When an important arts organization encounters an existential crisis, as Intiman Theatre and the Bellevue Philharmonic both did this year, business leaders inevitably scratch their heads. Perhaps if a nonprofit were run more like a business, they speculate, these organizations wouldn’t have to suspend operations after putting on only one of its five productions, as Intiman did, or go out of business altogether, as the Bellevue Philharmonic did.
And if a nonprofit were run more like a business, exactly what sort of business would that be?
“A startup that never ends,” says Gian-Carlo Scandiuzzi, executive director of ACT Theatre, which faced its own demise in 2003 but is now considered one of Seattle’s more viable arts organizations. Scandiuzzi, who joined ACT after cofounding a successful dot-com enterprise, IndieFlix, is familiar with the business model: the constant pitching of a product, which may be only an idea, with an ongoing quest for funds to make it happen.
“You can be a 40-year-old institution,” agrees arts management consultant Susan Trapnell, who helped rescue ACT and is now trying to do the same for Intiman, “but every year is like starting a new venture.”
Simply put, the arts make a poor business. There are no economies of scale and few ways to boost productivity. A string quartet needs as many musicians now as it did 250 years ago. Large, up-front capital costs can be impossible to recover in full over a limited run of a few weeks. Rarely does a revenue stream continue from one year to another. And most expenses are tied to labor, whose costs are always rising.
It’s also a business in which you can sell every seat in the house every night—and still lose money.
Kevin Maifeld, graduate program director in the college of Arts and Sciences at Seattle University, says the biggest surprise for most businesspeople is that ticket sales, even when those tickets go for $50 to $100 each, typically cover only half the cost of creating and operating an event. Arts organizations make up the difference on a subsidy of grants and donations. This 50/50 model has prevailed since the 1950s—and is under increasing stress.
Trapnell notes that in 1982, public support made up 12 to 16 percent of the budgets of five major theaters. Today, it constitutes 1 to 2 percent. ArtsFund, which raises money for arts organizations in King and Pierce counties, has tracked a trending decline in business support that’s unlikely to abate, along with a drop of 25 to 30 percent from all sources in the past few years.
Seattle-based fundraising consultant Eleanor Hamilton observes that donating to the arts remains strong among established wealthy families, who have stepped up giving to select causes, along with smaller donors. But, with a few notable exceptions, she says, people with new wealth from the technology sector haven’t yet established a deep loyalty to these organizations.
Some of Seattle’s arts institutions are surviving by employing the very features of successful for-profit businesses: innovation, brand loyalty and agile management. Not to mention a little bit of luck.
Finding an audience
When Scandiuzzi arrived at ACT in 2008, the theater was still recovering from its near death five years before. His task was to cut that year’s budget by more than $800,000. For the past two years running, ACT has actually reported a modest surplus on its $6.2 million budget, even while servicing its accumulated $2 million debt.
The Prisoner of Second Avenue at ACT Theatre. Photo by Chris Bennion
ACT is also redefining its relationship to audiences, largely because audiences have been changing their relationship to theaters. Not only have subscription theater patrons grown older, but they have also become less loyal. Attendance remains strong, but fewer theatergoers are season subscribers. ACT, for example, has 5,158 season subscribers, down from its peak of 10,645 in 1996. Nonsubscription tickets—which sell for more but are made less profitable by greater marketing costs—are filling the gap at all theaters. This development puts stress on any theater company because each play has to be sold on its own merits, driving up marketing costs and weakening the audience relationship.
To compensate, Scandiuzzi says, “We have opened our doors to the entrepreneur.” By launching the Central Heating Lab, which shares ACT’s underused spaces with other arts groups for performances of theater, film, poetry and dance, ACT has boosted the number of events taking place under its roof each year from six to 45. As well, the innovative ACTPass program grants unlimited entry to all events produced by ACT for $25 a month, and currently has more than 1,000 paid passholders.
A key aim of this strategy is to better connect patrons to the venue, to make ACT a household’s destination for the arts, not just an occasional stop. By the theater’s reckoning, this step helped bring more than 82,000 people through ACT’s doors in the past year.
Making a Splash
The Seattle Art Museum couldn’t have planned its special exhibit, “Picasso: Masterpieces from the Musée National Picasso, Paris,” to help solve its fiscal problems. “When we started [planning the exhibit] in 2008,” admits Chief Operating Officer Bob Cundall, “conditions were pretty good. You can’t anticipate where we are going to be in the economic cycle. It’s a calculated risk.”
Seattle Art Museum's Nick Cave: Meet Me at the Center of the Earth. Photo by James Prinz
That was before the financial crisis, which collapsed Washington Mutual Inc., SAM’s real estate partner in an ambitious expansion of the museum’s downtown footprint. Three years later, the museum has stabilized through a deal with a new partner, plus a seven percent reduction in staff and other economies. But it was record turnout for the groundbreaking Picasso show—which is touring only three sites in the United States—that helped the museum post a seven-figure surplus for its fiscal year. The show drew 405,000 visitors and helped drive museum membership to an all-time high of more than 48,000.
Engaging the public is one of SAM’s chief strategies, by getting its art to the streets, as with the popular body-suit sculpture of Nick Cave earlier this year and through its quarterly SAM Remix art and music gatherings. SAM doesn’t expect to break those records this year, even with its forthcoming Gauguin show (opening Feb. 9, 2012). But, while obviously aware of SAM’s good fortune in landing Picasso, Cundall emphasizes, “The number one thing is quality, regardless of what it might be, and having a spectrum of exhibitions.”
When Stuart Rosenthal took the reins as executive director of Flying House Productions in 2009, the choral arts organization didn’t need the oncoming recession to feel stressed. Audiences had been kept away from its keystone event, the Seattle Men’s Chorus holiday concert, by a city-paralyzing snowstorm. That alone put a $100,000 dent in the production company’s budget. “Between that and the fact that our donors’ portfolios had all shrunk,” Rosenthal says, “the spigot just shut off.”
Rosenthal’s response was aggressive: He led the organization in cutting its budget by 25 percent, let go staff and eliminated some programs. The group has clambered back to solvency, but 32-year-old Flying House differs from many arts nonprofits in that it has a strong social mission of inclusiveness, and its more than 600 singers are unpaid. Rosenthal estimates that without the labor of its volunteers, Flying House’s $2.7 million budget would have to be more than 20 percent higher.
Those community-based roots have been the group’s core strength, not just in effort but in the commitment of members, donors and audiences. The lavish performances bring in celebrity guest artists, but the organization is unshakably local in its ties.
Flying House Productions (Seattle Women’s Chorus). Photo by Mark Weeks
Members of the Seattle Men’s Chorus and Seattle Women’s Chorus are, as Rosenthal says, Flying House’s best marketers, and they are able to fill up to 20,000 seats each holiday season because they are of and about the community where they perform.
“If we were purely putting out a commercial product, we would be subject to the tastes and financial condition of our audiences,” Rosenthal says. “But the fact that people care about the difference we’re making in the world has kept us moving ahead.”
The effects of the changing landscape can be seen in the outlook of graduate students at Seattle University.
“In my generation, we all expected to work for some arts institution,” says Maifeld, who directs a two-year program at Seattle U that grants a master of fine arts degree in arts leadership. “Our students aren’t waiting for us. They’re bringing teams together for their own projects.”
It’s that entrepreneurial approach that fuels Cyrus Khambatta, artistic director of Khambatta Dance Company, formerly Phffft! Dance Theatre Co., and the driving force behind the Seattle International Dance Festival, which for its fifth season moved to South Lake Union last June. The festival brings an array of dancers from places like Iraq, Mexico, Japan and the United States to perform at Cornish College of the Arts and at numerous “Art on the Fly” events on the plazas and sidewalks of Seattle’s South Lake Union neighborhood.
Begun by Khambatta after relocating from New York and touring Europe, the organization has no ongoing staff or permanent office. Instead, the festival has thrived on partnerships with local businesses and the Mayor’s Office of Arts & Cultural Affairs, plus support from Vulcan, Paul Allen’s company. The effort to administer the festival is spread across many individuals and sites.
This is not unusual for a fledgling outfit, but Maifeld speculates that more fluid, impermanent collaborations such as Khambatta’s may become the common way that art gets made in the future. The large arts institution, he thinks, could well be the model of the past.
When asked about this, Trapnell notes that neither ACT nor Intiman set out to become large institutions, either, but the structure was needed for them to grow. Even Cyrus Khambatta would like to have that kind of stability someday. “I’m really an artist,” he says, “not a businessperson.”
Despite the obstacles, Khambatta can sum up neatly why not just his, but many arts groups, will certainly persist: “I love it, I’m really passionate about it, and really, I don’t know what else to do.”