Business and the Arts

1

• Business and the Arts

The Case for Investment in the Arts
May 24, 2006
Billie Bridgman
The Council for Business and the Arts, May 2006
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Real, substantial, economic impact
The Council for Business and the Arts, in
conjunction with McKinsey and Company, recently
completed a research and analysis project around
the the partnership potential between the
corporate sector and the arts. The simplest
measurement is economic and the assumption was
that this would be key to corporate interest.
The model developed by the study team indicates a
number of important features at this level

• Public sector investment in the arts and cultural
  community is essential. It is the catalyst for
  private sector support and together these drive
  direct, indirect and induced benefits.
• The arts in Canada provide an economic engine
  (based on public and private sector support,
  earned income and incremental tourism) which
  drives impact at as much as 8X the level of
  public sector investment.
• Because of these multiples, more than 80 of this
  public sector investment comes back to government
  in the form of taxes.
• The maximum impact is generated at the induced
  level - the real beneficiaries of cultural
  investment are Canadian communities.

The Council for Business and the Arts, May 2006
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A framework for calculating the economic impact
of the arts and culture sector in Canada
Type of benefit
Easy to quantify
Unable to quantify
Harder to quantify

• Financial benefits generated by the
  attraction/event itself

• Incremental tourist spend

• Regional revitalization economic activity from
  direct and indirect spending

• Real, but qualitative benefits for the community,
  government, and corporations

Description

• Admission/tickets
• Tax revenues

• Restaurants
• Hotels
• Services

• Incremental spend in region due to direct arts
  spending (i.e., ripple effect of direct benefits)

• Social capital, education, reputation,
  multicultural, support of objectives
• Talent attraction, CSR, marketing

Examples
Source McKinsey team analysis
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As a conservative estimate, 0.7 billion of the
tourism spend in Canada can be considered an
indirect benefit of cultural programs
Participation in arts/cultural events Percent of
tourists who attend
Total tourism spend in Canada, 2004 100 57.5
billion
Accommodation
Other
Visit museum/art gallery
Recreation/ entertainment
Attend a fair, festival, etc.
Attend a play, concert, or other cultural event
Food/ beverages
Transportation
Attend an aboriginal or native cultural event
of tourism spend attributed to the arts
0.5
2.5
1.25
Estimated arts-related tourism spend ( Million)
287.5
1,437.5
718.8
Visitors may attend multiple events during
their trip, based on domestic travel within
Canada Underlying assumption that approx. 25
of those tourists who attended an arts attraction
traveled solely for the event Source Canadian
Travel Survey, 2002 Statistics Canada, 2004
team analysis
5
Induced benefits are estimated to be 856 million
based on the multiplier effect of arts-related
spending
Multiplier effect of arts spending in Canada
2/3 of the direct arts spend is rippled through
the Canadian economy
Spend on supplies
38
Direct arts spend
80
86
42
Spend on wages
Disposable income
Personal spending
29
20
14
20
Other spend
Taxes
Personal savings
Assumptions
Induced spend calculation
Rationale

• 38 of firms spend is on supplies
• 42 of firms spend is on wages
• 80 of wages are disposable income
• 86 of disposable income is spent

• Arts-related revenue causes incremental economic
  activity amounting to 2/3 of the original benefit
• This sparks a ripple effect in the economy
  total induced benefit multiplies to 2/3 of the
  2/3 of the 2/3, etc.

1
- 1 X direct spend
1 0.38 0.29
2.0 X (206 215 7) 856 million
Source CBAC Annual Survey of Performing Arts
Organizations, 2003-2004 CBAC Annual Survey of
Public Museums Art Galleries, 2003-2004
Statistics Canada team analysis
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Economic Impact return on investment for 143
performing arts companies
2
Public/Private Arts Investment millions, 2004
Quantified Economic Impact of Investment
millions
Multiplier effect estimated to be 2X all
spending attributed to the arts (i.e., spending
by arts institutions and tourist spending)
Assuming 1.25 of tourism is attributable to the
arts and that 1 of that can be tied to this
sample.
856
1.284
215
7
101
206
105
Direct Benefits tickets, etc.
Total public/ private funding
Private Funding
Public Funding
Indirect benefits
Total benefits
Induced benefits
Sources McKinsey analysis 143 organizations
from CBAC Annual Survey of Performing Arts
(approx. 1 of total arts organizations in
Canada), 2004-2005 Hill Strategies Research
Inc., 2003 Canadian Travel Survey 2002 Team
analysis
The Council for Business and the Arts, May 2006
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All the reasons economic impact is the bonus

• But, the most important outcome of the study
  didnt have an economic basis.
• While corporate leaders found the numbers
  impressive, they all recognized that the real
  return on investment from culture is not
  monetary. It is not the reason we make art and
  it is not the reason we need art in our lives
• Our art makes us unique, it records our lives, it
  provides forum for debate, it improves
  education, creates community engagement, drives
  national brand identity, encourages multicultural
  expression
• Art facilitates neighbourhood regeneration,
  attracts creative employees, creates employee
  engagement and provides unique corporate
  marketing opportunities
• Public/private arts partnerships provide the
  financial foundation for creativity which in turn
  generates unique social, community and corporate
  value.

The Council for Business and the Arts, May 2006
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While economic impact is quantifiable, the real
value of the arts lies in their social, community
and partner benefits
Qualitative benefits of arts support

• For business
• A way to address an increasingly important
  Corporate Social Responsibility
• Reinforces a creative and attractive Corporate
  Culture
• Promotes Community development and engagement
• Provides unique opportunities to market to
  Customers

• For society
• Allows Canadians to express, share and recognise
  their identities building social capital and
  community engagement and supporting
  multiculturalism
• Helps to create a distinct brand identity for
  Canada
• Enhances the attractiveness of Canada to valuable
  talent
• Strengthens the education system

and allows businesses to align with the
interests of key stakeholders employees and
customers
An investment in the arts provides significant
benefits to society
The Council for Business and the Arts, May 2006
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The Best Partnerships between Business and the
Arts are based on

• Mutual respect
• Real engagement
• Real co-operative programs/projects not just
  cheque in / check out.
• It is not about doing favours, it cant be about
  asking
• It only works if there is a real value
  proposition on both sides and if both partners
  understand each others equal though very
  different - value

The Council for Business and the Arts, May 2006
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For Business, partnerships with the arts are

• Comparatively reasonably priced
• Offer the gamut of experiences and images with
  which to create brand association from
  traditional to very innovative
• Targeted opportunities
• Niche market high-touch environment, not
  impersonal
• Very useful to influence groups of important
  connections politicians, business leaders,
  clients, community leaders, press
• Associated with quality
• Allow layers of participation which build on each
  other offer opportunities for adding other
  specifically targeted associated initiatives
• Association with the arts communicates
  creativity, forward thinking, innovation very
  closely associated with creative city,
  knowledge worker corporate concerns

The Council for Business and the Arts, May 2006
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Business can be Proactive
Go after what you want Define where your
needs are objectives, issues, new business
initiatives Define each target group who do
you want to meet, how, how often, where What
image do you want to project innovative /
creative, refined, top quality, luxury, on the
edge Develop arts associations which address
specific needs / target groups / marketing
images Work with the organization to develop
ideas the sponsorship is just the ticket to
the dance Spend outside of the partnership
commitment to support the initiative Do fewer,
more targeted Make multi year commitments,
build a campaign strategy, study results,
recreate Dont ask the arts to be like
business, use the arts for what they are and what
they offer Think big by keeping it small
define specific objectives (a few) and make sure
that everything you do is on track with those
dont let things creep, spread, lose
focus Involve many aspects of the company
derive benefit on many levels Measure your
success through the usual measurement channels
as applied to each aspect of the company
The Council for Business and the Arts, May 2006
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Engagement, Relationship, Partnership
Recurring Messages From CEOs
1. Inspire me with your creativity, energy and
humanity 2. Help me find a proposition that my
employees, communities and customers care
about 3. Show me how we can be part of your
success 4. Let us make a difference with a
distinctive and committed contribution over
several years 5. Let us have an Artistic
experience together
The Council for Business and the Arts, May 2006