Reserve judgements

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By Jon

On her Turning Point blog, Susan Royce has posted a short interview she recorded with me a few months ago about reserves and Visual Arts organisations.

I’ts part of her series of posts on financial strategy. I’m never quite as lucid as I’d like to be, but we cover most of the salient points.


Size Matters – Matters of Value

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By Dawn

Cropped view of a pear and an apple side by side

Apples & Pears?

Is it possible that in the current economic environment smaller cultural institutions face the most uncertain futures?

There certainly seem to be a number of smaller arts organisations (turnover under £1m) that will have their public funding significantly or completely cut next financial year.

These tend to be organisations that have limited capacity to generate alternative funding streams. They do not have the tangible assets of their larger counterparts and are often unacknowledged for the research and development role they play.

Size Matters,’ the recent report by Common Practice and Sarah Thelwall of MyCake fame, attempts to surface some of these issues. I found it a good read. It is a well-considered and thoughtful piece that genuinely surfaces the concerns I have heard many smaller scale organisations raise. Issues that it seems to me are generally ignored.

There is a lot packed into its 41 pages, probably too much to do it justice in a single blog. It touches on:

  • The inability of many of the standard metrics around visitors, costs per head and earned income to capture the true value of these organisations
  • The misleading mismatch these metrics create in comparing large with small organisations
  • The lack of recognition of intangible assets
  • The lack of scope for development and growth
  • The poverty trap that many arts-workers in smaller organisations become caught in, and so on

Two things in particular caught my attention:

  •  The need to build a more sophisticated understanding of the concept of value
  • The notion of lifecycle assessment/investment

In developing a more nuanced understanding of value Size Matters suggests the need to consider: artistic; social; societal; and fiscal value. Opening up notions of value and measurement is something I very much support, as evidenced in my previous blog on Valuing Culture.

I do have a slight concern over the clarity of social as compared to societal value. I would offer sectoral rather than social, as it seems to refer to value created within the arts system itself. The report refers to this as an ecosystem but I find this metaphor can also be problematic, something for a later blog!

A number of examples are offered from Studio Voltaire, Chisenhale Gallery and Mute Publishing that illuminate the four interlinked values in practice.

“What we immediately see from these descriptions is that value accrues over the lifetime of an object or idea and that it does so in the four areas of artistic, social, societal and fiscal value in ways which are hard to separate out; indeed it is the fact that they are intertwined that is key to understanding how value accrues in an artwork.” (Size Matters: 26)

In laying out this approach to attributing value what follows is the challenging proposition (primarily for traditional funding sources) of deferred value. My understanding of this is that the four elements of value may be realised over different timescales, if at all in the case of fiscal value.

This is a particular challenge for the smaller organisations as they often serve as the catalyst for an artist or artwork but it is others in the system that then gain the full range of value. It is suggested that smaller organisations most often ‘forfeit two of the most measurable types of value created – the realisation of social value through the development of audiences and of fiscal value through sales via the art market.’ (Size Matters: 29)

While in some ways this seems obvious it is really refreshing to have it spelt out so clearly at a time when it definitely needs saying. My experience is that many of these smaller organisations need to build their confidence in order to take more control of how they are measured and understood.

The proposition for a move away from annual comparisons towards lifecycle-based assessments and investments carries with it significant challenges but I do find it persuasive. I hope Common Practice will pursue it further.

The wider charitable context

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By Tina

This week saw the launch of a new report, commissioned by Barclays Wealth and published by New Philanthropy Capital (NPC). The new report, entitled “An economic argument for philanthropy” investigates, not just a move away from needs- or even taste-driven giving, but giving on the basis of economic arguments and in a way that will induce not only benefits for society, but also for the economy. A sort of ‘preventative’ philanthropy targeted at the most “expensive” social ills would, in a nut-shell, ensure that less is spent by the government tackling would-be problems and more will be gained by enabling individuals to take better control of their lives to begin with.

This is indicative of what some mega-rich, results-driven individuals (eg Barclays Wealth clients) want to achieve with their giving, namely what they achieve with their financial investments: returns. In this case, it’s not direct gains that they’d be after but social impact, expecting therefore to see their money put to good use, where it’s needed most and where it can make most savings.

And charities are becoming increasingly transparent in proving the difference they make, how many lives they change and with how much money, therefore making a good case for ongoing support. 

But even so, according to another relatively recent study on the motivations of philanthropy, an economic argument to giving is probably not a very strong one for all philanthropists, considering that many of them ultimately give to causes that are close to their hearts. 

So where does culture fit into these rather fragmented but interesting arguments on philanthropic motivations and allocations? 

This week I also came across ACE’s updated Audiences Insight report – a cross-section of the English population grouped into detailed segmentations and providing a 360 degree view of their profiles, attitudes and behaviours (and a pleasant, insightful and engaging read I would add). According to this, 27% don’t engage with the arts. But that still leaves 73% of the population that do engage, and more specifically 7% that are highly engaged. So do they give to the arts? The brief exploration into their “arts patronage, charitable giving and volunteering” serves as a good starting point, but only to show that most segments are more likely to give to other charitable causes. This therefore seems to suggest, that contrary to the taste-driven argument, there is still a relatively low correlation between being interested in the arts and giving to the arts (though there is a need for more robust research in this area). 

And this brings us back to the two studies into the decision-making process of giving mentioned earlier – both rigorous in nature, but adopting a slightly different take on how individuals choose or should choose what causes and charities to give to, but neither include culture as major contenders for the increasingly competitive philanthropic pool.

And with local authorities’ culture funding now decreasing by nearly 6%, ever more pressure will be put on philanthropy and private/ charitable giving for the sector. The problem is that though cultural organisations have several strong arguments in their favour, appealing to both needs and taste-driven motivations, they seem to be quite insular and more detached from the wider charitable sector than other causes. This perpetuates a “them vs. us” mentality and differentiates the arts in a way that can sometimes be unfavourable. More efforts therefore need to be made to capitalise on the benefits of a collective with a strong voice, identity and case for support.

Worse culture

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By Jon

A fine example of public support for the arts in America via Michael Rushton

He sees no need to add comment. Beyond wondering whether ‘Made in Chelsea’ has any similar arrangements, neither do I.

What are the chances of that happening?

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By Jon

Here’s a nice (if long) article making a connection between skepticism and arts funding that hadn’t occurred to me before:

‘…natural skepticism often lets us down, especially when it runs up against another natural human instinct: wishful thinking.The desire to believe what we want to be true is powerful. On the positive side, wishful thinking generates millions for arts fundin via lottery grants. But it can also lead smart people to do very stupid things.’

So, not just casinos and psychics who profit from wishful thinking…

Psychic value?

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By Jon

Malcolm Gladwell has written an article about why otherwise sensible business people buy sports teams, and what they get out of it.

Almost in passing, he makes the following remarks:

The best illustration of psychic benefits is the art market. Art collectors buy paintings for two reasons. They are interested in the painting as an investment — the same way they would view buying stock in General Motors. And they are interested in the painting as a painting — as a beautiful object. In a recent paper in Economics Bulletin, the economists Erdal Atukeren and Aylin Seçkin used a variety of clever ways to figure out just how large the second psychic benefit is, and they put it at 28 percent.7 In other words, if you pay $100 million for a Van Gogh, $28 million of that is for the joy of looking at it every morning. If that seems like a lot, it shouldn’t. There aren’t many Van Goghs out there, and they are very beautiful. If you care passionately about art, paying that kind of premium makes perfect sense.

The paper is available here and is interesting throughout.

It reminds me of Bruce Hood’s SuperSense and (the accompanying blog) in which he has written about the physiological and psychological reasons why people come to believe objects have non-physical properties. As a result, the object’s value is often significantly enhanced.

What happens to the vast sums of money spent on online advertising?


Is the Ten Percent Problem getting worse?

Two years ago – September 2009 – UK businesses for the first time spent more on online advertising than TV advertising, or any other advertising media.   And many TV adverts today are simply directing people to visit online services; where, in many cases, they get to view more adverts!

Online advertising was worth £4bn last year in the UK.  In perspective, that’s around £65 for every single person – adult, child or baby – living in the UK.

We all know where the money is coming from… The everyday products we buy, from food to electricity; £65 per person, per year, is creamed-off by online advertisers (£260/year, if considering all forms of advertising).

But where is the money going to? Who’s making money online?  This question has massive implications for anyone attempting to fund any form of online culture from advertising.

We’re continuing to see strong growth amongst online retailers, despite the weak economy; but when it comes to tracing the £4bn online advertising spend I’m interested in the websites and services benefiting from the sale and trade in display advertising, not just businesses who happen to be making money online.

Professional content providers; from newspapers to bloggers, film makers, poets, photographers, novelists, comedians, musicians and internet radio stations; are still struggling to fund online-only services from advertising revenue alone.

A professional digital marketing specialist told me I could expect around £200/year from my own blog,, if I was smart regarding my advertising.  That would give me a return from advertising of approximately 80p/hour for the amount of time I spend blogging on digital rights issues!

That’s all my hacky little blog is worth, right?! Looking at a complex array of statistics puts my blog in the top 150,000 of websites visited by UK internet users (hey, Mum, look what I did!).  Taking into account page views, unique visitors and total content (number of articles) gives me an estimated 0.00006% audience share for UK-generated content.

Whilst the figures are minuscule – by one measure I have an estimated share of 0.6 millionth of the UK web audience – my share of the annual UK online advertising spend of £4bn should be around £2,400/year.  A £10/hour return puts blogging into the [lower end of the] category of a living wage.

But is this just a problem of scale? Do large national newspapers fair any better?

Seemingly not.  UK national newspaper websites have a healthy global share of audience, yet many are struggling to turn a profit.  The UK’s second-largest newspaper website by ABC (Audit Bureau of Circulation), The Guardian, posted a £59m loss in 2010.

Associated Newspapers, the national newspaper publisher of The Daily Mail (currently number 1 UK newspaper website by ABC) reported in May this year that only 1.8% – £8m from its 6-month revenues of £438m – came from “digital”.

According to website traffic monitoring company Alexa, is the world’s 129th most popular website by traffic.   DoubleClick puts the Daily Mail website 22nd most-visited in the UK.

If the UK’s number 1 newspaper website and 22nd most-visited website overall can only muster £16m/year – 0.4% of the £4bn annual UK online advertising spend: (i) where does all the money go; and, (ii) what hope is there for online content creators generally?

Four years ago this was described as the Ten Percent Problem: only 10% of readers came through print publication, yet only 10% of revenues came from online.  At 1.8% for Associated Newspapers, is the problem getting worse?

Looking the scale of the problem another way, more money is spent on online advertising than TV advertising; yet TV advertising funds the entire output of ITV, Channel 4, Channel 5 and the host of digital-only free-to-air TV stations.

Or, consider the sheer number of free print publications and newspapers funded entirely through advertising.  From regional rags like Metro and Evening Standard to local “advertisers” and hyper-local “directories”.

Show me the websites funding free-to-view culture of any description purely from advertising revenues? And no, I don’t mean user-generated content; but content that the creators and artists actually got a living wage from producing.


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