I had the pleasure of hearing Karen Hopkins speak at the National Arts Marketing Project Conference in Houston. During her speech, she said several things that caught my attention. Because the conference centered around how marketing and development departments could work together to maximize revenue, she outlined the revenue breakdown between earned vs. contributed sources for the Brooklyn Academy of Music:
Brooklyn Academy of Music
Expenses $38 million
Box office income: $11.9 million (31% of expenses)
Other earned revenue: 4.6 million (12% of expenses)
Contributed revenue: $22 million (private and public) (57% of expenses)
· The Next Wave Festival
· Spring season of theater, opera, dance
· Education—serving 25,000 students at 219 schools
I have always admired the artistic work of BAM, and some of the nation's most creative work from the past several decades have been created and/or featured at BAM, including Peter Brooks' epic Mahabharata and Philip Glass's Einstein on the Beach.
One of the struggles that we are facing at Arena Stage is an imbalance between earned and contributed revenue. Arena Stage is more reliant on earned revenue than most regional theaters, and it puts the marketing department in conflict with the artistic department. I joined Arena Stage because of its long heritage of superb artistic work, and our artistic strategic plan calls for the exploration of new and challenging work in the future. However, the more reliant a company is on earned revenue, the less risk and new work the company can take on because it is reliant on steady box office revenue. Thankfully the communications department and the artistic department at Arena Stage work very well together, and we are in the process of hiring a chief development officer to increase our contributed revenue streams.
To test my hypothesis about how an imbalance between earned and contributed revenue streams can affect programming, I took a look at two institutions--one known for artistic risk taking and new play development (The Public Theater), and one known for presenting/producing only well known, less risky work (Walnut Street Theatre).
Here are their breakdowns:
Public Theater (New York Shakespeare Festival)
2006 990Expenses: $17 million
Box Office income: $5.2 million (31% of expenses)
Other earned revenue: $1 million (6% of expenses)
Contributed revenue: $8.6 million (51% of expenses)
Walnut Street Theatre (from their 2006 990)
Expenses: $13.5 million
Box office income: $11.5 million (85% of expenses)
Other earned revenue: $500k (5% of expenses)
Contributed Revenue: $1.4 million (10% of expenses)
To quote Michael Kaiser from his new book, "Not-for-profit arts organizations should be doing work that commercial producers won't consider either because the work is too large or too risky. This is what justifies the use of tax-deductible contributions." As I look at Walnut Street's financials, they are very close to operating like a for-profit institution, with only 10% of its budget coming from contributed revenue. So, don't look for them to do anything "too large or too risky." They can boast that they have the world's largest subscription base, and although I like Ralph Weeks (their Director of Marketing), it isn't because they figured out the "subscriber problem" or have exceptional marketing, it's because of their programming. Their shows for this season include 5 shows: State Fair; Hairspray; A Streetcar Named Desire; Born Yesterday; and The Producers (all musicals and/or well known products).
From the opposite perspective, the Public Theater can do "large and risky" productions, which they are well-known for because more than half of its budget comes from contributed sources. For comparison purposes to Walnut Street, check out the Public Theater's season: Road Show; If you see something, Say something; Taking Over; The Good Negro; Why Torture is Wrong; The Singing Forest; Khartoum; The Native Theater Festival. As a theater insider, I have only heard of three of these projects, mostly because Arena Stage has a history with two of them.
The more a company is handcuffed to its earned revenue streams and box office, the less it's able to concentrate on its non-profit mission. And in this economy, a heavy reliance on either contributed or earned revenue isn't a good idea since an organization's revenue streams should be diversified, so as not to put all your eggs in one basket.