Earned revenue experienced an impressive recovery since FY 2021, but has not fully returned to its pre-pandemic levels, either as a percentage of overall revenue or in nominal terms.

Investment revenue rose to 13% of total operating revenue in 2021, possibly due to many organizations’ decision to increase their endowment draws to offset earned revenue losses at a time when the S&P 500 generated impressive returns. The presence of investment revenue was widespread across organizations in the cohort, including the majority of large organizations and 40% of small organizations. Only one in four BIPOC organizations reported investment revenue at least once during the five years.

Inflation represents an important aspect of this overall picture. Operating revenue was 14% higher in 2023 than in 2019 in nominal terms, but 4% lower once inflation is taken into account.    

Shifts in Earned Revenue Sources

Organizations experienced significant shakeups in earned revenue through this five-year period. Signs of recovery are starting to appear, but no earned revenue sources have recovered to pre-pandemic levels.

Before the pandemic, education revenues served as the primary source of earned income for organizations, on average. However, this source sharply declined during the 2020 shutdowns – only beginning to recover in 2022. These revenues – which include tuitions from workshops, courses, classes, and lectures – were still 33% lower than they were pre-pandemic in inflation-adjusted dollars. While education revenues have not fully recovered by any means, they have improved more than any other earned revenue category in our analysis. This recovery trend is particularly strong for medium sized organizations, whose education revenues have increased 21% over pre-pandemic levels in inflation-adjusted dollars.

Ticket and Admissions sales, the second largest source of earned revenue for the average organization before the pandemic, have bounced back since 2021 but are still 35% lower than pre-pandemic levels in inflation-adjusted dollars. Subscription and Membership revenue had been on a long downward trend heading into the pandemic. It has made an even slower recovery, showing indications of a permanent reduction. These two trends hold constant across organization size.

A closer look at ticket prices and attendance, as detailed in the table below, reveals further insights into the driving factors behind this slow recovery and how they vary across budget size. For small and medium organizations, single ticket revenue has declined to a greater extent than attendance, and in some cases, ticket prices have been lowered. This indicates that more volume is being sold towards the lower end of single ticket prices than the high end. The reverse is true for large organizations, with a drop in attendance of 43% over the 5-year period – double the rate of their smaller peers – 37% lower ticket revenue, and a raise of their highest ticket price by 50% more than inflation. At larger organizations, fewer people are paying higher prices. This is a reminder that inflation affects not just the spending power of the organizations but also the price sensitivity of many ticket buyers.

Previous research conducted on Chicago-area organizations showed that declines in attendance are most pronounced in theatres and other performing arts organizations, while museums and education organizations have fared slightly better. A number of studies confirm that the earlier organizations were able to resume in-person activity, the sooner their attendees and associated revenue returned.

Earned Revenue Mix Varies by Organization Size

The earned revenue mix of organizations in 2023 varies by budget size.

The importance of education revenue is most pronounced for medium organizations, though it represented the largest portion of earned revenue across all budget sizes in 2023. Tickets and admissions play a more important role for large organizations than they do for their smaller peers, and contracts and tours play an increasingly important role as budget size decreases.

Contributed Revenue Saved Organizations, Largely Due to Government Funding

As we saw at the beginning of this article, contributed revenue has made up a consistently larger portion of organizations funding since 2021. Total contributed revenue growth exceeded inflation by 16% from 2019 to 2023, a growth of 38% in non-inflation adjusted dollars. The biggest source of that growth was government funding, with an additional increase in foundation support.

An unprecedented level of federal relief funding fulfilled its intended purpose of keeping many organizations afloat during the pandemic and saving jobs in the arts. Government revenue supported an increasingly larger portion of the average organization’s expenses over the past four years, rising from 4% in 2019 up to 21% in 2022 then down to 9% in 2023. The wind down of these relief programs is already evident in the data, and will continue as the last trickle of federal relief funding makes its way through local government re-granting programs, where funds are required to be disbursed by 2026.

This varies considerably with organization size. Government funding already supported 20% of the average small organizations’ budget pre-pandemic. These organizations saw only a minor boost directly from federal relief funds, but they saw higher average funding in 2023 from local and state agencies as federal funding made its way to local agencies to be redistributed to organizations. The story was similar for medium budget organizations, although their boost in direct federal relief support was a bit bigger during the pandemic. Large organizations were the biggest beneficiaries of government support from programs such as the Small Business Administration’s Payroll Protection Program and Shuttered Venue Operating Grants. Government supported 2% of their expenses in 2019, 21% in 2022, and 8% in 2023.  They saw high triple digit increases in state and federal support – even in 2023 – and their local support growth outpaced inflation by 61%.

In terms of private sources, foundations increased their support while levels of support from all other sources remained steady over the period. However, taking inflation into account reveals that individual, trustee, and corporate support all declined over the five-year period in terms of real buying power provided to organizations. Donors may renew at the same dollar amount year after year without thinking much about the fact that those dollars don’t go as far during periods of higher inflation.