Business and the Arts The Council for Business and the Arts, May 2006 May 24, 2006 The Case for Investment in the Arts Billie Bridgman

1 Real, substantial, economic impact 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, 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: The Council for Business and the Arts, May 2006

2 Description Examples 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 Type of benefit Easy to quantifyUnable to quantify Harder to quantify 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 DirectIndirectInducedIntangible Source:McKinsey team analysis A framework for calculating the economic impact of the arts and culture sector in Canada

3 Visit museum/art gallery Attend a fair, festival, etc. Attend a play, concert, or other cultural event Attend an aboriginal or native cultural event *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 Participation in arts/cultural events Percent of tourists who attend* % of tourism spend attributed to the arts 0.5%2.5%1.25%** Estimated arts-related tourism spend ($ Million) , Total tourism spend in Canada, % = $57.5 billion Transportation Accommodation Food/ beverages Recreation/ entertainment Other As a conservative estimate, $0.7 billion of the tourism spend in Canada can be considered an indirect benefit of cultural programs

4 Assumptions 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 Induced spend calculation 1 1 – 0.38 – 0.29 Direct arts spend Spend on wages Other spend 38% 42% 20% Disposable income Taxes Spend on supplies Personal savings 80% 20% 86% 14% Personal spending = 2.0 X ($206 + $215 + $7) = $856 million Source: CBAC Annual Survey of Performing Arts Organizations, ; CBAC Annual Survey of Public Museums & Art Galleries, ; Statistics Canada; team analysis Multiplier effect of arts spending in Canada - 1 X direct spend 2/3 of the direct arts spend is ‘rippled’ through the Canadian economy = 29% Rationale 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. Induced benefits are estimated to be $856 million based on the ‘multiplier effect’ of arts-related spending

5 Public/Private Arts Investment $ millions, 2004 Sources: McKinsey analysis; 143 organizations from CBAC Annual Survey of Performing Arts (approx. 1% of total arts organizations in Canada), ; Hill Strategies Research Inc., 2003; Canadian Travel Survey 2002; Team analysis Economic Impact: return on investment for 143 performing arts companies Direct Benefits – tickets, etc. Total public/ private funding 105 Private Funding Public Funding Indirect benefits Total benefits Induced benefits 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. Quantified Economic Impact of Investment $ millions The Council for Business and the Arts, May 2006

6 All the reasons: economic impact is the bonus But, the most important outcome of the study didn’t 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

7 For business 1.A way to address an increasingly important “Corporate Social Responsibility” 2.Reinforces a creative and attractive Corporate Culture 3.Promotes Community development and engagement 4.Provides unique opportunities to market to Customers For society 1.Allows Canadians to express, share and recognise their identities – building social capital and community engagement and supporting multiculturalism 2.Helps to create a distinct ‘brand identity’ for Canada 3.Enhances the attractiveness of Canada to valuable talent 4. Strengthens the education system Qualitative benefits of arts support … and allows businesses to align with the interests of key stakeholders: employees and customers An investment in the arts provides significant benefits to society… While economic impact is quantifiable, the real value of the arts lies in their social, community and partner benefits The Council for Business and the Arts, May 2006

8 The Best Partnerships between Business and the Arts are based on: The Council for Business and the Arts, May 2006 Mutual respect Real engagement Real co-operative programs/projects – not just cheque in / check out. It is not about doing favours, it can’t be about “asking” It only works if there is a real value proposition on both sides and if both partners understand each other’s equal – though very different - value

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

10 Business can be Proactive The Council for Business and the Arts, May 2006 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 Don’t 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 – don’t 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

11 Recurring Messages From CEOs: Engagement, Relationship, Partnership 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