The Arts Mean Business: First in a Series of Three Articles on the Value of Nonprofit Arts and Culture Organizations

By Lynch, Robert | Public Management, January-February 2013 | Go to article overview

The Arts Mean Business: First in a Series of Three Articles on the Value of Nonprofit Arts and Culture Organizations


Lynch, Robert, Public Management


America's local governments were hit hard by the Great Recession. As managers, you have made some extremely tough and unpleasant decisions when preparing your budgets. You have likely cut important and valuable programs because of budget deficits. Luckily, the tide is finally turning in communities where revenues are increasing once again.

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Managers might be hearing about the importance of promoting small business and about how Main Street is the key to our economic recovery. Unfortunately, many community leaders do not recognize that nonprofit arts and culture organizations are just that: small businesses.

They are resilient and entrepreneurial. They are local employers, producers, and consumers. Their spending is far-reaching: they pay employees, purchase supplies, contract for services, and acquire assets within their community.

In addition, unlike most industries, nonprofit arts and culture organizations leverage a significant amount of event-related spending by their audiences. When people attend a cultural event they may pay to park their car, purchase dinner at a restaurant, shop in nearby stores, eat dessert after the show, and pay a babysitter when they get home. Cultural tourists often spend the night in a hotel. All of these dollars generate commerce for local businesses.

More and more, key decisionmakers--along with the general public--are recognizing these impressive economic benefits provided by our cultural industry. Fundamentally, the arts foster beauty, creativity, originality, and vitality. They inspire us, soothe us, provoke us, involve us, and connect us. But they also create jobs and contribute to the economy.

National Study Documents Economic Impact

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Americans for the Arts recently published Arts and Economic Prosperity IV, its fourth national study of the economic impact of spending by nonprofit arts and culture organizations and their audiences. The most comprehensive study of its kind ever conducted, this study evaluated the economic impact of the nonprofit arts industry in 182 U.S. communities representing all 50 states and the District of Columbia. (See sidebar, "Case Study: Portsmouth, NH.")

These diverse communities range in population from 1,600 residents (Gunnison, Colorado) to more than four million (Houston/Harris County, Texas). To complete the national analyses, researchers collected survey data from 9,721 nonprofit arts and cultural organizations and 151,802 of their event attendees. Finally, the project economists built 182 customized economic input-output models--one for each community.

The study findings are impressive (see Figure 1). In spite of the funding challenges created by the Great Recession, nonprofit arts and culture remain a thriving industry. Nationally, it generated $135.2 billion in total economic activity during 2010--$61.1 billion by the organizations themselves, plus an additional $74.1 billion in event-related expenditures by their audiences. This economic activity supports 4.1 million full-time equivalent (FTE) jobs and generates $86.7 billion in resident household income.

FIGURE 1: Source of Estimated Revenue for Nonprofit
Arts Organizations

Earned income    60%
Individual       24%
Foundation        4%
Local Govt.       4%
Corporate         3%
State Govt.       2%
Federal Govt.     3%

Note: Table made from pie chart.

A Key Jobs Supporter

What company would you name as your city's largest employer? Most likely it would be a local manufacturer, a hospital system, or a nearby university. Chances are you would not consider the nonprofit arts for your short list of candidates. But consider a few of the cities that participated in the Prosperity IV study.

In Telluride, Colorado (population 2,361), spending by nonprofit arts organizations and their audiences supports 740 1. …

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