Performing arts and culture

The character of the performing arts “industry”

• Most organizations are nonprofit, subsidized by government and private foundations grants, and individual contributions

• The audiences are dominated by highly educated individuals in high-income brackets

Audiences by education (2002)

Audiences by income (2002)

The audiences

• The effect of education on attendance at performing arts is substantially stronger than the effect of income

• Members of the professional classes (doctors, lawyers, engineers, teachers, artists) are the big attenders, with CEOs and managers (well paid but less educated) less numerous.

• The pattern holds also for jazz and folk music and even cinema.

Commercial theater

• Mostly Broadway District (On, Off Broadway)

• Most shows are musical reproductions or restorations.

• In New York about 45-50% attendance from tourists

• About 40% of box office receipts from “on-road” performances

Commercial Theater: Top 10 Broadway long runs (2012)

Show Opening season No. performances

Phantom of the Opera 87/88 10,089

Cats 82/83—2000 7,485

Les Miserable 86/87—2003 6,691

Chicago 96/97 6,416

A Chorus Line 75/76—1990 6,137

The Lion King 97/98 6,024

Oh, Calcutta! 76/77—1989 5,959

Beauty and the Beast 93/94—2007 5,461

Rent 95/96—2008 5,123

Hit musical v. hit movie

MusicalPhantom of the Opera

Motion pictureTitanic

Global box office $5 billion $2.8 billion

Average production & premarketing costs

$9 million $200 million

Length of run 25 years 15 years(most earningsduring the first year)

Nonprofit theaters

• Nonprofit theaters preserve, develop, and extend the availability of performing arts (new and “rediscovered” plays, new art directions, new talent).

• Often the source of new production On-Broadway and in other commercial theaters and/or are adapted by Hollywood.

Nonprofit theaters

• Supported by a combination of:

• Subscription fees

• Foundation grants

• Individual contributions

• Ticket and merchandise sale

U.S. nonprofit theater survey

Number of theaters 1,893

Attendance 30,500,000

Performances 172,000

Productions 14,000

Subscribers 1,760,000

Earnings $923,000,000

Contributions $868,000,000

Total Income $1,791,000,000

Expenses $1,667,000,000

Net Assets $124,000,000

Nonprofit theaters contribution to the U.S. economy

• Made a direct contribution of nearly $1.67 billion in the form of payments for goods, services and salaries.

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• The real impact on the economy is far greater: when audience members go to the theatre, they frequently go out to eat, pay for parking, hire babysitters, etc.

Center Theater Group (Los Angeles)

• A non-profit arts organization.

• One of the largest theatre companies in the nation, programming subscription seasons year-round at the Mark Taper Forum, the Ahmanson Theatre and the Kirk Douglas Theatre.

• It has a combined subscription audience of about 60,000 and a total audience exceeding 750,000 a year.

Economic issues in culture-related goods and services

• Demand is highly uncertain (nobody knows)

• Creative workers care greatly about what they produce (art for art’s sake)

• Many creative ventures require diverse skills

• Although the demand for attendance at the performing arts are price-inelastic, the overall income rise or fall have impact on demand.

Economic issues in culture-related goods and services

• Live performances are economically inefficient because performances are “consumed” at the point of production.

• Productivity cannot be raised significantly

Purely economic issue

• Taxpayers financial support for money-losing programs enjoyed by an elite few is a waste of resources better spent elsewhere

• Sol Hurok (Theater producer): “If I would be in this business for business, I wouldn’t be in this business.”

Arguments for public support

• Opens opportunities for development of talented individuals from non-affluent backgrounds

• Has educational benefit, exposing young people to cultural activities that they might not otherwise encounter

• Encourages artistic innovation, which is a source of economic growth

• Arts are public goods that, when provided to individuals, are of collective benefit to other members of the community.

Positive “externalities”

• An externality (spillover): the impact on a party outside of and not directly involved in the transaction.

• An option value to having a supply of culture even if an individual does not currently use the supply.

• A bequest value for future generations unable to express preferences on currently existing markets

• An existence value such as for historic landmark building, which, once destroyed, cannot be rebuilt

• A prestige value even for those who are not interested in art

National Endowment for the Arts

• The NEA funds an array of works and activities in music, theater, and the visual and performance arts.

• NEA grants range from $5,000 to $100,000, but all grant recipients must obtain matching private funding.

• Most grants fall into one of five main categories: creativity, organizational capacity, access, arts learning, and heritage/preservation.

National Endowment for the Arts

• At its inception in 1965, the NEA had a budget of $2.5 million

• The endowment's highest level of federal funding was its $175 million budget in 1991. But controversy over grant recipients led to major budget reductions in late 1999, when annual funding dipped below $100 million.

• Obama administration asks Congress for $200 million for 2010.

The NEA's impact on American culture

• Between 1990 and 2002, the NEA provided support to thirty-five recipients of National Book Awards, National Book Critics Circle Awards, and Pulitzer Prizes in fiction and poetry.

• It funded the regional theatrical production of A Chorus Line that went on to become a Broadway smash in 1975

• Supported Maya Lin's design of the Vietnam Veteran's Memorial, dedicated in Washington, D.C., in 1982.

• The NEA has also made a special effort to recognize American jazz masters through a series of fellowships.

Arguments against public support for the arts (from The Heritage Foundation)

• The arts will have more than enough support without the NEA

• The NEA is welfare for cultural elitists

• NEA funding threatens the independence of art and threatens artistic inspiration

• The NEA promotes politically correct and indecent art

• Funding the NEA disturbs the U.S. tradition of limited government