Arts and Business: the Impact of Business Models on the Activities of Performing Arts
Paper Title
Arts and business: the impact of business models on the activities of performing arts organisations in Australia.
Jo Caust
Associate Professor
University of South Australia
Keywords
Arts, government, business models, performing arts organisations
Abstract
The introduction of managerial business models to Australian performing arts organisations has now been around for ten years. Until the early nineties, Australian arts organisations were contextualised as ‘not-for-profit’ entities that had an overall objective of producing good art. Over the past decade however, Australian performing arts organisations have been viewed more and more as part of an ‘industry’. Within an industry construct, performing arts organisations are framed as business entities, with a need to prove positive financial outcomes as a first priority. This discussion explores what is meant by business models in the context of Australian performing arts organisations and what has beenthe impact of this approach.
Background
Over the past decade the framing of performing arts organisations as businesses first,has been both explicit and implicit in the Australian context. The creation of the Major Performing Arts Board at the Australia Council in 2000 (and before that the Major Organisations Board),signified a shift from the evaluation of the funding and activities of major performing arts organisations by peers (that is comparing like with like), to a situation where major performing arts organisations are assessed by business people using business performance measures, with little artform representation, input or evaluation. The approach of the Major Performing Art Board has trickled down to other artform boards within the Australia Council, and state arts funding agencies, so that business plans, performance contracts, boards dominated by business people and financial expectations of arts organisations, have become ‘de rigueur’. This paper tracks the development of this approach and considers its strengths and weaknesses.
Ways of evaluating the success of arts organisations
In terms of accountability it is noted that generally arts organisations see their major accountability to their largest funders; generally therefore in the ‘not for profit’ sector, government or its agencies (Turbide and Laurin 2003).
If arts organisations see that their major responsibility for accountability, is to their funders, in reverse, the funders see that the organisations’ major accountability is to them also. So the reporting demands and accountability expectations are set by the funder. In the Australian context this is government, be it federal or state. Brokensha (1996:101) points out that the performance indicators that funders impose on arts organisations, are not measuring how the organisation is performing against its own objectives, but how it is measuring up against the funder’s objectives. It would seem that ways of approaching the evaluation of arts organisations, by government funding authorities in particular, has focussed on measurable quantitative outcomes, while qualitative and less tangible outcomes are not considered (Brokensha 1996, Gilhespy 1999, Turbide & Laurin 2003). Major performance criteria can be organised under either categories of ‘efficiency’ or ‘effectiveness’ (Gilhespy 1999). A priority given to ‘efficiency’ is likely to favour measures such as earned income, audience numbers and access while ‘effectiveness’ is more likely to reflect the quality of the work, the diversity of the audience and the audience response. Belfiore notes in the UK that ‘data collection’ has been the favoured means of evaluating the success of arts activities, and this has meant that,
“Data were collected in a number of different ways: through audits, performance measurements, time series, impact studies, and studies on audiences (as well as non-audiences). Most of it was based on the quantitative analysis of policy inputs and outputs, and the results of such number crunching tended to be presented as neat statistics” (Belfiore 2004: 189)
So the ‘work’ (or ‘output’), which can be intangible in terms of its nature, is evaluated by positivist methods which do not necessarily have any relationship with the work itself or its intent. Brokensha (1996), a major architect of the National Cultural- Leisure Statistical Framework, introduced by the Australian Bureau of Census and Statistics in 1991, believes that governments have an obsession with numbers and see them as the only way of evaluating performance. In the case of the arts he argues that qualitative indicators are essential but are not understood or used appropriately by government agencies (Brokensha 1996:99-101).
Governments have certainly become increasingly preoccupied with a need to justify their expenditure in any domain, given competing priorities, as well as recent radical conservative attitudes to smaller government and reduced government spending.Expenditure by government in the cultural sector is always bound to be contentious, as, however it is evaluated, it still does not necessarily lend itself to clear objective, measurable outcomes. In fact there are likely to be disagreements about the nature of the outcomes, and what weighting should be given to different outcomes generated from the same activity. Further it is noted that,
“In the arts and culture sector, management control systems need to balance monitoring the artistic mission with ensuring that the organization respects budget constraints. Many leaders deplore, rightly or wrongly, the fact that financial matters often take undue precedence over artistic matters in evaluations of the organization’s performance.” (Turbide et al 2008: 10).
Throsby (2001:163) says however that, an exclusive emphasis on the commercial benefits of the arts skews the discourse, and ignores the essence of what the arts are about. In addition the multi-dimensional character of cultural activity makes it unsuitable for evaluation by means of conventional market surveys or economic models (Choi, Papandrea & Bennett 2006; Throsby 2003). The use of the industry model to frame the arts in the Australian context has been dominant since the publication of Creative Nationby then Australian Federal Government in1994. It has encouraged a mind set that sees the production of art as an industrial process, which can be evaluated by statistics set within a business model. The people who are best suited to doing this, are of course, business people.
The Advent of the Business Model
In 1999 the “Major Performing Arts Inquiry’ was commissioned by the then Federal Government. They appointed a committee (composed of two corporate bankers, a corporate lawyer and a CEO of a large corporate company) to enquire into the position of the major performing arts companies, given the precarious financial situation of several of them. The aim of the inquiry was to examine and make recommendations for the future, given an implicit acknowledgement that these large performing arts organisations were an essential part of the nation’s cultural infrastructure. The main premise of the inquiry was to ensure the future financial viability of these major performing arts companies, hence the title of its report, Securing the Future. The report made several recommendations but perhaps the key recommendation was the:
“…endorsement of a new funding model that reflects the cost of the artforms; each company’s strategic role; and the commitment to geographic access.” (Nugent 1999: x).
From the government’s point of view, the maintenance of the major (usually large)performing arts organisations with minimisation of risk and the least exposure of government to provide additional funding, were seen as primary goals. From the companies’ perspective, they wanted to be free of regular government interference and allowed to get on with their ‘business’, with a long term guarantee of future funding. Companies such as the Australian Ballet Company or the Australian Opera Company, may have also wanted to be free of conditions that demanded that they demonstratethey were doing sufficient Australian content or developing new forms or doing the work of Australian writers/ composers or choreographers (as per the Australia Council’s mandate). Many of these companiesbelieved their existence was not in question anyway, given thatthey were seen as an essential part of the country’s cultural infrastructure. They weretherefore generally happy to be treated differently from the rest of the arts sector, if their funding was guaranteed and they were able to make their own choices re repertoire etc.
As an outcome of the report, the Major Performing Arts Board(MPAB) was established as a separate entity at the Australia Council in 2000. Its role was tomonitor and evaluatethearts organisationsunder its mantel.TheMPAB operates under a different mandate than the other artform boards at the Australia Council, given its primary focus on financial issues. The Chair of the 1999 inquiry, Helen Nugent, a former merchant banker,became the first chair of this Board. The membership of the Major Performing Arts Board (MPAB) of the Australia Council has continued to reflect a business paradigm in terms of its membership. Of the eight members of the MPAB Board in 2008, only one has had hands on arts experience. The majority are from the business/commercial sector (Australia Council website at viewed April 2008). They are corporate accountants, corporate lawyers, full-time company directors and chief executives of corporate entities. This profile contrasts with the membership of the other artform boards at the Australia Council, who are all employed or work in their artforms (that is it is a system of ‘peer assessment’).
It is stated on Australia Council website that:
“To be included in the Major Performing Arts Board, a company must meet all of the following criteria:
- be a dance, music, opera or theatre company or a hybrid thereof
- demonstrate the highest artistic standards in performances
- show an ongoing commitment to the development of the artform
- demonstrate an ongoing commitment to the development of artists within the artform
- show evidence of a sizeable and increasing audience base
- have a minimum average annual total income of $1.54 million over the previous three-year period
- demonstrate an ongoing ability to be financially viable, including increasing levels of financial support from the broader community.
In 2000 there were 31 companies included as clients of the MPAB coming from the areas of Dance, Theatre, Music and Opera as well as Circus.
Securing the Future
Recommendations for the performing arts companies examinedin Securing the Future (1999) included:the goal of filling all their available seats by improved marketing, seeing private sector support as theirfuturemajorprovider for earned income and reducing costs by establishing tender processes for productions, increasing economies of scale by merging functions of different companies (such as an opera company and an orchestra) and expecting more flexible practices from musicians and arts workers in general (Nugent 1999: xiii-xiv).
A major strength of the report was the detailed statistics provided in it about every performing arts company being considered under its mantel (then 31 in total). These statistics included information about subsidy per seat, average ticket prices, cumulative deficits by artform and by company, international benchmarks in relation to revenue and in relation to numbers of performances and profile of performance income by artform and by company. It is a wonderful set of numbers and an amazing snapshot of these companies in 1999. It doesn’t tell you about the quality of their work, their artistic highlights, the people who were employed or how their work was received. There is one table however that says it gives an ‘overview of the artistic development process comparing artform differences’ at four different stages (Nugent 1999:201). These stages are called: ‘create work, ‘create production, ‘build production’ and ‘rehearse and perform’. This table highlights whether particular people such as composers and designers are used ‘frequently’ or ‘occasionally’ in a typical production process in dance, theatre, music and opera. While this table may provide information that has some meaning to an uninformed observer of performing arts, it does not however provide meaningful or even accurate information to those who are from the performing arts. Perhaps its intent was to address the goal of “expecting more flexible practices from musicians and arts workers in general” (Nugent 1999: xiii-xiv).
In 2003, 2005 and 2007, follow up progress reports were published by the MPAB and submitted to government. These summarised the achievements of the Board and the organisations it funded,over the period 1999-2007 (29 companies after 2001). The major thrust of these reports was again the presentation of statistics that were quantifiable and reflected issues such as earned income, financial health, number of performances and box office returns. In addition statistics about the number of new productions and the numbers of productions of Australian work were also included as tables. There is not as much detail provided as the original report, nevertheless they continue to use some identical tables as ongoing comparisons. These tables are organised under three categories: ‘Artistic Vibrancy’, ‘Breadth of Access’ and ‘Financial Results’. Under ‘Artistic Vibrancy’ they compare both ‘New Works by Artform’, ‘Total Australian Artworks by Artform’ and ‘New Productions’. Table 1 shows the total of Australia Artworks by Artform for the years 2001-2006.
Table 1
(Securing the Future 2007 :8)
From Table 1 it is possible to deduce that there has in fact been an overall decline in Australian works over the period under review. This is most noticeable in Dance but also in Theatre. There has been a slight increase in Chamber Music and in Symphony Orchestras. But the figures used here only refer in the case of the Symphony Orchestras to the years since 2004, or since the orchestras have been completely separated form the Australian Broadcasting Commission (ABC) (The ABC controlled the orchestras until this time). So it is not possible to know if this is an overall increase from the previous period when the repertoire was controlled by a central body. In the covering letter for the 2005 report to government from the Board, the then Chair of the Board, Mel Ward (another former banker), notes however that,
“ In meetings with companies with regard to the review, a number of representatives have expressed concern with regard to artistic compromises and to, some extent, access compromises that they have been forced to make in order to achieve positive financial outcomes” (Ward 2005).
So this would suggest that there was concern being expressed from the arts organisations, that the focus on healthy financial outcomes was negatively impacting artistic decisions or outcomes. Certainly there is likely to be an impact in the production of new Australian work because this is likely to be the most risky financially. Again there is no qualitative information provided. Artistic achievements in terms of critical successes, breaking new artistic ground, recognition by peers, international invitations or even response by audiences, are not presented.
A major goal of the original recommendations of Securing the Futurein 1999 was to increase access of audiences, by increased participation. This was expressed as “the goal of filling all their available seats by improved marketing” This does not seem to have occurred in most artforms in the evidence provided under Table 2. In Dance, Theatre and Symphony Orchestras from this evidence, there has been a decline in attendances, a slight increase in Chamber music and an increase in Opera attendances.
Table 2
(Securing the Future 2007 :11)
Another set of statistics by city (Table 3) also confirms that generally there has been a decline in attendances in all cities, with the exception of Canberra.
Table 3
(Securing the Future 2007 :13)
The evidence from Table 2 and 3 would suggest there is a problem in terms of generating new audiences despite the added focus (and expenditure) on marketing. At the same time there has been an ongoing concern about the capacity of companies to take enough artistic risk and continue to promote the development of new Australian work when they must focus primarily on fiscal conservatism.
A major success of the Major Performing Arts Board has been the levels of Net Assets held by the companies. The 2007 report notes that,
“The number of companies with positive net assets greater than $1m has increased from six in 1999 to 19 in 2006, with a 356% growth in total net assets of this category of companies from $18.9m to $67.4m. Conversely the number of companies with aggregate negative net assets had reduced from 10 in 1999 to two in 2006”
( Securing the Future 2007: 30).
So perhaps the central goal of Securing the Future in 1999 has been achieved; a majority of the companies in 2007 under the mantel of the MPAB now have assets and are not in the ‘red’. But this begs the question of whether the drive to secure assets, has been made at the cost of doing new/risky/ artistically adventurous/ challenging work.
The trickle down effect
The Australia Council for the Artsis the Australian Government's arts funding and advisory body. Aside from the Major Performing Arts Organisations Board, other performing arts activities are assessed at the Australia Council by artform Boards such as Dance, Theatre, Music. The term ‘major’ therefore only refers to size. It does not refer to quality, contribution, influence or significance.
The establishment therefore of two forms of evaluation (depending solely on an organisation’s size) within the mandate of the Australia Council,might be seen as contributing to an undermining of the principles of the funding body itself. That is the large performing arts organisations are primarily assessed on meeting their performance indicators related to financial goals. The smaller organisations in addition to achieving financial goals, are expected to make a significant contribution artistically.
The Australia Council web site notes that:
“Its mission is to enrich the lives of Australians and their communities by supporting the creation and enjoyment of the arts. This mission is underpinned by a commitment to:
- Excellent and distinctive Australian art - assisting Australian artists to create and present a body of distinctive cultural works characterised by the pursuit of excellence
- Access for all Australians - assisting Australian citizens and civic institutions to appreciate, understand, participate in, enjoy and celebrate the arts
- A strong and vibrant arts sector - providing infrastructure development for Australia's creative arts.”
(Australia Council website at viewed April 2008).