Economics of Live Performing Arts: Nonprofits, Repertoire, and Cost Disease

What are the main types of live performing arts?

Ballet, Modern Dance, Opera, Plays/Musical Theatre, Orchestras

What is Baumol's Cost Disease?

An economic theory explaining rising costs in the performing arts due to fixed production costs and limited productivity gains.

How do commercial firms in live performing arts generate revenue?

By selling tickets at the box office and occasionally selling ancillary rights.

What is the primary objective of nonprofit performing arts firms?

To maximize attendance while maintaining a repertoire that meets quality standards.

What percentage of total operating income for nonprofits can come from donations?

Approximately 35-40%.

What role do government grants play in nonprofit performing arts?

They provide significant funding and support for budgets, often through the National Endowment for the Arts and local arts councils.

What is the difference between short run and long run for commercial firms in performing arts?

Short run is a single production; long run involves adding or changing shows or venues.

What is the impact of donations on ticket prices for nonprofit firms?

Donations allow firms to reduce ticket prices, which can expand attendance.

How can contributions affect the quality of performances in nonprofit firms?

They may enable firms to improve quality by covering higher production costs.

What happens to the average total cost (ATC) curve when donations increase quality?

The ATC curve shifts upward due to increased costs associated with higher quality productions.

What is the significance of unrestricted contributions for nonprofit performing arts?

They can be used flexibly, allowing firms to allocate resources where needed most.

What is the market structure of most live performing arts firms?

They are not perfectly competitive; they may operate as monopolistic competition or local monopolies.

What is the relationship between ticket prices and quality in nonprofit performing arts?

Higher quality can lead to lower ticket prices and increased attendance if demand remains stable.

What is the role of subscriptions in live performing arts?

Subscriptions allow bundling of shows, providing stable revenue and audience commitment.

What are the fixed costs associated with live performing arts productions?

Costs incurred in setting up before the opening show, which are substantial.

What are the variable costs in live performing arts?

Weekly operating costs that remain constant per show due to the nature of performances being similar.

What is the effect of higher quality repertoire on attendance?

If quality improves, attendance may increase, potentially allowing for higher ticket prices.

What is the significance of the term '3DPD' in the context of commercial firms?

It refers to intertemporal decisions regarding pricing and production in the performing arts.

How do nonprofit firms break even financially?

By balancing their budgets through ticket sales, donations, and grants.

What is the challenge in measuring output in live performing arts?

Output is difficult to quantify due to variables like number of performances and ticket sales.

What is the impact of economies of scale in live performing arts?

They allow firms to increase the number of shows without a proportional increase in rehearsal or administrative costs.

What are the implications of strategic pricing in live performing arts?

Prices may be set based on content value rather than solely on cost considerations.

What is the significance of the repertoire in nonprofit performing arts?

It reflects the quality standards and artistic vision of the organization, impacting audience engagement.

How do donations and grants affect the quality of the repertoire?

They can enable firms to select higher quality shows, enhancing overall performance quality.

What is the relationship between demand and quality in the context of donations?

If demand increases due to higher quality, it can lead to higher attendance and potentially higher prices.

What happens to ticket prices and attendance when the demand curve shifts upward due to higher quality?

Prices are expected to be lower, and quality and attendance higher.

How do donations impact nonprofit LPA groups?

Donations are an important source of income and often come from individuals who attend performances.

What is the relationship between ticket prices and donor contributions?

The willingness of donors to contribute is likely inversely related to ticket prices.

What is one goal of nonprofit performing arts firms regarding revenue?

Maximizing aggregate revenue from ticket sales and donations.

What is a challenge grant in the context of nonprofit organizations?

A grant that encourages organizations to seek matching funds and grow, often leading to increased overhead costs.

How does institutional growth affect creativity in performing arts organizations?

As institutions grow, they tend to become more conservative and less innovative.

What did DiMaggio and Stenberg's study find about institutional size and conformity?

Larger institutions are positively related to conformity and negatively associated with innovation and risk-taking.

What is Baumol's Cost Disease?

The phenomenon where costs in the live performing arts rise relative to the economy due to wage increases outpacing productivity improvements.

What are the five sources of productivity gains in an economy?

1. Increased capital per labor, 2. Improved technology, 3. Increased labor skill, 4. Better management, 5. Economies of scale.

Why is technology less impactful in the live performing arts?

Most tech improvements are not central to the business, and the performer's labor is the output.

What is the implication of Baumol's Cost Disease for live performing arts firms?

They face constant pressure to constrain costs or increase revenue due to rising costs.

What did Baumol and Bowen's 1966 study argue about wage increases in the arts?

Wage increases in the arts must keep up with those in the general economy despite lagging productivity improvements.

What is the expected outcome of rising costs in the live performing arts?

Costs will rise relative to the economy as a whole, affecting the ability to hire necessary workers.

What trend did the Baumol effect predict between 1998 and 2018?

Services became more expensive while many manufactured goods became cheaper.

How does Baumol's Cost Disease potentially affect artistic repertoire?

It may cause a change in repertoire due to financial pressures.

What is the relationship between institutional size and artistic policy?

Larger institutions may adopt policies that limit creativity due to increased overhead and risk aversion.

What is the effect of challenge grants on nonprofit performing arts organizations?

They encourage growth and the addition of administrative staff, which can increase overhead costs.

How does the size of a performing arts organization relate to its innovation?

Larger organizations are less likely to be innovative due to the need to appeal to a broader market.

What does the term 'the establishment' imply in the context of arts organizations?

It connotes conformity, inflexibility, and an unwillingness to take risks.

What is the impact of increased overhead costs on artistic creativity?

Increased overhead costs may limit the organization's ability to take creative risks.

What is the primary output of live performing arts?

The performer's labor, such as singing, dancing, or playing an instrument.

How do performing arts organizations typically respond to rising costs?

They may constrain costs by reducing the number or size of shows or increasing revenue through donations.

What does the term 'productivity lag' refer to in the context of the arts?

The situation where wage increases in the arts must keep pace with the general economy despite lower productivity improvements.

What is the effect of ticket prices on donations to nonprofit performing arts groups?

Higher ticket prices may lead to lower donations from attendees.

What is the significance of the term 'matching funds' in nonprofit fundraising?

Matching funds are contributions that require the organization to raise an equal amount from other sources.

What is the expected relationship between artistic quality and contributed income?

Higher quality may lead to greater attendance and higher prices, ultimately affecting revenue.

Who are the main characters in Shakespeare's Hamlet?

Ophelia, Claudius, Polonius, Laertes, Hamlet, Horatio, Gertrude, Ghost of Hamlet's Father, Fortinbras, Yorick, Osric, Rosencrantz, Guildenstern, Voltimand, Reynaldo, 1st & 2nd Gravediggers, Francisco, Cornelius, Marcellus, Bernardo.

Which city has the highest concentration of music industry jobs per 1,000 residents?

Nashville, with 7.8 jobs per 1,000 residents.

What is the average music job earnings in Los Angeles compared to the US average salary?

175% of the US average salary.

What is the ACCRA Cost of Living Index for Nashville?

89% of the national average.

What are the three types of economic impacts in trade flows?

Direct, indirect, and induced impacts.

What are the physical requirements for ballet dancers?

Turn out, en pointe, proprioception, balance, and high tolerance to pain.

What is a common injury risk for ballet dancers?

Repetitive stress injuries, especially in feet, ankles, and shoulders.

What is the typical career span for ballet dancers?

They often retire in their late 20s or early 30s.

What is the significance of pointe shoes in ballet?

They must be broken in, have a very short lifespan, and are traditionally used despite resistance to change.

What are the two primary approaches to scheduling opera performances?

Stagione (producing one opera at a time) and Repertory (preparing several operas simultaneously).

What challenges do opera companies face regarding their audience?

A graying audience, high prices, and intimidation for first-timers.

What do opera and ballet companies share in terms of production requirements?

A grand hall with good acoustics, a springy dance surface, an orchestra pit, and large rehearsal space.

What is the purpose of selling season memberships for ballet companies?

To benefit from a stable revenue stream and build a loyal audience.

What are the three possible mixes in a repertoire decision for live performing arts?

XX (Old/Classic), XY (Mixed), and YY (New/Avant-garde).

What does the utility function U[X,Y] = XY suggest about audience preferences?

It indicates a balanced preference between old/classic and new/avant-garde shows.

What are the top three historically popular composers in US orchestras?

Not specified in the notes, but they are commonly recognized as Beethoven, Mozart, and Tchaikovsky.

What is the impact of blind auditions on female musicians in orchestras?

They promote impartiality and increase the chances of female musicians being selected.

What is the significance of the Joffrey Ballet's repertoire decisions?

They aim to attract and challenge a broad audience with a mix of well-known and new shows.

What is the economic analysis of investing in specialized music training?

It questions whether the benefits justify the costs in terms of knowledge, skills, and connections.

What are the challenges faced by orchestras in terms of revenue?

They rely on private donations, ticket sales, endowments, and grants.

What is the role of the Lyric Opera and Joffrey Ballet collaboration?

They collaborated on productions where dance and song are equally important.

What is the average music job earnings in Nashville compared to the US average salary?

156% of the US average salary.

What is the impact of economic factors on the performing arts industry?

Economic factors influence job availability, audience demographics, and funding sources.

What is the importance of the audience's preferences in repertoire selection?

Understanding preferences helps in maximizing audience engagement and ticket sales.

What is the significance of the term 'induced impact' in economic analysis?

It refers to the effect of income and wages on spending within the economy.