The Profits of "Nonprofit" Arts

by E. Arthur Prieve and Andrew Taylor
This article appeared in the March/April 1998 issue
of On Wisconsin, the alumni and friends magazine
of the University of Wisconsin-Madison.

Imagine being defined primarily by what you are not. If you were a man, you would be called a non-woman. If you were of average height, you would be labeled non-tall. If you were middle class, the world would think of you as non-wealthy. Such an existence would lead to identity confusion at best, and at worst, might leave you feeling that you don't belong in your own community.

While the premise seems a bit bizarre, this is exactly the fate of America's nonprofit arts organizations. Ever since the arts began moving from a commercial, for-profit business model to a tax-exempt, nonprofit status in the 1960s, they have been susceptible to that subtle undercurrent of identity confusion.

It only makes matters worse that profit, the flipside of the nonprofit label, is one of the driving social forces of American society. This fact implies a whole string of additional opposites with which to saddle the nonprofit arts: non-mainstream, non-democratic, non-relevant, non-central, and non-productive.

In reality, however, nothing could be more non-true.

The label "nonprofit" does not mean that an arts organization must lose money or at best break even. It simply means that the organization may not distribute profits to its owners or employees. In other words, "nonprofit" refers not to the organization's financial position, but to its goals. In an economic system driven by profits, nonprofit arts organizations seek outcomes other than owner or shareholder gain. Because of this, they fulfill an essential role in our market economy.

So, believe it or not, nonprofit arts organizations can make a profit (or more accurately, can end their fiscal year with a net revenue). And because that revenue can stabilize an organization and improve its ability to carry out its mission, many do just that.

Despite their different goals, nonprofit arts organizations still make a staggering economic impact on the nation. A 1994 study by the National Assembly of Local Arts Agencies, for example, pegged total expenditures of the nonprofit arts industry at $36.8 billion (a full third of the total expenditures of agricultural industries that same year). Further, the nonprofit arts support 1.3 million full-time-equivalent jobs -- more than legal services, more than police and firefighting, and on par with building construction.

In Wisconsin alone, the nonprofit arts spent almost $113 million and directly supported more than 3,700 jobs in 1995 -- more jobs than mortgage banking, advertising, and commercial sports, according to a report from the National Assembly of Local Arts Agencies. In addition, almost 37,000 individuals donated more than 1.5 million hours of work to the arts.

As for non-central and non-relevant, in 1995 Wisconsin arts events drew 1.6 million more attendees than professional sports events, the Milwaukee Zoo, Summerfest, and the state fair combined.

There seem to be two primary reasons why the economic and social impacts of the arts are not generally realized. First, the arts industry is inherently diffuse, with attendance spread among concert halls, museums, auditoriums, and other venues. Second, while we often argue for the arts based on their practical impact, their true benefit is not that they generate economic activity (which they do), or encourage tourism (which they do), or spark urban renewal (which they do), or enhance education in math and science (which they do).

The true benefit of the arts is that they give us beauty, they make us think, they enrich our children, they celebrate our culture, they ask tough questions, they give glorious answers, they help us feel, they make us see, they comfort us, they prod us along, they bring us together, they change our perspective, and they offer us meaning within and beyond the market economy.

Of course, none of these primary benefits add a nickel to the gross domestic product (at least not directly). But what do you expect from a nonprofit?