations that are healthy enough to survive will need to consider downsizing their costs and refocusing their energies as the dwindling support for the cultural sector is likely a permanent shift away from robust public, foundation, and individual financing of the arts.

A thinned-out and downsized nonprofit arts sector is probably inevitable and may actually bring greater good. Strategically downsized organizations will more readily make this transition and might create more sustainable arts businesses. Mergers are often thought of as drastic measures to cut expenses or end duplicative services, but they can also be planned for to better prepare organizations to face new economic and cultural realities, fill strategic gaps, and lead to new programming and greater services.

Of course, downsized organizations will only become stronger, remain competitive, and possibly lead change through rigorous planning. Yet, these conversations are being resisted at precisely the time they need to be had. I explore some ideas for such change in my chapter, and there’s a lively discussion online now, sparked by NEA Chairman Rocco Landesman's recent comments on "Supply and Demand" (that's #supplydemand) and I gave my thoughts here. Love to hear more of your thoughts on this in the comments below.

In my next installment, I’ll speak about the rise of both for-profit and what I call with-profit endeavors in the arts.


Jim said...

Clear, succinct and very provocative....should lead to lots of good conversation and (hopefully) action.

Paul said...

Well, that’s refreshing. A candid assessment of the state of nonprofit arts as the economy settles into a position long envisioned (and desired) by our collective love affair with conservative ideology. Economical models based on mathematics are driving governmental policies and provide the language for contemporary discourse. Of course, the only problem with all of this is that we don’t actually live in an economy. Perhaps a few do, but most of us live in a culture. An environment where an idea doesn’t have to be profitable to be a valid idea. A healthy and thriving culture produces the wonderful ideas that bubble up through the creative artists and those who experience their work.

I think it can be said that an artist’s best work is often inspired by struggle or desperation. A comfortable and happy status quo breeds inertia and defensiveness. Perhaps the nonprofit arts sector can be galvanized into its own creative renaissance as a result of the ongoing budget struggles. Looking forward to further installments, Brian.