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Singing in the rain: theatres respond to uncertain weather with bright new ideas.

IT CERTAINLY WASN'T THE BEST OF TIMES; but then, it wasn't the worst of times either.

That's the impression one might get when sifting through tables and charts in Theatre Facts 2003, the latest installment in TCG's annual survey of the financial health of the national not-for-profit theatre field. Looking at the big picture, the study estimates that the more than 1,200 not-for-profit professional theatre companies in the U.S. mounted 170,000 performances of 13,000 productions, employing 104,000 individuals in artistic, administrative and technical capacities. These theatres added over $1.4 billion to the U.S. economy in direct spending through salaries and payments for goods and services--and that does not count the ripple effect of successive rounds of spending by employees, vendors and others, nor of theatre-related spending by consumers on restaurant meals, parking and the like.

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Written by Zannie Giraud Voss and Glenn B. Voss with Christopher Shuff and Katie Taber, the 29th edition of Theatre Facts was published in June and is now available on the TCG website. The study is divided into four sections, each of which examines a different grouping of theatres, beginning with a broad "universe" focus and becoming more and more detailed through trend groups and profiled theatres. This enables the authors to both quantify longitudinal data derived from tracking stable groups of institutions over time and present snapshot horizontal analysis of the state of the field in a single year. All in all, 287 theatres provided financial, attendance and performance data for their fiscal years that ended any time between Sept. 1,2002 and Aug. 31, 2003, with additional data provided through IRS Form 990 of 987 not-for-profit theatres used in the universe extrapolation.

While the report highlights significant areas of growth, it also points to a number of unsettling trends, including rising costs, shrinking endowments, declining subscription totals and fundamental shifts in where contributed dollars come from. Theatres are adopting various strategies to face these challenges that are likely to result in long-term changes that will inform the industry's business and creative ecology for years to come.

What a difference half a decade makes. In 1999, booming stock markets and across-the-board economic expansion buoyed budgets and nourished what that year's Theatre Facts called "times of plenty." By 2003, the theatre community and the rest of the nation were buffeted by the effects of economic uncertainty, job losses and social turbulence due to the war in Iraq and the lingering effects of the 9/11 attacks. Still, theatres' total income grew in every year from 1999 to 2003, amounting to a cumulative increase of 15 percent after inflation. Expenses grew at an even faster rate, outpacing inflation by 22 percent over the same period. Overall productivity has increased, with the total number of performances growing by 6.4 percent and attendance rising 4.2 percent--the latter despite a drop in 2003 to the lowest attendance level since 2000. Whether this decline is a one-year glitch or the harbinger of a long-term trend remains to be seen.

Two other promising statistics: The total number of artistic, management and technical personnel has increased by 13 percent since 1999. The 2003 figure shows a slight rebound from the dip in 2002, suggesting that theatres may have begun to grow again after making strategic staff reductions. Endowment income is also up, presumably due to the overall U.S. economic recovery; and though theatres reported net capital losses on investments in 2003, those losses were substantially less than in either of the two previous years.

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Seeing Red

Other numbers paint a more troubling picture. "2003 was a difficult year for the theatre industry," the Theatre Facts authors conclude, noting a steady increase in the percentage of companies whose financial statements are in the red. For the second year in a row, more theatres ended the fiscal year with a deficit than with a surplus; 58 percent reported a negative change in unrestricted net assets, or CUNA, versus only 30 percent of the same theatres in 1999. Fortunately, the size of these deficits continues to remain relatively small, with the number of theatres running a deficit greater than 20 percent of their budget actually dropping over time.

A word about CUNA. Though it's an eye-glazing term for many a layperson, the authors point to CUNA as the most useful measure of a theatre's bottom-line financial health over a given year. In the most basic sense, CUNA tells you whether a theatre has made or lost money. A theatre that ends the year with a surplus is said to have a positive CUNA, whereas a negative CUNA indicates an operating deficit. The bigger the CUNA, the larger the surplus--or if CUNA is negative, the greater the shortfall. That said, a theatre with a history of surpluses may have no trouble handling a small negative CUNA of, for example, less than 5 percent of its operating budget.

Talk of deficits often raise alarm bells, but it's important to note that many theatres have plans in place to deal with them. "We have worked really hard for 10 or 15 years to be able to absorb a bad year, to build surpluses, to build endowments," says artistic director Richard Hopkins of Florida Studio Theatre in Sarasota. "If we have downturns we can absorb it and buy ourselves time to strategically refocus the business aspects of what we're doing." A healthy not-for-profit should be able to withstand red ink, says Actors Theatre of Louisville executive director Alexander Speer. "Our deficits have been foreseen and planned rather than being surprises," he says, pointing out that the theatre built up an accumulated surplus during the '90s as a contingency for future shortfalls. "We went through a strategic planning process and we foresaw that we were going to be in a deficit situation for three or four years." The worst is over, he says. How does 2004 look? "Very positive."

Theatre Facts focuses primarily on operating funds. While it's good news that in 2003 theatres witnessed an overall growth of assets, including investment portfolios, endowments and capital campaign funds, these funds tend to be restricted--e.g., grants payable over time to fund specific projects such as capital improvements or educational programming. They generally do not figure into CUNA and are not part of working capital, the assets available to the theatre to meet such everyday obligations as paying bills and meeting payroll.

Adequate working capital provides a cushion for the vagaries of a turbulent economy. In other words, managing director Teresa Eyring of the Children's Theatre Company in Minneapolis explains, "If you have a strong working capital position you can handle a couple of years of ups and downs." Using a formula developed by Cool Spring Analytics, Theatre Facts examines theatres' balance sheets to determine the state of their working capital. In Eyring's eyes, the data show that the situation for theatres across the country is "not as strong as it should be."

When working capital is negative and theatres amass an accumulated deficit, they must bridge the gap to meet daily operating needs. Some institutions access cash reserves and similar funds from past surpluses held aside for precisely this purpose. Others are forced to delay payables, rely on monies from deferred subscription revenue and take out cash-flow loans. In other words, they must borrow against their future.

"This is a serious issue, [but] it's not a sexy issue," Eyring says. "Going out to funders and saying, 'We need help improving our working capital' is not necessarily the thing that makes people pull out their checkbooks." It's a lot easier to raise money to build a new building than to pay the electricity bill to keep it lit.

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Feeling the Pinch

Imagine a factory that produces electric blenders. Let's say it costs $10 to manufacture a dozen blenders. If it can cut costs and build a dozen for only $7, great. And if it can squeeze out 14 for that $7 dollars, even better--that's increased productivity. But at what price?

Theatre is a labor-intensive industry--in 2003, 55 percent of expenses went to compensation: artistic (21 percent), administrative (20 percent) and production (14 percent) payroll--and as such, the price may be too great to bear.

"What we've tried to do in order to deal with these tougher times is to do more work," former managing director Jon White-Spunner of Pennsylvania's Bloomsburg Theatre Ensemble says. "The flip side of that is that we have burn-out. We haven't seen a pay increase in four years here. How do you manage trying to increase productivity and at the same time keep your staff? That's the major challenge I see going forward."

When faced with tight working capital situations and looming deficits, theatres pare down budgets to make sure to get the most out of every penny, on both the administrative and artistic side. "We are really good at controlling our costs," says White-Spunner. The problem is that after several years of reining in budgets, there may be no more room left to cut. "We are so bare-bones in terms of what we pay to produce plays, what we pay our artists, what we pay our staff," he comments. "Our challenge is to find alternative sources of revenue." And so theatres are putting more resources into fundraising, as well as exploring innovative strategies for increasing earned income and entering into collaborations with other companies or commercial producers (see sidebars).

Even so, strategic cutbacks are sometimes necessary. These may involve layoffs, scaling back or postponing specific productions and cutting non-essential programs. At the Alabama Shakespeare Festival, Kent Thompson faced a severe funding crisis in 2003. "What we tried at first was what many theatres try: to do the same with less money. We cut staff, cut positions, cut what we spend on our product and yet at some point try to keep true to our artistic mission." He describes this as "internally cannibalizing ourselves."

That didn't work. "We didn't have a significant enough staff on our administrative side to sell the tickets more aggressively," he explains. The theatre has since changed tacks. "We have chosen not to greatly increase our production or artistic staff. We're going to keep them at the same level--the reduced level--for the near term. We're going to pay them better. We're going to restore the materials budget to our productions. Our big focus is going to be on marketing and attracting new and more audiences. And we're also going to put money into development to go after the small business donor and the individual donor more aggressively than we ever have in the past." The theatre also embarked on a radical administrative restructuring, whereby the board chose not to renew the managing director's contract. Instead, Thompson now heads a six-person management team consisting of five department heads, himself acting as artistic director and CEO.

All the while the theatre's board and professional leadership engaged in lengthy discussions, Thompson says. "We talked a lot about our mission. There were a lot of suggestions about why don't we just do more 'fill in the blank': big musicals, or children's theatre, or country-western revues, or things the board perceived bringing in big crowds. It took a lot of talking back and forth for the board to accept that no, what we are is a Shakespeare festival and a creator of new Southern plays, and then we do other plays and other kinds of theatre that fit within our mission."

Managing director Thomas Proehl of the Guthrie Theater in Minneapolis says that staying on mission also helped the Guthrie get through a rocky patch. "We did a reduction-in-force which was very difficult, but it ultimately helped us focus the organization on creating more with less," he says. "Instead of retreating and doing two-handers, we're doing larger plays and expanding our repertoire and we cut costs on the [administrative] side. We can't retreat from who we are. If we're not producing big plays with large casts, we're not the Guthrie people expect, and ultimately that will hurt us."

It's hard to overstate the thought and effort that go into maintaining an optimal balance between a theatre's economic underpinning and its programming goals. Art is, alas, expensive and sometimes financial realities threaten this balance. Witness a June 2004 New York Times article entitled "Soft Financing Causes Arts Groups to Make Hard Choices," which focused on troubles at several arts organizations, including a prominent regional theatre that was forced to substitute a popular farce from the 1980s for a "newer, more experimental" play when funding came up short.

Having felt some of the same pressure, Ann Ciccolella, managing director of the Zachary Scott Theatre Center in Austin, is cheerfully unabashed about the effect of economics on programming. "Zach has always tried to do a mix of popular and populist shows and more challenging work. When the economy was really strong, we felt comfortable doing [Suzan-Lori Parks's] The America Play. Right now we're running Always Patsy Cline for months and months and months, as long as it will run." She calls this diversity of programming a strength, not a weakness. "Our mission has always been to be both entertaining and challenging," she notes. "The artistic director very much sees populist work as part of our love of being entertaining and we're unembarrassed about that. It's important to not feel like you're compromising, it's just another phase. We've introduced tons of audiences to theatre who have never gone to theatre by doing Patsy Cline. Some of them are going to come back when we do [Regina Taylor's] Crowns this fall."

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"TCG's 'big, hairy, audacious goal' of wanting every person in America to see theatre every year is powerful inspiration," says Ciccolella. "There's nothing like sharing the work we love."

Shifts in Funding

Theatre Facts 2003 is a research-driven document, crammed full of statistics that examine theatres as economic entities from various angles. Look behind the numbers and the study points to a number of substantial changes in theatres' business models, starting with the growing importance of individual donors as the back-bone of the fundraising efforts.

Theatres are depending more and more on trustees and other individuals as a source of contributed income, as other funding sources constitute ever-smaller pieces of the revenue pie. "We turned to individual donors," says Thompson, "and they have been our salvation." This salvation comes while many donors are struggling with the same nationwide fiscal malaise that makes their contributions so timely.

The numbers are striking. Theatres report a 68-percent increase in individual donations over five years--despite a sizeable dip in 2003 that followed the dramatic spike in 2002. The authors suggest that the contraction from 2002 may reflect a decline in the number of theatres engaged in capital campaigns. Many such campaigns began during the 1990s and are now complete; the study reports that a third fewer theatres were raising capital funds in 2003 than in 2002, and that 27 percent of theatres ended capital campaigns in the past five years. It may also be the inevitable correction coming on the heels of an extraordinary outpouring of emergency donations by patrons who heeded calls for increased support in the aftermath of 9/11 and the uncertainty that followed. Only time will tell if this decrease denotes a trend or only an adjustment from the unprecedented 2002 donation levels.

A number of theatres report re-allocating expense budgets to focus on cultivation events and other programs designed to target individual donors. But donor cultivation is a time-consuming, hands-on, labor-intensive process that requires what Thompson calls "a new level of social interaction with our audiences." It's also far less cost-effective than writing grants. According to Thomas Proehl of the Guthrie Theater, cultivation requires "a lot of hand-holding and making people feel important, making sure they feel welcome and respected." Artistic director Philip Sneed of Foothill Theatre Company in rural California works to make donors feel like part of the family. "We're keeping in touch with them, getting to know more of them personally," he says. "We're trying to solicit their feedback whenever possible. We're making a point of encouraging them to e-mail their personal responses to the plays or seek us out in the lobby. The more invested they are, the more they're willing to give."

"The best way to do it, and it's the hardest way, is always one-to-one," says managing director Edith Love of Oregon's Portland Center Stage. "If an unsolicited gift comes through your door, make sure you find out who this person is and get them engaged. Find out what might interest them. Take them to lunch." Then, after a pause, she adds, "Obviously you have to do things with broad brush strokes as well." And there's the rub: There are only so many hours an artistic director can spend over lunch with donors. "I don't think we have another choice," says Thompson. "I wish we did because I'm not sure how we find hours in the day to do it."

And yet, a number of theatre managers believe that individuals still represent an underutilized asset. Beyond raising revenue, the new level of social interaction Thompson describes can foster a deeper sense of community and a more visceral connection between the theatre and its most important stakeholders. "You can develop ownership in your theatre company that was never going to be there from federal, state or local government agencies," Love explains. "That will serve you well in the long term."

Tactically speaking, that means maximizing contribution levels from current donors, as well as cultivating new ones. Gillian Darlow, managing director of the Red-moon Theater in Chicago, reports success with "stretch gifts"--asking patrons to give more than they usually would, generally in support of a specific fundraising campaign, as well as with asking donors for multi-year commitments.

"Two years ago we began approaching our board members and funders in general and asked them to make three-year commitments," says Thompson. "We knew that board members would do it; we found that many of the people we were going to on a regular basis would too. This frees us up to spend more time on reaching out to new donors." He adds that his theatre has had success with targeted appeals, which have "great resonance" for donors. "They want specificity," he says. "They want to see where their monies go and they want the recognition." He outlines a typical pitch: "We need a new box-office ticketing system and this is what it would do for us; we need a new projector for our tour of Macbeth and here is what it would do for us."

True, corporate and foundation giving are also up over the five-year period, though the latter has shrunk slightly from its 2002 level. But the increases are far smaller, and as a result they support a smaller percentage of expenses than they did five years ago. Local government funding recovered from a substantial drop in 2002, though it is still down 9 percent (after inflation) over five years. Even so, the authors note that theatres received more funding from city and county governments than from state or federal sources, and federal government support covers only a 10th as much of theatres' expenses as gifts from non-trustee individuals.

One of the most carefully watched figures in the 2003 report is state funding, and the data make it clear that expected cutbacks have now arrived. State arts councils from coast to coast have slashed giving as legislators have sought to rein in statehouse budget gaps. Among the trend theatres, state funding fell 17.5 percent over five years in inflation-adjusted dollars, more than obliterating the uptick recorded in 2002.

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"The state of Florida really slammed us," says Hopkins, citing a two-thirds cut in its arts commission budget in recent years. "The good news is the state is putting a little more in this year. Things are getting better, but they're not back to where they were." Theatres in other states are bracing for cuts as high as 100 percent. Kent Thompson says that in the 1990s, Alabama Shakespeare Festival received an average of $800,000 a year from the state. "Four years ago that was cut to about $525,000," he says, and by this year it sank to $125,000. "Next year it will be zero."

Thompson notes a sense of inevitability surrounding these cuts. "There was not an incredible hue and cry when we lost so much state funding, as there was when they threatened to cut it a decade ago," he says. "[This time] there was a sense that there were going to have to be real cuts everywhere and we were just going to have to take it."

Still, the decline in arts council funding is only part of the story. Long Wharf Theatre recently announced a $30 million capital grant from the state of Connecticut that will help the theatre build a new home in downtown New Haven. (Incidentally, because capital grants of this nature tend to be at least temporarily restricted, they are typically reflected on a theatre's statement of activities only as they are released, and then are offset by the specific expenses they are intended to cover.) Though he is grateful for the state's capital support for his and other local arts organizations, managing director Michael Stotts bemoans the cuts in operating assistance. "[Connecticut] needs to invest more in general operating support so we can all afford to live in our fancy new facilities," he says.

Though White-Spunner reports a 35-percent drop in state arts council funding over recent years, he reports that the theatre was able to secure state community development funds for a capital campaign. "We know the value of talking to our local congressmen and [state] senators," he says. "They've been very supportive of going into the DCED"--the Department of Community and Economic Development--"and seeing what's there in terms of community development [money]."

These two examples suggest that theatres should continue to press for state support by championing theatres as vital components of local economies. White-Spunner laid out the strategy that worked for Bloomsburg: "We made the case to [elected officials] how important we are to our community. This is a small community and we always ask the question, 'What would life in Bloomsburg be like if we were not here?'"

Audiences

When it comes to creating an audience (through ticket sales) and assembling a devoted community of theatregoers (via subscriptions), theatres are expert at making the most of the magical connection between performer and spectator and the communal experience of sharing the live theatrical experience with fellow audience spectators. In other words, they leverage this essential equation to maximize the size and loyalty of their audiences. Now theatres are exploiting these same intangible assets to an even greater extent, mobilizing them to persuade donors to open their checkbooks. What's more, they are upping the ante by bringing patrons even closer to the creative process through donor cultivation efforts that feature backstage tours, dinners with artists, personal e-mails from the artistic director and so on. None of these assets appear on a theatre's balance sheet. Yet they are all vital to the theatre's prosperity and will be more so as theatres continue to capitalize on them--in every sense of the word.

The subscriber model has long been the cornerstone of the regional theatre movement, and so the balance between subscriptions and single ticket sales is a topic of perennial concern. Theatre Facts 2003 confirms that the long-term shift away from subscribers continues unabated, with the collective number of subscribers falling by 3.5 percent over the past five years, even as the total number of admissions is up by 4.2 percent. Collective subscription renewal rate held at 75-76 percent in 1999 through 2001, but dropped to 69 percent in 2002 and 2003. In other words, these theatres now lose 31 percent of their subscribers at the end of each season. This puts the squeeze on theatres to sell new subscriptions in order to maintain a stable audience base, as well as to move more single tickets.

One result of this pressure, says Love, is that "the whole subscription ecology, around which so many of us grew up, has changed." Portland Center Stage has increased the number of its subscribers, she says, "but we are very, very flexible in terms of what makes a subscription. A subscriber can be someone who buys seven plays, a 10-play flex pass, or a 10-ticket flex pass, or [even] three plays. Back in the old days that would not have been the definition."

At Long Wharf Theatre, Stotts describes an intriguing effort to sell subscriptions based on reaching out to "initiators." A grant from the Wallace Foundation helps the theatre identify and target leaders of book groups, wine tasting clubs and the like. "We want to find the person who initiated the book club and find out how we can give them an experience at Long Wharf. That person, because they are the organizer, will go out and rally the troops and get them to buy subscriptions." The theatre offers a package that is smaller than the normal subscription offering, but comes with a bonus. "It's not just coming to the theatre. It's about coming to a value-enhanced experience here, whether it's a lecture or a wine tasting or a conversation with the artistic team," Stotts explains.

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Sweetening the offer with those value-adds is an important selling point. According to Theatre Facts, the average across-the-board cost of a subscription ticket is actually about the same as the average single ticket, after discounts are taken into account. This suggests that it's not the buy-in-bulk price discount that attracts subscribers, but other aspects of the subscription--whether it's the ability to switch dates at the last minute, the opportunity to meet artists and so on.

In Florida, Hopkins takes a different approach to maintaining a large subscription base. "We keep the price down," he says. "We probably have the lowest [priced] subscription in America," with the average subscriber seat costing $12-13. Here's his formula: "Low price plus high quality equals high volume and high volume will cover the lack of price." A modest subscription price translates into high value for the ticket buyer and a large subscriber base keeps the cost of selling single tickets down because "you can rely more on word of mouth and less on paid advertising--we sell out the single tickets on many of our shows strictly based on word of mouth."

Still, it is not likely that the vast majority of regional theatres that have embraced the subscription model will abandon it any time soon. "We haven't given up on subscription. We absolutely need it," says Ciccolella. But for most theatres, it's clear that single-ticket buyers "aren't the frosting on the cake anymore," as Love puts it. Indeed, among theatres, single-ticket income has outpaced subscription income in each of the last five years. "We all invest much more money in marketing than we used to because we are really depending on single ticket buyers," says Love. Just as with individual donors, the shift to single tickets yields a decline in cost efficiency. Figures from Theatre Facts confirm that theatres have to spend fewer dollars on marketing subscriptions than on marketing single tickets to bring in the same amount of revenue. What's more, they had to spend 3.1 percent more to produce every dollar of single-ticket income in 2003 than 1999.

With more resources being steered towards chasing single-ticket sales, theatres are careful about getting the most out of their marketing dollars. "If you do five plays a year, I don't think that the marketing budget for the season should be divided in fifths," advises Love. "There are some plays you can throw all kinds of marketing revenue at and it's just not going to tickle the fancy of the broad theatregoing public. There are other plays you know will attract people in your community. That's when it makes sense to invest marketing dollars to get the word out so that people come to the play before it closes." She quickly adds, "That doesn't mean you choose all your plays for their marketability. It means you take that portion of your budget and you invest it as wisely as you can so that over the whole season you're making the maximum amount of money [in ticket sales]."

"It's the stuff in the middle that I'm having a hard time with," Sneed says. "I can't find anybody to support the stuff that's neither a new play nor a popular, well-known crowd-pleaser." The former might receive underwriting from foundation or government sources and an audience favorite--he cites Greater Tuna and Always Patsy Cline--will pay for itself at the box office. "Who's going to pay for the Ibsen I want to do?" he asks. "Who's going to pay for work that's neither new nor popular?"

While theatres continue to embrace such traditional platforms as radio and telemarketing, the Internet occupies an ever-more-significant slice of the marketing pie. "About five years ago we went fully automated, [with] all of our ticketing available via the web," says Proehl. He says that internet ticketing now accounts for 40 percent of the Guthrie's single-ticket sales. E-mail has also become a vital communications medium--messages from the Guthrie are called 'G-mail;' the Zachary Scott Theatre Center sends its patrons 'Z-mail.' "G-mail has become an immediate tool for us and it costs next to nothing," Proehl says.

As with any tool, e-mail should be used properly, lest the consumer hit the "This is Spam" button. "We don't contact [patrons] unless we have something for them," says Proehl, "a deal or an announcement or something that they have requested to be a part of. They get to opt out if they don't want something. We mail to them consistently so that they expect information from us, but we try not to do too many e-mails. We combine our efforts so that we have many things offered in one e-mail, rather than getting 10 a day from us."

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Smaller theatres rely on the Internet as well. Says White-Spunner, "We've started seeing people come from much farther afield, people who are interested in a particular play or a playwright. Without [the Internet] they would never have known we existed." Sneed calls the Internet an essential marketing tool for a destination theatre. His company makes sure they are featured on as many web-sites as possible so a tourist might visit when planning a trip to the area.

Looking Up

Conversations with a number of theatre leaders around the country in the summer of 2004 revealed stirrings of optimism, tempered though they may be. "The glass is half full in some regards and half empty in others," says Ciccolella. "When you look at the downturn in the economy, I think we did a smashing job at a time that was challenging to every industry." The initial shock has passed, she says. "Everybody is looking with more optimism about how the wave of the economy is pushing us forward. We're definitely past staff cuts. We're seeing a little bit of building in terms of a part-time person here and there. We haven't seen a huge increase in corporate funding or even individual funding, but people are talking like they're expecting it to happen. The funders are talking with optimism about a renewed level of contribution. We're all very cautious--we don't want to, as one of our board members would say, 'lean out past our skis.'"

Hopkins describes 2003 as a "really bad year," but says that things are now looking up again. "When I looked at the figures [in Theatre Facts 2003], I kept asking myself, 'Is the glass half full or half empty?' We need to look at the half-full side, which is not in our nature as theatre professionals, because we feel undervalued. We are undervalued. But that's not going to change until we look at the half-full side and ask, 'What are we doing right?' And then replicate what's working."

RELATED ARTICLE: CASE STUDY Enhancement and Co-Production

WHEN THEATRES SEEK TO GROW ARTISTICALLY without breaking the bank, they sometimes embark on collaborative relationships with other companies and commercial producers. Theatre Facts 2003 notes an increase in activity in both categories.

Portland Center Stage's Edith Love says that while 15 years ago co-productions with other not-for-profits may have been a novelty, they are now a routine part of the thinking when companies plan a season. She lists three compelling rationales: "I've done co-productions over the years because they've enabled us to do something artistically we couldn't possibly do on our own financially," she says. "I've done co-productions because we needed to save money. And I've also done co-productions because we've wanted in on something fascinating, to be involved with an exciting [project] we wouldn't have had the opportunity to do on our own. Sometimes you accomplish one, sometimes two of these goals. If you're really lucky, [all] three."

When a not-for-profit theatre works with a commercial producer, it sometimes accepts so-called "enhancement money" to underwrite various production elements. The producer generally retains the right to move the production to another venue under commercial auspices. A recent example is the musical A Year with Frog and Toad. Enhancement money enabled the Children's Theatre Company to mount the production at what Teresa Eyring calls a "higher level" with more out-of-town artistic personnel than otherwise would have been feasible. Though the enhancement funds appear on the income side of the theatre's ledger, these monies were not "budget-relieving," as she puts it. "Enhancement is called enhancement for a reason. It pays for you to do things that you wouldn't normally be able to do without that assistance. It wasn't that what we spent was what we normally would have spent and then we had enhancement; enhancement dollars enabled us to achieve a production at a higher level than we might normally."

Even when the theatre realizes no net savings from enhancement or co-production, there is great potential for other kinds of rewards. "It was a fantastic experience," says Eyring, "a great partnership for us," she says. Frog and Toad eventually went on to Broadway, garnering a Tony nomination for the Children's Theatre Company and raising its national profile. "It really allowed us to create a fantastic show. It increased visibility for the company. We made some really good friends along the way and hopefully we'll do more of those kinds of projects."

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"One of the concerns I have about more troubling times for theatres is that theatres are not able to pursue as aggressively the development of the art form," Eyring says. Using resources that come from co-production, enhancement and other kinds of partnering, she says, theatres can afford to take more of those important artistic risks.--B.P.

RELATED ARTICLE: CASE STUDY Capital Campaigns

A GOOD BAROMETER OF OPTIMISM AMONG THEATRE leaders is the number of companies that begin capital campaigns in a given year. Theatre Facts reports that four theatres took the leap in 2003; none of the 2002 theatres (a slightly different group) did. Theatre Facts takes a broad view of these capital campaigns, rather than limiting them strictly to bricks-and-mortar or equipment-based endeavors. Nonetheless, the fact that these theatres have entered into substantial, multi-year fundraising drives suggests that theatre managers feel confident in their organizations' capacity to attract sustained financial support.

Gillian Darlow of Redmoon Theater describes hers as a capacity-building campaign. "There's a capital aspect to it, but it's also about building the infrastructure and capacity of the organization, professionalizing the administrative staff and building our donor base," she says. "Redmoon has gone as far as it has on the strength of the quality of its art and not at all on the strength of it administration." Like many arts organizations, the Chicago-based company was founded by artists who doubled as administrators. "Now we've brought on people with professional expertise," she says, a move that has propelled the theatre into its adolescence.

The campaign kicked off in January 2002. "It would have been wrong to delay," says Darlow. "A number of opportunities came together. While the economy was a factor that worked against the decision, we had been looking to purchase a building and had a lot of momentum."

What's more, the theatre is using the campaign to grow its future fundraising capability. "Redmoon is 15 years old but it had never done a major-donor campaign like this before. There's a lot of potential, a lot of people who really believe in the theatre at a very deep level emotionally. We had the confidence that we would be able to engage them despite the economy. We hadn't really asked them in the right way before." With a $2 million target, the campaign is a relatively small one. As of August 2004, the theatre had raised 54 percent of its goal.

Speaking from Pennsylvania, White-Spunner calls the Bloomsburg Theatre Ensemble's capital campaign "low-key and probably quite small." What drove it was the need to replace outdated technical equipment and a leaky roof. Now two-thirds complete, the theatre also embarked on a simultaneous endowment campaign, asking the theatre's supporters to invest even more deeply in its long-term stability. "The thinking behind it was that we've been here long enough for the community to recognize that we're not going away," he explains.

"We've sown the seeds of some really positive long-term fundraising," White-Spunner says, though he points out that some board members worried the endowment campaign might cannibalize operational fundraising. "We countered that argument by being pretty specific about who we went after to contribute. We went very quietly to certain people who were good supporters and they all turned out."--B.P.

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RELATED ARTICLE: CASE STUDY Education Programs

DESPITE A DROP IN THE NUMBER OF PROGRAMS offered, the total number of people served by theatres' education and outreach programs increased 30 percent from 1999 to 2003. Many of these programs represent important sources of revenue, thanks to student matinee ticket sales, fees for special workshops and the like--the Zachary Scott Theatre Center offers theatre classes to home-schooled children, for example. Some are supported by grants specifically earmarked for such programs. But at what point do education programs drive the theatre's agenda rather than complement it?

Philip Sneed of the Foothill Theatre Company in Nevada City, Calif., wrestles with this dilemma. "Educational programs are a profit center for us. From a purely business standpoint, getting students into the theatre is the cheapest return on investment. It pays off very well, [because] it takes a lot more time and effort and marketing dollars to get a hundred new members of the public into seats than it does to get students into seats."

Of course, those marketing dollars are also an investment in the future of theatregoing in general. There is also the potential short-term audience-growth. "For us it's about trying to reach as many school-aged children as we can," says Sneed. "The challenge is to find ways to turn that compulsory attendance into elective attendance, both by the student and by their families."

And yet, Sneed has "mixed feelings" on at least two fronts. One is the very idea that education programs should be moneymakers. "Ideally we'd like to be able to offer more of these programs at lower cost--or free--with more scholarships. We're beginning to be able to do some of that. But there's a certain price people are willing to pay [for these programs] and we still see growth there. So, on the one hand I'd love to be able to say we serve all of these young people for free. On the other hand, we're offering something that's valuable to families and schools. They're willing to pay for it and that helps fund our operations."

The second front is the question of how much of a role education programs should play when it comes to choosing a season.

"The danger is if the educational community drives the programming," Sneed says. "When we program a season, we find ourselves saying, 'What are the schools going to think? Are the schools going to come? Does it have value for the schools?' We find ourselves in a position where we're looking for [plays] we think the schools will be interested in and that the public also will be interested in. When we can produce one play that serves both constituencies, it's cheaper than producing two plays, one for each.

"I both bemoan that and welcome it. If we're offering something that's only interesting to the adult population and doesn't draw young people, then we may not be doing our job. It's not bad to face the challenge of asking what is going to appeal to young people and the gatekeepers in the educational initiations and is also going to appeal to the public and to the artists. That's a terrific challenge. If you can meet it, it's tremendously satisfying."

Sneed does draw a line. "There are certain slots when the educational community is not the priority. For example, picking the premiere we do every year on the main stage as part of the new play festival. If it happens to have student appeal we'll bring students in, but we absolutely do not consider student appeal when choosing that play."

There are no simple answers. "I'm concerned about finding the balance," Sneed says. "When are we bending so far to serve education that the general community is bored or uninterested or turned off? I think we do a fairly good job of finding that balance. But every year I worry, are we thinking too much about the schools?"--B.P.

RELATED ARTICLE: CASE STUDY Earned Income

BESIDES GRANTS, CONTRIBUTIONS AND OTHER donated monies, not-for-profit theatres depend on "earned income." This category includes ticket sales, rentals, sales of refreshments and merchandise in the lobby and other income in exchange for which the theatre provides a product or service. Many companies are investing in strategies to bolster earned income without raising ticket prices.

Teresa Eyring of the Children's Theatre Company in Minneapolis describes three such initiatives at her theatre. "One is our costume rentals business, which is a joint venture with the Guthrie Theater. We launched this business about a year and a half ago. We've taken both of our stocks--30 to 40 years of costume making in two accomplished shops--combined them in one facility and created a rental business together. This gives us an opportunity to gain income from costumes that might otherwise be sitting in storage. It also allows us the opportunity to borrow from each other's stock. The business itself covers the cost of what we would have spent on space rental to store the costumes."

There were certain up-front costs, some of which were covered by a foundation grant. But the main investment was a preexisting, under-utilized resource. "A big part of the investment was the costumes, this phenomenal existing asset that otherwise was not generating any income for us."

The theatre's second program involves another pre-existing asset: the purchasing power of patrons in the theatre lobby. "We have always had concessions and a little kiosk where you could buy memorabilia related to the show, but they were really small-scale. We made a decision last year that we wanted to invest, to improve them and see if we could increase [their] profitability. We decided to do what it would take to ratchet it up several notches. We were able to buy the equipment we needed to make the selling efficient and the tracking more accurate; we contracted with a firm that assists in purchasing logo materials. They process our online sales. We've been able to net a higher profit than we did in the past."

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The third endeavor is still in its early stages. "We license scripts that we commission, for a fee," Eyring explains. "We've been doing this for years, but we've recently combined forces with the Seattle Children's Theatre to put all of the properties that we license into one catalogue." Together the two companies hope to streamline operations and maximize revenue while providing a service for other organizations.

These particular businesses make sense for the Children's Theatre, says Eyring, but other companies can get in on the act too. "One of the things that organizations can look at in trying to figure out ways to generate additional income is what kinds of resources or assets are within you organization already that you can lease or sell or create a business out of."--B.P.

Ben Pesner has been writing about theatre and editing theatrical publications (and now websites) since 1987.
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Title Annotation:A SPECIAL REPORT BASED ON THEATRE FACTS 2003
Author:Pesner, Ben
Publication:American Theatre
Geographic Code:1USA
Date:Nov 1, 2004
Words:7476
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