Local Arts Index: The Competitive Environment for the Nonprofit Arts
Posted by Jun 04, 2012 0 comments
This post is one in a series highlighting the Local Arts Index (LAI) by Americans for the Arts. The LAI provides a set of measures to help understand the breadth, depth, and character of the cultural life of a community. It provides county-level data about arts participation, funding, fiscal health, competitiveness, and more. Check out your county and compare it to any of the nation’s 3,143 counties at ArtsIndexUSA.org.
I unpack my suitcase in about 30 cities per year. Every community I visit has its own unique cultural character. You can see it in the landscape of the built environment, the distinctive mix of organizations—old and new, large and small—when walking the cultural districts and among the public art, sampling local culinary delights, and seeing evidence of the artists at work. So, how to capture that character using the numbers? This is one of the primary objectives of the Local Arts Index.
Last time we released an indicator about the number of artist-entrepreneurs that the Department of Commerce counts at the county level. This week, we share county-level findings about the competitive environment for old-and-new and large-and-small nonprofit arts organizations.
The “millennial” share—the old and the new
It is well known that the number of arts nonprofits grew substantially between 2000–2010 (76,249 to 113,188, according to the Urban Institute).
To explore the relative impact of "old vs. new" arts organizations, we created an indicator that measures the share organizations that are “millennial”—that is, established January 2000 or later. A larger or smaller share of new arts organizations is one element of the character of a community, showing the entrepreneurial vigor in the nonprofit sector.
- This indicator measures the percentage of all nonprofits that are “millennial” in the 426 counties with 20 or more arts nonprofits that file an IRS 990. Nationally, millennials represent about 30 percent of a county’s arts nonprofits. With this baseline established, we can now poke the question...how do the old vs. new stack up in revenues?
- Millennial arts organizations pull an average of 19 percent of their county’s total nonprofit arts revenues. Thus, while close to one-third of arts organizations are new, they are bringing in less than one fifth of revenue. There are several possible explanations for this difference. Millennials may be more efficient, with a smaller infrastructure that needs less support. They may rely on the drive of a founder. Or, they may face a very competitive funding environment that makes it hard for new and emerging organizations to build revenue.
The big and the small
Another way to characterize a nonprofit arts population is to look at the mix of "small vs. large" organizations. Some communities have a handful of “majors” that consume a high share of resources. They get a lot of attention because they produce large-scale, high-attendance arts activities.
To apply a gauge to this phenomenon, we turned to some business school analytics. A “four-firm concentration ratio” measures how much of a market is occupied by the largest entities. For example, the “Big 3” auto makers had virtually the entire market share of U.S. auto sales in the 1960s and 1970s. Presently, four major companies dominate the cellphone market. In our case, we measured the share of organizational expenditures captured by just the four largest arts organizations.
- In the average county, the top four organizations represent 58 percent of total expenditures by the nonprofit arts organizations. In the median county, the concentration ratio is even higher, an astounding 65 percent. A lower value on this ratio suggests a county with more competition, while a higher number is a place more dominated by the biggest players. We were able to conduct this analysis on the 426 counties with 20 or more arts nonprofits that filed an IRS 990 in 2009.
Some readers may be reflexively slapping their foreheads and grumbling about those...[fill in the blank: large, small, new, old, institutional, entrepreneurial, traditional, community-based] organizations.
Stopping there, however, would be missing the real opportunity: to begin a data-driven conversation about what your community’s cultural character is—and, what you aspire for it to be.
If the answer is to be a community of innovation and new work, are you in an environment where the small and emerging can be nurtured? Are your major institutions cultural anchors healthy? You’ll be able to tell by comparing your county to those national averages. The Local Arts Index provides a place to begin the conversation as well as to track your changes over time.
What is the cultural character of your community?