A new William Penn Foundation-commissioned study paints a portrait of the Philadelphia arts scene as rife with both promise and peril.
The report, which examines more than 160 groups, says some are coming up with innovative ways to adjust to changing demographics and ticket-buying patterns, but it also finds that 70 percent are in poor financial health, undercapitalized, and unable to withstand financial stress or to fund new ideas. And while there is a promising new generation of philanthropists in the area, they have not been persuaded by arts groups to loosen their purse strings.
Huge sums of money are being sought for projects such as expanding the Philadelphia Museum of Art and underpinning the Philadelphia Orchestra with adequate endowment - a total of $1.4 billion among just a sampling of 38 groups, without taking into account millions more needed for annual support, recovery funds to stabilize balance sheets, or deferred maintenance.
"It is unclear if individual donors will step in to keep total funding level going forward," says the report, from the consultant TDC of Boston. "Our interviewees sketched for us the dynamic that is playing out: a generational shift taking place among major donors in Philadelphia. Stalwart community leaders who drove individual giving are retiring. While wealth continues to exist in the region, arts organizations have not yet cultivated close relationships with the next generation. The question remains - who is on the other end of the arts community's $1.4 billion call on philanthropic capital, and how will they be engaged?"
The study, "Capitalization, Scale, and Investment: Does Growth Equal Gain?," is to be discussed Monday morning in a presentation to the arts community at the Chemical Heritage Foundation. Coauthor Susan Nelson says Philadelphia should take heart that much has changed in the city since her last snapshot, 2009's "Getting Beyond Break Even."
Donor fatigue continues, as does the ticket-buying public's abandonment of the subscription model. But, she said, "one of the most encouraging things is that in 38 interviews, we heard some really great ideas. In the previous study, we heard people just struggling, and that's a huge change.
"What Philadelphia should be thinking about is, how do we invest in the next best ideas and give them the capital they need to do it? Don't just give them enough, give them more than enough."
Easier said than done. But the William Penn Foundation increasingly is aiming its support at innovative ideas, with a "new audiences/new places" line item in its grant budget for 2015 that is expected to award $6 million, and an as-yet-undetermined amount for business-model change.
"As we look at this, the thing that we're probably most focused on is, what is going on with audiences?" says William Penn executive director Laura Sparks. The study is confirmation, she says, of anecdotal reports from arts groups that "paid audiences are flat-to-declining and really a recognition that audience behavior is different, consumption patterns are different, the subscription model perhaps not being a viable model. And as we look at younger generations and look at the ways in which they spend their free time, really thinking about how to capture their attention and potentially their financial contributions over time is important."
The foundation's overall arts budget is rising to at least $17 million in 2015 from $14.1 million in 2014 - and possibly more, depending on the kinds of proposals the foundation receives. Within that figure, the amount going toward general operating support is also going up. "We intend to offer at least $8 million," Sparks says, "a 35 percent increase in core support over last year."
The total amount going toward its "creative communities" program (of which arts and culture is a part) will rise in 2015 to $30 million from $25 million in 2014. The foundation's giving to all areas will go up in 2015 to $105 million from $90 million. Both increases reflect the rising market value of the foundation's endowment.
Sparks said that, in addition to providing support, William Penn is trying to recruit foundations outside the city as potential partners in some projects. "We have informally been doing much more outreach to those foundation peers in other parts of the country," she said, "to see if we can recruit some of that funding here."
TDC's report said those they interviewed were not wrong in their "collective perception that they are chasing a shrinking pie." Competition has increased because, by and large, weak groups have not folded, large groups grew the amount they needed and were raising, and the paying audience has not grown. Between 1995 and 2008, the number of nonprofits in the area grew to 2,740 from 1,669, the study notes.
And it wasn't just the growth of the overall sector that made it hungrier. Unlike elsewhere, Philadelphia's large groups - those in the $5-million-to-$20-million annual budget category - have expanded in recent years. These large groups added nearly $60 million in need between 2007 and 2011.
The current report uses data from 2007-11, the latest available, but Nelson believes little has changed. Many of the findings closely align with the conclusions of The Inquirer's three-part "Culture at a Crossroads" series published in the fall of 2013.
While the sector has grown, paid attendance has not kept up. Attendance rose 1.6 percent, but some of that came from free tickets. Backing out that number, paid attendance actually fell 1 percent. Ticket prices, however, went up. The average grew to $21.22 in 2011 from $18.33 in 2007, or more than 15 percent. "Going forward," the report says, "greater-than-average increases to ticket prices may quickly bump up against limitations."
A bright spot was museum membership, which the study reported had increased 35 percent between 2007 and 2011. As an avenue to donations, however, the boost was not useful. Contributions from individuals declined slightly, the study said.
With the last two or three decades focused on growth, much of it supported by foundations like William Penn, questions of when it's smart to grow and when it's time to administer palliative care are examined in the report. William Penn, for instance, approved a grant at its recent board meeting to pay for the costs of ending operations of the Philadelphia Singers, which, after experiencing leadership change and not receiving its last William Penn grant, decided to dissolve after this season.
"As we know, it can be a very difficult decision for an organization to wind down," says Sparks. "Part of what we hope - as more and more organizations look to new models or look to mergers or look to wind down - is that by seeing other organizations do this, they can realize that it's not necessarily a sign of failure, that sometimes organizations run a course. For us, it's important to make sure that those organizations can wind down in a responsible way."
The report rattles off a series of questions likely to set off heated discussions throughout the city: "Is it possible to conceive of exit as something other than failure, and rather a natural phase in the life of an organization? What kind of incentives might encourage managers to consider exit as a viable option and a cause to rally their boards around? Does growth indicate success? When does growth make sense, and when is it going to make an organization less sustainable?"
The last question, though, might be the most germane, and the most difficult to confront: "Have mature arts markets like Philadelphia reached a saturation point where significant audience growth is not possible?"
70 - Percentage of area arts and culture groups in poor financial health.
1,669 - Number of nonprofits in the area in 1995.
2,740 - Number in 2008, an increase of 64 percent.
$18.33 Average ticket price in 2007.
$21.22 - Average price in 2011, a 15 percent rise.