The State of the Arts and Culture Subsector
Published August 2020
In 2020, a striking number of challenges have highlighted and tested this role. Perhaps most obviously, the COVID-19 pandemic has transformed the way arts and culture organizations can reach and serve their patrons. When they closed their doors earlier this year, organizations faced a loss not just of earned income, but also of a vital way to foster connection. Many organizations have responded with the creativity and dependability their patrons have come to rely on. Quickly making the shift to offer digital experiences, organizations are now exploring how to weave that virtual engagement back into a sustainable earned revenue model. Nevertheless, many continue to grapple with challenges to their pricing structures, staff and performer employment, and new health regulations.
The pandemic is not the only major factor shaping the arts and culture landscape in 2020. As the groundswell of the Black Lives Matter movement has amplified, organizations play a critical role in shaping the community’s cultural and historical awareness. Some organizations had already been working to address issues now at the forefront of headlines, such as addressing Confederate monuments or ethical gift acceptance practices, while others are now hastening to examine their responsibilities more deeply during this cultural moment.
One thing is certain: arts and culture organizations are vital to our ability to meet our society’s rapidly evolving needs creatively and innovatively. In this report, we examine the specific ways in which giving to arts and culture organizations has unfolded both over the long term and the recent past. This report offers clues into how this vital subsector weathers change and how fundraisers and leaders alike can prioritize engagement to continue serving into the future.
With 2019 in what seems to be the distant past, how can we better understand which trends reflect the state of our sector now? What types of information can we provide organizations, stakeholders, and constituents to help navigate the road ahead? And when challenges feel stark, how do we remind ourselves that they offer the opportunity to reimagine our futures?
Confronted by these changing times, it is more crucial than ever that we seek greater perspective.
Understanding the long-term trends that have shaped your subsector is a key component of your response to today’s landscape. We hope that these perspectives will help you to identify and invest in the right strategies to move your mission forward in the long run.
The Long View
Taking a longitudinal view allows us to see how charitable giving has weathered similar events. It allows us to learn from these changes, grow, and move organizations forward with data-informed strategies. Adjusted for inflation, giving has increased nearly $300 billion between the years 1979 and 2019 (Giving USA, 2020). Total charitable giving has increased or plateaued in current dollars every year since 1979, with the exception of three years that experienced significant economic declines: 1987, 2008, and 2009.
While these declines coincided with severe economic downturns, overall charitable giving rebounded alongside economic recovery. Giving USA Foundation research indicates that, in the past, it has taken an average of three to four years for inflation-adjusted charitable giving to rise back up to pre-recession levels. Between 2008 and 2019, giving increased $77 billion, from nearly $350 billion in 2008 to $427 billion in 2019. The recent Great Recession ended in 2009 and yet, for the most recent decade from 2010 to 2019, the total growth in inflation-adjusted giving is 33%. Giving in 2019 reached nearly $450 billion (Giving USA, 2020).
The arts and culture subsector has been more vulnerable during recent economic downturns (in 2001 and 2008). When confronted by a financial crisis, arts organizations often experience a decline as they compete for donations against public and society benefit groups. Following the Great Recession between 2007 and 2009, giving to the arts, culture, and humanities subsector did not exceed pre-recession levels again until 2015. However, arts organizations have proven to rebound over time. In 2019, the total amount contributed to this subsector reached its highest inflation-adjusted value, having increased by 12.6% year-over-year and totaling $21.64 billion.
Arts and Culture Subsector Trends in
Total Giving, 1979-2019
In addition to trends in total giving, gross domestic product, or GDP, is one of the most helpful indicators for tracking and explaining changes in revenue across the nonprofit industry. Research shows that giving revenue growth rises during periods of strong economic growth, when the GDP is growing, and slows or even falls during periods of relative economic weakness (Target Analytics, 2015.) Charitable giving in the United States has been about 2% of total GDP for more than 40 years. In boom times, it has reached as high as 2.3%, and in recessions, it has dipped as low as 1.7%. This means that in a slow economy, not only does giving slow down, but it also declines as a proportion of the average American’s spending dollar.
In recent years, however, this figure has remained steady while overall giving has grown and philanthropy has opened its doors to additional channels like crowdfunding and donor-advised funds (DAFs). When larger circumstances influence those factors like financial capacity and inclination to give, fundraising often feels the effects. However, philanthropy tends to lag behind stock market volatility, following the general up- and downward trends across time. As markets continue to fluctuate and as philanthropy continues to shape its response to today’s current events, it remains too early for recent market volatilities to be felt across overall giving
Just as the percentage of GDP has remained steady, the percentage of disposable income has also hovered around 2% for the past 40 years (Giving USA, 2020). Despite this continuity, major events and social movements have the power to temporarily attract attention towards specific causes. Natural disasters, for example, have almost always prompted a noteworthy charitable response. Following major environmental events, organizations such as cultural institutions (which, who are not considered on the “front lines”) tend to see a dip in giving as donors and organizations respond to immediate needs.
In 2017, an extraordinary multitude of circumstances motivated Americans to engage socially and politically (Vital Signs Part 2, 2018). Beginning in late 2016 and gaining massive energy in 2017, civic involvement was charged with political and social energy due to the presidential election. In tandem with those influences, 2017 tax reforms further shifted giving dynamics by motivating the use of DAFs and foundations.
In the immediate aftermath, organizations saw significant rises in households making new gifts. While organizations did not retain all those new donors, the spotlights shone on their causes provided a renewed interest in giving. So far, 2020 has felt an unforeseeable convergence of similar influences. From economic shutdowns due to the pandemic to the advocacy and protests generated by the Black Lives Matter movement, we should anticipate 2020’s climate of giving to be affected by these events.
Year-to-Year Change in Households Making New Donations
History—specifically the 1970s and 80s—shows us that while these kinds of social and political movements do not directly benefit all charitable subsectors, expanding the population of donors inevitably benefits all charity. Advocacy organizations and those most directly affected by social and political movements see increased support first and often dramatically.
We can better see this by assessing the allocation of charitable dollars across subsectors. For instance, while overall giving to religion continues to receive the majority of giving year over year, it has declined as a share of giving to all organizations since the early 1980s (Giving USA, 2020). Moving from 54.8% of all giving in 1979 to 31.4% in 2019, this reallocation has allowed additional subsectors to flourish, furthering their growth.
Giving by Type of Recipient: Percentage of the
Total in Five-Year Spans, 1979–2019
In addition to this view, the breakdown of charitable dollars given by individuals, foundations, bequests, and corporations has fluctuated. Over the last 40 years, giving by individuals has begun to decline as a percentage of total giving. And for the most recent two years in a row, individual giving has totaled less than 70% of all giving. This is in sharp contrast to the five-year period beginning in 1980, when individuals gave 82% of all charitable dollars. The increasing concentration of wealth throughout the U.S. has played an outsized role in creating foundations. This trend, coupled with rising income inequality and the emerging influence of DAFs, continues to increase the share of giving by foundations, and decrease the percentage of giving from individuals.
Though 2020 will be marked as a time of widespread change, the overarching trends in philanthropy are positive: Individuals, companies, and groups continue to invest in the causes they care about. Giving by individuals remains the largest contributor to overall giving year over year. More than ever, this reminds us that while much is in flux, the core values of patrons remain the same. It is up to our organizations to remain committed to cultivating these relationships. Staying attuned to the long-range trends, as well as the continued influences of innovations like DAFs and crowdfunding, will support your mission as you approach your strategy for 2020 and beyond.
2019 In Review
In 2019, charitable giving in the United States grew 1.0% based on analysis of $36.3 billion in donations by the Blackbaud Institute (Charitable Giving Report, 2019). Online giving grew by 6.8% compared to 2018 after analysis of $2.7 billion in online donations. Arts and culture organizations experienced a 9.4% decline in overall giving and an 8.1% increase in online giving.
Traditionally, most transformational and major gifts are not yet made online, so on average, online gifts are lower than offline gifts. In 2019, the average donation amount was $617, while the average online donation was $148. For arts and culture organizations, the average donation amount was $334 and the average online donation was $75. While online donation amounts may remain low, we may see an inverse of this trend as in-person stewardship and programming give way to online-only engagement.
2019 also saw a continuation of multi-year trends in monthly giving patterns. While December remains the largest month as a percentage of giving, June continues to drive giving due to end of fiscal year fundraising campaigns. While this year has proven to be a mixed bag of unexpected spikes in need and attention, organizations should continue to anticipate growth at the end of the year as organizations execute giving day and end-of-year campaigns. Know which months yield the highest giving for your organization and subsector to ensure that you are prepared to maximize your opportunities.
Snapshot in Time
As trends throughout 2020 begin to emerge, we can identify how several subsectors and organization types have started to navigate the current environment.
Year over Year change in overall giving, June 2019 - June 2020
Pertaining to year-over-year trends, data from the Blackbaud Institute Index shows that overall giving declined in the immediate onset of the pandemic. The general donor population froze with the rest of the social good sector, as businesses shut their doors and individuals stayed home to quarantine. The cancellation of major events, conferences, and galas created a decrease in giving for March and May but showed slight increases in April and June compared to giving in the same months in the year prior.
Heading into April, overall giving spiked as philanthropy responded to the pandemic. Widescale giving days, such as the addition of #GivingTuesdayNow in May shone a spotlight on charitable giving at a time when many were receiving economic impact payments, assisting in its execution.
Arts and Culture Subsector
Year over Year change in giving, June 2019 - June 2020
Data from the Blackbaud Institute Index, which captures giving arts and culture organizations, shows that this subsector experienced increased giving through April and May with declines in June compared to the previous year’s cumulative 12-months. As you can see from the chart above, organizations across all subsectors experienced a slight, 12-month cumulative increase from April to May. Potentially impacted by the fiscal year’s end, all organizations saw a year-over-year increase in June.
Beyond the arts and culture subsector, other mission areas, such as food banks, received significant support throughout the several months. Across many charitable subsectors, increased demand for services due to economic shutdowns, job losses, and healthcare needs, have been supported by increased contributions. Organizations found their stride in late spring with overall giving in June leveling off at an increase of 1.2% for the last 12-months ending in June compared to the same months ending in June 2019.
While the percentage of online donations has levelled off for the last two years, we may see an uptick in 2020 as in-person stewardship and programming give way to online-only engagement. These effects will be telling if seen throughout major giving, where gifts have traditionally been made in-person. Across all subsectors, there has been a 36% in online giving year-over-year from the three months ending in June 2020 compared to June 2019. Arts and Culture organizations saw a -0.4% decrease of online giving in the three months ending in June 2020 compared to June 2019. Significant jumps during the month of May show an increasing reliance on online platforms, as many organizations rushed to leverage momentum from #GivingTuesdayNow.
In addition to these emerging trends, several other factors may continue to shape the year in charitable giving. Throughout the remainder of 2020, we may anticipate heightened civic and political giving following a summer of activity that saw the growth of the Black Lives Matter movement, as well as increased advocacy for safety, health, and healthcare workers’ rights amidst the pandemic. In the fall, the potential effects of hurricane season may also draw increased support to disaster relief causes in the aftermath of any events.
In tandem with this engagement, the upcoming presidential election presents an opportunity for organizations to broadcast their causes and how they relate to issues on candidates’ agendas. The election will coincide with the start of many organizations’ end of year campaigns, which could further fuel charitable activity. Underpinning each these factors, the CARES Act of 2020 reinstated a $300 charitable deduction for one year. This may entice an uptick in low- and mid-level donations by a comparable amount, as many individuals race to give to the causes of their choice. These effects may amplify pending further changes in unemployment and federal relief.
To brace for these and bolster your organization, you can examine several core practice areas.
Diversify Your Revenue Mix
Arts and culture organizations should not overlook revenue mix as a component of ongoing strategic planning. Examining data from the Urban Institute’s Nonprofit Almanac shows that, across subsectors, arts and culture organizations rely principally on private contributions and non-government grants and fees. While different organizations may thrive through various combinations of revenue sources, organizations should avoid an over-reliance on any one source.
Percentages of Revenue by Sources of Reporting
Public Arts and Culture Charities, 2013
While many organizations are working creatively to monetize the digital engagement experiences they began building in the early days of the pandemic, the initial loss of earned income has left many organizations in weakened positions. In compliance with social distancing measures, arts and cultural institutions closed their doors to the public, along with opportunities to earn revenue through ticketing as well as event rentals. Although crises like the pandemic are unpredictable, organizations should be aware of revenue sources that could exert an outsized influence on their budgets. Several key metrics can support you in uncovering hidden variables throughout your budget.
- For instance, the dependency quotient is a metric that quantifies the risk associated with a lack of revenue diversification. It assesses the percentage of an operating budget that would be left unfunded if an organization were to lose its top five donors. To calculate your dependency quotient, divide the total contributions of your top five patrons by your organizational expenditures. While some organizations may cease to exist if they lost their top five donors, others may experience minimal distress. This metric allows you to take a more nuanced approach to your fundraising strategy to steward your top patrons, while also staying focused on your other revenue sources. See The Right Mix to learn more.
- In addition to their dependency quotient, organizations should regularly calculate their cost to raise a dollar. This metric shows the investment that your organization requires to fundraise. To calculate this, add staff and all fundraising expenses together, then divide that by the total net fundraising total. Most development staff understand that investment is often required to achieve long-term fundraising success. Regularly tracking this metric across your campaigns, grants, events, and more will help you to assess your most affordable or unaffordable actions and better steer your budgeting process in the long run.
While your revenue mix may vary based on your specific type of organization, these metrics can illuminate the weak spots that may be hiding in your budget. By putting the costs of your fundraising into perspective, you can strive towards financial sustainability by prioritizing a revenue mix that can weather downturns and position you for long-term success.
Inspire Your Major Giving Strategy
Data from the Vital Signs series has found that while the overall amount of dollars donated continues to grow, the number of individuals donating money is shrinking across time. As the chart below highlights, donors who are still giving are giving more than ever before. Research from How America Gives also demonstrates that the influence of major donors masks the distribution of giving across income levels. A decrease in the number of lower and mid-level donor households shows that major donors persist as a critical component of any organization’s fundraising performance.
To shore up your major giving strategy, ensure that you are familiar with the patrons in your file who are already giving as well as the prospects who have the capacity to make a major gift. You should continually review your file to evaluate your major giving program and track the success of your stewardship and moves management. Key wealth indicators can assess capacity to make a major gift. Doubling down on retention, stewardship, and cultivation efforts are crucial steps in ensuring that your mission resonates with major donors.
Focus on Retention
With all the factors affecting philanthropy, fundraisers play a more important role than ever in guiding their organizations and causes through turbulent waters. Donor retention reflects how you keep in contact with your patrons and build a pathway for their continued support. It is a direct, quantifiable reflection of how you are engaging your patrons and communicating your mission.
You should annually calculate your overall donor retention rate to assess who is choosing to stay in your donor circle every year. While organizations with a high retention rate keep or renew many donors from year to year, those with a low rate must acquire new donors to keep their bottom lines above water. This reinforces the significance of calculating retention to benchmark your internal progress annually and over time.
Donor Retention in the Arts and Culture Subsector, 2010-2015
First-year donor retention continues to be a challenge among nonprofit organizations, but multi-year retention rates remain strong. New donors disproportionately come from the pool of patrons who are already donating to other organizations. Not only do they give to twice as many nonprofits, but they also give twice as much per year when compared to donors who did not make a new gift.
While the value of your retained donors should be clear, their continued stewardship should remain a core priority across your organization. Recall that your marketing and fundraising strategies must be aligned to best frame and communicate the societal values embraced by an organization’s mission and programs. This results in stronger donor engagement and retention.
Invest in Sustained Giving Programs
Sustainer giving is a long-term strategy in which donors commit to regularly giving a set donation amount. Allowing donors to give an amount of their choosing, sustainer programs automatically support your retention while ensuring a dispersed revenue source.
Data from Sustainers in Focus examined multiple donor files and compared the retained revenue of new donors—those who first gave a sustainer gift and those who later converted to sustainer giving—against those who never gave a sustained gift. Overwhelmingly, this shows that revenue per donor increased in the years preceding to the two years following a donor’s commitment to a sustainer program. Giving increased from 50% to 300%, with even the low end far exceeding the typical return for non-sustaining donors. As a strategy choice, there is substantial value to be had in sustainer fundraising.
Returns on sustainer giving are long-term, and the success of your sustainer program relies on excellent retention strategies.
Double Down on Acquisition
To expand, organizations need to focus on strategies that address the changing macroeconomic environment in which we find ourselves. Though many of us are focused on retention and sustained giving at this time, they cannot happen without acquiring new donors. Organizations should not take their foot off the gas of acquisition. To provide the most long-term growth for your team, you’ll want to continually add to your pool of donors and enhance your acquisition strategy as a sustainable practice.
To support this, you may consult your donor acquisition cost. This metric is calculated by adding all expenses that go into recruiting a new donor, then dividing by the number of new donors acquired over a given period. By calculating the donor acquisition cost at your organization, you can better pinpoint the tactics that merit further investment while zeroing in on the channels, preferences, and behaviors that will expand your patron base.
10-Year Overall DonorCentrics Index Revenue & Donor Trends, 2007 - 2017
As highlighted above, major social and political advocacy throughout 2016 and 2017 resulted in a spike of new donors throughout 2017. In 2020, spotlights on widescale political change, civil rights, and social movements have garnered similar attention. Arts and culture organizations aligned with these causes are in advantageous positions to welcome new donors into the fold (in tandem with these influences, the 2020 CARES Act reinstated a $300 charitable deduction for one year). Together, these could potentially inspire an increase in low or mid-level donors, leaving it up to our organizations to complete the additional due diligence required to initiate and maintain relationships with new donors.
Navigate Your Digital Transformation
From reducing your manual processes through workflow automation to thriving in remote working environments and embracing new platforms, arts and culture organizations must adhere to a new focus on delivering strong, digital experiences to their stakeholders. Cincinnati Zoo & Botanical Garden is one example of the many creative ways in which organizations quickly shifted gears to continue connecting with patrons virtually. While a focus on retention and stewardship will advance your cause, you’ll also want to be sure that you are speaking to your stakeholders through the channels and platforms that they are embracing.
As consumer behavior begins to show itself across the social sphere, it is becoming clear that individuals are more eager to sit in the driver’s seat of their engagement. Speaking to individuals on a one-to-one versus a one-to-many level, these campaigns continue to gain traction, connecting people to the causes they care about through the channels they regularly use. Keeping these connections going in a virtual environment is critical for arts and culture organizations. Research by IMPACTS shows that, while near-term plans to visit cultural institutions remain low, patrons intend to return to more regular visiting patterns within six months. By keeping those connections strong in the interim, your organization can be well-positioned to welcome visitors back as soon as they are safely able to visit in person.
An organization’s success in these arenas lies in leading their staff and stakeholders. Whether you are leading your organization through shifts in your day-to-day operations or toward a full digital transformation, you must be prepared to support the donors, patrons, and networks who advocate best. Although our minds may try to steer us a different way, we need to be even more collaborative during crises. Communicating needs and understanding the realities your community and staff are working within will help you find tech tools that match their access and skill options. Just as the challenges of the organization may have changed, so too have new challenges been presented to your staff and community.
While digital transformation covers a broad spectrum, remember that the key is to use these tools to strengthen your relationships and build loyal patrons for life. In a changing digital environment, these platforms will be more crucial than ever before, offering you the ability to make more informed decisions about how to identify your patrons and nurture relationships with them.
Though we are still watching 2020 unfold in real time, we can expect a further confluence of influences to alter the year ahead. As the Black Lives Matter movement grows across the U.S. and as we head towards a presidential election, we may anticipate heightened civic activity resembling the waves felt throughout 2016 and 2017. The potential for an active hurricane season coupled with continued coronavirus relief may also usher in similar activities. While much may feel uncertain, we can better prepare for these events by grounding ourselves in the long-term perspectives that have helped philanthropy to adapt over time.
When challenges shine a spotlight on the areas in our organizations that require additional support or change, we can use these moments to emerge in stronger positions. Leaning into these moments as opportunities to reflect on how arts and culture organizations can adapt, innovate, and participate in the transformation of culture will help us tap into the practices that work in the long run. Fundraising in the arts and culture subsector will grow if fundraisers are able to reach new patrons in ways that meet the needs of both the patrons and the organizations.