In the ongoing coronavirus pandemic, museums and performing arts organizations have been among the charities hit the hardest, as they’ve watched their business models devastated by closure as “nonessential” businesses. Earned revenue from admissions and ticket sales—along with other income from on-site gift shops, restaurants and parking—has all but plunged to zero since March, in many cases draining the majority of institutions’ budgeted income.
Even when they reopen, social-distancing requirements are likely to depress audiences and visitors for the foreseeable future.
With all of these revenue-depleting challenges, the fundraising abilities of arts organizations could spell the difference between survival and permanent closure. According to leaders in the field we spoke with, that will require keeping a sharp fundraising edge—pivoting quickly, adjusting arts offerings to changed conditions, identifying new sources of support, and convincing donors to reallocate their giving to general operating support and other pressing needs.
The No. 1 priority for arts organizations now is survival, said Mary Anne Carter, the chairman of the National Endowment for the Arts (NEA). She says her agency is seeing furloughs, layoffs, and organizations shutting their doors for good, and the NEA is trying to keep as many organizations as possible from closing. Under the CARES Act, the federal coronavirus relief law, the NEA received funds and has started new programs that support organizations’ general operating expenses, rather than provide project-specific grants, as it has traditionally done.
But given the sheer scope of the challenge ahead, most institutions will need to call upon a wide array of supporters and strategies to make it through this downturn.
A recent study jointly conducted by SMU DataArts and TRG Arts estimates that because of the health crisis, the nonprofit arts and culture sector will lose $12.4 billion in income. These anticipated income losses include less earned revenue from “mission-related services” (e.g., admissions) along with an anticipated loss of contributed income of another $5.2 billion. Taking into consideration offsetting reductions in expenses—primarily in employee and artist compensation—the study projects that net overall losses to the sector will be $6.8 billion.
Jill Robinson, TRG Art’s chief executive, says that she and her co-authors worked under the assumption that the arts sector would reopen October 1. If that date proves to be overly optimistic and the crisis drags on, the damage could exceed the $6.8 billion estimated loss. Moreover, this figure does not take into account the $3.9 billion that employees and performers will lose as a result of pay cuts, furloughs, layoffs and cancelled contracts.
The study’s estimate looks only at the impact on the arts organizations themselves and does not account for the much larger loss of arts-related spending on local economies. The NEA’s Carter says that the arts are an economic engine and that their overall impact is $877 billion, which equates to 4.5% of the nation’s gross domestic product. This multiplier effect is demonstrated by a theater group in West Virginia, the Contemporary American Theater Festival in Shepherdstown, which has a budget of approximately $1.5 million. The organization recently conducted an economic analysis of the festival, which indicated that it annually injects $5.86 million into the local community.
The loss of earned income among nonprofit arts groups is not limited to ticket sales, of course. Ancillary income is an important revenue stream for arts venues in particular. Nicholas Gigante, vice president of development at the Pittsburgh Cultural Trust, says that his organization relies on fees paid by commuters who use the organization’s parking facilities. However, that revenue stream has dried up as a result of stay-at-home rules keeping people away from their downtown offices.
One troubling sign related to arts fundraising: The NEA’s Carter says that even after her agency loosened its grant restrictions to allow arts organizations to adjust the scope of an approved project or request an extension, few have done so. This, she says, suggests that recipients are encountering difficulties in raising funds to match the NEA grant, a longtime requirement that is still in place.
Rob Ritter, director of institutional advancement at the Smithsonian Institution, says that his organization is losing money from retail, restaurants and special events, which are currently not feasible. He says the Smithsonian had a tremendous first half of its fiscal year—“and then COVID-19 hit.” And it’s about to get worse. “Our gift shops and restaurants make two-thirds of their revenue in the three summer months,” Ritter says. “We know what’s coming in terms of lost revenue.”
Many nonprofit arts venues, such as the Pittsburgh Cultural Trust and the Tennessee Performing Arts Center, are also heavily reliant on income from for-profit touring Broadway productions such as the smash hit “Hamilton,” now shuttered along with nonprofit arts performances. Jennifer Turner, the chief executive at the Tennessee organization, says the income from Broadway shows is critical for her nonprofit arts center and the programs it provides in the community.
Although many arts organizations applied for and received forgivable loans under the federal Paycheck Protection Program, that will expire June 30, 2020, unless Congress extends it.
With earned revenue erased and government lifelines expiring, arts organizations can only hope fundraising helps them survive until some form of normality returns.
Unprecedented Fundraising Challenges
According to a 2017 study by Americans for the Arts, approximately 60% of revenue for arts organizations is earned income, with the remainder coming from government grants and corporate, foundation and individual giving. “There are going to be some charities that don’t make it through this, and there might be a lot of mergers,” says Robert Sharpe, a Memphis fundraising consultant. Fundraising success, he adds, “is imperative if you want to survive.”
Sharpe, who focuses on bequests and other estate gifts, has done research showing that in economic crises like the Great Depression, and to a lesser extent, the last recession, bequest giving enables many charities to stay afloat. Sharpe is blunt about the ramifications of not communicating and expressing organizations’ appreciation now, particularly for older donors. “You should call and thank your donors now, because a lot of people will be redoing their will after all this over—and they will remember who called and who didn’t.”
But as they reach out to their donors, arts organizations should not forget to communicate with other stakeholders, such as the companies that advertise in programs and on their premises, says Ruby Lopez-Harper, a senior director at Americans for the Arts.
Leah Hester Burton, chief advancement officer at the Solomon R. Guggenheim Museum, says, “We have been on the phone and video with our donors the past eight weeks. It’s always important to communicate, but now more than ever.”
Conveying an arts organization’s gratitude is a good job for staff and others whose jobs and lives are on hold with stay-at-home orders and other restrictions related to the pandemic. After the Contemporary American Theater Festival canceled its entire summer season of plays, Vicki Willman, director of development, helped recruit the organization’s 35-member board to participate in a “Thank-a-thon” for people who agreed to give up a refund on tickets to canceled plays, turning those funds into a donation. A trustee has called all of the patrons who donated that way and personally thanked them. Willman says her organization has steered clear from making any other ask or request during the calls.
Pivot and Adapt Quickly
Many arts groups that had scheduled major fundraising events for the spring were forced to cancel or postpone them. But more flexible and nimble groups have been able to salvage their events, and even increase what they normally raise.
When the crisis hit, the Oregon Symphony had its most important yearly fundraising event scheduled for April 16. Rather than canceling the dinner and auction that raises $1 million or more, or trying to move it to some later date, Scott Showalter, the orchestra’s chief executive, decided to transform it into a “virtual fundraising gala.”
“We grossed just slightly less in the virtual event than we anticipated for our in-person gala, but we actually netted more revenue for the symphony.” Holding a virtual event, he explains, was less costly than the live one. “Even though our gross revenues were slightly smaller, we exceeded our expectations.” The event even “sold out,” Showalter says, at about 450 tickets. “And almost none of those who had purchased tickets to the live event requested a refund.”
There were, of course, some downsides to canceling a live event. “We might have seen more spontaneous gifts in an in-person event,” Showalter says. However, he adds, “we had more smaller donors participate,” with hundreds more than the live gala draws, and about 1,000 virtual attendees altogether. The online format was also enhanced by other features. For example, the Oregon Symphony staged a “virtual red carpet,” allowing supporters to dress up and send photos of themselves to an Instagram page. The symphony has since posted gala content on various social media platforms and experienced thousands of hits. Although Showalter doesn’t see the virtual gala as a permanent way forward, his organization has learned new ways to widen the impact of a fundraising event.
Fundraisers and other leaders in the arts have quickly adjusted to the crisis in other ways. The Guggenheim’s Burton has asked donors to reallocate their gifts to general operating expenses or, if possible, fulfill pledges early. The museum is also requesting that members renew their memberships early this year.
Similarly, Peter Hansen, a fundraising consultant who spent many years raising money for the New Jersey Performing Arts Center, recommends that organizations in the middle of capital or endowment campaigns contact donors and ask if their contributions can be redirected to general operating support.
Crisis Messaging and Engagement
While they are closed, arts organizations are also exploring new ways to engage with people by developing online content and offering it, often at no charge, to the public. Hansen likes this approach, but offers a cautionary note. “It should be curated, original content different than just putting archival content online,” he says. “Original content, if it’s creative, can make a difference in member engagement. You might even be able to monetize it.”
The Barnes Foundation, a prestigious art museum in Philadelphia, pivoted to digital offerings within days of closing, says Nina Diefenbach, a senior fundraiser there. The organization developed its “Barnes Takeout,” which features curators giving a daily talk about a work in the collection. The talks have generated 150 unsolicited online donations from people who saw the talks, including from unexpected sources such as one donor in Greece.
Fundraisers in the arts are sensitive to the fact that there are many competing needs, and that some potential donors might prefer to support more urgent causes, such as emergency responders or food banks. In other cases, a donor’s personal situation might have been affected by asset losses, unemployment or business difficulties, or a need to support family members.
The Smithsonian’s Ritter acknowledges changed conditions. “We do national fundraising, and in times of crisis, there are some donors who want to focus on local institutions,” he says. “We might not be the priority now, but we want to stay in touch… maybe not making an ask right now. And some major donors just want to stay in touch.”
The NEA’s Mary Anne Carter advises fundraisers to emphasize that the arts have helped in the health crisis and made people feel less isolated by providing an opportunity to watch a concert online or take a dance class on Zoom.
“The arts are proving how important they are in our lives,” she says, “and once we get through the crisis, arts will help us in the aftermath. The arts are playing an important and visible role, and I hope we in the arts can take advantage of that.”