In This Episode

Erik and Zannie talk about a number of studies Zannie oversaw including their recent "Bottom Line Report," which examines troubling data about the financial health of arts organization in the U.S. They also discuss a study highlighting how distance from an arts organization impacts participation, and compelling data about how arts and culture aren't an elitist extravagance, but critical to the American economy.

We examined the data for arts organizations and realized the patronage likelihood drops off by 80% if they live one mile away from that organization.

ABOUT ZANNIE

Zannie Voss is the Director at Southern Methodist University’s National Center for Arts Research. She oversees the creation of evidence-based research to help arts and cultural leaders increase impact. In a world of declining audience participation and increasingly challenging financial scenarios, her studies are critical reading for anyone working in the arts today.

EPISODE TRANSCRIPT

Erik Gensler: Thank you so much for being here today. I'm really looking forward to speaking with you.

Zannie Voss: Same here, Erik. Thanks for the invitation.

Erik Gensler: Absolutely. Can you tell me a little bit more about the National Center for Arts Research?

Zannie Voss: We are kind of a joint venture between the Cox School of Business and the Meadows School of the Arts at SMU. We started about four years ago and our mission is to be a leading provider of evidence-based insights that enable arts and cultural leaders to overcome challenges and increase impact and it's really important to us because we see our role as researchers, instead of being about, how the arts impacts society, of really looking at arts and cultural leaders as our primary target market. How can we provide insights to the field, to the people who are running the organizations, out of their own data? We have a series of reports, a series of whitepapers, tools. One that we've launched already, the Dashboard, and one we're developing with the goal of being useful in terms of the insights. We want to ultimately help make a small contribution to improving the health of the field.

Erik Gensler: Wonderful. So, let's talk about your most recent report, the bottom line report, which examines, the bottom lines of arts organizations. Can you talk a little bit about this research and some of the headlines of what you found?

Zannie Voss: Sure. the big headline is that, overall, the report showed that arts and cultural organizations, kind of struggled to breakeven as a field in 2016 and it's becoming increasingly difficult for them to breakeven over time, and we consider this a trend that's particularly alarming, giving that the, economy itself is in a period of economic growth. To dig a little bit deeper, we look at bottom line using three different measures, if you think about it, bottom line's just revenue less expenses, but what story we tell about bottom line health really can depend on what revenue gets included and what expenses get included. Typically, the most positive view of bottom line, and of revenue, is, unrestricted surplus. So, it's a bottom line figure that you see in most financial audits. It includes not only operating revenue, but it also has in there some non-operating funds, like investment gains and losses and capital gain proceeds, capital campaign proceeds. in 2016, the average organization saw an unrestricted surplus equal to 2.1% of expenses. So, just above breakeven and, and that's number one, measure number one. By contrast, the operating surplus, it paints a little bit more sober but realistic, portrait of performance, since it removes all non-operating funds, and, in the report, we look at it both before and after depreciation since, adding in depreciation helps to show whether or not organizations are generating sufficient surpluses to cover estimated annual wear and tear on fixed assets like buildings. And in 2016, average operating surplus, before depreciation, was basically a breakeven, but when we threw depreciation into the calculation, average organization had an operating deficit equal to 4.2% of expenses.

Erik Gensler: Thank you so much for being here today. I'm really looking forward to speaking with you.

Zannie Voss: Same here, Erik. Thanks for the invitation.

Erik Gensler: Absolutely. Can you tell me a little bit more about the National Center for Arts Research?

Zannie Voss: We are kind of a joint venture between the Cox School of Business and the Meadows School of the Arts at SMU. We started about four years ago and our mission is to be a leading provider of evidence-based insights that enable arts and cultural leaders to overcome challenges and increase impact and it's really important to us because we see our role as researchers, instead of being about, how the arts impacts society, of really looking at arts and cultural leaders as our primary target market. How can we provide insights to the field, to the people who are running the organizations, out of their own data? We have a series of reports, a series of whitepapers, tools. One that we've launched already, the Dashboard, and one we're developing with the goal of being useful in terms of the insights. We want to ultimately help make a small contribution to improving the health of the field.

Erik Gensler: Wonderful. So, let's talk about your most recent report, the bottom line report, which examines, the bottom lines of arts organizations. Can you talk a little bit about this research and some of the headlines of what you found?

Zannie Voss: Sure. the big headline is that, overall, the report showed that arts and cultural organizations, kind of struggled to breakeven as a field in 2016 and it's becoming increasingly difficult for them to breakeven over time, and we consider this a trend that's particularly alarming, giving that the, economy itself is in a period of economic growth. To dig a little bit deeper, we look at bottom line using three different measures, if you think about it, bottom line's just revenue less expenses, but what story we tell about bottom line health really can depend on what revenue gets included and what expenses get included. Typically, the most positive view of bottom line, and of revenue, is, unrestricted surplus. So, it's a bottom line figure that you see in most financial audits. It includes not only operating revenue, but it also has in there some non-operating funds, like investment gains and losses and capital gain proceeds, capital campaign proceeds. in 2016, the average organization saw an unrestricted surplus equal to 2.1% of expenses. So, just above breakeven and, and that's number one, measure number one. By contrast, the operating surplus, it paints a little bit more sober but realistic, portrait of performance, since it removes all non-operating funds, and, in the report, we look at it both before and after depreciation since, adding in depreciation helps to show whether or not organizations are generating sufficient surpluses to cover estimated annual wear and tear on fixed assets like buildings. And in 2016, average operating surplus, before depreciation, was basically a breakeven, but when we threw depreciation into the calculation, average organization had an operating deficit equal to 4.2% of expenses.

Erik Gensler: Hmm.

Zannie Voss: And this negative here basically is telling us that, the average organization isn't currently bringing in surplus funds that can be set aside to replace, fixed assets as they wear out. so, for 2016, it's kind of what you would expect, a stair-step, approach. Depending on the rosiest to the least positive view of bottom line, going from just above breakeven to deficit.

Erik Gensler: Mm-hmm. And which driving the less rosy picture is the assets that these organizations are carrying. Is that right?

Zannie Voss: Yeah. You think about it even with your car, the value of it depreciates over time and are you setting aside enough money to do maintenance, to repair, eventually replace it? Same goes for organizations. when we want to own facilities and equipment, which can have, many positive mission related reasons, it just means that our organization's generating enough revenue on an annual basis to set aside to, to cover that when needed.

Erik Gensler: I never thought of this before, but it almost seems like how many organizations treat their website, where they'll raise capital funds, create this beautiful website, and won't spend the money every year to maintain it because it's not part of the operating budget, but it sounds like a similar thing. Do you, do you tie this at all to the idea of how money is, is raised, particularly if someone's going to build a building, they'll get the board very excited, they'll run a capital campaign, and they'll have all this money, but then it's not appropriately accounted for going forward.

Zannie Voss: Exactly. You know, so there are different strategic approaches to this, there's nothing wrong with saying, "Okay, every time we need to, replace our assets, we're going to have a big campaign, and we'll get everyone galvanized behind it." That has its pros and cons. I think anyone who's done capital campaigns also struggles with, do you get into a point of donor fatigue, where you keep going back to the same people for both operating support, as well as these one-time, supposedly one-time capital expenditures. Or, as an organization, do your operations allow you to sufficiently generate revenue that you can set aside yourself so that those, you know, kind of one-time, big event campaigns. It's not that they aren't good ideas to get people galvanized behind, but you're able to repair and maintain the assets with a sense of assuredness over time. For the other two measures, the operating bottom line, it was basically a breakeven. so, if we look at a cohort of organizations that- For which we have data every year from 2013 to 2016, a concerning issue for us is that the overall trend was negative, regardless of which of the three, measures that we use. if we looked at the bleakest measure. So, an operating surplus including depreciation, in 2013, that average was 2% of budget and, by 2016, it got down to a deficit of 6% of budget over time, the downturn is actually reflecting that growth and revenue didn't keep pace with inflation and growth expenses, that it was actually higher than the rate of inflation.

Erik Gensler: Mm-hmm.

Zannie Voss: So, it's becoming increasingly difficult for the arts and cultural organizations, to breakeven.

Erik Gensler: So, it's not just the fixed assets. It's other costs as well?

Zannie Voss: It's definitely other costs as well. The basic math of if you're not going to breakeven, you've got three choices: you can earn more revenue, raise more revenue, or cut expenses, and we're seeing that the revenue growth isn't keeping pace with inflation, whereas the expense growth is exceeding inflation. So, the expense issue, is, is a larger, you know, part of the problem then, just looking at this issue of fixed assets.

Erik Gensler: We're in a very tough business model, where we have a fixed number of seats and a fixed number of performances, mostly, and very high fixed costs. the revenue can only go so high, right? I'm interested in your opinion on this, a lot of the organizations that are, are doing well have really invested in dynamic pricing, so they're able to get more revenue with the fixed amount of seats they have, but I think that's, that's going to reach a ceiling at some point.

Zannie Voss: Absolutely. You know, Roche Schulfer, who's the Goodman Theatre's Executive Director, he gave a really powerful presentation about this, at Theatre Communications Group's fall forum a few months ago. He's very interested in, in Baumol's cost disease, which is, basically a phenomenon that was recognized, by Baumol and Bowen, back in the 1960s that basically says that the arts are heavily labor intensive, so salaries are going to naturally increase over time, but whereas other industries can benefit from, technology driven productivity increases, we're so labor intensive that, a lot of those benefits and those productivity increases just don't apply very easily to the arts. that it basically means that unless annual contributions rise in excess of expenses every year, the result's going to be prohibitively high ticket prices over time and, with these increasingly high ticket prices, it's either going to lower attendance or mean that only those who can afford the higher ticket prices are able to attend. is it going to put more pressure on artistic risk taking? Will there be less risk taking in repertoire a reduction of quality, or do we just face chronic deficits or all of the above? This is an area that Jill Robinson at TRG and I had an exchange about recently while she was writing her 2018 'State of the Arts' blog, and Jill firmly believes that organizations actually can invest in revenue growth strategies that are rooted in relationship management.

Erik Gensler: Mm-hmm.

Zannie Voss: Relationship building is really where the efforts should be. It's kind of what, what Jack was talking about in his, 'CI to Eye' interview about audience engagement, relationship building, the frequency spiral. You know, the forward-looking organizations, the forward thinking, are really in a position of saying, "We don't need to be hapless victims of circumstances that all destined to go belly up." But the key is how do you generate those increases in revenue and maintain your accessibility to a local community? It's a real tension.

Erik Gensler: Absolutely. I'm curious, as you sliced and diced this data, if you saw differences, among genres, or certain genres within the arts faring better than others?

Zannie Voss: Yes. As a matter of, fact, we did and that gave us a lot of insights into what we think is kind of going on there. From a strategic standpoint, the genres that are actually faring better, five sectors with comparatively lower average budgets, which were the arts education, community-based sector, music, and in music it's, everything from choruses to jazz ensembles, everything that's not an orchestra, theater, and what we call 'general performing arts,’ which is kind of multidisciplinary, a lot of presenting series. These five sectors averaged actually a positive bottom line in 2016 by all three measures. And for music, theater, and general performing arts, they actually trended upward in bottom line from 2013 to 2016. By contrast, two of the larger budget, sectors, that have a high level of fixed assets and fixed costs, art museums and symphony orchestras, ended 2016 with an average negative bottom line by all three measures. when we start thinking about this. We also saw differences, just generally speaking, in terms of organizational size. So, yes, from a genre standpoint, if we pool all organizations together and say, "Okay, if we look at small organizations, regardless of sector, medium and large, we see that smaller budget organizations that have lower fixed assets and more fixed costs, demonstrated the highest surpluses by all measures and continued a four year upward trend." Conversely, the larger budget organizations tend to end the year with deficits, which was continuation of a four-year negative trend. When we looked by sector and by size, kind of combining the two, even in the sectors where bottom lines trended downward overall, the smaller budget organizations within the sectors actually grew, is it a questions of genre or is it a question of size one of the takeaways, you know, for me was about the smaller organization that, allows them to breakeven more easily than the large ones? for really large organizations, is it strategic choice to allow yourself to run an annual deficit, knowing that perhaps you have a higher level of cash reserves to cover that on an annual basis? You know, for small organizations that don't have a lot of money in the bank they appear to be nimble enough to be able to make course corrections through the year if they see that they're not meeting some of the revenue goals.

Erik Gensler: Mm-hmm. It's interesting. As, you know, for profit businesses grow, generally a larger business, the margins shrink, but your revenue's growing as well, and so that's okay. So, a smaller business tends to have a higher margin and, as you grow in size and, and, have all of the costs of a growing business, it just gets more expensive to run your business, which I think, in for profit, is okay because you don't have this revenue cap, necessarily-

Zannie Voss: Right.

Erik Gensler: -the way a lot of these organizations do. So, that's sort of the s- The small versus large makes sense to me, and also the smaller ones tend to not have those, expensive fixed assets, right?

Zannie Voss: Right.

Erik Gensler: Right.

Zannie Voss: So, it's a, it's a combination of, we do want to have somewhat pricing constraints. We are nonprofit organizations.

Erik Gensler: Mm-hmm.

Zannie Voss: And at the same time, we also have capacity constraints. You take a sector like, like theater, where, where the commercial theater model. There's open-ended runs, so when you have that, you know, box office , production, you can just keep it running.

Erik Gensler: Right.

Zannie Voss: For the nonprofit organizations, we operate on, on seasons and, you know, it's difficult to say, "Oh, this one's running really well. Let's not do the next show now."

Erik Gensler: Mm-hmm.

Zannie Voss: It is a more constrained model, and it's understandable how large organizations kind of get into that squeeze.

Erik Gensler: Mm-hmm. Curious if you see any differences across geography.

Zannie Voss: The biggest difference we saw in geography, was actually with what we call 'small' and 'very small' markets. So, in clusters of markets that are similar in terms of population and, and number of arts organizations per capita. These small and very small markets had the highest bottom lines across all measured geographic clusters. At the same time, in these markets, you tend to have organizations that have lower budget size. So, again, the small organization phenomenon kind of playing out in, in the geographical, results as well.

Erik Gensler: Mm-hmm. Do you see any, and I'm just taking a more 30,000-foot view here of the world, but you know, the 20th century is when, really, major arts organizations, these big symphonies, big museums, big, performing arts centers were built and, I mean, I lived through, the collapse of New York City opera that ultimately couldn't create enough revenue to cover the fixed costs of supporting a theater, supporting a full-time orchestra and just the costs were too much and it ultimately ad- You know, contributed to their collapse amongst some…a list of other things I won't get into. But, it really is sort of a 20th century construct of building these arts institutions mirroring slightly a corporate model of you have a big administrative staff, you have heavy fixed assets and you're operating very much, in many ways, like a for profit business. Of course, you don't make profit, but it's this idea of distributing art through sort of a corporate structure, and this is something I talked about on the podcast with Adam Huttler from Fractured Atlas who first brought that to, to my attention and I just thought it was an interesting paradigm to look at. Is, this sort of corporatized structure the best way to distribute art? And I just wondered your thoughts on that.

Zannie Voss: A couple of thoughts: one, you know, there's a point in time where I worked in nonprofit professional theater. I was the associate manager at the Alley Theater in Houston and, you know, having your own facility, you know, having your own assets does come with its own application. I remember someone telling me once that as an arts organization, when you decide that you want to buy your building, you are, in some respects, changing your business model. You are no longer just in the theater business. You're also a landlord, right?

Erik Gensler: Mm-hmm.

Zannie Voss: You own an asset that is going to require maintenance. The production manager used to call me 'Queen of the Mundane' because so much of my job was about dealing with operational issues security, staff, you know, having to replace the dire VATs and it changes, your perspective quite a bit, so yes, in that respect. I think that's right. I also think about, differences, whether you're a for profit or nonprofit, in terms of strategic decisions. I've always been interested in, the entrepreneurship literature and I remember there was one, article that talked about entrepreneurship and middle management and it's about having an administrative orientation versus an entrepreneurial orientation. You know, how much of our assets do we need to own versus where are we allowing ourselves, within our model, to be nimble?

Erik Gensler: Mm-hmm.

Zannie Voss: How much do we have to have under our control. Because once we own something, or once we have a full-time staff, which is, on the one hand, a real commitment to, those who are helping to make the art, a commitment to community, a commitment to people. On the other hand, once you own that asset and you have that contractual fixed commitment, it also means that you have less flexibility in terms of allocating your resources otherwise, should new opportunities come-

Erik Gensler: Right.

Zannie Voss: Come up or you want to make course corrections. Part of what I take away from the bottom line analysis is, you know how can you allow yourself to be nimble?

Erik Gensler: Mm-hmm.

Zannie Voss: If you want a breakeven budget, and that's cool, you know, what aspects of operations can you consider renting rather than owning? You know, are there some resources that are really essential to being under permanent control versus outsourcing on, on an 'as needed' basis?

Erik Gensler: One of the challenges that we see, from our lens of digital marketing is it’s easier to curate a full experience if you have full control of the theater, if you have full control over the ticketing system, if you have full control overall, patron touch points, from coming on the website to buying a ticket to, you know, your relationships with the ushers to the facilities, and your ability to make that a better experience that you can then manage and there's all sorts of frustrations I hear from often smaller companies that feel like, because they don't have control of the ticketing system or they don't have control of the theater, that, They lose that ability to, to curate, you know, all those patron touchpoints. So, it's an interesting perspective. Like, it's not all rosy on the other side either. (laughs)

Zannie Voss: No, and if there were a magic pill, I'm sure I could make a lot of money. There are, there are certainly pros and cons. The reason why organizations, decided to own is because of all the and the ability to control. You want your own space because you don't want to feel as though you're always at the of, you know, someone else making choices or not being able to become so deeply familiar with a person, a process, a system, or a space, because you were only there on a temporary basis. That's a really smart, strategic decision for a lot of organizations, but then what is the model for revenue generation that's going to maintain, you know, that level of expense?

Erik Gensler: Yeah, I love what you said about, you know, you can't necessarily take those artistic risks and, because you have these fixed costs, so you're a landlord. You're, you're dealing with all of these challenges around that and it- I think it also comes down to just brain, space, and time of the leadership team and the, and the people who work in the organization. You only have so much time in the day and if you're focusing that time and effort and, and fundraising focus and all of that, managing these, assets, it's time you're not able to dedicate to, what you said, like, innovation and new artistic risk taking, necessarily, if you look at that as sort of a fixed pie.

Zannie Voss: Yeah. I wholly agree with you. It's a daunting task.

Erik Gensler: Yeah. I'm curious, when you did look at adding different revenue streams, like say rental income or, you know, merch or other ways of making money, did you come across organizations that have been successful in supplementing through additional revenue and do you think that you know, is that a good thing, saying, "Okay, we have these, fixed number of seats. We can, you know, make this and, and earn revenue, but here's a few examples of organizations that have been able to successfully supplement, and therefore are, are in a healthy position?”

Zannie Voss: You know what? As part of this report, we were really so cl- Narrowly focused on bottom line that we didn't unpack the revenue to say, "Okay, where is there a sweet spot? What are organizations doing that are actually kind of bucking the trends?" But, I can share with you, we also work with Theater Communications Group on authoring their annual report, 'Theater Facts,’ and as part of, you know, 'Theater Facts,' we are seeing that organizations are generating on an increasing basis, that the ancillary revenue, whether it be from rentals, whether it be from looking at co-production revenue. The organizations that are making investments in trying to grow and diversify that revenue stream are certainly seeing the benefits of that on their bottom line.

Erik Gensler: Mm-hmm.

Zannie Voss: I don't think anybody looks at it, though, as that being a substitute or a cure-all for being able to, take care of all of the growth and expenses. There has to also be growth in the contributions, and in the other earned revenue areas.

Erik Gensler: Mm-hmm. I've been talking to a lot of researchers on the podcast and a lot of very smart people, and I have to say, even in the last month I feel like I have learned so much about arts administration and one thing that I've just heard consistently with all of these incredibly smart people I've spoken to echoes what you were talking about in your conversation with Jill, which is stop looking at ticket buyers as buyers a donation until they're second year subscribers. So, it's that sort of disciplined approach of bringing people, up that patron engagement ladder through relationship building that I keep hearing again and again and again on this podcast and it's really resonated with me and, and here you are saying it again.

Zannie Voss: When you think about society, so even think of ourselves as consumers, there's increasing competition for consumer attention. Nielsen's 2017 Q1, they published this thing called the 'Total Audience Report' and, in the beginning of 2017, they said that the average American spends 11 hours and 18 minutes a day in front of a screen and that's 40 minutes more than last year. We have to give people a really compelling reason to leave their screen behind-

Erik Gensler: Mm-hmm.

Zannie Voss: - and if they are willing, you know, on a one-time basis, to take that risk of going to this digital device separation anxiety and attend, we need to give them a really compelling experience. There has to be something about their engagement with us that makes them want to come back a second time. Because it's so easy, we, we know what the statistics are. I believe that Jill had, had talked about what was it? Around 75% of first-time ticket buyers don't come back. You know, when you under-invest in the relationship building aspect of it, then that's just a constant pass-through of resources invested to get someone to come the first time, and, and they kind of just leak out. So, It hasn't gotten easier. It's gotten harder as society has changed.

Erik Gensler: Mm-hmm.

Zannie Voss: And the organizations that are seeing a difference, in terms of earned revenue, are those who have figured out, how to have a relationship.

Erik Gensler: Yep. That's what Steven Roth, from, JCA, calls 'shopping in your closet.' I love that term, where, you know, we're very good at acquisition. we're very good at buying new things or buying new patrons. We're not so good, necessarily, at investing in shopping in our own closet. I think that frames it really smartly.

Zannie Voss: That's a great expression.

Erik Gensler: Yeah. So, let's talk about some of the other studies that have been released by NCAR.

Zannie Voss: Mm-hmm.

Erik Gensler: I saw a study on your site about how distance from an arts organization impacts participation. Can you talk a little bit about those findings?

Zannie Voss: We titled it 'At What Cost? How Distance Influences Arts Attendance.' We had estimated, you know, looking at models from other industries, looking at supermarket shoppers. There's something called a Huff Gravity model, where, we estimated that a person living about seven miles from an arts and cultural organization The purchase propensity would Drop off of 80% after about seven miles. When we examined the data, though, for arts and cultural organizations, we realized that we were really wrong, like the patronage likelihood actually drops off by 80% at about one mile from the organization.

Erik Gensler: Wow. (laughs)

Zannie Voss: So, for us, the lesson is, for people who are interested in arts and culture, there's this real perception of cost and distance plays a big role as a cost in attending. "If it's not in my neighborhood, then I'm much less likely to go." And there are a number of things that will change. So, we're basically looking at a demand curve and that curve shifts. Like in a community, if there are high commute times, then the arts become even more radically local for people. It would make sense, if you've been sitting in a car all day long, commuting to and from work, or on public transportation, when you get home, you're much more likely to see distance, or getting in that car again, to go to an arts organization is a big deterrent.

Erik Gensler: Mm-hmm.

Zannie Voss: People in arts organizations, we think that everybody, because of what we do, is so interesting, so good, people will come from anywhere to see it and the data's telling us, no, that's really not true.

Erik Gensler: That's interesting. I mean, you said you, you worked in Houston. That’s a market that I think suffers from that because the population is so heavily in the suburbs and so many of them arts institutions are, are downtown and you have that commute and the highway.

Zannie Voss: Yeah, and, and you see it in Los Angeles. You, you actually see it also in New York. It's not in terms of cars, but you know, public transportation, you know? Take two subways to get to work, it may wind up taking them an hour and a half each way, to get to and from work. Different markets have different architectures of that distance decay. Another one of the findings was, all else equal, people have a preference for staying in the neighborhood. Let's just take, a market that has nine neighborhoods and the people are equally dispersed across the nine neighborhoods, in one market, if there's an arts organization in each of those neighborhoods, people in those neighborhoods would be highly likely to attend the arts organization in their neighborhood and Less likely to attend an arts organization in another neighborhood. But, if we look at the same dispersion of the population and all the arts activity is clustered in the center, just in an arts district. People in the outer-lying who don't have any other choice if they want to go, they will have a slightly elevated, propensity to purchase and if- Travel a further distance. For the people who live near to the arts district, they're more like to attend the arts in general, but less likely to attend any individual arts organization because there's increased competition, you know, for that person's dollar. So, you know, some of it is really linked to what is the density and dispersion, not only of people, but also of arts and cultural organizations?

Erik Gensler: Wow. I saw that socioeconomic characters also figure heavily into the perceptions of distance.

Zannie Voss: Yeah. So, households that higher income and education are more likely to attend and more willing to travel greater distances to attend. Their propensities Are higher. However, households with lower income and education are still willing to attend. It's not as though it's binary, either you have it, or you don’t. Those with lower socioeconomic characteristics, are willing to attend, especially if it's in the neighborhood. I mean, it's not too surprising that the arts would become even more radically local for people in low socioeconomic communities, already the monetary cost may be a barrier, but you throw into that the hassle of travel and it's going to compound the financial barriers of attending. So, they do patronize, but they just tend to patronize what's in the neighborhood.

Erik Gensler: Fascinating. Another finding that I found insightful was the arts and cultural organizations located in areas that are bustling with other leisure components benefit from an overall increase in purchase likelihood.

Zannie Voss: Yeah. So, what we found that people will look at- For a destination, you know, for an entire day or an entire night out, and they're willing to drive longer distances if they can have that. When we look at, at what we call 'leisure complements', we were looking at bars/ restaurants/hotels on a per capita basis, so basically a sense of dynamism, around the arts and cultural organizations, so that somebody doesn't have to drive to a restaurant, get in their car again to drive to the arts organization. organizations that are surrounded by a high level of these leisure complements, they get a bump of about 5% above the baseline purchase likelihood from all neighborhoods located within about three miles and the purchase likelihood curve actually stays above that baseline at all distances. so, we take that as having a lot of leisure complements around the arts organizations is a perceived benefit-

Erik Gensler: Mm-hmm.

Zannie Voss: -for those who are close by and a reduction of perceived costs of travel-

Erik Gensler: Mm-hmm.

Zannie Voss: -you know, for those who have to travel.

Erik Gensler: I see a lot of implications for organizations in, in how to use this data, particularly - heavying up on marketing communications, within a tight geographic range. I also see impact on communicating the additional leisure components within the area. I'm curious: what other takeaways do you think are, are super actionable from these findings?

Zannie Voss: What I see as being actionable, certainly those, those marketing implications, that you just mentioned, but going back to this idea of relationships. You know, what is the arts organization's relationship to its really immediate community?

Erik Gensler: Mm-hmm.

Zannie Voss: You know, we want people to come to us, but what are we doing for the community?

Erik Gensler: Mm-hmm.

Zannie Voss: You know, to what extent is the arts organization active in community life that's going to take on an added importance?

Erik Gensler: Mm-hmm.

Zannie Voss: I think there's another implication, if I'm an arts organization and there are no leisure complements around my organization, can I play an active role in trying to work with neighborhood associations, Chambers of Commerce, community development corporations, and the like, to try and get local restaurants and, and bars to…

Erik Gensler: Mm-hmm.

Zannie Voss: …create that sense of destination. You know, we are in the process right now of taking this information from a marketing perspective. We're developing a free audience development tool. So, because of this work, we've been able to estimate, "What is the purchase propensity given the characteristics and the distance from, every to an arts organization and its socioeconomic status, average commute time, and etc., of what's the purchase propensity for every census track?" So, with this tool, we'd like for organizations to be able to go online, give us their location, and then we would be able to provide for them, the purchase propensity for every census that's tracked, for every, you know, zip code area within a 30-mile radius. But then also provide them with, information about socioeconomics. We want to be able to say, "Okay, if your, your marketing goal is increased purchase, you have this information. If you're looking to diversify audiences in some way, we're also providing you with that information." This is a tool that we're going to be pilot testing in, in Houston and Dallas and making modifications to before we roll it out. Knowing what we know now, how can we help to put that knowledge into the hands of arts and cultural leaders, so that they're able to see where there are kind of a land of opportunity, perhaps areas of town where they haven't necessarily focused marketing attention, and what are the areas where they are already getting a high saturation and what we would've expected them to do, in terms of purchase propensity?

Erik Gensler: That is so cool. So, what is the timeline for that rollout?

Zannie Voss: We're doing the pilot testing in the spring. The Houston Endowment and the King Foundation have supported this work and, if all goes well, we hope to roll it out, nationally next fall.

Erik Gensler: That's so cool. So, that's a nice segue into, the dashboard that you currently have. Do you call it the KIPI dashboard or is KIPI? (laughs)

Zannie Voss: (laughs) We call it the KIPI dashboard-

Erik Gensler: Okay. (laughs)

Zannie Voss: And it's kind of a takeoff on, you know, there's a lot of consultant speak of KPIs. You know, "What are our key performance indicators?" 



Erik Gensler: Yeah, guilty. (laughs)

Zannie Voss: (laughs) So, what we're talking about here is key intangible performance indicators. What is a KIPI? It's a measure to provide, for each individual arts organization for which we have data, results on its performance relative to the field, taking into account the organization's community characteristics and the organizational characteristics, like its sector, its size, its age, its square footage, if it targets a particular, you know, primarily serves a particular kind of community. All of that gets factored in. So, we, we start out by trying to establish a level playing field, given who you are and where you're located. Let's take the example of, if we had on, on a street corner, two coffeehouses and, by all measures, they should be bringing in the same number of people. You know, they both serve coffee, have similar menus, similar prices, and yet one has a line out the door and the other one has no one in it. We've all seen this happen. And so, when you start thinking about, "Well, if they're exceeding average performance, why would that be?" So, Erik, why would you think that would be?

Erik Gensler: I mean, there's so, so many things. It could be in the case of a coffeehouse, it could be the design. It could be the relationship with the barista. I mean, there’s some factor that is this sort of 'wow' factor that's tipping one, one over the edge.

Zannie Voss: And that 'wow' factor, that's exactly it. They're intangibles. You know, the- Arts organizations have their 'wow' factor, too. I know important intangibles like, good decision making, the intellectual capital. What's the organization's customer service like?

Erik Gensler: Right.

Zannie Voss: What is the ambiance, the reputation, the relationships? You know, all of these things drive high performance and are reflected in the NCAP KIPI dashboards. So, we're basically telling you: are you outperforming or underperforming other organizations like yours nationally, you know, based on what we would expect? Dashboards help, organizations in many other industries understand high performance and we're, we're, we're trying to take that and put that power in the hands of arts and cultural leaders. So, if an arts organization, data is already within our data set, either because they participate in DataArts' Culture Data Profile, they are with the League of American Orchestras survey, etc., working with one of our partners, they just need to login and we'd provide this for them free of charge and we make it available to be seen, though, only by the arts and cultural leaders. So, it's kind of a safe space to see where your strengths lie, to look at where are areas that you may need improvement on? and then, if that organization wants to share it with anyone else, then certainly they can, but we don't do that. I think the organizations can themselves.

Erik Gensler: Great. What sort of support do you give, I mean besides providing these great resources and, and this great data? Do you provide one-on-one consulting or support once, an organization has downloaded this kind of information?

Zannie Voss: We don't do consulting, one-on-one consulting. We are a small team and, if we got into the consulting business, we would never have time to do the research part of it. So, what we've done is establish relationships with a stable of consultants. You know, even if you go to the dashboard and you see that you have, an area where you need help there's a button there to click to our resources and there we provide you with consultants who have experience in- Or expertise in that particular outcome area, whether it be marketing versus, you know, looking at financial management and bottom line or working capital or fundraising. All of them have been through kind of the dashboard training. They're familiar with the dashboard, so you know, you won't be going to them cold, without them knowing what you're talking about. We didn't want to leave organizations with a sense of, "Hey, you just told me some bad news. Now what do I do?"

Erik Gensler: Right.

Zannie Voss: We wanted to be able to pass the baton.

Erik Gensler: Right, and I just want to make sure people listening knew that, so I really encourage everybody to check out those, studies and research and, I want to turn, now, to an article that you published in reaction to a threat from the current administration, to abolish federal arts funding, and I believe that was in March of 2017. You published an article, with great research, entitled 'Arts and Culture Aren't an Elitist Extravagance, They're Essential to American Life'. So, how is the assertion that art is only for the elite incorrect?

Zannie Voss: This notion of arts and culture as something that's irrelevant to most al- Americas, or just for the elite, we thought, "Hey, wait a minute. We've got data to try and help either support or refute that claim." And there are a couple of facts that, butt up against that contention. We mapped the location of more than the 39,000 arts and cultural organizations in the country that filed an IRS 990, so with a budget of 50,000 or more. We overlaid it to a map of the U.S. population distribution and I have to give a shout-out to Randy Cohen at AFTA for that suggestion. And what you see is the comparison is striking. We see that arts and cultural organizations are where people live in communities throughout the country, not just in big cities, not just on the coasts. They're in the communities where people are, big and small. Taking a bit of a deeper dive into that although the arts are often framed as being inaccessible and irrelevant to everyday life and, therefore, unworthy of public support, the fact is that the majority of arts and, and cultural nonprofits, and the majority of attendance can be found in four arts and cultural sectors, as you called them 'genres' before, that are really family oriented and highly accessible and relevant to neighborhood life and, those four were: what we, we call 'other museums,' which is a cluster of children's museums, history museums, natural history, science, community based organizations, which is a sector that's multipurpose arts organizations, folk arts, cultural and ethnic awareness organizations, community celebrations. The third sector was theater and the fourth being music. So, you know, this notion of it being elitist and inaccessible. Maybe when people think of arts and culture, they're thinking of something that is different than the reality, but if you ask them, "Hey, you know, but do you go to the local children's museum or, you know, participate and go to the, choral performances?" Yes, but that's not what they're thinking of when they're thinking about arts and culture and what was really striking to me, and this is something that really evolved in my thinking as we were going through this. The estimated 467 million people that attended these over 39,000 arts organizations are really What we call 'the tip of the iceberg.' What we really see, you know, if you start looking beyond that, is that there's so much more beneath the waterline, you know? So, even a- As, important as these figures are, there's a lot more activity that's happening, that we're not even accounting for in those numbers. So, let's just take this tip of the iceberg. 467 million people attended the organizations. You could say, "Gosh, that seems really high, the U.S. population was 322 million at the end of 2015." The NEA estimates that about half of Americans attend a live visual performing, arts activity in 2012, so you look at half of it, it would mean that, on average, every person who attends the arts, attends about three visits per year, already that's really an astonishing figure, and so when we start looking beyond that there are lots of arts organizations that are a part of the public sector and file a 990. In smaller communities, the performing arts center at the community college is the major cultural presenter. So, these entities are not filing as arts organizations. They perhaps are filing as social service organizations or educational institutions, there are about 4,500 local arts agencies. Many of them have public art programs. The arts happen in hospitals. They happen on military bases, They happen in religious organizations, in libraries. all of this filters down to that beneath the water level. So, as pervasive, even as we found within these, you know, kind of official 39,000 organizations, there's so much more, in many ways, that arts and cultural infiltrate the lives the Americans.

Erik Gensler: Those numbers are really impressive. The article also shares impressive stats about the, economic impact of the arts, and so hoping you can share some of those as well.

Zannie Voss: So, the arts organizations, these 39,000, they collectively added 31.7 billion to the U.S. economy in the form of direct payment for labor, goods, and services. they employ about 908,000 people in full-time and part-time positions or as independent contractors, and that doesn't even take into account the armies of volunteers who contribute their talents, both in administrative and artistic roles. That's just direct impact, direct cost. if we really look at the indirect, the very real impact of arts if there are about 908,000 people employed, so these are artists, administrators, production people, curatorial staff, security personnel, they live in communities. They buy homes. They pay rent. They purchase cars. They pay taxes. They are regular consumers on a day to day basis, so what they receive in compensation gets filtered into the local economy. The more than 467 million attendees, they stop at a local restaurant when they go to the arts events. They hire babysitters. They pay to park. You know, all of these, add to the economy, above and beyond just the direct expenditures, into the economy, and in terms of the federal funding just kind of where we had started the paper, you know, we saw that, all else being equal in an organization that receives federal arts funding, those dollars increase employment by 1.5% and attendance by 2.7%, so more funding for arts and cultural on a national basis would mean that even more Americans in communities would benefit from the in participation stimulated by, a federal funding boost.

Erik Gensler: Wow, that's really nice that you have that data so clearly at your fingertips and, as administrators, to own that and, and, and see it through that lens, I think, is tremendously useful.

Zannie Voss: We've been around for about four years now. There is so much more to explore and, as a field, we are becoming increasingly, sophisticated as arts and cultural organizations in understanding and appreciating, what data can tell us. It's really heartening to see the field and the availability of data, that can help us to start to unlock that knowledge. You know, sometimes I feel like we are at the very bottom of a mountain, just starting to scratch the...

Erik Gensler: (laughs)

Zannie Voss: …the lowest rocks where, when you look up, there's, an enormous amount of potential of what can be explored, not just by NCAR by from, you know, researchers everywhere.

Erik Gensler: Absolutely. So, what's the next big study we could look out for from you?

Zannie Voss: We've got a couple of projects in the pipeline. The next study is going to be related to an analysis of working capital. So, we looked at bottom line in the most recent report. We want to look at, do organizations, have enough current assets to cover their current liabilities or not? Is that an area where cash is tight? Is it an area where it's tight for some sectors and not others? Is there a through line that we're seeing between organizations that, were perhaps running deficits, but do have strong working capital or the reverse? We are in the process of, you know, the results are solidified. We're designing the report and would like to do an accompanying whitepaper for it. There's another project that we are examining that looks at arts and cultural clusters. so, what we think of as arts districts. There's going to be another addition of our annual 'Arts Vibrancy Index Report,’ which really just shines a light on communities, large/medium/small, throughout the country that have a high level of arts vibrancy. And as I said, we're working right now on the pilot testing for this audience development tool, which is going to be taking a good bit of our immediate attention.

Erik Gensler: I bet. Great. so, I'd love to turn to some questions about you. I'm just curious, how did you get involved with this organization?

Zannie Voss: Actually we started it. Glenn Voss, who's not only my husband, but he's also Research Director, we've been working on research in the arts and cultural realm for about 20 years now. We've been working with Theatre Communications Group on 'Theater Facts' for about 20 years, as well as publishing, you know, academic research and we got started in part because, as what was then the Cultural Data Project, now DataArts, was looking to expand. I was on a call where they were saying, you know, "There were different states, different constituents that want reports on a kind of localized basis, but wouldn't it be great if some researcher one day wanted to look at all of the data?" And we were always curious whether what we were seeing in the theater sector, were similar pressures and trends that other sectors were experiencing. You know, was there something that perhaps art museums had already been through that theaters could learn from? And about the same time, it was within the span of a couple of months, I had a conversation with, Rick Lester, who was the founder for TRG, and also teaching for me at the time at SMU. Rick said, "We've got all this national data about arts consumption. It would be really great at some point if we had researchers to look at the body of it. We're consultants. You know, that's where our energy is directed." And so Glenn and I kind of looked at each other and said, "This would be really interesting if we could look at, not just organizational health as the organization's data within a sector for here, which is fascinating in and of its own, but if we could look more broadly across sectors, and not only look at the organizational health, but tie that into arts consumption health, to Census Bureau datand really try to get a bigger model of the arts and cultural, ecosystem, and if we can find data to represent as much as possible, that arts and cultural ecosystem." So, our involvement was, just out of, a sense of curiosity and a desire to look at, you know, what makes it all tick and whether or not we can generate insights that are going to be useful to the field out of its own data.

Erik Gensler: Great. So, you said you were working at the Alley Theater. I'm just curious: what is, what is your background that brought you here?

Zannie Voss: So, before the Alley, I was in audience development at Center Theatre Group at the Mark Taper Forum in Los Angeles. Between CTG and the Alley, I got an MBA at Texas A&M and, from the Alley, I was the managing director at PlayMakers Repertory Company, which is a resident professional theater company on the campus of UNC Chapel Hill, which came along with a faculty appointment, as an assistant professor, which is kind of my backdoor way of getting into academia.

Erik Gensler: Mmm.

Zannie Voss: And in addition to running PlayMakers, I was also teaching and looked around the campus and said, you know, "So, where does the currency lie on a university campus?" It's really with, having a PhD and being a professor and doing research, so I got a PhD and have moved from UNC to Duke University, where I was on the faculty within theater, and then eventually also with Fuqua School of Business and producing director of Theater Previews at Duke, and always continuing to work, at the time, not only on, you know, professional productions, but then having moments of the year where I was focused on teaching, moments of the year where I was focused on both academic and practitioner research, and I've always just been really curious, having sat in the seat of someone trying to make decisions for an organization, really hungry for more information that could help to guide my decision making rather than, at the time, you know, just making decisions based on either gut feeling or anecdote.

Erik Gensler: Mm-hmm.

Zannie Voss: So that's sort of the arc of my, you know, personal desire to want to have this kind of impact now.

Erik Gensler: Cool. What did you teach? Like, in the theater department?

Zannie Voss: At Duke, I taught in the theater department, courses…let's see. I taught a course on, producing for the theater. I taught another one, that was about entrepreneurship and international arts management. In the Fuqua School of Business, I taught a course on entrepreneurship in the social sector. At SMU, I've taught courses on strategic planning in the arts in the Meadows School of the Arts, and nonprofit marketing strategy in the Cox School of Business.

Erik Gensler: Alright, cool. So, what's something you've learned in the last year or so and through your work that, has been profound in, in, in how you work or think?

Zannie Voss: Hmm. I have learned so much this year. It's really hard to pick. Let's see. I think one of the most important lessons that I've learned is the importance of getting out of my bubble. you know there's really a danger in surrounding yourself only with others who think like you, who are in your same head space. Last year's presidential election was a real profound reckoning on how out of touch my worldview was with, underestimating the magnitude of people whose viewpoints diverges from mine. you know, how's it changed my, my work and how I think? it was really a big inspiration in the framing for 'The Arts and Culture Aren't Elitist' paper.

Erik Gensler: Mm-hmm.

Zannie Voss: You know, NCAR's work focuses on the tip of the iceberg, and that's my bubble. but understanding the health of that tip really requires both acknowledging and better understanding the whole rest of the ecosystem. You know, it's all intertwined, and all equally relevant. So, you know, one of the big lessons is the importance of getting, out of your bubble. It gives you license to learn, to accept other truths, counterintuitive findings. Like the distance research. You know, was a counterintuitive finding of being willing to step outside and allow, for those divergent, viewpoints and facts to help you think more broadly.

Erik Gensler: Absolutely. So, this has been a great conversation and I'd, love to go to our last question, which is your, your CI to Eye moment and the question is, which is you may know, is: if you could broadcast the executive director's leadership team's staff and boards of 1,000 arts organizations, what advice would you provide to them to help them improve their businesses?

Zannie Voss: My advice would be: don't forget to meet needs. You know, as, as nonprofit organizations, I think it was Phil who talked about, you know, the definition of marketing was to, to meet needs profitably and, for nonprofits, it's about meeting needs. You know, we're in the business of meeting needs of people in our communities and it's somewhat easy to forget that and to focus only on the things that we want to deliver. What we want to say and then ask, "Well, what's wrong with those people?" if they don't respond to it. I love the old Yogi Berra quote that if people don't want to come to the ballpark, how are you going to stop them?

Erik Gensler: (laughs)

Zannie Voss: What is it about their sphere of needs, that either is not being addressed by anyone, that we might consider meeting, or is not being met well, and how can we consider meeting it? I think improving our business means consideration of what we offer that doesn't meet needs and gets no traction and should we let go of it? People per offering is one of our metrics and what we saw over time is that arts and cultural organizations, over a four-year period, added 15% more programs. Do all of them, always need to stay? You know, to some extent, we, we kind of look at them as, you know, that would be killing our children. We birthed something. How could be possibly let it go? But, to think about a program is either not meeting needs or not meeting needs well, it's not generating enough revenue to cover itself, and it's not, close enough to mission, then is it something that we can should consider letting go to make room for meeting another need in the community, that could fit with mission and is not currently being met? The meeting needs, or relationship development more generally, I think, just requires listening closely, listening more than speaking, and that's really hard work. Listening rather than assuming, and I think it's really the only path to relevancy and now, more than ever, you know, this building on the arts' great legacy of relevance is, is really critical.

Erik Gensler: Absolutely. Well, thank you so much for, for your time, all this amazing research. I hope we can, help you get this in front of more people and I learned so much talking to you and I thank you so much for your time.

Zannie Voss: I am delighted to speak with you, Erik. Thank you for the opportunity.