Why is the COVID-19 pandemic so bad for arts nonprofits?
We hear a lot about canceled performances and events as a result of public health policy to stop the spread of COVID-19, which of course has a severe and sudden impact on admissions revenue. But there are actually several issues that arts organizations are coping with right now in addition to that. Nonprofit arts organizations are facing particularly difficult challenges that in many cases are compounded by the structure of our annual schedules and the diversification of revenue, which under normal circumstances is a strength. Below are a few factors you may use in describing to others why this pandemic will be so particularly impactful on the industry. Every challenge listed may not apply to every arts organization, and there may be some situations not covered. However, as we start to have conversations with friends, families, and networks who work outside of the arts (and almost every industry is struggling), it will be helpful if we can articulate why the COVID-19 pandemic is so particularly bad for the arts.
Seasonal Structure:
Most arts organizations, especially performing arts, structure their programming on a season that runs September through May. From June through August, separate programming is offered, often for school-aged children who are not attending classes. Nonprofit arts organizations also offer a wide variety of programming on very tight budgets as we move from one scheduled program to the next. The timing and expected length of this pandemic were particularly challenging because of this seasonal structure for some of the reasons listed below.
Canceled Performances:
Once the events were canceled, there were, of course, no new sales, but the vast majority of arts admissions are paid in advance, both individually or through subscriptions. Some patrons may opt to turn tickets into donations. Many will opt for a credit for a future event, but while that saves the sale, it decreases future potential revenue. However, many will ask for a refund, which fiscally speaking is not just a matter of shutting off the tap, it is actually a leak in the tub. Also, many of the expenses such as creative material, personnel, and production costs had already been paid prior to cancelation and cannot be recouped.
Subscription Sales:
Spring is when most performing arts organizations are selling subscriptions for the next season starting in the fall, providing them with much-needed cash. The uncertainty of the pandemic and the effect it will have on next season’s programming has all but halted all subscription income.
Fee for Service (Instructional Programming):
Instructional programming, particularly for youth, is common across a wide variety of non-profit arts organizations, often for a low fee or with need-based assistance. These fees are primarily collected prior to the classes and other programs being provided. The recent closures have left many nonprofits owing refunds for services not rendered, turning their limited cash into a liability.
Summer Youth Programming and Performances:
Many arts organizations offer either summer programs for youth or a summer performance series during the summer months. The uncertainty of the pandemic has left patrons and organizations alike wondering if these programs will even be possible. As such registration and sales have come to a standstill, and may yet be canceled.
Donations:
Both the economy and the stock market have an uncertain and volatile year ahead. This is likely going to lead to a major drop in giving across the entire nonprofit sector.
But isn’t there savings when there is a cancellation?
Yes, organizations may save on some expenses, but not all. And many of these programs individually, especially youth programs and season finale’ blockbusters, usually generate a profit, so the losses are considerably greater than any savings. Those dollars are usually invested in the organization and the creation of the new programming.
And what about next season?
For the reasons listed above, arts organizations will be left with very little money to produce the very programming they exist to create. While the new SBA loans may keep people in jobs in the short term, they will not be enough to sustain and reignite the engines of our nonprofit arts economy, causing arts organizations to reduce both the quality and amount of programming they provide, if they are able to continue operations at all.
Cumulative Effect:
Not every arts organization is struggling with all of these issues, but the vast majority of cultural nonprofits are dealing with most of them. It is the cumulative effect of the mounting financial losses and relationship between each program’s earned revenue and the expected drop in contributed income, that provide the stark myriad of challenges we will be working to solve in the months ahead
What is the impact of less arts programming on the broader economy?
The arts are a major economic driver, attracting business and investment as well as supporting over 70,000 jobs in NC, both in the arts and in other sectors. Of course, the arts improve quality of life, provide a means of self-expression and improved well-being, and give a community what many call “food for the soul.” An example of how the arts will affect the economic recovery can be found in our most symbiotic economic partner, the foodservice industry. Based on a 2015 study, the nonprofit arts in North Carolina generate hundreds of millions of dollars in food and beverage sales each year. At a time when both the arts and foodservice industries are hurting, helping the arts helps the restaurants, which helps the larger economy as well. This is just one example of the myriad of ways the arts impact the broader economy.
Share your story AND listen to others’ stories.
This is a crisis that expands across the entire country and the entire world. Every industry and economic sector will be negatively impacted in some way. While it is important to tell your story, it has never been more important to listen to the stories of others. We are going to need to have a real two-way communication and understanding outside of our silos if we are going to be able to work together to solve our collective challenges. We will all be struggling, but by hearing the stories of others and sharing our own, we will be able to find the shared purpose that will unite us and the unified vision that will see us to the other side of this crisis.