Recessions, sponsorships and the arts

by Jane Haley, CEO, AbaF

I recently read an article which claimed that the sectors that do well in recessions are alcohol, gambling, hairdressing and sex – an interesting combination of basic urges and discretionary spending. But as we enter a year that looks certain to be economically gloomy, how might the arts fare?

It’s relatively early days and the evidence is inconclusive so far. Towards the end of last year we saw a considerable slowdown in sales in the formerly buoyant art market, with most auction houses reporting that many works are not meeting their reserve price. Then again, many people believe that the art market was over-inflated in the first place, so perhaps a correction was inevitable. It’s concerning to hear that many artists are selling fewer, if any, works at exhibitions.

In contrast, subscriptions for performing arts companies seem to be holding up reasonably well and people continue to flock to art galleries and festivals. The Sydney Theatre Company’s latest production, an eight-hour version of Shakespeare’s history plays starring Cate Blanchett for the Sydney Festival, broke the STC's one-day sales record, selling 1,814 tickets on the first day on sale. 

Here at AbaF our attention is focused more on sponsorships and donations. From the evidence that we have collated, including our national survey last year, it is apparent that corporate support has been trending steadily up over the last decade – but we recognise that this will slow in the considerably changed economic climate.

The effect may not be so noticeable in 2009, because many companies had sponsorships in place before the downturn, often with multi-year agreements. It is likely to be in 2010 and beyond that we see the real impact. This would conform to experience of previous recessions – according to our sister organisation Arts & Business UK, in the early 1990s a fall in private sector support for the arts occurred some 18-24 months after a major drop in the GDP.

Conversations with major corporate partners with the arts reveal that some businesses will pull back from sponsorships; there will most likely be more in-kind sponsorships, less cash; and fewer new relationships will develop in this period.

Others make the point that the short-term volatility can be ridden out when partnerships are multi-dimensional and clearly articulate the benefits for each party. One corporate CEO told us “It’s not a question of ‘We can’t afford this any more,’ it’s ‘Are we getting good value from the relationship?’ If the answer is yes, then it will be continued.”

The economic downturn provides time for a focus on the merit of the partnership – to clarify desired outcomes, appropriate strategies and meaningful evaluation and reporting.  Imaginative ideas for leverage will add value and strengthen the chances for the partnership to be maintained and renewed.

According to Arts and Business UK “as the recession catches up with businesses and their consequent partnerships with the arts, the climate is expected to remain quite dire … If the previous recession is anything to go by, business investment in the cultural sector should start picking up once the economic climate starts showing clear signs of improvement.”

We believe that it will be the same, although less drastic, in Australia.

There may, however, be a different experience in regard to donations. In the last decade, donations to the arts in Australia have significantly increased, albeit from a low base. Like every other ‘industry’, philanthropy is directly linked to the health of the overall economy, and is subject to all the factors bearing on it.

The capital investment of many philanthropic foundations has been severely diminished; as a result their earnings (funds for distribution) will be considerably less. The good news is that in Australia, according to John McLeod of Goldman Sachs JBWere Philanthropic Services, in years of negative share market growth and even recession, donations have continued to increase.

So – what are the key things the arts need to do to ensure that they get through these choppy waters? AbaF plans to host sessions for arts managers around Australia in the next couple of months to explore this topic and ideas for action.

There are some general principles that we can all adopt:

• work on developing the relationships you already have, rather than putting a lot of effort into new ones which will be harder to achieve.
• make sure the business benefits of your sponsorships and partnerships are spelled out to your partners. This will assist corporate staff with responsibilities for arts partnerships to make the case within the company for why they should continue.
• make sure that everyone in your organisation thoroughly understands the requirements of your corporate partners and the ways in which your organisation has committed to achieving and reporting them.
• research those businesses that are less affected by the economic downturn (or indeed advantaged through it) and examine potential for good fit with what your organisation might have to offer.
• be flexible with your partners – if cash sponsorship has become difficult, explore options for other ways in which they can assist and support you, including in-kind support and business expertise.
• strengthen your focus on building and maintaining relationships with donors. Let them know that during difficult times, their support is more important than ever.
• investigate ways in which your organisation can assist businesses to meet corporate social responsibility (CSR) objectives which are likely to become more important to them.
• remember that this financial crisis will not last for ever. Build and maintain good relationships with partners and donors now, and they will be committed to supporting you when the good times return.

Arts organisations have a big responsibility to keep the ship afloat through difficult times because it’s at times like these that we need the arts more than ever.

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