Bryant Park Part 2: a comparison to other entertainment venues on attracting tourists, user frictions and costs to create or significantly renovate

Posted on September 27, 2014 by DANTH

Posted by N. David Milder

Introduction

Part 1 of this article focused on showing how Bryant Park is a model informal downtown entertainment venue. That entailed describing how it performed three key functions:

Providing visitors with a pleasant, green refuge from a downtown’s hustle and bustle
Offering opportunities for visitors to engage in fun activities, with their resulting performances entertaining nearby people watchers
Holding entertaining events for park visitors that are performed al fresco, often on “flexible use” locations within the park, using impermanent infrastructure, e.g., stages, movie screens, ice rinks, etc. Here the visitors are usually observersrather than participants (1).

Part 1 also demonstrated that Bryant Park is a very strong entertainment attraction for the Midtown Manhattan CBD. In terms of annual attendance, it either closely rivals or surpasses such world-class formal entertainment venues as the Lincoln Center for the Performing Arts (LCPA), the Metropolitan Museum of Art (Met), the Museum of Modern Art (MoMA), Madison Square Garden (MSG), Yankee Stadium and Citi Field. Bryant Park’s magnetism demonstrates the powerful contribution an informal downtown entertainment venue can provide for a district’s entertainment niche as well as for its economic well-being.

Part 1 can be found at: http://tinyurl.com/kv36u4s

Here, in Part 2, the discussion will continue comparing Bryant Park to some formal entertainment venues from a downtown economic development perspective by focusing on:

Bryant Park’s comparative strength as a tourist attraction in NYC
Its user frictions compared to other major NYC entertainment venues
The cost of its rebirth in 1992 compared to how much it cost to create 18 other significant entertainment venues — or to do a major renovation of them.

Because covering those topics requires about ten pages, I now am planning on writing a Part 3 of this article that will cover:

A comparison of the total annual operating expenditures of the corporation that operates Bryant Park to those of the organizations that operate 20 other major entertainment venues located across the nation
A look at Bryant Park’s economic impacts compared to those of other major entertainment venues. This comparison will occur within a discussion I have subtitled: Arts Venues’ Economic Impact Studies – Watch Out for the Horse Puckey.

Comparing Bryant Park to Some Formal Entertainment Venues from a Downtown Economic Development Perspective (continued from Part 1)

The Tourist and Local Audience Mix. Tourism is a major component of the New York City economy, as it is for many other communities across the USA — be they large or small. In 2013, for example, the direct spending of tourists in NYC was about $39.4 billion, with their overall economic impact valued at $58.7 billion (2). Consequently, Figure 11 takes a closer look at Bryant Park’s ability to attract tourists by comparing it to other major NYC entertainment venues. The selection of these comparable venues was simply a function of finding those for which the needed data were available (3). They were not easy to find. Also, the available data are not uniform: MoMA, the Guggenheim and the Joyce Theater categorize guests who come from beyond the NY Metro area as tourists, while the other venues define guests who come from beyond NYC to be tourists.

Compared to the Guggenheim’s 87%, the Met’s 75%, MoMA’s 75% and the Broadway League’s 66%, Bryant Park scores much lower on the percentage of its visitors who are tourists, 20% to 40%. In this regard, it stands with the other public park listed in the table, Central Park, which has tourists accounting for 30% of its annual attendance. However, when we look at the absolute numbers of tourists who visit each venue, it is Central Park that is the hands down winner with 12 million tourist guests annually. Bryant Park also shows significant strength: it probably has more tourist guests than the Guggenheim and likely is giving the formal entertainment venues at LCPA and MoMA a run for their money. Bryant Park is not just an “amenity” for people employed in nearby buildings or local residents.

Downtown entertainment niches can be strategically tasked to attract more visits and capture more dollars from tourists as well as from locals (e.g., trade area residents and people who work in the downtown). All too often, in our meetings in smaller downtowns that have had some measurable success with penetrating the tourist market:

We’ve heard leaders describe the dissatisfaction local residents have with the downtown’s tourist-oriented retail, food and entertainment establishments that are seen as catering to outsiders rather than the local community’s tastes and needs
There is an unspoken assumption that vibrant public spaces are really for “the locals,” while formal entertainment venues—e.g., PACs, theaters, museums, arenas – are much more capable of attracting tourists and consequently better able to bring in lots of outside money and serve as the cornerstone of a downtown entertainment niche.

The data in Figure 11 support concluding that both Bryant Park and Central Park are able to serve the local community while also attracting significant numbers of tourists. This suggests that informal downtown entertainment venues have the potential for achieving comparatively similar success in other communities, even in smaller ones. This is not to say that such success is assured, but to argue that it is worthwhile to seriously consider an informal downtown entertainment venue as a tool to bring both more tourists and more local folks downtown.

The Brooklyn Academy of Music and the Joyce Theater are well-known and very highly regarded cultural institutions that have been around for several decades. Their comparatively modest penetrations of the tourist market demonstrate that a formal entertainment venue may not always be an effective strategic vehicle for attracting tourists, but it still can be popular with local residents. It may even be that the managements of these two organizations, and their donors, prefer focusing on their local audiences. One might suspect that, across the nation, a significant number of the managers of downtown PACS, theaters and museums have a similar preference. In our firm’s experience, dreamer arts advocates – not venue managers — are usually the ones who see formal entertainment venues as the path to capturing tons of tourist dollars.

That the Met, MoMA, the Guggenheim and the Broadway League’s theaters have tourists –of which a high percentage likely come from abroad — accounting for the vast majority of their audiences probably contributes to their being considered world class institutions. These museums are also legendary fundraisers, mostly from very wealthy local and regional donors who often have substantial national or international reputations. One might reasonably suppose that these donors strongly support the orientation of these institutions toward a world audience and their having the “products” to win substantial amounts of prestige and market share in it. Relatively few other arts organizations in the USA are in a similar position or can even hope to get there. That also suggests that few of them can realistically hope to bring in comparatively huge numbers of tourists into their downtowns or communities by becoming world-class institutions.

Furthermore, the importance of “location, location, location” frequently comes into play, providing important limits on the size of the potential tourist market. The locations of many communities make it difficult for them to tap the national tourist market because their interstate highway, rail and airline assets are relatively weak. Also, many communities frankly lack other strong assets, such as scenic beauty, places of significant historical import, sports activity opportunities, attractive hotels and restaurants, etc. Few communities can grow into a Las Vegas, Nevada or a Branson, Missouri – and many do not want to. It is much easier for an entertainment venue in a small town or small city to capture tourist patrons when there are lots of tourists already visiting other places in its market area, than for the entertainment venue to become the magnet that will be the area’s primary tourist attraction.

Small town and small city entertainment venues probably can be more successfully positioned within a regional tourist market. However, then regional consumer entertainment preferences also can come into play. For example, a few years ago, we visited a very interesting and attractive downtown museum in a midwestern city with a population of over 100,000 people. Its county’s tourism agency reports servicing about 85,000 sports tourists annually, averaging out at about 282 per day. In our opinion, the museum’s holdings were unique, high quality and impressive; many other museums would probably love to have holdings of comparable quality. Yet, we were surprised to find, on Thursday and Saturday afternoon visits, that we only could count fewer than 20 other guests on each occasion. In this, and many other communities across the nation, high brow arts-based events and venues may be far weaker customer magnets than other entertainment venues.

Frictions on Visitation. Entertainment venues, be they formal or informal, face a varying array of non-physical constraints that help structure when and how often people will visit them. Some of these frictions are:

Their operating hours – the days and hours they are open to receive guests. If they are not open, guests cannot be received and a substantial part of the venue’s potential impact on local businesses cannot be felt directly
Their admissions. The higher the fees, the more guests are likely to be people with lots of disposable income. Also, venues in larger cities featuring sports events, concerts and Broadway shows often sell tickets in a way that leads to a large percentage of them being resold at substantially higher prices by brokers or individuals in a secondary market. This can both increase the skew towards those with more discretionary dollars and annoy the hell out of those who are less affluent. If and when admission fees/tickets need to be obtained, the more lines one has to stand on and the longer they are, the more annoyed a potential customer can get
The need for an “appointment.” Scheduled events like shows, concerts and sports games really require the user to make something analogous to an appointment that, too often, only is available when it is convenient for the other party. The more one likes a performer, the more one is likely to adapt to the performance’s dates by altering one’s own schedule and by paying a premium ticket price
They require a lot of time. Because of the length and timing of most scheduled events, they cannot capture a very important segment of a downtown’s entertainment demand: the people who, mainly during the daytime hours, are looking, in a spontaneous and unplanned manner, for entertainment opportunities that last 45 minutes or less. Those with a short-time period type of entertainment demand can include nearby residents, people employed in the downtown who are within a 5-minute walk of the venue and tourists. Office workers and adults with children are especially likely to appreciate daytime downtown entertainment opportunities that last less than 45 minutes. Downtown office workers are most likely to visit a nearby informal entertainment venue on their lunch hours. These days, their lunchtime out-of-office trips only last about 45 minutes (4). Also, research has suggested that parents often need to find an entertaining activity for their children that will last for less than about 45 minutes (5).

Figure 12 describes where Bryant Park stands on these four factors, while facilitating a comparison to some of Manhattan’s other major formal entertainment venues. Bryant Park – as is the case with other informal downtown entertainment venues – poses potential users with far fewer obstacles to visitation than the formal entertainment venues:

It is open 15 to 16 hours a day, daytime and evening, daily, almost year round
There are no admission fees
Most visits are driven by the users’ schedules. Those wanting to attend the Park’s scheduled events will, of course, have to adapt to their timing. But, there are lots and lots of other things to do in the park for those who spontaneously decide to visit
The park definitely attracts a lot of users who stay for 45 minutes or less. Visits can be short or long, depending on the individual’s needs and desires. The lunchtime peak in Bryant Park’s visitation suggests that a large proportion of the visitors are employed in nearby buildings and they probably are office workers. My field observations and recent chats with park users support that conclusion. My field observations also suggest that a lot of the mid-morning and mid-afternoon park users stay for less than 45 minutes.

Movie theaters cannot accommodate those with 45 minutes or less to fill, but they are open during both day and evening hours, their admission fees are affordable and their films have frequent showings that facilitate match-ups with a potential guest’s schedule. The formal venues of the Met and MoMA can meet the needs of those with only 45 minutes or less to fill, and guests’ schedules can drive the timing of their visits during the daytime. However, the museum’s admission prices are about twice that of local movie theaters.

The venues that present concerts, shows and sports events are those that have the strongest user frictions. All of these events last longer than 45 minutes, and it is usually difficult to spontaneously gain admission to them — unless one is prepared to pay a high dollar premium. Their events are mostly scheduled for evenings and a few weekend afternoons. Their average ticket costs are magnitudes higher than that of the average nearby cinema that my recent purchases in NYC found to be around $13. For example:

At Lincoln Center, the average ticket for an evening at the opera costs $156; tickets for the New York Philharmonic, at series subscription prices, range from $29 per concert for a highest tier, nosebleed seat, to $112 for a seat in the more preferable orchestra section (6)
The average seat for a Broadway show during the 2012-13 season was $98.44. However, a good number of the Broadway tickets are resold in the “secondary market” where prices can soar, with some reaching $1,000+ (7)
The costs of concert tickets through Madison Square Garden’s box office will vary with the performer, but generally are close to the range of the $64 to $124 charged for a Billy Joel concert. The average box office prices for NY Knicks basketball games and NY Rangers hockey games are $125 and $78 respectively. However, lots of the tickets to these MSG events also end up being resold in the secondary market where prices can exceed $1,000 per ticket. (8)

Obviously, these are New York City prices and the premium dollars extracted in our secondary ticket markets are less likely to occur in much smaller towns and cities. However, the prices for shows and concerts in such locations can still be several times the price of a local movie ticket. For example, in one city with a population of about 17,000 that is located in a state with a population under one million persons, a movie ticket costs about $6.50, while the ticket costs to some concerts in the downtown’s attractively restored theater are:

Aaron Neville $44.75 to $49.75
BB King $65.75 to $95.75
Jazz at Lincoln Center $74.75 to $84.75
Season pass to Metropolitan Opera HDTV performances $160 to $200.

Bryant Park has many fewer frictions to entry and use than any of the NYC formal entertainment venues it has been compared to in this analysis. It presents nowhere near the economic barriers to entry that the formal venues do, and it most readily accommodates spontaneous visits of fewer than 45 minutes. In these respects, Bryant Park exemplifies some of the important advantages informal downtown entertainment venues have over the formal venues, even in small and medium-sized downtowns.

Comparing the Costs to Create, Expand or Renovate Downtown Entertainment Venues. What has really struck me over the past few years, as I looked into downtown entertainment venues, is how many reports have been done since the early 1990s on the positive economic impacts performing and visual arts venues have on their communities and how much media attention they have attracted. In contrast, there has been relatively little discussion about the comparatively high costs of creating and operating these arts venues. Also, it should be remembered that an organization’s strong economic impacts do not necessarily correlate with its financial viability. For example, in 2008, the Big Three automakers were on the verge of bankruptcy, but they directly and indirectly supported 3 million jobs, many of which were well-paying.

This focus on the robust economic impacts also was surprising since — as I have detailed in prior articles in this series — there now are two disturbing trends in the arts, one for consumer demand to be far more uncertain, changing and often in decline and another for donations and grants from government, foundation and corporate sources to be falling-off and far harder to obtain. These trends support the hypothesis that a downtown organization wanting to create or strengthen an entertainment niche might want to identify the types of venues that require the fewest financial resources to first create and then operate.

The data presented in Figure 13 are related to the costs of the creation or major expansion/renovation of 20 entertainment venues in towns and cities of all sizes, though the largest number are located in NYC (9). To facilitate comparison, I have presented these capital costs in 2014 dollars. The data are neither exhaustive nor systematically collected. They are presented because a discussion about them can be, though not definitive, nevertheless suggestive and useful.

The cost for the critical renovation of Bryant Park that was completed in 1992 is presented in two ways: the far larger estimate includes the cost of putting book storage space for the NY Public Library under the six acres of Bryant Park that are behind the library’s building. This was included because a pre-publication reader maintained that the work on the library’s book stacks probably reduced, to some unknown degree, the cost of renovating the park, most likely related to demolition work. The $57.9 million number is presented in recognition of that possibility, but the lower number will be used in the analysis since I believe it is much closer to the true renovation cost.

Comparing the cost of renovating Bryant Park in 1992, $13.9 million (without the subterranean library improvements), to the other projects in NYC shows that it was:

About as much as renovating one of Broadway’s major theaters ($11.3 million – $13.2 million)
Less than two percent of what it cost to expand MoMA in 2005, $1 billion
Far less than the $1.2 billion needed for the LCPA renovation completed in 2012
Also far less than the cost of the 2014 renovation of MSG, $ 1 billion.

If we look at projects listed under “Elsewhere” in Figure 13, the costs to renovate all but one the theaters and to create the PAC in South Orange, NJ are in the same league as the cost to renovate Bryant Park. This suggests that lots of other communities can mobilize the funds to create their own version of a Bryant Park.

If we look at the three Newark projects, again we find that the informal downtown entertainment venue, Military Park, had renovation costs, $5 million, that were a small fraction of the $431 million needed to build the Prudential Center sports arena or the $277 million spent on creating the NJPAC. To some degree, this cost differential may be due to the fact that the city already had possession of the park, so there was no land acquisition cost. However, I doubt that accounts for a significant amount of the differences. The Military Park renovation is very recent and it will be interesting to see how its attendance in five years compares to NJPAC’s and the Prudential Center’s.

Looking at Millennium Park in Chicago, we see an entirely different situation. The full cost of building the park, in 2014 dollars, was over $605 million. That’s about $25 million per park acre. It cost considerably more than the new Modern Wing of The Art Institute of Chicago, $277 million. This, of course, demonstrates that creating an informal downtown entertainment venue will not always cost less than creating a formal entertainment venue. However, taking a closer look at the situation suggests that the high costs are inevitable when two factors are involved:

There are numerous and very complicated infrastructure improvements that are considered essential to the project. In Millennium Park, for example (in 2006 $s):
- $105 million was spent on an under the park garage that can accommodate over 2,100 vehicles
- $60 million went to improve the under the park superstructure for Metra’s commuter rail system
- $14.5 million went for the BP Pedestrian Bridge—designed by Frank Gehry
- The Nichols Bridgeway, designed by Renzo Piano, that connects the Lawn of the Pritzker Pavilion to the third floor of the Art Institute’s Modern Wing, was built at a significant, but unpublished cost
- $7 million was spent for the Exelon Pavilions’ four solar energy generating structures
There are a lot of expensive fixed attractions and fixed event venues for visitors. For example, in Millennium Park:
- The Jay Pritzker Pavilion, an outdoor amphitheater with 4,000 fixed seats, cost $60 million and also was designed by Frank Gehry
- The Harris Theater (that is mostly underground because of height restrictions) also cost about $60 million
- The Crown Fountain cost $17 million
- The Cloud Gate sculpture, a.k.a, The Bean, cost $23 million
- Lurie Garden cost $13. 2 million
- Boeing Gardens, outdoor art exhibition spaces, cost $5 million (10).

The significance of these two factors is also attested to by an informal downtown entertainment venue, Mitchell Park, in the small community of Greenport, NY (population 2,200). That four acre waterfront park cost $14.9 million to create (in 2014 $s) largely because of serious brown field issues that had to be resolved, land acquisition costs and a design calling for a 60+ slip marina, a glass building to protect a full sized carrousel, a camera obscura and a building to provide offices for the park and harbor master as well as a viewing point of the harbor.

On the other hand, Division Street Plaza in downtown Somerville NJ (population 12,000) and Central Park Plaza in downtown Valparaiso, IN (population 32,000) show that effective informal entertainment venues can be created at significantly lower costs, $0.6 million and $3.39 million respectively. I will go into greater detail about the Greenport, Somerville and Valparaiso informal downtown entertainment venues in an article scheduled for late October 2014.

The differences between Bryant Park and Millennium Park are probative and go well beyond the vastly different costs of renovating/creating them. For example, Millennium Park has many expensive fixed infrastructure elements that enable visitors to attend events and connect the park to other adjacent attractions. In contrast, Bryant Park’s infrastructure for events is basically temporary and cost far less. It also is firmly embedded in Midtown Manhattan’s street grid and consequently does not require connecting bridges. Much of the seating in Millennium Park is fixed (about 4,000 seats); in Bryant Park it is flexible, with visitors able to move their chairs to wherever they want to put them. Bryant Park provides copious opportunities for visitors to perform by engaging in activities ranging from ping-pong to chess to yoga, while Millennium Park encourages visitors to behave more like observers.

Fundamentally, these differences probably are based on the divergent professional backgrounds of those who had the strongest influences on the designs of these two great parks. Millennium Park’s design was most influenced by famous architects. In contrast, the design and programming of Bryant Park were the products of urbanists who believed that public spaces should be designed to reflect how people are likely to behave in them.

Take Aways

Bryant Park is admittedly not the strongest tourist attraction in NYC, but it certainly holds its own compared to some of the city’s best-known formal entertainment venues, e.g., MoMA, LCPA and the Guggenheim Museum. Its strength with tourists demonstrates that informal entertainment venues can be important magnets for tourists as well as for downtown workers and trade area residents. That ability should be of strategic interest to downtowns that want to create or strengthen their entertainment niche, especially those in small and medium-sized communities.

In many key respects, Bryant Park is far more user friendly than NYC’s major formal entertainment venues. You can pretty much use it when you want or need to. There are no admission fees to pay or lines to stand on. Your visit can last three hours or ten minutes, depending, again, on your wants and needs. Your visit does not require an “appointment.” As a result, Bryant Park can attract the many tourists and other downtown users who have less than 45 minutes to spend in an entertainment venue. Here again, it exemplifies a trait of informal entertainment venues that should be of strategic interest to downtowns that want to create or strengthen their entertainment niche.

The 1992 renovation of Bryant Park was not its creation, but more akin to its recreation. The cost of that recreation, whether you chose the number that includes the cost of the NYPL’s subterranean 40 miles of bookshelves or the smaller and more probable amount, is dwarfed by the costs of renovating NYC’s formal entertainment venues that can compete with it in terms of attendance. While Chicago’s Millennium Park demonstrates that this is not always the case, Bryant Park does demonstrate that informal entertainment venues capable of attracting very strong visitor flows can be created for far less money than formal entertainment venues. For any downtown that wants to create or strengthen its entertainment niche, this should be an important strategic consideration — most especially for those in small and medium-sized communities, where financial resources are likely to be limited.

Endnotes

1. Given some reactions by readers of Part1, I want to clarify that: a) I am a very frequent patron of all of the NYC entertainment venues I discussed, save MSG and the Broadway theaters and b) I think that the venues I do not visit frequently still are strong economic assets for NYC and I am glad that we have them.

2. Michael Howard Saul, “New York City Sees Record High Tourism in 2013: Hotel Room Rates, Bookings Up; Number of International Visitors Doubled in 12 Years,” Wall Street Journal, Dec. 10, 2013 http://online.wsj.com/news/articles/SB10001424052702304744304579250521791383050

3. Most of the data on the tourist component of an entertainment venue’s attendance came from: http://www.thirteen.org/metrofocus/2012/08/tourists-help-the-nyc-arts-economy- thrive/ . However, some tourist data was obtained directly from an organization’s staff or its website

4. ICSC 2003 survey of office workers

5. Randy White, “The shifting nature of leisure time and expenditures”, “Leisure eNewsletter – January/February 2008,”

6Daniel J. Wakin “The Met Will Lower Ticket Prices,” New York Times, February 26, 2013. http://www.nytimes.com/2013/02/27/arts/music/metropolitan-opera-to-reduce-ticket-prices-next-season.html. Info on ticket costs for the New York Philharmonic taken from its website http://nyphil.org/

7. The Broadway League, “Broadway Statistics at a Glance 2013,” http://www.broadwayleague.com/editor_files/broadway_statistics_at_a_glance.pdf

8. Claire Suddath, “Billy Joel Will Play Madison Square Garden for the Rest of His Life,” BloombergBusinessweek, Dec 4, 2013. http://www.businessweek.com/articles/2013-12-04/billy-joel-will-play-madison-square-garden-for-the-rest-of-his-life; Forbes. NBA Team Valuations: New York Knicks. http://www.forbes.com/teams/new-york-knicks/ ;Forbes. NHL Team Valuations: New York Rangers. http://www.forbes.com/teams/new-york-rangers/

9. A wide range of sources, both on the Internet and in personal conversations and communications was used to obtain this data. Paul Goldberger’s May 3, 1992 review of Bryant Park gave me $8.9 million as the cost of its renovation, which I have converted to 2014 $s. Another NYT article around that time gave me the cost of NYPL’s subterranean work, that I turned into 2014$s and added to the updated Goldberger number to get the highest cost estimate. (All of the other cost numbers I found were also updated to 2014 $s.)The cost of the SOPAC project comes from an “Evaluation of SOPAC” done by Harac Consulting in 2011. The cost of Division Street Plaza in Somerville comes from an email from Beth Anne Macdonald, the executive director of the Downtown Somerville Alliance. Mayor David E. Kapell, who spearheaded the development of Greenport’s Mitchell Park, gave me the cost for creating it in a July 2006 telephone conversation. The costs of the remaining projects were obtained from Internet sources, mainly local newspaper articles

10. All of the cost estimates for specific parts of Millennium Park come from an article in Wikipedia: http://en.wikipedia.org/wiki/Millennium_Park . However, I found other sources that confirmed each of them.

DOWNTOWN FORMAL ENTERTAINMENT VENUES PART 4: MOVIE THEATERS

Posted on May 25, 2014 by DANTH

By N. David Milder

Introduction

The importance of downtown movie theaters. One of the most distinguishing characteristics of the “new normal” for our downtowns is the importance of having strong Central Social District (CSD) functions. Dynamic downtown entertainment niches contribute mightily to having a strong CSD. Movie theaters will play important roles in many of these entertainment niches, often serving as niche cornerstones in many smaller and medium-sized communities. Movie theaters usually differ from other downtown formal entertainment venues, such as theatres, concert halls and PACs, in some critical respects:

They show films during the daytime as well as evenings almost every day of the year – though this is less likely in very small communities
Their admission fees are relatively low and affordable – averaging $8.13 in the US and Canada in 2013 (1)
They are very likely to have a larger potential audience than the other formal performing arts venues: about two thirds of the US/Canadian population aged 2+ went to the movies at least once in 2013. This dwarfs attendance at other formal performing arts venues, theme parks and MLB, NFL, NBA and NHL games (2). For example, only about 49% of adult Americans attended a performing arts events (plays, operas, concerts) or visited visual arts venues ,e.g., museums, art galleries in 2012 (3)
They appeal to minority groups: for example, Hispanics represented about 17% of the population in 2013, yet accounted for 25% of the movie tickets sold that year and their attendance is growing (4)
More downtowns are likely to have a movie theater than a “legit” theatre, concert hall or PAC. In smaller communities they are often “…built right into the fabric of the main street, and they pretty much serve as the anchors. If those buildings were shuttered or torn down, it would affect the look and feel of the downtown area” (5).

Because of their long operating hours and ability to win an audience that is socioeconomically and ethnically diverse, movie theaters not only bring a lot people downtown through most of the day, but also stimulate their patrons to take a psychological stake in the downtown and make it their downtown.

Downtown movie theaters have long been under threat. Downtown movie theaters can be very important assets, but they have long been subject to forces pressing for their closures. When some of these forces wane, others seem to rise to take their place.

Back in the 1940s, 60% of Americans went to the movies every week. That level of attendance fell dramatically when TVs became a staple in every home during the 1950s (6). That, combined with the flight to the suburbs, led to the closure or repurposing of many downtown theaters. Nationally, though individuals went to the movies less frequently, through the 1980s and 1990s movie attendance continued to increase because of population growth until 2003 when a pattern of decline set in. By the end of 2013, attendance had fallen 13.9% from the 2002 peak. (7)

Within the movie theater industry there has long been a preference for theaters with more screens. This has led to a pattern of increasing screens, a steady decline in the number of movie theaters and larger cinemas with more screens. For example, between 2000 and 2012, the number of indoor movie theaters decreased by 18.8%, while the number of screens increased by 9.4% (8). However, this pattern was uneven. Some downtowns, usually the larger ones with some significant revitalization success stories, saw large new multiplexes open, while many others saw their 1-5 screen theaters close. The smaller theaters, with fewer screens were increasingly marginal. Even more marginal have been the smaller, few screen theaters in low population market areas.

In 2008, a DANTH, Inc. research paper summarized the challenges then facing downtown movie theaters:

Their hold on adult audiences was small and diminishing. Attendance was down and a Pew Research Center survey found that by a 5 to 1 ratio, Americans watch more movies on their TVs and electronic devices than in a movie theater
Even the most frequent moviegoers, a group whose behaviors are critical to the industry’s success, preferred home viewing
Many theaters had low operating margins based primarily on revenues from concession stands and screen ads
A relatively modest reduction in paid attendance by a small group of frequent moviegoers could easily erase these meager margins. The frequent moviegoers did not have to completely stop visiting movies theaters for the impact to be devastating. This was an important point.
The frequent movie-goers had demographic characteristics that highly correlated with the use of computers and other electronic home entertainment equipment. Such equipment could greatly facilitate a shift in their movie viewing from theaters to home and mobile distribution channels
Many theaters lacked amenities such as many screens, large screens, first run films, stadium seating, clean restrooms and clean theaters floors
US theaters provided a very small revenue stream for the major movie studios, e.g., an estimated 13% of their total revenues in 2003 (9). Consequently, the studios are incentivized to make decisions that will help other film distribution channels that are more profitable although this may hurt the theaters (10).

Our 2014 Deep Dive DANTH’s most recent assessment of the challenges and opportunities that downtown movie theaters now face shows that they now are probably stronger than in 2008, but still have to face significant uncertainties about both threats and opportunities. The good news: the shift to digital projection and distribution is done and very probably left a stronger group of movie theaters. The recent studio forced conversion to digital distribution and projection reportedly was going to cause a large number of closings among the smaller and financially vulnerable cinemas with fewer screens. For example, the National Association of Theatre Owners (NATO) estimated that as many as 20% of all cinemas in North America – about 1,000 — would be forced to close by the digital conversion (11). We could not find any reliable data on how many were actually forced to close by the end of 2013, though such information may become available later in 2014. NATO’s most recent data show a decrease of only 244 indoor cinemas from 2009 through 2012. However, the Motion Picture Association of America (MPAA) data in the above table show that there were still 2,981 analog screens, in an unknown number of cinemas, in 2013. If they did not convert to digital, then they would be very prone to being left out of the film distribution network and, if they have not failed, they have become even weaker. However, we have come across several reports of these small non-digital theaters still hanging on by still being able to get access to some new studio analog films, reducing their schedules and supplementing their revenues by on -stage events.

More encouraging are the unknown number of smaller, vulnerable theaters that have been saved in recent years by local communities organizing to own and/or operate them or help raise the funds needed by operators to bring them across the “digital divide.” We have come across reports of local communities organizing to save small cinemas in ND, NY, and ME. For example, of the 31 operating historic theaters in North Dakota identified by one researcher, 19 are community-run (12). In NY, the Adirondack Film Society and the Adirondack North Country Association (ANCA) created a Go Digital Or Go Dark program that won state grants and used the Razoo online crowdfunding service to raise matching funds from local residents (13). The funds raised by this program have been used to help six movie theaters in the region go digital: two have completed the conversion; four are still in the process of making the conversion, either still fundraising or awaiting the installation of the digital equipment. Three other theaters that the program initially contacted found other ways to fund their digital conversions. Only one theater has not been able to cross the digital divide; it was physically too small to accommodate the digital equipment. The owner now is looking for a new and larger location in the community for the theater (14). While the Go Digital Or Go Dark program has been very impressive in helping to raise the funds needed by many of its region’s theaters to go digital, it is probably prudent to consider it still as a work in progress until the four “in process” theaters actually complete their digital conversions. At that time it will be easier to measure its degree of success and to get a good handle on its potential transferability to other communities. Nevertheless, the proactive actions of these communities in North Dakota and the Adirondacks do demonstrate that if communities want their cinemas to be saved, their active involvement can be an important part in making that happen.

Also, we have found a few instances – in suburban and urban districts — where new theater operators, with capital and industry know-how, have been recruited by savvy landlords to upgrade troubled movie theaters – e.g., the Cedar Lane Cinemas in Teaneck, NJ (15).

Internet fundraising is an important tool that some small movie theater operators can use on their own. For example, in Westport, an entertainment district in Kansas City, MO, the owner of Tivoli Cinemas (the oldest movie theater in the city) used Kickstarter to raise $136,393 from 1,386 backers. The funds raised are to be used to make the digital conversion as well as physical improvements to the theater (16).

The downtown movie theaters that remain open today are probably stronger than their peers were five years ago because:

The fittest have survived and the really weak theaters and operators have largely been squeezed out by the financial pressures induced by the digital conversion.
Digital conversion helps theaters provide patrons with higher quality viewing experiences, an important element of making going to the movies a special occasion
There are interesting tools that communities now have successfully used to help save their movie theaters and that other communities might adopt or learn from. Indeed, for smaller communities that are often financially challenged, the organizational and fund raising tools used to save the movie theaters might also be effectively used to achieve other downtown revitalization objectives.

Even after the conversion to digital screens, the health of US movie theaters is mainly contingent upon the their ability to indirectly generate revenues for the movie studios. American movie studios have become increasingly focused on their international box office, because it has become much larger than the domestic box office: 70% of their film box office revenues now come from outside the US. Also, while US box office revenues only increased by 3% between 2009 and 2013 to $10.9 billion, the international box office grew by 33% to $25 billion (17). Today, most of the studios’ blockbusters earn at least two-thirds of their box office revenues in foreign markets and some producers are tailoring their films to the tastes of foreign fans” (18). It remains to be seen:

If the need for films to meet both American and international tastes can be accomplished without losing a significant portion of the current American audience
Or if the greater revenue potentials of international blockbusters substantially diminishes the production of “independent” films, such as the highly acclaimed Moonrise Kingdom, that only earned about one-third of its gross take in the international market and that targets an audience that has less interest in big action films, especially those based on comic books.

In addition, domestic movie theaters only account for a small portion of the movie studios’ domestic revenues: about 36% in 2010 according to one analyst (19). Most of their domestic revenues come from DVD sales, pay for view TV, online movie streaming, electronic games, amusement parks, franchises and licenses, etc. In recent years, DVD sales have nose-dived while increased revenues from movie downloads and streaming have not filled the gap.

Today, the importance of the movie theaters to the movie studios is not so much the dollars they bring in directly as the fact that they are the major marketing platform for generating studio revenues in the more profitable ancillary distribution channels! Domestic theater operators would be in a severely jeopardous situation should the studios find a more cost effective marketing platform for reaching their ancillary markets.

Persistent clashes between the studios and theater operators have occurred over when films are to be released into these ancillary distribution channels. Lately, the pressure for a shorter theatrical window has grown, because important movies now open in about 4,300 theaters versus about 2,000 twenty years ago and about 90% of theatrical revenue comes within the first four weeks of a film’s run (20). Distributing films earlier through the ancillary channels may not significantly hurt the revenues of first run theaters – though their operators still will fight it. However, the smaller and weaker second and third run cinemas that get the films weeks later– those that are likely to be in smaller market areas and smaller commercial districts – probably would not fare as well.

Where studios and theater operators agree: squeeze more dollars from each movie visit. Both movie studios and movie theater operators have decided that if US attendance is diminishing, then the best strategy for increasing revenues is to capture more dollars from every customer that walks through a movie theater’s doors:

For over a decade, the price of general admission tickets has steadily increased. In the 10 years between 2003 and 2012, ticket prices increased by 38%. In comparison the CPI increased by 25%, while, more importantly, median household incomes rose by only 17% (21). This means that ticket prices increased while the incomes of American households was not even keeping pace with inflation.
There has been a real push to have more films that can be shown on 3-D, IMAX and IMAX-like (e.g., in Cinemark theaters) projection systems. They command higher admission fees. Also, many industry leaders see these types of films as the best way to compete with watching movies at home or on mobile devices because of their ability to provide larger and more immersive viewing experiences. By 2013, about 36% of all movie screens in the US had digital 3-D projection capability, up from 8% in 2009 (22).
However, the popularity of regular 3-D movies is now in question. Several observers foresee them losing out to the large format films — about 75% them are also in 3-D (23). Smaller theaters often can accommodate 3-D projection systems and many do today after the digital conversion. However, one wonders how many could fit the large format screens into their buildings. On the other hand, one also has to wonder if smaller theaters in less densely populated areas and far from other and larger theaters, would really have to compete in this way. They had to go digital in order to stay in the distribution system, not so much because their competitors were digital. It seems doubtful that the studios similarly would force them to adopt the large screen format by refusing to distribute a lot of important films in regular digital format
For many years now, theater operators have been trying to provide a more pleasurable and unique experience for moviegoers. Stadium seating and Dolby sound systems are widespread. Some theaters have become dinner cinemas, where they serve viewers meals. The large AMC chain is among them. Theaters in some smaller communities also have successfully used the dinner cinema format. For example, the Gilson Cafe & Cinema in Winsted, CT, has been around for over 25 years (24). However, the large chains experimenting with this format is new. It remains to be seen if dinner cinemas will become more widespread
AMC is also experimenting with seating in 25 of its locations by providing each patron, for an increased ticket fee, with “ a person-and-a-half-wide, motorized, reclining, La-Z-Boy-style chair, upholstered in a glossy red leatherlike material” (25). These large recliners reduced the seating capacity in these theaters by 64%, yet attendance reportedly increased by 84% (26). Here, again, it remains to be seen if this type of seating will achieve greater adoption.

Will movie theater attendance continue to decline? Given that our current economy means middle-income households are suffering from stagnant incomes and filled with deliberate consumers, movie ticket price increases may have deterred moviegoing – especially among middle and lower middle-income households and those with children. As was detailed in an earlier article in this series on the markets of formal preforming arts venues, fewer discretionary dollars have been a major factor in lowering attendance at those venues. A few dollars increase in movie admission prices may not seem like much to those in the top two household income quintiles or to a young creative type or a teenager. However, for those with more modest incomes or a household with children, the same price increase can be much more meaningful, especially when combined with costly purchases from the concession stand. While households with children now represent just 32% of all households, they are still one third of the movie theater market. Continued ticket price increases that are substantially above rises in middle-income household spending power – not just the CPI– would be a growing threat to movie theater attendance. In some market areas, these increases could push the size of the movie audience down towards the much smaller audience sizes of the formal performing arts venues.

DANTH’s 2008 research report on downtown movies concluded that the then biggest threat to movie attendance would arise if frequent movie goers diverted more of their movie viewing from movie theaters to their home TVs and mobile devices. Since frequent moviegoers were also the highest users of mobile devices and technology products, the potential for such a diversion seemed to warrant significant concern. The MPAA’s 2013 market report indicates that not much has changed in this regard:

“Frequent moviegoers tend to own more key technology products than the general population (adults 18+). Nearly three-quarters of all frequent moviegoers (74%) own at least four different types of key technology products, compared to 51% of the total adult population” (27).

While viewing diverted to high tech ancillary channels may well substantially decrease theater attendance, it is doubtful that it would approach anywhere near a major collapse. The earlier impact TV had on attendance showed that while there was a very significant decline, Americans still liked going to the movies. Something comparable in scale may happen with the impact of the high tech gadgets and online services. Furthermore, the high tech based immersive viewing and sound experiences provided by 3-D and especially IMAX are quite popular with those who are high users of tablets, smartphones, laptops, AppleTVs, Netflix, etc., and they fit well into a high tech entertainment culture. Whether or not there will be a tech-induced attendance decline and what its magnitude might be remain unknown, but the digital-induced audience diversion must still be considered a substantial potential threat.

Some interesting changes have emerged in the demographics of the movie audience and frequent moviegoers. Caucasians are still the largest racial group among moviegoers, 59%, tickets bought, 54% and frequent moviegoers, 49%, but these percentages are below their population share, 63%. Moreover, the trend over the 2009-2013 period was for the Caucasian shares to decline across the three movie audience variables. In contrast is the Hispanic-Latino audience that now accounts for 32% of the frequent moviegoers, 25% of all tickets sold and 20% of all moviegoers, although they now comprise just 17% of the national population. Afro-Americans and other racial groups have been holding rather steady in their shares of the movie audience variables. Movie studios may well want to take this demographic composition of their domestic audience into consideration when they decide which films to green light for production and distribution.

Perhaps the most interesting column in the above table is the one on the extreme right that shows average per capita movie attendance between 2009 and 2013 for each of the demographic categories in the table. For downtown theater operators, the per capita data can be quite useful for generating meaningful estimates of what their total annual attendance will be as well as who in their trade area will be accounting for most of the tickets sold. It also should be noted that:

Among the racial groups, Caucasians have the lowest per capita attendance, 3.6 times a year, while the Hispanics’ rate is 69% higher at 6.1 movie visits per year. This may impact on where movie theater operators will want to locate their new cinemas as well as the revenues of existing theaters
The 12 – 24 age groups still have, as they have long had, the highest per capita attendance rates. Regardless of the fuss some commentators have recently made about increased attendance in the 2 -11 and 50-59 age groups, those cohorts still lag woefully behind the teenager/young adult crowd who will nevertheless command the primary attention of studio execs and theater owners (28). However, the Hispanic market is about the same size and strength and may viably compete for comparable studio and theater operator attention
As is well known, the Hispanic segment of the US population is growing rapidly. With the Hispanic high attendance rate, could this growth bring about an equal growth in moviegoing – and one that might actually result in a structural net increase in movie attendance?

The growing importance of making moviegoing a special event. In recent years, a number of famous and well-regarded Hollywood filmmakers, such as James Cameron and Jeffrey Katzenberg, have come out strongly in favor of 3-D and IMAX movie formats. They have done so, because they realize that the future of moviegoing in the USA is significantly dependent on cinemas being able to provide a differentiated experience that can successfully compete with watching movies on a home TV or mobile devices. They want to make moviegoing again a special event. The efforts of the movie theater operators to bring dining into the movie-going experience, to provide not only improved stadium-type seating, but large plush seating, and to make 3-D and IMAX viewing a more everyday viewing experience also have the same objective. Many savvy real estate developers also have signed on, such as Rick Caruso, who made access to a major restaurant a key design component of a large multiplex in The Grove in L.A.

Visits around the country have demonstrated the importance of easy access to food and drink as a means of differentiating and enhancing the moviegoing experience and consequently contributing to successful small movie house operations. These food and drink operations are not four or five star eateries. Nor are they pricey. Some may specialize, e.g., a pizzeria, an ice cream parlor, a sausage house or a brewpub. Affordable places, especially those that appeal to kids and families, can play strong support roles for adjacent or very nearby cinemas. They do not have to in the theater building, but having them there can strengthen the theater financially by providing an additional revenue stream.

Cinemart Theater, its restaurant’s outdoor dining, with Eddie’s in background

One example that we know quite well is the Cinemart in nearby Forest Hills, NY. It has been in operation at least since 1949. It now is basically a second run theater. About 10 years ago it opened a casual and affordable restaurant in its building, with outdoor seating when weather permits, that can be enjoyed by moviegoers, but also attracts many other customers. The eatery both broadens the potential moviegoing experience while providing the theater operator with another source of revenue. Within 150 feet of the Cinemart is Eddie’s Sweet Shop, a 100+ year old and very popular ice cream parlor. On weekends and in the weekday evenings one can observe platoons of patrons entering Eddie’s after each movie ends.

Our field observations in recent years also suggest that a healthy, well-activated, energetic commercial district offering visitors a variety of interesting and affordable things to do can help warrant a visit to a movie theater located in it because the experience would be sufficiently special and different from home or mobile device film watching.

Unfortunately, there is a potential conflict between the need to keep the moviegoing experience affordable and the need to make that experience special, since the latter is likely to involve more expensive tickets and/or add-on costs associated with food and drink or other “special” items. Such conflicts are least likely to occur in wealthy residential areas – e.g., those where households in the top income quintile reside – since for those residents the incremental costs associated with enjoying a special event excursion to a cinema would be relatively negligible. This conflict is more likely to emerge in residential areas where household incomes are in the middle and lower middle ranges.

Implications for Downtowns

District organizations in small and medium-sized downtowns as well as in urban neighborhood commercial centers should recognize that even though their movie theaters have successfully transited the digital divide, their futures are sufficiently uncertain to warrant attention, concern and perhaps even some preliminary contingency planning (29). These cinemas are such important assets that the significant negative impacts of their closures would ripple strongly through their districts and surrounding communities. Their importance was recognized by the communities around the country that organized in some manner to help them make the digital transition and survive.

However, a number of other district organizations did not become involved because they were either unaware of their theater’s situation, or thought it was the theater operator’s role – not theirs – to make the digital transition, or felt they did not know what they could do to help. In response, one might argue that:

As stewards, not just of the of their district’s physical condition, but also of its economic well-being, they should have been aware of their theater’s problems and done so within an actionable timeframe – especially since a movie theater is such a strong and irreplaceable asset
Though a district organization obviously had no obligation or role to undertake on its own a movie theater’s digital conversion, the cinema’s strategic economic importance certainly warranted the organization helping the theater operator to do so — or to facilitate bringing in a new operator who could
The experiences of towns in ND and the Adirondacks show a number of tools communities and district organizations might use. Crowdfunding is certainly one of them. Also, Josh Bloom has written about a number of community enterprise tools that might be used to help keep downtown and Main Street businesses open that could be applied to a movie theater (30). Furthermore, a number of states appear to have funding programs that can be tapped to help save movie theaters. An empty toolbox is no longer an excuse for inaction.

With the digital transition almost completed, movie theater operators no longer face an immediate threat to their survival – other than those arising from normal day-to-day business activity. Nonetheless, there are uncertainties present that might soon generate new meaningful threats:

Will the studios and theaters continue to increase ticket prices and to the extent that there is a growing reduction in moviegoing among deliberate consumers?
Will improvements associated with making watching movies in a theater a stronger special occasion translate into higher ticket prices that also reduce moviegoing among our deliberate consumers?
Will the studios shorten the “theatrical window” and release most new films much sooner into the ancillary distribution channels?
Will the studios’ focus on the international box office lead to films that do not appeal to significant domestic market segments?
Will technology produce new gadgets, e.g., virtual reality devices, that can make home or mobile viewing similar to watching a movie in a theater? Or will the costs of cable connections and streaming services rise so much that they make theater prices more competitive?
How do the changing rates of moviegoing among demographic categories translate into likely attendance in a downtown’s market area?

Happily, most downtown organizations now need not worry intensely about their cinemas, yet it is not the time for them to completely look away. During a crisis is not the time to figure many things out. It might be very useful for them now to:

Keep abreast of their theater’s situation – including changes in attendance rates — and alert to relevant happenings in the film industry
Explore how existing and planned district amenities and activity offerings can be marketed to make district moviegoing even more of a special occasion. Note: this way way of improving a cinema’s ” special occasion” capability does not entail costs that have to be passed on in higher ticket prices
Think about what they would do if their theater became endangered to help raise money, attract patrons, find another operator or create a new form of ownership for the theater
Give thought to other communities, local organizations and government agencies they could work with should a threat emerge.

ENDNOTES

1. Motion Picture Association of America. “Theatrical Market Statistics 2013.” P.10. Hereafter referred to as MPAA. http://www.mpaa.org/wp-content/uploads/2014/03/MPAA-Theatrical-Market-Statistics-2013_032514-v2.pdf

2. Ibid. and https://www.ndavidmilder.com/2014/03/the-new-normals-challenges-to-developing-a-downtown-entertainment-niche-based-on-formal-entertainments-part-2-the-audiences.html

3. See: https://www.ndavidmilder.com/2014/03/the-new-normals-challenges-to-developing-a-downtown-entertainment-niche-based-on-formal-entertainments-part-2-the-audiences.html . Hereafter cited as Part 2.

4. MPAA p13

5. Melissa Hart of the Adirondack North Country Association, quoted in Stephanie Garlock , “Why the Switch to Digital Projectors Means the End of the Small-Town Movie Theater,” Atlantic Cities, Aug 28, 2013 http://www.theatlanticcities.com/arts-and-lifestyle/2013/08/why-switch-digital-projectors-means-end-small-town-movie-theater/6625/

6. Source: Motion Picture Assn Worldwide Market Research. Cited by Edward Jay Epstein, “Hollywood’s Death Spiral: The secret numbers tell the story.” Slate, Posted Monday, July 25, 2005, at 2:48 PM ET

7. Part 2

8. Part 2, MPAA

9. See Epstein in endnote 6

10. N. David Milder, “DANTH’s FOURTH LUSTRUM DOWNTOWN TRENDS ASSESSMENT 2008 Part 1: Downtown Movie Theaters Will Be Increasingly In Great Danger,” Danth Inc., 2008, p.14 https://www.ndavidmilder.com/wp-content/uploads/2012/05/trends_p1_films_08.pdf

11. Michael Hurley, “We’re About to Lose 1,000 Small Theaters That Can’t Convert to Digital. Does It Matter?” Indiewire, February 23, 2012 http://www.indiewire.com/article/were-about-to-lose-1-000-small-theaters-that-cant-convert-to-digital-does-it-matter

12. Patricia Leigh Brown, ” Movie Houses Find Audience in the Plains,” New York Times, July 4 ,2010http://www.nytimes.com/2010/07/05/us/05theater.html?pagewanted=all&_r=0

13. Melissa Hart of the Adirondack North Country Association, quoted in Stephanie Garlock , “Why the Switch to Digital Projectors Means the End of the Small-Town Movie Theater,” Atlantic Cities, Aug 28, 2013 http://www.theatlanticcities.com/arts-and-lifestyle/2013/08/why-switch-digital-projectors-means-end-small-town-movie-theater/6625/ ; Paul Post, “Small Theaters in Adirondacks Face Choice in Switch to Digital: Pay or Perish,” New York Times, December 25, 2013, http://www.nytimes.com/2013/12/26/nyregion/in-switch-to-digital-small-theaters-in-adirondacks-face-choice-pay-or-perish.html and telephone interview with ANCA staff

14. Telephone interview with ANCA staff

15. See, for example: http://teaneck.patch.com/groups/business-news/p/teaneck-s-cedar-lane-cinemas-to-reopen

16. See: https://www.kickstarter.com/projects/613557145/tivoli-cinemas-in-westport-go-digital-or-go-dark

17. MPAA p.5

18. Richard Corliss , “Five Things We’ve Learned in Five Years of Box Office Reports.” 10:00 AM ET 040514 Time.com. http://time.com/49440/five-things-weve-learned-in-five-years-of-box-office-reports/

19. See: Information is beautiful. https://docs.google.com/spreadsheet/ccc?key=0Aqe2P9sYhZ2ndEtDWmVXNi1FWmN5ei0yMlUwdXBIZ1E&hl=en_GB#gid=1

20. Doug Stone, “How do studios decide when to release a DVD for a theatrical release_ – Quora. July 3, 2012. http://www.quora.com/Movie-Business-and-Industry/How-do-studios-decide-when-to-release-a-DVD-for-a-theatrical-release”

21. http://www.boxofficemojo.com/yearly/ and http://www.bls.gov/data/inflation_calculator.htm

22. MPAA p.26

23. Brooks Barnes, “Battle for the Bigger Screen,” New York Times, April 11, 2014, http://nyti.ms/ORPuJm

24. See: http://www.gilsoncafecinema.com/index2.htm

25. Anand Giridharadas, “The Screen Is Silver, but the Seats Are Gold: AMC Theaters Lure Moviegoers With Cushy Recliners.” http://www.nytimes.com/2013/10/18/movies/amc-theaters-lure-moviegoers-with-cushy-recliners.html?pagewanted=1&_r=0

26. Ibid.,

27. MPAA

28. See endnote 18 and MPAA

29. N. David Milder, “Many Downtown Movie Theaters Have Closed: Some Lessons For Downtown Organizations,” https://www.ndavidmilder.com/2012/12/many-downtown-movie-theaters-have-closed-some-lessons-for-downtown-organizations.html

30. Joshua Bloom, “Community-owned Businesses: How Communities Become Entrepreneurs,” Main Street Now, March/April 2010. http://www.preservationnation.org/main-street/main-street-now/2010/marchapril-/community-owned-businesses.html. See also Kennedy Smith, “Capital Thinking: Creative strategies to support at-risk businesses”, Downtown Idea Exchange, February 2012 http://www.downtowndevelopment.com/perspectives/dixperspectives020112.pd

The New Normal’s Challenges to Developing a Downtown Entertainment Niche Based on Formal Entertainments: Part 2 the audiences; revised 041214

Posted on March 28, 2014 by DANTH

Posted by N. David Milder

Introduction

This is the second part of the third in a series of articles about the “new normal” for our nation’s downtowns. It focuses on the challenges many downtowns — especially those that are not very large — now face when they decide to bolster their central social district functions by creating and/or strengthening their venues for the performing and visual arts, e.g., performing arts centers (PACs), theaters, cinemas, concert halls, museums, art galleries, etc. Part 1 dealt with a general introduction of the challenges, a discussion of who can afford formal entertainments and changes in the ways governments, corporations and foundations are funding arts projects. Part 3 will discuss a number of formal entertainment venues as examples and then dive into an update of DANTH’s analysis of what’s happening with movie theaters.

Here, in part 2, the discussion will turn to changes in the ways Americans attend performing arts events and visit visual arts venues. Secondary analyses of two kinds of data will be employed: representative sample surveys done for the National Endowment of the Arts (NEA) and other arts related organizations and reports of admissions to various types of arts venues/performances that were obtained from a number of arts sector organizations.

While both types of data can potentially shed light on consumer demand for attending various performing and visual arts events, they are quite different in nature, much as beans differ from broccoli, though both are vegetables. For example:

While the surveys ask individuals whether they attended various arts events over the prior year, the admissions data report the number of people who attended events put on by arts organizations or visited their venues. The surveys report on characteristics of individuals; the admissions data are characteristics of the organizations or venues
Translating directly between the two usually is difficult because of a number of issues. For example, the NEA survey may ask about attending classical music concerts, but the best relevant admissions data are only about attendance at concerts done by our largest symphony orchestras. The NEA survey data reports do not detail how often an individual may attend a particular type of arts event, e.g., once to a museum, three times to an opera, six times to a ballet, etc., while the Culture Track report does. The admissions data reports do not detail how many admissions were accounted for by people who had attended multiple times, e.g., subscription ticket holders
The survey data also tell us, at least by implication and sometimes overtly, about the percentages of people who did not attend each of the arts events/venues asked about. However, memories about attendance over a prior year can lead to an unknown degree of erroneous reporting. The admissions data are not informative about those who do not attend. They simply indicate an important fact for those operating arts organizations and venues: whether admissions have gone up or down – and usually with a good deal of reliability
Population growth is also an important factor. It is entirely possible that the number of people who are buying tickets for a type of arts events, e.g., chamber music, stays the same over 10 years, but, because of population growth, their proportion of the population would decline.

In this article the survey data will be treated as providing evidence about the proclivities of individuals in the USA to attend various arts events/venues and for explaining why they do so. Though their availability are quite limited, the admissions data will be treated as the best data about actual attendance and ticket sales and as the best indicators of how arts organizations and venues are doing. Obviously, the former should have some impact on the latter, but the paths of that influence are often difficult to accurately identify and detail. However, when both show a similar pattern, e.g., declining attendance and admissions, they can help validate each other’s findings.

The Surveys

The potential audiences for formal entertainment venues are composed of people who “consume” art by attending performing arts events (plays, operas, concerts) or visiting visual arts venues ,e.g., museums, art galleries, etc. The 2012 NEA survey shows that only 49% of its respondents reported engaging in such attendance behavior in the prior year (see the table immediately below). Movie-going, in comparison, had a 59% attendance rate.

Looking more closely at specific arts, the NEA survey showed that in 2012 only relatively small proportions of respondents attended them: classical music 8.8%; jazz 8.1%; dance other than ballet 5.6%; ballet 2.7% and opera 2.1% (see table immediately below). This suggests that the potential audiences for such arts events are comparatively small, though they will be higher where they are geographically clustered, e.g. affluent neighborhoods.

Moreover, when compared to the findings of a 2002 NEA survey, it appears that there has been a general decline in attendance: classical music -24%; jazz -25%; dance other than ballet -11%; ballet -31% and opera -34%. This would indicate that the audiences for these performing arts are not just relatively small, but they are also dwindling when looked at on a percentage basis.

The National Arts Index Report 2013 (NAI) uses survey data gathered from 210,000 individuals by Scarborough Research to demonstrate that attendance at art museums between 2006 and 2011 was below 2003 levels, down by about 8% in 2011 (1). Moreover during the 2003-2011 period, museum attendance never regained their 2003 level.

Some have argued that the decline in arts attendance revealed in the NEA’s 2008 survey was a result of the Great Recession. However, 2012 is three years after the recession’s official termination, yet the decline continued. The economy is undoubtedly a factor, but probably through economic forces that were in play prior to the recession’s onset and continue to have impacts today. This view will be supported below when the admissions data of arts venues are discussed.

One reason for this decline may be the growing consumption of performing and visual arts through electronic media. For example, the 2012 NEA survey found that 61% of the respondents used TV, radio or the Internet to access art or arts programming (see table above). A closer look shows that 57% consumed music of any kind via the electronic media; 14% accessed ballet, modern or contemporary dance or dance programs or shows; 7% theater productions and 4% opera. The numbers for dance and opera rival those who attended such performances in person in theaters or other physical venues.

In the near future, technological innovations may increase this diversion to e-attendance. For example, Mark Zuckerberg posted the following comment to explain Facebook’s purchase of the maker of the Oculus virtual reality headset: “When you put (the headset) on, you enter a completely immersive computer-generated environment, like a game or a movie scene or a place far away. The incredible thing about the technology is that you feel like you’re actually present in another place with other people” (2). The potential for using a virtual reality headset to attend sports events, plays, concerts, operas, etc. appears real; the degree to which it will be realized remains unknown. If not Oculus or some other virtual reality device, then some other technology may emerge to drive more e-attendance. This Pandora’s box has been opened. Also, it should be remembered that technological impacts on arts attendance are not a new phenomena: back in the 1950s TV viewing drastically decreased movie attendance and changed the way that industry works, but we still keep going to movie theaters.

Other factors are also very important in determining attendance at arts performances. As the Culture Track 2011 report noted: “Decisions about whether to participate in the arts are driven primarily by cost, programming, and convenience. This is true at all ages and income brackets” (3). This report was also based on a large national survey with 4,000+ respondents. The NEA surveys also show that age, education and ethnicity can be factors, but it notably neglects to discuss the impacts of income. Education is probably acting somewhat as a surrogate variable for income in the NEA analyses because of their high correlation. In today’s economy, one might reasonably argue that admission cost is a major determining factor for persons who are not wealthy and who do not have heaps of discretionary dollars to spend.

The Culture Track 2011 study did identify a number of high arts consumers: the young cultural omnivores — likely the young hipsters with lots of discretionary dollars to spend — and the older seasoned cultural omnivores, who appear to be older and affluent. As the word “omnivore” implies, both like to attend a variety of arts/cultural events. However, together, they represent only about 10% of the Culture Track survey’s respondents. Then there are three segments that specialize in the type of cultural events they prefer to attend: the museum mavens just like to visit museums, the devoted theater goers just like to go to the theater and the family centrics prefer to attend mostly child friendly events. The specialist consumers’ attendance rate is about half of that of the omnivores. The specialists account for 30% of the Culture Track survey’s respondents. Forty-eight percent of the survey’s respondents are non-attendees and infrequent attendees, and 12% are in the rural history segment that basically is lives in very rural areas, far from major cultural venues.

The Culture Track survey also found that decreasing attendance was being influenced by the general economy and manifested in the reduced number of events culture consumers went to, not in a reduction of the number of people who are culture consumers.

These findings suggest that besides about half of all adults being hard or impossible to attract to cultural events, substantial portions of those who are culture consumers will opt out if a venue does not put on the particular type of cultural event/performance they prefer. They also show that the economy is having a negative impact on how often American cultural consumers attend cultural events.

It should be noted that the NEA’s 2012 survey did find art events that were attracting more people, e.g., 5.1% reported going to events where Latin, Spanish salsa music was played compared to 4.9% reported in its 2008 survey. The NAI report, again based on Scarborough Research survey data, shows that attendance at “live popular music,”– which includes country, R&B, rap, hip-hop and rock music performances — equaled or exceeded the 2003 level every year but one between 2004 and 2011. Indeed in 2011, attendance at live popular music events was 14% above the 2003 level (4). This reflects another pattern the surveys agree on: some arts forms are attracting stronger audiences. However, the “high brow” culture/arts forms, e.g., opera, ballet and classical music are not among them.

For those believing that the performing arts can be a silver bullet solution for downtown revival, the NEA and similar surveys indicate a changing and too often dwindling potential audience. They also suggest that the demographic characteristics of a market area and its prevailing lifestyle segments can have a big impact on potential attendance for each of the various types of performing and visual arts events. Formal entertainment venues are likely to be intensely challenged when they try to find and capture audiences for their programs and events. Consequently, the critical ticket and admissions sales portion of their revenues seem to have become more uncertain, just as have their government funding and grants from corporations and foundations.

REVISION 041214: Since the initial posting of this article DANTH has come across survey information released by the Broadway League, “The Audience for Touring Broadway: A Demographic Study 2011 -2012,” which had the following findings:

“Seventy percent of attendees were female.
The average age of the Touring Broadway theatregoer was 50.5 years.
Eighty nine percent of Touring Broadway theatre goers were Caucasian.
Seventy-eight percent of the audience held a college degree and 30% held a graduate degree.
Forty six percent of national theatre goers reported an annual household income of more than $100,000, compared to only 21% of Americans overall.
Thirty one percent of respondents were subscribers to the “Broadway Series” at their local venue.
On average, Touring Broadway attendees saw 4 shows per year.
Women continued to be more likely than men to make the decision to purchase tickets to the show.”

Performing and Visual Arts Admissions

To research annual levels of admissions at various types of performing and visual arts venues, DANTH reviewed relevant data posted online by such organizations as the League of American Orchestras, the Theatre Communications Group, the National Association of Theatre Owners (movie houses), The Broadway League, the American Alliance of Museums, Opera America, et al. Some of the reported data are not specific enough for the needs of the analysis in this article. For example, the Alliance of Museums surveys its museum members asking if attendance went up or down in the reporting year within specific percentage ranges. It does not collect anything like “counts.” Most of the other organizations survey their membership about admission counts and then on the basis of the reported data extrapolate out to the total number of organizations in their field. For example, the Theatre Communications Group, for its 2012 report, collected data from 178 theaters and then used those results to make an estimate of the annual admissions of 1,782 nonprofit theaters. Some of these organizations appear to have ceased publishing data about admissions.

The analysis below only covers five of the six types of performing arts for which we could find count-based admissions data: movie theaters; symphony orchestras; touring Broadway shows; opera, and nonprofit theaters . Although the desired data are available for Broadway shows staged in Manhattan’s theater district, they were not included because of their geographically confined relevancy.

One of the things to take away from the above table is the relative sizes of the absolute admissions numbers for each of the arts categories. Attendance at movie theaters, which is in the billion+/yr range, simply dwarfs the combined attendance of the other four arts categories. The opera admissions are far, far smaller than those for the symphony orchestras and nonprofit theaters. For downtown leaders who want performing arts to drive more traffic downtown, the implications seem obvious.

Attendance for symphony orchestras, opera and movies began their declines well before the onset of the Great Recession. This strongly suggests that other factors were influential. On the other hand, attendance for touring Broadway shows has certainly varied over the years, but usually has been strong. The non-profits theaters’ admissions did hit bottom during the recession, but they have since recovered and actually peaked in the most recent year for which there is data, 2012.

The above table helps to see historic trends more easily by indexing the attendance statistics for each category to the 2003 attendance:

Movies. Movie attendance had an average index score of .923 between 2000 and 2013. It topped out historically in 2002 at 1.03 and then followed a bumpy downward path to .84 in 2011. That is a percentage decline of about -18.4%. However, attendance bounced back with about a 6% increase in 2012 over 2011 and then ebbed slightly, 0.40%, in 2013 (5). That still left movie attendance about -14% below its 2002 high. As movie attendance has declined, research by Pew found that Americans watch five times as many movies at home than they do in movie theaters — and that study predated Netflix’s entry into the movie and TV show streaming business (6). To help stem the decline, Hollywood has increased its annual movie production by about 39%, from 478 in 2000 to 665 in 2012. Over this same period, the number of indoor movie theaters declined by 18.8%, the number of indoor movie screens increased by 9.4% and all distribution and projection functions went digital. Since movie house ticket sales only account for a fraction of movie studio revenues — under 15% — a growing number of movie moguls are pressing for new films to be released digitally at about the same dates as they are screened in traditional theaters
Touring Broadway Shows – Although this category shows about a -13% decline in 2013 from its peak year in terms of absolute attendance, the 2013 attendance is still 20% above the 2003 benchmark year, and it has the highest average indexed attendance score presented in the above table, 1.14. Its index scores exceeded the benchmark 1.0 in 12 of the 14 years for which we have data, peaking in 2010 at 1.39. The index scores were relatively high in the preceding 2006 and 2009 period, with scores of at 1.34 and 1.25 during the two recession years. Its index score has not been below 1.10 since 2004. Attendance is significantly impacted by the number of plays on the road and the lengths of their runs. For example, for Broadway shows there is a .69 correlation between the number of playing weeks in a year and attendance. That can statistically explain about 47% of the annual variation in attendance. From the data the Broadway League publishes about gross revenues of the touring shows, it appears that in 2013 the average revenue per admission was $64.01 (up 22% since 2003). If the average ticket price was around that figure, then a lot of folks probably cannot afford to attend touring Broadway shows. Not all downtown theaters can attract a touring Broadway play; they must have an ability to generate ticket revenues that are commensurate with the size of the production’s cast and costs.
NonProfit Professional Theaters. There were an estimated 1,782 of these theaters in the USA in 2012, and most were not very large– they averaged just 174 admissions per performance. For the 11 years that there is available data, the attendance index scores for this arts category are below 1.0 in nine of them. But, the most recent score was its highest, 1.07 for 2012, and it followed a 0.99 score in in 2011 that was a .09 improvement over 2010. These theaters get about 52% of their revenues from earned sources and 48% from contributions. Using the published expense data and dividing it by attendance indicates that there is about $54.11 in expenses associated with the average admission. The earned income, probably from ticket sales, would cover about $28.26 of the average admission cost, with contributions covering the remaining $25.85. Theater tickets in the $30 range are likely to be affordable to many more people than tickets costing $60+. But, needing this audience subvention certainly contributes to pushing about 50% of these theaters to operate in the red (7).
Opera. Between 2000 and 2011, opera attendance dropped off dramatically by about 40%. The decline has not been linear. Between 2000 and 2003, well before the recession’s onset, attendance fell by about 24%. It’s attendance index score then increases to 1.09 in 2004 and wobbles up to 1.14 in 2007. It then continues to decline down to 0.73 in 2011, the final year for which we could find data. The difference between the 2000 and 2011 index scores is a stunning 0.51. However, this decline was not linear: an important attendance decline occurred well before the recession, and another and stronger decline started when the pre-recession financial crisis began to emerge.
Symphony Orchestras. For the years the DANTH team was able to find relevant data, attendance at concerts of 187 symphony orchestras peaked in 2001 and 2002, with index scores of 1.14 and 1.07. It then dropped to 1.0 in 2003 and 2005, well before the Great Recession. Attendance actually rose to 1.04 in 2006 to 2008 as the financial crisis and the the recession set in, but then incurred a substantial drop in 2009 to its lowest index score, 0.89. Attendance recovered somewhat in 2010 and 2011 with index scores of 0.93 and 0.95, showing something of a recovery trend. But attendance in 2011 still was about 7% off the 2003 benchmark and about 17% below the 2001 peak. While the Great Recession probably had a significant impact on attendance, the drop in 2003 and 2005 suggest that other factors also might be at work. Within the field, there has been much heated debate about whether attendance has ebbed because the classical repertoire has become too limited, boring or inaccessible and whether substantial efforts are needed to expand its audience by attracting more people from a wider range of ethnic, income and age groups. However, a number of observers have argued that even if attendance may have fallen, the quality of the players and orchestral performances has been very high, and the popularity of classical music has grown in such places as college campuses (8). This raises the question: what, then, are the factors that have been pushing admissions at symphony orchestra concerts down, if it is not the quality of the performances and other than recessionary impacts?

The table immediately above takes the absolute admissions data from the table “Attendance in Five Performing Arts for Which There Are Admissions Data” and indexes/standardizes it to the national population in each of the years covered. It is, mathematically, something akin to turning them into percentages. The results are per capita admissions by year of each of the arts categories in the table. Some things to note:

Opera and a classical music subset, symphony orchestras, display strong reductions in attendance in the most recent years for which there is data from their peak years, -46.3% and -24.3 % respectively
These are significantly higher declines than those revealed by the analysis of the absolute attendance data, -40.7% and -17.2%
While the touring Broadway shows also show from this perspective a stronger decline, the per capita attendance is still well above the benchmark year
Movie attendance also shows a greater decline than the absolute attendance numbers, -21.7& compared to -13.9%; its most recent per capita attendance is well below that of the benchmark year
Non-profit theaters had their highest admissions ever in 2012, but the per capita admissions in 2003 were just barely higher, 0.1182 to 0.1169.

Take Aways

This analysis has looked from several perspectives at the issue of what has been happening to the attendance levels for various types of performing and visual arts venues over the past decade or so.
The contention that attendance patterns are changing significantly seems hard to refute.
The contention that forms of “high brow” culture such as opera, classical music and ballet have suffered attendance declines also appears to be supported by the numbers
Art forms associated more with popular culture, e.g., live popular music performances, are those that seem to be doing best. However, movie attendance is not what it has been, despite huge efforts to buttress attendance by by providing more movies per year on more movie screens and using 3-D and IMAX projection systems to substantially enhance the viewing experience
The impact of technology to provide new ways of e-attending performing arts events or visiting museum art collections (MoMA, the Met, the Louvre, the Smithsonian, the Whitney, etc. all have them) is undeniable, but the extent and pattern of that impact is still uncharted. However, what the movie attendance shows — remember we watch 5 times as many movies at home or on our e-devices than in cinemas — is that to a substantial degree we still want to watch/see arts events in person with other people. That does not mean that there will not be adverse impacts — just think of all the closed movie theaters, about 10% of them, some say, due just to the conversion to digital projection and distribution
Whether or not these audience churns and declines reflect a cultural dumbing down of our population or whether performing arts repertoires have become stale or their performance levels waned are irrelevant issues for downtown leaders who want to enhance their central social district functions by building a stronger entertainment niche
What is important are the changes in arts audience behaviors. They increase the uncertainty of existing arts organizations’ earned incomes and definitely will be affecting the economic feasibility of projects to create new formal entertainment venues. Creating such formal arts venues is seldom associated with cheap capital costs
Regarding the new projects, given the probable capital expense, the uncertainties associated with earned income and the inherent tendency to best serve an audience that has a significant amount of discretionary dollars to spend, some downtown leaders might do well by considering other types of projects to enhance their entertainment niches. These projects might take the form of new vibrant public spaces that are: open to all; where plays and movies can be shown, but focused mainly on maximizing informal entertainment opportunities; either free or low-cost; designed to capitalize on people watching; where participants are both the performers and the audience.

Endnotes

1. Americans for the Arts. National Arts Index: 2013 Report, pp.149, p.67

2. Ibid., p.64

3 See: http://www.businessinsider.com/zuckerberg-why-facebook-bought-oculus-2014-3#ixzz2x1lgtLVO

4.LaPlaca Cohen/AMS Planning & Research Corp, Culture Track 2011 Market Research Report, pp.87, p.7

5. http://www.boxofficemojo.com/yearly/

6. Pew study cited in:https://www.ndavidmilder.com/wp-content/uploads/2012/05/trends_p1_films_08.pdf

7. The data in this section are drawn from Theatre Facts. It has been published annually by The Theatre Communications Group since 2000. See the 2012issue at:http://www.tcg.org/pdfs/tools/TCG_TheatreFacts_2012.pdf

8. See for example: http://classicalvoiceamerica.org/2014/03/07/campus-concerts-rebuff-notion-of-classical-decline/ and http://www.city-journal.org/2010/20_3_urb-classical-music.html . Thanks to Andy Menshel for bringing them to my attention.

The New Normal’s Challenges to Developing a Downtown Entertainment Niche Based on Formal Entertainments: Part 1

Posted on March 9, 2014 by DANTH

Posted by N. David Milder

Introduction

This is the first part of the third in a series of articles about the “new normal” for our nation’s downtowns. It focuses on the challenges many downtowns — especially those that are not very large — now face when they decide to bolster their central social district functions by creating and/or strengthening their venues for the performing and visual arts, e.g., performing arts centers (PACs), theaters, cinemas, museums, concert halls, museums, art galleries, etc. Part 1 deals with a general introduction of the challenges, a discussion of who can afford formal entertainments, and changes in the ways governments, corporations and foundations are funding arts projects. Part 2 will turn to changes in the ways Americans attend performing arts events and visit visual arts venues. Part 3 will survey a number of formal entertainment venues.

As noted in an earlier article on the new normal for downtown, successful formal entertainment venues undoubtedly can be strong assets for the downtowns in which they are located. However, the success of such venues has long been uncertain and challenged because, from their get-goes, they are the equivalents of loss leaders for their districts. Most are nonprofit operations that sell tickets to events/performances or charge visitors admissions fees that seldom cover their full costs. For example, among performing arts centers,, be they large or small, only about 40% of their operating costs usually are covered by performance revenues (1). To survive financially,they must be able to tap a number of “charitable” revenue streams, e.g., grants, bequests and other donations from government agencies, corporations, charitable foundations and individuals. This financial dependence makes them vulnerable. Evidence suggests that recent trends have made their financial success significantly more difficult to achieve. Funding for the arts took a big hit during the Great Recession, with its full recovery still in doubt, while research studies have consistently shown attendance at performing and visual arts venues has been changing, in some instances declining significantly for over a decade.

In the performing arts, the fees of performers — be they individuals or groups — are related to their popularity. The ability of a venue to attract them will depend on its seating capacity and the ticket prices it can command. Consequently, as more communities with comparatively limited market area populations and wealth try to develop such venues, they often find that their smaller potential audience base, seating capacity and financial resources require adjustments of their aspirations and a fine-tuning of their programs. In other instances, formal entertainment facilities have been built that just have too much capacity for their market areas or are weakened by new competing formal entertainment centers within their market areas

The arts as an engine of economic growth and downtown revitalization too often seems to have achieved the exaggerated status of a religious credo among downtown advocates or the unrealistic expectation among some of them of being the “silver bullet” solution path to economic rebirth. While the arts undoubtedly can contribute to economic growth, their ability to do so will depend on arts venues and programs being planned and designed in a manner congruent with local needs, behaviors and resources. This challenge is now made more complicated by the fact that these local needs, behaviors and resources may be subject to substantial change.

Consumer Expenditures for Entertainment Admissions and Fees.

Tickets admission fees are an important revenue source for the organizations that operate formal entertainment venues. The less revenues they realize from tickets and admission fees, the more they must rely on obtaining outside funds from government agencies, corporations, foundations, and individual donors. The fees can vary. For example, the Cincinnati Museum of Art has free admission; the Columbus Museum of Art charges $12; the Museum of Modern Art in NYC has a $25 fee; the ticket prices for Broadway shows and tickets for concerts by major attractions can reach well over $100 in prime venues. Obviously, the affordability of these

admissions is a function of both their prices and the incomes of those who would purchase them.

Formal entertainment venues that charge relatively high prices are in a sense targeting more affluent households and a downtown entertainment niche based on a cluster of such venues is likely to be a feature that helps draw affluent households or young people with a lot of discretionary spending power to want to live in or very near to the district. During the 1960s, 70s and 80s attracting such residents was just a long-term goal of many downtowns leaders. Today, in a growing number of downtowns, that goal has been achieved and they are stronger for it. Sophisticated formal entertainment venues that feature major attractions that have substantial admission fees are probably well suited for such downtowns. But, a lot of downtown users, be they current or potential, are being priced out of using these formal entertainment venues.

The table above shows that nationally, in 2012, 56% of the expenditures for entertainment fees and admissions came from those in the top 20% of the households sorted by annual incomes. The mean annual household income in this quintile was about $167,000. Those in the top two household income quintiles, with average annual incomes over $75,900, accounted for 77% (56% +21%) of all entertainment fees and admissions.

The general thrust of these findings is not new: the more affluent have long spent more on entertainment, especially the arts. What is new are:

The emergence of deliberate consumers in middle income households who have reduced discretionary incomes and for whom discretionary entertainment expenditures now are a lower priority than in years past (2)
The income stagnation and general economic decline of middle income households, a trend that preceded the Great Recession, but recently has become a hot political issue.

The implications for many downtowns are:

More than ever, ventures to establish new formal entertainment venues must be calibrated in their ambitions, designs and costs to the financial resources of local residents that might be tapped through admissions, fees and donations
Such ventures are more likely to succeed in communities that have greater residential wealth, especially if capital investments in new buildings, busy event/performance schedules and pricey admissions fees are involved
In smaller and less affluent communities such ventures are very likely to need strong long-term government subventions and grants from corporations, foundations and community organizations. Most downtowns are likely to fall in this category. In these communities, the presence or absence of very broad support among local residents, the business community and elected officials can be the deciding factor in whether this critical external financial support will be obtained. Often such strong support is mobilized around something or someone that is a source of considerable community pride or identity, such as the artist Grant Wood in the Cedar Rapids (IA) Museum of Art and life on the plains and the Oregon Trail in the Legacy of the Plains Museum in Gering NE.
Many of the downtowns with weaker financial resources to tap might do well to consider that many Americans see art exhibitions and attend performing arts events not only in museums, theaters and concert halls, but also in parks or other open air facilities, restaurants, bars, nightclubs, community centers, places of worship, college campuses, etc. (See table above).

Grants for Arts Nonprofits

Since the onset of the Great Recession, it has become more difficult for arts nonprofits to get the grants they need from public sector agencies, corporations and foundations. An unanswered question is whether this funding trend will turn around as the nation’s economy improves. Downtown leaders considering the development or expansion of formal entertainment venues might benefit from understanding the topography of these new financial support patterns for the arts.

Public Sector Funding. It is important to understand the magnitude of the public sector’s financial support for the arts. It now only accounts for about 7% of the revenues of arts nonprofits nationally and, adjusted for inflation, between 1992 and 2013 public funding declined by about 30%. FY2013 was the first fiscal year since FY2008 that aggregate public sector funding for the arts has increased, but it is still far below former high years (3). The National Endowment for the Arts (NEA) only accounts for about 12% of the public sector funding. Its expenditures are not expected to increase significantly anytime soon.

County and municipal governments account for 63% of the public funding for the arts and they recently have shown signs of increasing their funding levels as their economies improve and the impacts of natural catastrophes (e.g., Hurricane Sandy) abate. However, local governments in more densely populated areas often face a large number of requests for arts funding and that usually results in many relatively small grants.

Corporate Support. Unfortunately, data are unavailable for small and medium-sized corporations, but the major findings of a recent report by CECP and The Conference Board on giving in 2012 by large corporations are still illuminating (4): though large corporation giving increased by 42% from 2007 to 2012, funding for the arts decreased by about 40% during that period (5)!

On the hopeful side for a resurgence in corporate arts funding is the fact that giving to the arts remains popular among the corporations; it is the size of their contributions to the arts that have decreased. But, changes in corporate behaviors and preferences suggest that such a resurgence is not likely to happen any time soon:

Education and economic development have become much more important funding priorities
More corporations want to make in-kind donations and arts organization may find it difficult to benefit from bulk product donations
Corporations are increasingly seeing giving as part of their corporate strategy and less as charity
Corporations are increasingly reviewing their giving from a return on investment (ROI) perspective and nonprofits often do not know how to provide the needed metrics (6)

Foundations. Since about 81% of America’s larger corporations have foundations and they account for about 35% of their corporations’ total giving, there is some overlap between corporate and foundation funding (7).

In 2011, the last year for which there appears to be available data, there was a familiar pattern: while there was a 25.3% increase over 2010 in overall giving by 419 foundations, the increase for the arts was a marginal 0.5%. Here again, the arts’ share of the number of grants remained unchanged (8). However, a “larger share of arts grant dollars provided operating support than most other fields” (9).

Endnotes

1. Harac Consulting, “Evaluation of SOPAC.” October 2011, p.3. http://southorange.org/SOPAC-finalPDF.pdf

2. See: https://www.ndavidmilder.com/downtown-revitalization/the-deliberate-consumer

3. Ryan Stubbs “Public Funding for the Arts: 2013 Update,” GIA Reader, Vol 24, No 3 (Fall 2013): http://www.giarts.org/article/public-funding-arts-2013-update

4. CECP and The Conference Board, “Giving in Numbers: 2013 Edition.”

5. Ibid, page 20.

6. See:ARTSblog » Blog Archive » Michael Stroik. “Corporate Funding Came Back After the Recession, But Did it Leave the Arts Behind”_ (from The pARTnership Movement, an initiative of Americans for the Arts) posted Oct 4, 2013 and ARTSblog>> Judy Belk, “As Corporate Giving Bounces Back, Six Things Nonprofits Need to Know,” posted December 13, 2013.

7. See endnote 4, page 5.

8. Steven Lawrence and Reina Mukai, “Foundation Grants to Arts and Culture, 2011 A One-year Snapshot,” Foundation Center, GIA Reader, Vol 24, No 3 (Fall 2013), http://www.giarts.org/article/foundation-grants-arts-and-culture-2011

9. Ibid.

Many Downtown Movie Theaters Have Closed: Some Lessons For Downtown Organizations

Posted on December 29, 2012 by DANTH

Introduction.

Across the nation, about 10% of our movie theaters recently have closed or will do so in the near future. They are folding because of long term declining attendance and, more immediately, their operators’ inability to pay for the equipment costs of transitioning to the digital film distribution and projection techniques that the major Hollywood studios have made mandatory – no digital, no films. Most are relatively small houses located in small and medium-sized downtowns. Obviously, their closings probably will have huge adverse impacts on their downtowns.

The tragedy is compounded by the fact that, while some were seedy and many others had very low ticket sales, there were still many of these critical downtown assets that might have been saved. It was well known that these theaters were in danger and that the major studios were moving toward costly digital film distribution and projection upgrades. Tools for potentially saving these theaters were available. However, few downtown organizations had formulated viable action plans they could quickly implement should their cinema be threatened with closing. Once the problem appeared, they were overwhelmed by its complexity, the money needed to remedy it and the short time available to formulate a viable plan for the cinema, win community support and implement it.

The Need for Strategically Critical Business Retention Efforts.

In many ways the closings of these movie theaters are classic examples of failed business retention, but they are obviously something much more significant for their downtowns than the closing of the average retailer. Closed cinemas can mean the loss of important customer traffic generators, big hits on downtown images and the throwing of large vacant commercial spaces on the market that are difficult to lease or restructure for reuse. Far too often closed movie theaters become long-term downtown eyesores.

Most downtowns usually have a handful of establishments – businesses, museums, sports teams, cinemas, etc. — that are disproportionately important to their economic well being. Strategically, they are of critical importance. This, in turn, means that they are worth saving and warrant the investment of a downtown organization’s scarce resources.

The closings of the movie theaters suggests that downtown organizations should be aware of strategic downtown assets that are at risk and have at the ready at least the basic outlines of the actions they quickly can take to help retain these assets.

Determining what is and is not a strategic asset is a critical step. A movie theater, for example, is not a strategic asset by definition. A cinema that is in very bad condition and that attracts few patrons will not have strategic import and my observations suggest that some downtown organizations have indeed written off their movie theaters for these reasons. However, in these situations, the question about retaining the cinema then often turns into an even more complex question about the viability of reviving it.

The Downtown Organization’s Role?

In a recent conversation, the manager of small downtown district “X”, with a movie house that is in deep financial trouble, explained that there was little that the downtown organization could do because so much money would be needed not only for the digital projection upgrade, but also for substantial physical improvements. Of course, most downtown organizations, like this one, will never have the financial or staff resources needed to retain through their own actions the critical strategic establishments that are at risk. Nevertheless, that does not mean that they do not have a pivotal role to play in the retention of these critical assets.

Downtown organizations are effective not only because of their own activities, but also because of what they can get other people and organizations to do: e.g., they not only run street fairs and hang Christmas Decorations, etc., but they also get municipal and state agencies to fund wayfinding programs, support façade improvements, fund performing arts centers, etc. I would argue that this means that the most effective way that downtown organizations – especially small ones – can successfully retain imperiled strategically important downtown assets is to lead the mobilization of the community and its resources in a retention effort. Downtown district X may not have the resources to save its movie theater, but if it can get the municipality, businesses, nonprofits and residents in the community to contribute money and staff, the future of its movie theater probably would be quite different.

If downtown organizations do not play such a role in retaining these strategically important downtown establishments/functions, then who in the community will?

Furthermore, if playing such a role in retaining critically important downtown assets is not a key element of the downtown organization’s mission, then why does it exist?

The Existing Challenges Often Have Been Around For Quite A While.

As the travails of the movie theaters show, the challenges that these critical economic assets were facing were not surprises, but have existed for several years and were well known. In Downtown “Y” in NJ, for example, the possible closing of its cinema has repeatedly come to the fore since the mid 1990s, yet the recent announcement of its demise has sparked a fragmented and desperate effort within the community to save it, in which its downtown organization seems paralyzed. Many other downtown cinemas have had similar histories of teetering on the financial abyss. The downtown organizations in these communities should not have been surprised that their cinemas were on the verge of closing, but my interviews and review of published reports indicate that too many were.

Downtown organizations – even in relatively modest-sized communities– need to proactively identify their critical downtown establishments that are facing challenges and learn about what is happening in the industries they are in. By doing so, those with cinemas would have learned much to alert them of potential problems. For example, about a decade ago the movie industry took a big hit, with many of the chains flirting with bankruptcy or closing and many independents following suit. Furthermore, industry observers for many years have been writing about the attendance decline caused by the public’s growing home film viewing. Back in 2008 DANTH became so aware of this trend that we issued a major report on the challenges downtown movie theaters were facing. Despite the easy availability of such information, too many downtown organizations were caught unaware of the imminent danger their movie theaters were in.

Which Actions Are Timely Depends On When They Are Needed.

When an operator announces the closing of a movie theater, there is little or no time for the downtown organization to determine the economic viability of a movie theater operation, assess how much the community wants a local cinema and then formulate and implement an action plan to retain or save the existing operation. A successful retention effort under this scenario would most likely only occur when the downtown organization has the components of a relevant action plan in hand ready to tailor to the current situation and then implement.

Failing that, the retention focus would probably shift from the operator to the function, i.e., having a strong, viable movie theater in the downtown. This simply may involve the landlord seeking another operator to take over the theater or the far more complicated routes of creating of a community-owned corporation to take over the movie operation or perhaps even integrating it into a new performing arts center.

It is important to note, however, that for several years it has been known that theater operators would need to go digital, that the process would be costly -between $65,000 and $125,000 per screen – and that industry subsidies would not go to theaters with very low ticket sales. Earlier retention interventions would have had more time to work in and probably involved relatively simpler efforts. Instead of finding and recruiting a new operator or having to create and fund a new entity to operate the movie theater, the focus could have been on helping the operator pay for the digital upgrade through traditional bank loans or even crowd funding websites.

Some Relevant Reading:

N. David Milder, “Downtown Movie Theaters Will Be Increasingly In Great Danger”, Downtown Trends Assessment 2008, DANTH, Inc. March 2008 https://www.ndavidmilder.com/wp-content/uploads/2012/05/trends_p1_films_08.pdf

Joshua Bloom, “Community-owned Businesses: How Communities Become Entrepreneurs”, Main Street Now, March/April 2010 http://www.preservationnation.org/main-street/main-street-now/2010/marchapril-/community-owned-businesses.html

Kennedy Smith, “Capital Thinking: Creative strategies to support at-risk businesses”, Downtown Idea Exchange, February 2012 http://www.downtowndevelopment.com/perspectives/dixperspectives020112.pd

Amanda Palmer & The Grand Theft Orchestra are putting out an album. Pre-order it / get more info on the art book & gallery tour, here!

Patricia Leigh Brown, ” Movie Houses Find Audience in the Plains,” New York Times, July 4, 2010 Article

N. David Milder at DANTH, Inc.

Downtown Revitalization Specialist

Category Archives: movie theaters

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Introduction

The Surveys

Performing and Visual Arts Admissions

Take Aways

Endnotes

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Introduction

Consumer Expenditures for Entertainment Admissions and Fees.

Grants for Arts Nonprofits

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