NFP Theater Supply Down by At Least One: Intiman of Seattle

The news came out yesterday that the Intiman Theatre of Seattle was canceling the rest of this season and laying off all staff.  The board hopes to restart the theatre with a 2011-2012 season.  We hope they can but it's hard to plan and implement without staff.  

This news made us think about the hubbub started when the chairman of the National Endowment for the Arts, Rocco Landesman, said that theater supply was in excess of demand a few months ago.  Since demand was not increasing, he continued, supply would have to shrink.  We've been seeing the shrinking for several years and some good and vital theaters with national reputations have gone away.  Think of the Theatre de la Jeune Lune of Minneapolis, one of the first to exit even before we knew the world had entered a major recession.  

We weren't surprised.  The "Afterword" of our book, Stage Money, lays out the problem using statistics similar to those Landesman used.  

[An] NEA study, limited to theatres with a budget of at least $75,000, found that the number of not-for-profit theatres had doubled between 1990 and 2005.  Although the financial state of these theatres looked sound at the time of the survey, the NEA findings about the changing size of the theatre audience were troubling.  The study found that audience size in this period, measured by a respected national survey of public participation in the arts, did not grow and in some cases declined.  The audience for musical theatre remained roughly flat as a percentage of the US population, but population growth increased the audience size for musical theatre from 32 million in 1992 to 37 million in 2008.   The absolute size of the audience for straight plays declined, from 25 million people to 21 million.  The question that remains is obvious and stark: how can the number of theatres double if the audience for all theatre has only increased by 1.7 percent? 

In business terms, this would be called a glut, where there is an overabundance of a product causing prices to fall, in a perfect market.  When a farm product is in a glut, some farmers decide to raise something else in the next year.  When a manufactured good is in a glut, companies go into bankruptcy, are acquired or merge with other companies, or change what they manufacture.  Once supply and demand are in better balance, the remaining firms can make a profit again. Recessions often trigger this consolidation.  When the economy is hot, companies on the brink can last a little longer but a recession reveals weaknesses.

The NFP theater is not like a manufacturing company so the effects of a glut on theater are different in some ways.  A community has a sense of ownership of a successful NFP theater and will not readily let one die.

NFPs have two sources of funds: box office and donations and grants.  Many grant making groups have discouraged NFP arts groups from having surpluses; this policy has put some groups at risk.  Grants organizations have been more interested in funding some new initiative, a new building, than in funding operating costs.  Grantsmakers in the Arts, an organization in support of arts grantsmakers, published the results of its "National Capitalization Project" in September 2010, urging its members to reconsider these policies that have put arts organizations at risk in this recession, and not only theaters, but dance companies, opera companies, orchestras, and museums.

For the NFP theater, box office counts, too.  In addition to supplying 40 to 60 percent of budget in the NFP theater, a thriving box office convinces donors that the organization is healthy, filling an aesthetic need in the community.  There is some level of audience so low that unearned moneys will start diminishing, too.

(In passing, note that Broadway never has a glut problem because it has only 40 theaters to fill.)

One doesn't get to choose directly which companies will survive. We don't get to choose directly which theaters will survive this recession.  The issue is not only artistic.  In the case of Intiman, the board says, a history of running in the red and carrying excess debt has lead to their shuttering now.

Some have argued on theater blogs that this conflict between supply and demand doesn't apply to the NFP theater because the people involved are making art.   Nice idea, but even artists have mortgages and health costs and student loans, etc.  Yes, artists will tighten their belts to hang on.  But as we looked at average wages for theater artists for our next book in process, Theater Career Facts: What Students and Parents Should Know, we found that for many theater artists, there is little room left for economizing already.