August 2010 Field Letter
Written on July 29, 2010
We gain crucial information from Captivate, our elevator TV news service, as we ride the 24 floors to TCG’s offices. We learn new vocabulary words we never knew existed, how the markets are faring and various world news updates. Last week, a phrase flashed across the screen, "slow is the new fast." It’s odd to read that on an elevator television monitor, which is pummeling us with news and advertisements when we could be having a moment of respite. Its message is also a far cry from the old Target motto, “speed is life!” It's a reminder that even in fast times of rapid change and endless communication, there is an important place for “slow and steady wins the race.”
Late July is when TCG completes Theatre Facts, our annual report on the attendance, performance and fiscal health of the field based on responses to the TCG Fiscal Survey. Theatre Facts 2009 is derived from data for the fiscal year that theatres completed between October 31, 2008, and September 30, 2009. I’ve had many conversations with colleagues about the usefulness of any financial information that is more than a few months old in these radical economic times. In response to these conversations and the pressing need for instant field-wide fiscal information during the recent economic crisis, TCG initiated the Taking Your Fiscal Pulse Snapshot Survey series in September 2008. Through short surveys circulated to the field at six-month intervals, we were able to glean and report “up-to-the-minute” information about fundraising, ticket sales, budget cuts, year-end projections and so on. (Going forward, we plan to conduct Fiscal Pulse surveys only at the beginning of the calendar year, when the majority of theatres will have completed their last fiscal year and have a sense of how they expect to end the one they are in.)
While the Taking Your Fiscal Pulse Snapshot Surveys are a valuable addition to our research efforts, they cannot take the place of an in-depth fiscal survey. TCG’s steady commitment over the last 36 years to gathering, verifying and analyzing fiscal information from member theatres has created a tremendous body of knowledge and historical information for the benefit of the field. The annual TCG Fiscal Survey serves an important function both as useful information for the present moment and as an historic profile of our field and its growth. It’s helped us get to know ourselves and each other better, and I would venture to say that it has strengthened our field by providing a regular benchmarking mechanism for those theatres opting to use it in such a way.
When the Fiscal Survey was first launched for the 1973-74 fiscal year, then-executive director Peter Zeisler wrote:
This cooperative and reciprocal project is an indication of the growing trend among these theatres to see themselves not only as individual institutions serving specific regions and communities, but also as segments of a larger phenomenon which reflects many mutual concerns and characteristics and may be considered America’s “National Theatre.”
Before arriving at TCG, I was leading TCG member theatres in a variety of locales, and I always found the Fiscal Survey to be incredibly useful in educating boards about the economic make-up of our field. The theatres that complete the survey have access to the data supplied by each theatre as well as a variety of tools for sorting and further analysis. (Contact Ilana Rose at firstname.lastname@example.org for further information about how to use these tools.) In my own work, I’d identify three or four theatres that I most wanted to emulate and then compare my theatre’s economic makeup and performance with theirs. Often I would share that information with my artistic director and board, and we would strategize about the areas we wanted to improve. As I travel now, I have been in many a board room where entire presentations have been based on comparisons among theatres—and on the TCG Fiscal Survey.
There’s an enormous amount of information in Theatre
Facts 2009, and I wanted to share with you a few items that
grabbed my attention. 2009 was the first full year in which TCG
theatres absorbed the impacts of the recession. The Profiled Theatres
section of the report includes a budget group breakdown of the data
from 180 theatres that participated in 2009 and tells an important
story about what happened that year, but it is also fascinating
to look back through the data supplied by our Trend Theatres—the
112 theatres that have participated in each of the past five years—to
see where the shifts are occurring.
CUNA (Change in Unrestricted Net Assets)
CUNA is what is also referred to occasionally in the report as the surplus or deficit for a year. It is the surplus/deficit “writ large” as it includes investment gains and losses, as well as assets released from restriction for capital projects—both of which remove the numbers from what is a strict operating result.
In the last five years, the percentage of theatres with negative Changes in Unrestricted Net Assets went from 39% to 60%. This was driven primarily by investment losses that particularly affected the larger theatres. In FY09, the average deficit for 180 theatres responding to the survey was ($465,729). The negatives were the highest in the largest theatres with Group 6 at ($2,477,483) and Group 5 at ($657,974). For fun, I subtracted from the equation the gains and losses on investments—which typically are not included when a theatre is evaluating their surplus/deficit for the year—and the average surplus/deficit numbers look more like this:
Group 6: ($369,211)
Group 5: ($496,993)
Group 4: $222,490
Group 3: $4,010
Group 2: ($3,326)
Group 1: $19,677
While it’s been a difficult time for everyone, the larger
theatres on average had deficits while the mid-size and smallest
theatres, on average, did not. Any assets released from restriction
for capitalized items such as buildings are still skewing these
numbers to the positive.
(NOTE: One Group 1 theatre had six-digit positive CUNA; without that theatre, the group overall would have averaged negative CUNA. Groups 3 and 4 theatres averaged positive CUNA.)
Poor cash flow is one of the biggest contributors to sleep deprivation among American theatre leaders. The part of our survey that gives a clear snapshot of our field’s liquidity is the analysis of working capital—theatres’ ability to meet day-to-day cash needs and current obligations.
In the Profiled Theatres section, working capital is calculated for 169 theatres; the average was ($1,648,113) and total negative working capital for the aggregate was approximately ($278 million). If every TCG member theatre responded to the survey, I imagine the number would be closer to ($500 million). On one hand, this is a large number for the field to be managing—i.e.: a lot of lost shut eye. On the other hand, it is small when compared to, say, the $700 billion bank bailout which was approved by Congress in 2008.
An important feature of the Fiscal Survey is an extrapolation of the findings to a larger Universe of theatres, allowing us to estimate activity by 1,825 not-for-profit theatres operating in the U.S. in 2009.
The estimate for total paid workforce is 128,200. Artistic and production jobs far outnumber administrative jobs. The breakdown is as follows: Artistic (63%), production/technical (25%) and administrative (12%). The number of jobs is down from the previous year by 2,800, a 2.1% shift.
Among Trend Theatres, administrative payroll exceeded artistic payroll in each year from 2005-2009, and the amount that payroll exceeded inflation in the last five years is as follows: 4.1% for artistic, 12.6% for administrative, and 17% for production/technical.
Exceeding or trailing inflation?
The Trend Theatres section of Theatre Facts 2009 reveals how various income and expense items either exceeded inflation or did not keep pace with it over the 5-year period from 2005-2009. Interestingly, the trend in earned income decreased 23% over the 5-year period. This was primarily driven by negative changes in investment income, which fell short of inflation by 244.4%. Ticket sales only decreased by 2.2%, while “other earned income”—non-ticket income from tour contracts/presenting, educational/outreach programs, royalties, concessions, enhancement/co-productions, advertising, rentals, etc.—actually increased by 13.4% over the 5-year period. If investment income is excluded from the equation, then, earned income growth for the period was 0.8% above inflation. Theatres are finding ways to complement traditional forms of income with new income streams. Still, overall expense growth from 2005-2009 exceeded inflation by 9.7%. Most expense categories saw increases in the double-digits; only royalty expense and production/technical non-payroll (physical production) expense decreased during the 5-year period.
Also of note: There were double-digit increases in federal, foundation, trustee, in-kind and “other” support and double-digit decreases in state, city/county, corporate and United Arts Funds support. Overall income decreased 12% over the 5-year period and supported 20.3% less of total expenses in 2009 than 2005, the lowest level of expense support during the period. Despite theatres’ dramatic capital losses in 2008 and 2009, both fixed assets and investments had inflation-adjusted growth in the double-digits over the 5-year period.
Longer term trends: 10-year Trend Theatres
While the exact same set of theatres do not participate in the Fiscal Survey each year, there is a subset of sixty six Trend Theatres that have been a part of the survey for the last ten. This special 10-Year View can be found on pages 19-21 of the report, and the following quote from Peter Zeisler, from his launch of the Fiscal Survey in 1973-74, exemplifies how this body of knowledge was intended to gain value over time:
This survey was conceived as an annual TCG service, and its usefulness will increase in the years to come, when valid specific comparisons can be made from year to year. The statistics indicate the strong base most of the theatre institutions have developed, and considering how young the nonprofit professional theatre is in our society, this survey reflects its extraordinary growth so far.
What strikes you as you look at Theatre Facts 2009 and the trends contained therein?
Until next month, all the best,
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