The Importance of Financial Management in Live Entertainment

As with any industry, succeeding in the world of live entertainment depends largely on strong financial management. However, funding for the arts differs in many ways from funding in other industries.

Typically, when you sell a commodity or service, the expenses involved are fairly straightforward, such as human resources and labor, material costs, rent or property ownership — these expenses apply to the arts, too. However, rather than relying on direct sales alone, arts organizations’ income is generally a combination of different revenue streams, including ticket sales, public grants, fundraising campaigns, investments, endowments and others. Degree candidates in an online Master of Arts in Arts Presenting and Live Entertainment Management program study the budgeting unique to this field.

You Get What You Pay For

While arts organizations share many of the same expenses as other industries, some are unique. According to a study by the Center on Nonprofits and Philanthropy, the largest expenditure for most arts organizations is paying artists’ fees. Clearly, the quality of the performance or art in an event is integral to that event’s success. The fees these organizations must pay to the artists and their managers reflects the level of quality they will receive in return.

The Price of Success

In terms of attendance, support and revenue, successful programming depends on effective promotion. Some organizations maintain in-house promotion departments, while others contract these services with marketing firms. Either way, promotion is another substantial expense for a live entertainment company or organization.

Human Resources in the Arts

Human resource management in the nonprofit sector is also somewhat unique, in that many organizations rely on volunteers to augment their paid labor force. This can help offset costs, but most organizations still need to pay their administrators’ salaries. In addition, these organizations must hire event-specific staff like sound and lighting technicians, bartenders, hosts and security personal on a regular basis.

Keeping up Appearances

The cost of maintaining office space and performance venues is also an important part of financial management in live entertainment. Whether the organization is a theater, an arts center or a museum with its own performance space, this expense is critical in budget planning.

The Fundraising Challenge

Funding for the arts includes other forms of income as well, such as financial contributions and service donations. Many non-profit organizations cover their building and maintenance costs with public funding or private donations. In fact, only about half of an arts organization’s revenue comes from ticket sales and admission, generally speaking. The other half comprises funds from various sources, such as grants, fundraising campaigns and others. An organization’s financial stability depends on this diversity of funding sources.

The most effective arts organizations constantly search for new sources of funding. This is vital to the stability of the organization. Financial management in live entertainment can be difficult because budgets are fluid from year to year, and revenue from events varies each time. Further, grants and other public funding are often only available for a specific period of time.

In the case of renewable grants and funding for the arts, reapplication and renewal processes are generally necessary, and there is no guarantee that these organizations will receive renewed funding. Establishing trusts or endowments can help organizations secure some level of dependable funding, but this requires substantial financial investment up front.

Thoughtful financial management is critical to the success of any arts organization, from a theater to a university arts program to a community performance center. Understanding the many revenue streams available, as well as how to take advantage of them and diversify income sources, is a necessary part of securing funding for the arts and maintaining a financially stable organization.

A Master of Arts in Arts Presenting and Live Entertainment Management degree program offers students the financial management knowledge they need to develop and run successful organizations in the live entertainment industry.

Learn about the Frost School of Music’s online master’s degree program in arts presenting and live entertainment management.


Sources:

Urban Institute: The Capacity of Performing Arts Presenting Organizations

Artists House Music: The Three Essentials of Management: The Importance of Money: How Management Gets Paid

Chron: Why Is Financial Management So Important in Business?

Americans for the Arts: Funding Resources


Have a question or concern about this article? Please contact us.

Request More Information

Personal Information
All fields required.
Or call 855-578-4809