| Many arts firms are experiencing increasing costs relative to their revenues. There are a number of possible explanations as to why; a more difficult problem involves how this might be combated effectively. This dissertation explores several methods of increasing revenues and decreasing costs that have not been systematically explored in the literature.;One way to increase revenues is by stimulating demand for the arts. A Veblenian approach enhances the luxury image of the arts, while a Marshallian approach exposes new audience members to the arts. Data on symphony orchestras suggest that the Veblenian approach, as embodied in fundraising and development, is more effective for smaller (in budget) orchestras. The Marshallian approach, evidenced in advertising, is better for larger orchestras.;Nonprofit arts firms generally have three major revenue sources: "earned revenue," that from private donations, and public subsidies. It is important to understand whether any feedback between revenue sources occurs. Proponents of government arts funding have argued that public funds leverage private giving, whereas others have argued just the opposite, that government subsidies ought to crowd out donations. The symphony orchestra data indicate that these two funding sources are in fact independent.;One cost-side avenue involves simulating a lower (marginal) wage faced by the firm. This might be achieved by substituting part-time or noncontracted freelance artists for some that are currently full-time. This suggests that semiprofessional arts firms might have a structural advantage in the fight against the cost-revenue gap, in the absence of other remedies. The data on symphony orchestras support this finding.;This research makes a number of points that can help to inform the discussion on the role of government in supporting the arts. For example, higher levels of government subsidies to the arts generally lessen the need for the demand management strategies described here; and when the demand side of the arts firm's problem is ignored, firms may also ignore price signals and thus make inefficient production decisions. Also, since different demand manipulation strategies are indicated for different-sized firms, public arts policy that treats all firms homogeneously and restricts the use of funds is almost certainly suboptimal. |
