The Impending Disposable Income Gap

Recently, my ArtsJournal.com blogging cohorts Greg Sandow and Andrew Taylor have touched on a budding concern over the need to engage a younger generation. Greg and Andrew have a similar yet unique outlook on the problems associated with not only a shrinking audience, demographically speaking, but a shrinking pool of potential artists, administrators, board members, etc. Those are all worthwhile discussions but my mind tends to wander in the direction of economic issues…


There are a number of current events pointing to future challenges (otherwise known as problems) with regard to traditional revenue streams for professional orchestras. Among those is the impact of increased long-term financial responsibilities among younger demographics on an orchestra’s ability to conduct successful annual fundraising campaigns.

For example, sharp increases in artificially inflated home values combined with aggressive subprime lending are tapping into future disposable income levels at alarming rates. Left unchecked, the 20-somethings and 30-somethings of today will not have the same levels of disposable income that 40-somethings through 60-somethings currently enjoy – and orchestras count on for annual fund drives and planned giving. Combine that with other increasing multi-decade expenses such as record breaking levels of bankruptcies, long-term credit card debt, and sharply escalating college tuition fees and you have a situation where the younger generations of today will have much less economic flexibility than their counterparts among today’s elder generations.

As a result, in order to stay ahead of thinning revenue streams, adaptive development strategies will need to be formed well in advance of actual need. Since all of the potential economic hurdles mentioned above will impact each metropolitan area at different levels, executives and board members need to keep an eye on local levels of subprime borrowers, bankruptcy rates, and whether or not home values have been artificially inflated to alarming degrees.

Fortunately, this isn’t an exercise in doom-and-gloom scenarios; instead, it is an examination of current economic indicators to predict how orchestras will need to adapt to future fundraising challeng, er, problems. Consequently, as long as the stewards for America’s 100 or so professional symphonic orchestras don’t turn a blind eye to these issues then most should be able to avoid having the rug pulled out from underneath them when the funding climate changes.

Click here to read Greg Sandow’s article
Click here to read Andrew Taylor’s article

About Drew McManus

"I hear that every time you show up to work with an orchestra, people get fired." Those were the first words out of an executive's mouth after her board chair introduced us. That executive is now a dear colleague and friend but the day that consulting contract began with her orchestra, she was convinced I was a hatchet-man brought in by the board to clean house.

I understand where the trepidation comes from as a great deal of my consulting and technology provider work for arts organizations involves due diligence, separating fact from fiction, interpreting spin, as well as performance review and oversight. So yes, sometimes that work results in one or two individuals "aggressively embracing career change" but far more often than not, it reinforces and clarifies exactly what works and why.

In short, it doesn't matter if you know where all the bodies are buried if you can't keep your own clients out of the ground, and I'm fortunate enough to say that for more than 15 years, I've done exactly that for groups of all budget size from Qatar to Kathmandu.

For fun, I write a daily blog about the orchestra business, provide a platform for arts insiders to speak their mind, keep track of what people in this business get paid, help write a satirical cartoon about orchestra life, hack the arts, and love a good coffee drink.

Related Posts

Comments (powered by Facebook)

11 thoughts on “The Impending Disposable Income Gap”

  1. Let’s go up one level and look at this “challenge” from that perspective.

    There are a lot of cultural institutions that do not have to pay their own way — libraries, zoos, museums, schools, and religious groups partially subsidized by tax breaks. Why are orchestras not included?

    Some of these organizations are partially supported by contributions, but few (if any) of them try to support themselves mainly from paid admissions. But orchestras try to.

    This results in the fatal circle: orchestras raise prices to make more money, less people attend concerts, orchestras raise prices even more, even less attend. . . ..

    No one single thing is going to save orchestras, but among the things that would is educating metropolitan areas that they need to fish or cut bait: If they want an orchestra, they need to support it.

    But that would involve orchestra managements reaching out to the community and explaining WHY that community should want an orchestra. And orchestra managements are notoriously reluctant to reach out. Except to ask for money and to sell season subscriptions.

    I have spent a number of decades trying to persuade orchestra managements to drain the moat, shoo away the crocodiles, let down the drawbridge, and emerge from their fortresses. The most frequent response I get is nothing — no response. The next most frequent is, “I’m sorry, but we are understaffed, have too much to do, and don’t have time to discuss this.”

    OK, but if they are too busy to discuss this “challenge” with me, then I am too busy to buy tickets to their concerts and send them money during their fund drives.

    Oh, speaking of fund drives. I have a friend in St. Louis who reports that she contacted the SLSO during a fund drive, offering to make a donation, and was told, “we’re not accepting such small donations right now, get back to us later.”

    Good PR, anyone?

    Paul

  2. Hi- What is up with the DUNS+4 deal that non-profits have to get in order to get federal money? Speaking of income eaters- somebody at the D&B offices said ‘Hey George,(Bush) we want to market to the non-profit community, they have lots of public money- let’s sell THEM financial ‘products’, and let’s make it mandatory, so we get their attention right in the beginning- can we tell them that they have to use us for something, huh, can we George, huh, can we?
    Katrina

  3. The economic issue is very real. Not only is their less disposable income for those potential concertgoers, there are more “free” ways in which to receive music over the internet. Another economic issue that has been talked to death is the lack of commitment that school boards, taxpayers, school administrators and music teachers are showing in forcing the issue of mandatory music education. It always seems to be an issue of funding and music and the other humanities take a back seat, or in the case of music, quite frequently, no seat at all.

    Joe Nichols

  4. The very dark cloud of income disparity in the US may actually have a silver lining for arts organizations. Unfortunately, tapping that lining may also rely on perpetuating the class-conscious elitism that I think is both philosophically unsound and bad for the industry over the long term.

    This recent NY Times article http://www.nytimes.com/2007/03/29/business/29tax.html?ex=1332820800&en=fb472e72466c34c8&ei=5088&partner=rssnyt&emc=rss
    is a good source for the data I’m interested in. What we find is that the rich are getting richer and the poor are getting poorer, which means the donor pool is getting more and more wealthy. Every dollar redistributed from the poor to the rich is a dollar converted from non-disposable to disposable income, and we should remember that modern philanthropy was essentially created by the robber-barons of the late 19th and early 20th century. If upward redistribtion of wealth means more available charitable giving (and from a more concentrated pool — what organization wouldn’t rather get one million dollar gift instead of ten thousand $100 gifts), arts organizations may feel even more tempted than they already do to set themselves up as part of the culture of the upper class.

  5. Thanks for mentioning that income gap between socio-economic classes Galen. I had originally included that in the article but had to cut it out due to a lack of time. Nevertheless, it’s a fundamental component which is deeply connected to all of the other issues examined in the article.

  6. I’m unclear why reader Paul thinks orchestras try to pay their way based on ticket sales. That’s not the case at all – huge amounts of fundraising are required by orchestras, small classical institutions, and, especially, opera, to pay the bills.

  7. Lisa, thanks for letting me clarify my comment about orchestras trying to pay their way based on ticket sales.

    Once upon a time, around the middle of the last century, the St. Louis SO got 80% of its income from ticket sales, giving it the highest income from ticket sales of any top tier American orchestra. So, you’re right; orchestras do not try to pay their way via ticket sales.

    But, they try to pay PART of their way and, in this attempt, they have been raising prices steadily. This is what I think is the bad policy. A superficial analysis indicates that as prices are raised, attendance drops. Maybe it’s just coincidence, and not cause and effect, but it is something which orchestras need to give some long, hard consideration.

    And, for those who want hard data derived from controlled studies, I offer the opinion that any such study would cost hundreds of thousands of dollars, take years to complete, and end up stating “the data indicate that . . . so further studies should be done. We can’t afford the money or the time; we need to start dropping prices now and see what happens.

    Does that clarify my intent, Lisa?

    Paul

    Paul

  8. Arts institutions do have to partially pay their way with ticket sales. How high a percentage of costs can come from sales depends on many factors, including size of the institution, size of its admin staff, what the performers are paid, etc.

    There’s already a lot of evidence backing up your contention about the effects of raising ticket prices, including what happened to the BSO following a major price increase in their cheapest seats and the known effects of having rush and other discount seats. No one will claim that big studies are required.

  9. When I was a kid, admission to the St. Louis Art Museum was free. I was still free the last time I was there — some 20 years ago. Admission to the National Art Gallery and Smithsonian Galleries in Washington are tax-supported, and free.

    The St. Louis Zoo was free, and still was some 20 years ago.

    10 percent of the 10,000 seats at the St. Louis Muny opera are free, but it has an amazing record of paying its own way via ticket sales.

    Libraries are free.

    The Jewel Box in the St. Louis Forest Park, where flowers are displayed, was free (may still be).

    The St. Louis area has a special tax to raise money for the Zoo, Museum, and something else.

    The SLSO has tried to get included in that tax, but without success.

    People in the St. Louis metropolitan area, even the people who never go there, perceive the civic importance of the zoo, art museum, et al, and so vote to tax themselves in order to keep them running.

    Why don’t they have similar pride in their orchestra?

  10. I’d suggest you look into how these institutions were started. I’m willing to bet that the currently or previously free institutions were and are municipally-funded, while the orchestra was started and originally funded by private citizens. Cities don’t usually take on existing privately-run groups.

  11. Does anyone have the data on the extent to which orchestras in Europe and Great Britain receive municipal subsidies?

    I have been lead to believe that it is quite common.

    Paul

Leave a Comment

TWO WAYS TO SUBSCRIBE BY EMAIL:

Subscription Weekly
weekly summary subscription
Subscription Per Post
every new post subscription

Send this to a friend