Gathered information on the impact of the financial crisis on the Performing Arts sector by telephone interviews of Pearle* s members.

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Reynold Patterson
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April 2 nd, 2009 Gathered information on the impact of the financial crisis on the Performing Arts sector by telephone interviews of Pearle* s members.

A series of questions were asked to our members through the phone and they gave as much information as is possible in this early stage of the crisis.

1 April 2 nd, 2009 Gathered information on the impact of the financial crisis on the Performing Arts sector by telephone interviews of Pearle* s members. Pearle has been gathering information throughout a selection of countries on the current economic situation and its impact on the Performing Arts sector. A series of questions were asked to our members through the phone and they gave as much information as is possible in this early stage of the crisis. We could thus call this a general view, a first feeling on the situation. Here are the main points discussed: Any changes in public funding? The situation regarding private funding (sponsorship, trusts etc) Any changes perceptible in audience participation? The employment situation France: Regarding public subsidy the situation is stable for 2009 but there remain huge uncertainties for 2010/2011. In some regions the DRAC (regional office of cultural affairs representing the Ministry of Culture) announced a cut by 6% in The greater difficulties come from local financing in the municipalities where fewer funds are available. On the private funding side company-conventions are being abandoned and sponsors seem to be getting cold feet. Finding new sponsors is equally difficult if not impossible. It is not possible to notice any changes in audience participation yet because the new season s tickets will be sold around May or June of People seem to be choosing the cheaper tickets or are buying subscriptions containing fewer shows and some opera houses feel they need to develop their marketing and communication skills. Unemployment is expected to increase.

2 Slovakia: There is clear economic problem in the country; nevertheless it is not expected that the impact on the sector will be too drastic. The minister of finance has asked for a reduction of financing for all sectors. And obviously the cultural sector is the first struck by the crisis. There have been some cut downs, for instance a grant for a festival was not given out and were lost impeding a choir to come from Estonia. Regarding sponsorship, a cut in funds is clearly expected. Companies and banks still have to make an announcement regarding their decisions towards sponsorship but they say they haven t come to a final decision. To keep the public and good audience participation work will be carried out on marketing and if necessary ticket prices will be brought down and special offers will be made. Sweden: Regular activities have not gone down much; performances in music and theatre are still selling just as well. The more expensive projects have more difficulty selling though. People are producing less and taking fewer risks. Regarding public funding not much can be said until the vote of the next budget in autumn. The sponsor market seems on the other hand seems dead in the sense that it is impossible to find new sponsors. For example a producer in Denmark specialized in touring orchestras around Scandinavia had to close down because it was financed by sponsors who stopped giving out their help. Finland: The crisis has no strong effect yet but there are some signs, similar to the ones visible during the big depression in when commerce with the Soviet Union collapsed. At that time there was a major change in participation, and today resemblances can be found : the private participation is still the same, even tending to go up whilst group orders from communities and firms are going down, not totally disappearing but there are much less of them. The bigger problem is coming from the funding: state funds are safe for this year : there exist a three year program that ends in 2010 and gives an extra 20% every year. Although it is not absolutely certain that it will be maintained next year. A crisis program has been established (for instance the average age for pension has gone up), so the law could be changed if the crisis is too strong; if not State is compelled to give out its annual funds. In Finland 70% of theatre funds come from public funds. So there is a danger for them because municipalities are cutting down already quite a lot. Some theatres have forbidden taking on new contracts which will affect the functioning and the income (less people, less productions) on the long run.

3 Belgium: There will be elections in June in Belgium. More liberal views are being developed in the political campaign. It is being said that the art field has received enough money and should now turn to the market and to private funding. So there is a strong chance that subsidies will cease increasing which is problematic because the cost of employment is higher than the amount of subsidies. Sponsorship is not common in Belgium and it is hard to obtain it. Most of the sponsors in the country are media sponsors that limit their funding to big institutions and don t support the producing sector. Contracts with private partners are either being revised towards a decline in financing or else are not being renewed. A particularity of the country is that subsidies are given out in four goes: 25% in January and so on. At the beginning of each year it is difficult for the organizations to pay the wages so they often take credits from banks, but now the banks are not keen to give out short terms loans for paying the staff. Another example that could reflect the impact of the crisis is the extra income organizations would obtain from shares that have now gone down. So this extra money that was used for the running costs is now lower. Companies touring internationally are being hit by the crisis. There have been a few cases of foreign organizations cancelling the coming of the companies, especially in countries were private funding is strong like in the US. The contracts with foreign organizations in the UK, the US, Canada and Australia are done in the local currency which means that today the fees are worth less than initially. In the future the contract will be done in Euros. Regarding audience participation there is no change, it is still too early to say anything until the next subscriptions in May-June The public seems to be choosing the less expensive ticket; to be listening more attentively to critic s opinion and to be taking fewer risks in their choices. As regards employment, not much can be said until the decision for the budget of the coming year in April. What is already noticeable is that the exterior demands for the costumes and stage setting for instance are going down, which may have its effect on employment. Estonia: (written testimony from Estonian Association of Performing Arts) With complex worldwide financial crisis on the background, Estonian culture is also having a difficult time and struggles to find a way to survive these critical years. As an employee of a cultural establishment, I m hopeful, that all the performing organizations give their best not to lose the trust of their audience. As for today, the public funding to cultural establishments has already decreased 15%, to which different theatres have reacted differently - some have had layoffs, others have postponed premiers or cancelled performances. Similar point of action for theatres is cutting down administrative costs etc. About the 4 points which seem to be of main interest: - In Estonia there are two opera houses. Firstly Estonian National Opera, depending on the level of government funding and secondly, Theatre Vanemuine, depending on both government and municipality funding. Budget has decreased for both operas. - It is harder to find private funds and conclude sponsorships. I know that some theatres have lost their sponsors in the middle of the season, although there have been fixed term contracts between the parties.

4 - There are already some signs which indicate that audience is not capable to buy tickets as much as before for example the cheapest tickets are sold out first. In spite of all that we are not worried yet, because there haven t been any severe references to diminishing number of viewers and the auditoriums are not empty. - Theatres don t take the risk with expensive and unknown projects. Theatres employ less guest artists and actors. Notwithstanding complicated situation, we hope that Estonian Theatre will survive and will apply the generally recognized skills and guarantee its high professional level. UK: There is a three year program regarding public funding running from April 08 to April It was recently indicated that the last year of the program may meet with some cuts which could be problematic because the performances are already planned. For the two first years the money is fixed. In England there is a 2.7% increase/year in public financing, an inflation increase. Scotland and Wales have more of a standstill financing. A deflation is expected next month but the consequences are still unknown. The ticket prices are already published, so the public might expect the prices to go down because of deflation. Regarding philanthropy: the individual donations have increased over the past years. The latest figures are stable but a decrease is predicted in For instance, orchestras rely on rich bankers but this crisis is also hitting the rich. Corporate sponsorship has gone down by 7% in December 2008 against December It is being reduced not because the money isn t there but for the company s reputation, because it is seen as insensitive and immoral to give to culture whilst people are being laid off. Arts & Business reported a 13% cut in sponsorship which is likely to rise. The biggest problem might come from the Trusts and Foundations who will be generating less income for it relies on investment and is linked to the stock exchange. One project from this year s Edinburgh Festival had to be cancelled because of this problem. No decline in ticket sales but it is assumed that there will be a decline in coming years. UK will probably be enormously hit by this crisis because of its odd model between the continental way and the American way, it relies on what it earns more than on subsidies. There have been some trimming of concerts, but concerts have already been announced publicly so it remains difficult to cut down too much. What might suffer more from this are the educational and community programs, they may be further reduced. No major changes yet in employment. In an orchestra for instance, each musician is part of a whole, they are all are needed. The downturn is also a lot based on rumors and fear that create negative attitudes. For instance touring companies are having problems with venues who are taking fewer risks, cutting back on interest projects.

5 Maybe the sector can build positively on this crisis: people are maybe looking for more meaning in their lives. There could also be a positive outcome to this crisis in the sense that it could bring an increase of attendance in the Performing Arts. Germany: Not much change can be noticed for the time being. Public funding is strong, the Landers are the financers. The situation goes up & down and has done so for the last 15 years but it is not connected to the crisis. This year cities are having a bit more difficulty financing. There has been a wage increase of 8% for employees. The wages are set by a conventional agreement between the unions and the public service. The non-artistic staff is part of the public service so benefits from this, but the artists don t. Currently there is a discussion about public funding to see whether it should be increased in proportion to the wage increase. The organization s position is that there are huge financing programs for the private industry and that it is not understandable to give so much and not keep on helping the financing of the cultural sector. There are employees in the theatres and operas so public financing is also important for jobs. Sponsorship only represents around 4% of the financing of the sector, so is not so important but still helps finance certain big productions like Wagners ring for instance. There is a case in Hamburg where a private sponsor is giving if the opera is produced in the next four years. There are two cases: the bigger companies who suffer from their public image due to the financial crisis and for whom no longer financing the arts would make their image worse. Next to the billions of Euros spent to run the enterprise, sponsorship is a small amount (2 to euros). So for the time being they are trying to continue their sponsorships. Then there are the smaller companies who are situated in the towns and that help finance city theatres. These city theatres gather between 2000 to 4000 employees for 500 to 700 performances a year. They usually get around or per year in sponsorship. For these smaller companies it is more problematic. They have to decide whether to give notice to employees or to continue giving money to the theatres For now, it is impossible to say how the situation will evolve. Audience participation stays the same; people are interested about coming because theatres provide a space for debate and opinion making. Denmark: There is a cutback in public funding in all sectors, but it has been going on for 4-5 years. It is also a structural change. Private financing has gone down since autumn. Private theatres are closing down. No statistics on audience participation but you hear in the media that concerts and theatres all feel an audience decrease. Everyone is cutting back on private spending.

6 Hungary: There is a real political and economical crisis in the country. National opera, national theatres that are funded by the central government have a cut of 3% of public funding. The palace of the arts has lost almost 10%. The opera house made a 3 year agreement with the min of culture in which the founder of the opera house would agree on the amount given. But this year the opera house has received 8% less. The min of culture and education has a smaller budget this year. It is in discussion to ask lawyers to make new contracts by which the budget can be changed at any moment, with a flexibility of 15%, because ministers don t want to be sewed by cultural organizations. The orchestras funded by the local district are in a better situation. There is a new law for theatres, orchestras and dance organizations, based on an agreement between employers and employees and the Ministry. The new law regulates public funding, it gives the definition of what the different organizations are, gives stipulations to be fulfilled, and says how much can be given out if fulfilled. So there is money stored that will be given to local orchestras and theatres. This does not apply to nationally funded organizations. Sponsorship has gone down; car manufacturers were the main sponsors. More than half the banks have serious problems, so they no longer support the arts. The symphony orchestra used to be owned by the post, but as the post has less money due to political changes it was sold to a German telecom who has decided not to support it anymore. The orchestra is fighting for survival, trying to collect money from rich immigrants. There is little hope for the 90 musicians and 15 people in management. Theatres have a better situation because of the new law. They are protected for 2009 because the law was prepared before the outcome of the crisis. Hopefully most of the organizations will survive. Orchestra managers have the strong intention of defending the work places even if it means reducing the number of concerts, changing the programs Bulgaria: About one and half months ago the government announced that the sector should expect a 10% cut in the yearly budget. This cut could only amount to 5% if the situation allows it. Many cultural structures in Bulgaria are state owned so they are the first to feel the impact. Municipalities play an important part in the financing of the live festivals. These are expecting cuts between 10% and 30%. Indeed, there are tensions in municipalities across the country because of salary payment delays which show the financial difficulties they must deal with. Private financing is poorly developed in the country and it is difficult to find sponsors. Besides the crisis context, there are also elections coming up in June which make it even harder to find sponsors. There is currently no change in audience participation and in employment. But there are signs across the country, underground tensions not yet visible to those not working in the sector that testify of the impact of the crisis.

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Tax Advisers VAT FOR ARTISTS IN AN INTERNATIONAL CONTEXT Dr. Dick Molenaar 2017 Rotterdam, the Netherlands www.allarts.nl VAT FOR ARTISTS IN AN INTERNATIONAL CONTEXT 1. INTRODUCTION Activities of artists