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Posted January 26, 2009
The Financial Crisis and Implications for the Theatre Industry: Council Hears Perspectives On "Galactic" Financial Crisis Weighs Impact on Theatres Connolly Declares The Arts Must Be Included in Economic Recovery: "We are a shovel-ready industry"
How can we get a piece of the pie ? At press time, Actors' Equity had under taken these initiatives in response to the financial crisis... The current global financial crisis and its potential impact on the American theatre was the focus of a special Council meeting on Tuesday, Jan 13th. A leading economist, a seasoned Broadway producer, and the executive director of the non-profit arts service organization brought their perspectives to the current economic situation and explored future implications for the theatre industry. Calling the recent meltdown a "body blow" to American workers, Executive Director John P. Connolly said "it would be irresponsible not to take a serious approach to this, to somehow pretend that the theatre is immune from what is happening all around us, the collapse of key elements of our economic system. We need facts and informed opinion to develop the proper strategy and tactics to address this crisis as representatives of workers and working families." He acknowledged the presence of Ed Ott, the Director of the NYC Central Labor Council and Susan Borenstein, Field Mobilization Director from the AFL-CIO, as evidence of how important the entertainment sector of the labor movement is regarded by the labor movement. "It's important that all of us learn about this crisis, because we're in it together, continued Connolly. "This will be very rich conversation which we'll have to have amongst ourselves, with our colleagues in the labor movement, and with our employers and other forces in our industry. It is my perspective and the perspective of our leadership, that if there is going to be a significant recovery and stimulus package under the new administration, then the performing arts must be included. No one speaks for artists better than the organizations who represent artists and are led by artists. That's our job, and that's what I intend to do in concert with our colleagues across the industry." "We are shovel-ready industry," declared Connolly, using President Obama's phrase for relief projects that can start up immediately. "There are projects in the pipeline and a ready, willing and able work professional work force of actors, and other performing artists. Live entertainment is ready to go." He then introduced James Parrott, Executive Director and Chief Economist, Fiscal Policy Institute; Jed Bernstein, the former head of the Broadway League and now head of the Commercial Theatre Institute; and Teresa Eyring, Executive Director, Theatre Communications Group.
James Parrott/Fiscal Policy Institute In his presentation, Parrott provided a comprehensive overview of the meltdown: What is it? Where did it come from? What should we do about it? and What should a recovery program include? Among his sobering statistics:
Calling this a crisis of "galactic" proportions, Parrott traced the causes of the meltdown to a toxic mix of de-regulation policies under the Bush administration; excessive risk inflated by questionable lending practices; a loss of confidence in the markets; and a huge overhang of credit default swaps which contributed to a bank solvency crisis. The costs are staggering: in a span of 9 months, the US government committed $7.8 trillion for a variety of capital investments, low-interest loans and government guarantees. And despite this massive infusion, the outcome is very unclear. So what should we do? Parrott concluded by advocating for restoring an effective government role in the economy; establishing a new economic model that creates broadly shared prosperity; facing reality about New York's fiscal challenge and adjusting to a smaller finance sector. To create this new economic model, he advocates policies and programs that are being championed by the labor movement, including: the Employee Free Choice Act; higher minimum wage and improved labor standards enforcement; universal and affordable healthcare; infrastructure modernization and public works investment; green jobs and alternative energy development; the auto industry; improving social welfare programs including unemployment benefits; and putting a moratorium on foreclosures to restructure debt.
Jed Bernstein / Commercial Theatre Institute Mr. Bernstein began by explaining in detail how Broadway shows are financed and capitalized, and how producers are remunerated. He noted that the average play on Broadway is capitalized between $2.5-$3.5 million (musicals costs upwards of $10 million) and that producers raise this money privately by offering "units" in their production company. After opening, investors are paid back out of the weekly surpluses until they are made whole, before any profits are distributed, but after weekly operating costs and royalties are paid. Practically, this means that the higher the unit cost, the fewer producers there are and by implication, the more attractive the investment. Producers make money off of their % of net profits; producer royalties (a relatively new concept); weekly office fees; and a share in subsidiary rights (from movies or television) for example). "There are many obstacles to investing on Broadway even when the sky isn't falling," joked Bernstein, noting that investing has always been risky. "This just adds another layer of uncertainty to the process" and cited these obstacles to investing in the current climate.
Bernstein said he was particularly concerned about front money, which is the most difficult to raise, and gives producers the option to develop works before mounting a full-blown production. He also projected that there would be a lag effect, given that there are upcoming Broadway shows which are already fully financed, and that Broadway has just come off of a strong box office season with tourism at near-record levels.
Teresa Eyring / TCG Eyring reported that TCG has been working with the broader arts community to make recommendations to President Obama's administration to strengthen support for the arts in communities nationwide. As part of the Performing Arts Alliance, TCG joined other arts and cultural institutions and have submitted a nine-point proposal to promote economic recovery for the arts. "The arts need to be recognized as an important sector of the work force and economy," Eyring emphasized. "Nearly 2 million people say their primary profession is an artist, just under the number of active duty military. As a category of worker, it's larger than many categories, including doctors, accountants and lawyers. Research shows that 100,000 not-for-profit arts organizations are members of the business community: employing people locally; purchasing goods and services; and promoting their communities. These organizations and their audiences generate $166 billion in economic activity every year, proving that the arts are an economic driver that provides jobs and revenue." Some of PAA/TCG's specific recommendations include:
Regarding the economic crisis, Eyring reported that the impact on theatres and arts organizations has manifested in a variety of ways. Across the country, state and local arts funding is being slashed as governments try to balance their budgets. Philanthropic and private donations have been affected as investment portfolios shrink. And audiences are being more careful with their entertainment dollars. "Most theatres are planning cutbacks in the double-digit percentages, anywhere from 10 to 25% or higher," she predicted. "As a result, we expect to see reductions in production size with a serious loss of employment for artists and administrators. She echoed Executive Director Connolly's call for the arts to be included as part of the President's proposed economic stimulus package.
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