Letter to Editor: Plaintiffs’ Response to AEA President (Part 2)

letter to the editor footlights“And the other is that – and I think this is one of the things that guided the Council – the idea that a mid-sized theater could open at this point, or even a smallish theater, could open at this point in Los Angeles when they had to compete with the 99-seat business model (which is much more cost-effective) is kind of preposterous.”  ~ Actors’ Equity President Kate Shindle

On a superficial level – without critical thinking and in depth study – this most pernicious belief makes sense. Unfortunately, what sometimes seems to be common sense can itself be preposterous and can lead to disastrous conclusions and actions.

To understand why this belief is preposterous we must have an understanding of how the business of theatre works. Kate has been using the words “business model.” One definition for “business model” from Investopedia is:

A business model is the plan implemented by a company to generate revenue and make a profit from operations.

Almost all theatres outside of Broadway and tour venues are now not-for-profit. Theatres can and should be run like businesses but theatres are not businesses – they are 501(c)(3) charitable service organizations that do not generate enough earned revenue to exist without subsidy.

The Theatre Communications Group (TCG) yearly reports tell us that not-for-profit theatres must find 50 to 60% of their revenues from donations, grants, and corporate support. Typically, earned income from ticket sales amounts to about 40% of what is needed each year. Additional earned income may come from rentals and classes.

The TCG yearly reports suggest that, on average, 80% of not-for-profit theatre’s yearly contributed unearned income comes from private donors.

So here’s a recap of the not-for-profit theatre “business model” – large or intimate.   On average, 40% of the needed yearly revenue comes from ticket sales. As much as 10% may come from other income producing activities. 50 to 60% of the remaining revenue needs are met from unearned contributed income. 20% of that 50 to 60% comes from grants and corporate support. 80% of the needed unearned revenue comes from private gifts. More than 1/3 of a theatre’s total yearly income must come from private contributions.

Any midsized theatre created here would have to be a not-for-profit theatre to survive. There would have to be much more private funding for such ventures than is currently available here. The science of cultivating and keeping donors has become highly sophisticated. Read Michael Kaiser’s book The Cycle: A Practical Approach to Managing Arts Institutions.   People only give money to people or organizations they know. Any theatre that wishes to grow, to survive, must cultivate donors. Cultivation is an incredibly slow process.

In addition, there are many better funded charitable organizations here in Los Angeles which have those full time, highly trained and sophisticated paid staff who do nothing but donor cultivation. The Center Theatre Group has about 30 people in their development department. More than half of all the donations to theatres in this area go to 2 organizations – The Center Theatre Group and The Geffen.

Right now the money isn’t here. It is not Intimate Theatre that is curtailing the growth of midsized theatres here; it is a lack of funding.

Creating new midsized houses isn’t impossible but we must understand how challenging finding funding for new arts organizations is and will be in this community. We live in a time and in a country where the arts are not well subsidized.

poor funding underfunded footlightsAccording to a 2014 Theatre Communications Group Survey of 118 Theaters (15 of which had budgets of 499,000 or less),  federal funding was at a 5-year low in 2014, less than half of its 2010 level in inflation-adjusted dollars. This 56% decrease represents the biggest reduction in support of all contributed income sources. And for those 15 smaller theaters surveyed (Alter Theater Ensemble, The Chance Theater, Golden Thread Productions and Sacred Fools Theater were included in this National Survey) ticket income makes up for only 26.6% of total yearly income. 36% of these smaller theaters has negative working capital.

According to a survey from the National Assembly of States Arts Agencies: In New York, the per capita appropriation to states arts agencies is $2.28. The per capita in California is 27 cents. According to The Art Newspaper, New York is in the top 10 of the Country for Arts Funding while California is in the bottom 10. The city of NYC has more arts money to play with (157 million) than the whole NEA (146 million).

According to a TDC survey as reported in the Boston Globe, Los Angeles doesn’t even rank in the top ten cities for government funding of the arts. According to a 2015 OTIS survey of Los Angeles County: Art Museums earned 21.2% of non-profit income, followed by History Museums (12.4%), Cultural and Ethnic Awareness Organizations (9.2%), symphony orchestras (7.5%), and arts education (6%) with non-profit theater not even ranking. Here’s why: Of 201 non-profit theaters in Los Angeles country, the average asset amount of the non-profit theater is $140,654. The average income of the non-profit theater in Los Angeles is $111,742. The average non-profit theater in Los Angeles is either losing money or treading water. Note: Our larger theatres (CTG and The Geffen) were included in this survey making the average income higher than they would be if only 99 seats theaters were reflected.

According to a 2014 study as reported in the Los Angeles Times, the top 50 US philanthropists, the big ticket private donors, gave $9.8 billion in 2014, but just 142 million to the arts. That’s about 1.5% going to the arts nationwide.

There is very little corporate support for theatre in Los Angeles. Laura Zucker, executive Director of the LA County Arts Commission, has stated this is because there are no national corporate headquarters here.

There are a few local foundations that do give some support to local theatres but it is often tied to specific service programs. The City and the County do support the arts but the per capita funding available for the arts is literally and verifiably 1/10 of what is available in NY.

The idea that more funding would be available for mid-sized houses if there were fewer intimate theatres is just wrong. The idea that a mid-sized theatre can’t flourish in this community because there are too many intimate theatres is wrong. We won’t get more apples if we have less oranges.

Agencies, organizations and individuals are not going to automatically give what they used to give to theatres that have been forced out of business to other theatres. That isn’t how giving works.

Those few government agencies, local foundations, and corporations which do support intimate theatre have the same system in place as most national funders: grant awards are generally made in relation to budget size, so larger theatres do and will receive more funding.

Remember, almost all of the unearned income needed must come from private donors. Michael Kaiser insists these individuals must have a stake in the organization; they are part of the family. They are not going to give to anonymous arts organizations no matter how good the work is.

Intimate theatres are not unfair competition. To think so is to impose a structure on the arts in community that does not exist. If intimate theatres are forced to close larger theatres won’t spring up to take their place. The funding isn’t available.

Closing a number of intimate theatres isn’t going to make funding happen or create “producers” who will find the funding on their own. Finding this funding is no longer only a function of producers, but paid development staff supporting strong boards, and that takes resources and time to develop.  It is also a function of community and it will take government and business leaders working with determined arts and union leaders to effect this change.

What will happen if these theatres close is Equity members will be denied an opportunity to pursue what they love in life; what gives them identity in spite of a clear majority’s expressed wishes. What will also happen is Los Angeles will be denied this diverse and thriving arts community, a community that could, if nurtured, generate the kind of excitement that might help create more midsized theatres.

We know theatres stimulate the economy and that children who are exposed to the arts do better in school and in life. If we want midsized theatres to thrive in Los Angeles we must work together as a community to develop the financial support necessary.

Part 3 will look at some ways we might all work together to create midsized theatres in Los Angeles.

Ed Asner, Tom Bower, Gregg Daniels, John Flynn, Maria Gobetti, Gary Grossman, Ed Harris, Salome Jens, Veralyn Jones, Karen Kondazian, Simon Levy, Amy Madigan, Tom Ormeny, Larry Pressman, Michael Sheppard, Joe Stern, Vanessa Stewart, French Stewart
Los Angeles, CA

(Part 1 of this letter can be found here.)

About Peter Finlayson

Peter Finlayson is the Founder, Publisher and Editor-in-chief of FootLights magazine and footlight.click. While working on a prelaw program at the University of Michigan, he happily got involved with the theatre program. Much to his mother’s chagrin, law school never happened, but in a career spanning more than 4 decades, Peter has performed, directed or designed more than 150 productions. In his spare time, he is working on a new play. You can follow him on Twitter @Thtrdog .

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  1. Thank for for this excellent, fact-based article. The anti-99 people at AEA may be entitled to their own opinions, but they are not entitled to their own math.

  2. The fact that the union has ignored the members’ vote says it all. There is a deep, fundamental disparity between the union’s high-flown theory and membership’s reality. This must be addressed as the first order of business.

    At some point, this too must be addressed: “There is very little corporate support for theatre in Los Angeles. Laura Zucker, executive Director of the LA County Arts Commission, has stated this is because there are no national corporate headquarters here.” Is that true? If so, why?

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