By Karen Kardos
Head of Philanthropic Advisory – North America
September 4, 2020Posted InPhilanthropy
Our website no longer supports your current web browser version, which means you are no longer able to access this website. Please update your browser to continue.
Many arts and cultural organizations face a fight for their very existence as a result of the pandemic. In order to survive, they will need to adapt, including how they attract funding.
The COVID-19 pandemic has dealt a particularly heavy blow to the nonprofit sector. While overall charitable giving has increased during the pandemic, the need for relief efforts, food and medical programs, and other human service programs has far exceeded available resources. Many nonprofits have therefore had to cut back their programs and services or shut down completely. Especially hard-hit are arts and cultural nonprofits; those engaged in visual art, dance, music, theater, writing, and film; those that derive much of their revenue from ticket sales, special events, restaurant and gift shop receipts; those that closed their doors to comply with social distancing policies or could no longer survive.
In the UK alone, Oxford Economics estimates that the film, television, video and photography industries may shrink 57% and lose £36 billion ($45.3 billion) in revenues in 2020 due to the effects of COVID-19. In the US, the Small Business Administration (SBA) estimates that over 42,000 nonprofits received a Paycheck Protection Program loan, a facility designed to directly incentivize small businesses to keep their workers on payroll. The arts and cultural sectors did not even crack the list of the top ten most common nonprofit loan recipients, although there is some criticism of inaccuracies in the SBA data.
Prior to the pandemic in the US alone, donations to arts, culture & humanities nonprofits accounted for around 5% of the total charitable donations in 2018 and 2019. Other sectors such as religious, educational, human services, and health are a higher philanthropic priority for a larger number of donors.
As a result, arts and cultural nonprofits – which are typically not as well funded as their non-profit peers and receive very little government support – will need to be creative as they seek to reinvigorate societal engagement, and maybe more importantly, rejuvenate societal funding.
Before looking to the future, perhaps the arts and cultural sector needs to take a look back. Prior to COVID-19, many arts and cultural organizations were struggling to stay relevant. This is particularly true from the perspective of funders from Generation X, Generation Y, Millennials, and Generation Z, who are commonly referred to collectively as the ‘next generation.’
While disparate in some ways, the ‘next generation’ also have many common traits. They are generally considered to be technologically savvy and more socially conscious than their predecessor generations. They want to work for, invest in, and give their custom to companies that make a positive impact in our world. The next generation of funders will not only play a critical role in the arts and cultural sectors’ revival, but also in their very survival.
Digital media is already a key component in the regeneration of arts and culture and will remain so. It is probably now the primary mode of connection and social engagement for the next generation. Indeed, as a result of the pandemic, its use has also increased among generations young and old, in settings from classroom to conference room. Operas and ballets are streaming into homes and museum collections from around the world are available to a much broader, more diverse audience and potential sources of funding. Film festivals are no longer constrained by the occupancy requirements of physical theaters. Journalism is increasingly migrating towards a digital-only format.
Upgrading and maintaining technology will be vital for all such organizations in order to expand their on-line footprint to offer programming and other services. Virtual operations – including fundraising events – have become standard practice for many nonprofits that have either had to abandon their physical office space or that are working through the complicated challenges of keeping employees and patrons safe as they slowly reopen. This is likely to remain the case for the foreseeable future
Art, in all of its forms, is an important feature of every social movement, from political posters to lapel buttons to films and music. Driving social change and measuring its impact clearly resonate with the next generation, as we have seen from the many recent protests against racial and social injustice. For arts and cultural organizations, social change is multi-faceted. It is about building a culture of diversity and inclusion not only at the board level, but throughout leadership positions within the organization. It is about supporting Black, Indigenous, and other artists and cultural workers of color. It is about serving communities of color to drive revitalization by putting arts at the center of community development to make those communities more exciting and attractive to live, work, and visit. Arts and cultural nonprofits will need to find a systemic approach to measure their impact within the community for their funders. They must be clear about the value that their art brings to the community.
However, it is not just the value of art to communities, but also to individuals within communities. The power of the arts to help healing cannot be underestimated, especially in times of crisis. For example, dance can be used to help trauma victims or victims of domestic abuse; filmmaking to tell stories that combat the stigma of mental illness; museum-based programs to help people with Alzheimer’s. Each of these highlights the role that arts can play in the healing process. The impact of providing these services to low-income or diverse communities can create engagement that lifts up the entire community.
Whether for-profit or not-for-profit, governance, transparency and accountability provide a solid foundation for well-run and well-managed entities, which in turn help them to create positive impact in the world. Everything from the nonprofit’s culture to its investment strategy, from its board diversity to its gift acceptance policy, each is important to the next generation.
For example, there is increased pressure for arts and cultural nonprofits to perform more robust due diligence when accepting funds to ensure they do not come from “tainted” sources. And while the question of ethics can certainly become a slippery slope, the next generation is more inclined to support “honest and ethical” organizations. In the long-run, establishing and adhering to a policy designed to apply guidelines for how gifts are considered, accepted, and administered, reinforces a culture that is transparent and accountable. An investment strategy that aligns with and augments a nonprofit’s mission is viewed by the next generation as yet another lever for doing good and driving change.
While the next generation will play a critical role as the future funders of the arts and cultural sectors, they will not be the only funders. Collaboration and partnership will also play an important role in this revival. Foundations, governments, the non-profit industry and private sector will need to step up and become substantial collaborators. This underscores the need for the arts and cultural sectors to find ways both to demonstrate their value and measure their impact on individuals and communities. Foundations that typically fund social justice or health programs can look to expand funding to arts and cultural nonprofits. Hospitals and schools can partner with the arts and cultural sectors to provide the healing. Over the decades, scientific studies have shown that engagement in the arts provides cognitive, emotional, and physical health benefits and governments must find ways to provide funding.
The pandemic and the growing calls for social and racial justice have accelerated the arts and cultural sectors to a long-awaited inflection point. How they pivot will determine how they reinvigorate their sectors and how they come through this stronger, more relevant, and regenerated.
 Giving USA: The Annual Report on Philanthropy for the Year 2019 (2020). Chicago: Giving USA Foundation™.