On the rebound

The restrictions caused by the COVID-19 pandemic on the Australian arts sector resulted in massive losses. But creative ideas have placed the industry back in the
spotlight and tickets are selling fast

Soon after the pandemic confined Australian Dance Theatre performers to their homes, artistic director Garry Stewart decided to harness restrictions to break new creative ground. With the assistance of South Australian state government funding, the Australian Dance Theatre company, based in Adelaide, commissioned 10 choreographers and 10 composers from not-for-profit organisation Music SA to create a series of short dance works to be performed as The World’s Smallest Stage.

Each five-to-10-minute dance performance was confined to a four square metre stage, allowing dancers to rehearse in their living rooms. The performances were filmed using skills gleaned via training from Flinders University screen lecturers and later performed at the Odeon Theatre, once restrictions eased.

Audiences were able to view the performances in the safety of their own homes during lockdown, via a computer screen, says Lisa Bishop, Adelaide Fringe deputy chair and former CEO of Music SA.

“When companies couldn’t use the theatre to put on a show, it was a great example of thinking inside the square — that is, viewing the performance through a screen, instead of live.”

While digital performances now appear to be an expected element of service delivery, arts organisations have found this a difficult ingredient to monetise. Nevertheless, The World’s Smallest Stage represented one of the many ways in which NFPs came up with creative ways to keep delivering services in the face of social distancing and other restrictions. The project helped the dancers maintain their fitness and practise their craft — and ensured that audience members remained engaged.

Forcing change

According to the AICD Not-for-Profit Governance and Performance Study 2021 (bit.ly/37EUM9U) the pandemic forced major operational changes, with up to 95 per cent of organisations saying they’d tweaked or overhauled their service delivery post-pandemic. Bishop points out that while some of this year’s Adelaide Fringe performances were delivered digitally, those delivered in physical venues were modified to some extent — for example, through the introduction of chequerboard seating or the removal of tent roofs for a more alfresco feel.

In other industries, boards had to grapple with ever-changing rules and restrictions. For example, caps on attendance at the Australian Open cast a long shadow over what many had hoped would be a year of sport and sunshine. Prior to the 2022 Australian Open, crowds had been capped at 50 per cent, increasing to 65 per cent for the semifinals and then 80 per cent for the finals. In this uncertain environment, where things could — and often did — change overnight, the focus shifted heavily to mitigating risk and financial loss.

Despite the pandemic’s many twists and turns, the AICD study confirmed the resilience of the NFP sector after enduring more than two years of pandemic-related upheaval. NFP directors won’t sugar-coat the impacts of immense financial pressures and ongoing disruption to their operations, but for the most part, steadfast commitment to their stakeholders — along with rigorous financial planning — has allowed the sector to weather the storm.

At the time the AICD conducted its survey, 84 per cent of respondents reported making a profit or breaking even, although 82 per cent also called for more financial help from the government. For the vast majority, the pandemic-pivot has become less of a cliché and more of a permanent reality, as the Omicron variant virus summer surge put NFPs back under the stress test.

In January, Live Performance Australia (LPA) CEO Evelyn Richardson GAICD said the live music industry had fallen into an abyss as a result of Omicron, and called for urgent federal government funding. “The notion that it is all over and we’ll ride through is not the reality we’re living in right now,” she says. “We need support until things settle down. We’re in a transition period and there is still winter to get through, with the ongoing risks of community transmission surges or another variant.”

LPA figures show that following a record year in 2018, the live performance industry recorded its second-highest revenue, attendance and average ticket price in 2019. However, the industry shutdown from March 2020 due to COVID-19 cost it $1.4b in ticket sales. And 2021 delivered more of the same. “We’ve had two years of continued business interruption and the risks are still significant. Theatre is back and largely operating at 100 per cent capacity, but live music is not,” says Richardson, adding she’d like to see a government-funded national insurance scheme to underwrite the financial risks associated with delivering concerts, music festivals or other large- scale events.

LPA would also like to see a skills and training package delivered in the upcoming budget in March to address the significant loss of skills due to impacts of COVID-19.

Cutting costs

Such challenges are familiar to Opera Australia CEO Fiona Allan, who arrived in Australia from the UK in November 2021, right before the Omicron wave broke.

The month before, the NFP had announced its 2022 season as heralding, “a return to normal programming... confident that shutdowns and debilitating restrictions will be a thing of the past”. However, the weeks following Allan’s arrival were a frustrating exercise in the stop- start dynamics that have now become all too familiar to arts organisations. For example, the much-anticipated New Year’s Eve Opera Gala was cancelled.

Last-minute cancellations are financially as well as emotionally devastating, because of the size of the orchestra and chorus involved in any performance. Turandot had about 200 people performing, and all of them needed to be paid — whether the show proceeded or not. “We’re not as agile as a small theatre company that can drop back to three performers,” says Allan.

Even the rollback of government restrictions has failed to restore a sense of business as usual, because business and consumer confidence has been battered, she says, noting that this summer, Opera Australia saw just 50 per cent of its previous capacity, because successive rounds of cancellations and rescheduling had dented customer willingness to purchase tickets. Those who booked now tended to do so the day before, or the day of, the performance. “This makes it difficult to plan and keeps you on an adrenaline knife edge all the time,” says Allan.

The AICD study also noted that 35 per cent of respondents dipped into their financial reserves to fund operations. Opera Australia drew heavily on reserves “into the millions”, says Allan and, like similar organisations, is now turning its attention to replenishing depleted reserves.

Meanwhile, Bishop says that the Adelaide Fringe was in a different position, not having much in the way of reserves to draw from. Instead, it decided that what little was available ought to be allocated via grants to artists, some of whom rely solely on festivals to earn their income.

“Reserves can be tricky for arts organisations because when you apply for a government grant, you can’t be seen to be holding onto accumulated profits, because the government will say you have the means to fund activity,” says Bishop. “At the same time, we need reserves so we can replace assets, invest in our digital ticketing platform and help artists deal with the pandemic. That’s why arts organisations always try to have a degree of earned income that is not reliant on government.”

All organisations were forced to engage in cost-cutting — reducing staff numbers and hours worked and, in many cases, the salaries of those left behind.

“We cut our organisation just about in half, and then cut everybody’s pay by 20 per cent... and then, as we started to look at every line item, we went from being a profit-and-loss environment to a cash-flow environment,” says Richardson.

Diversification of income increased in importance and boards turned their attention to creative ways to overcome the cash-flow crunch. Opera Australia sold a warehouse it owned in Alexandria to release money, and the Adelaide Fringe raised $100,000 by inviting festival-goers to add a $1 donation to the cost of their tickets.

“When we weren’t able to perform live, we also conducted a bit of housekeeping around our warehouse and ran an auction of the stuff we no longer needed — that raised $60,000,” says Bishop.

For many organisations, the pandemic brought a renewed focus on purpose, and the need to ensure that strategy was aligned to that purpose. Although tough, this challenging environment hastened the evolution of operational models, forged deeper exploration of purpose and fuelled renewed commitment to serving clients.

According to the AICD study, 24 per cent of respondents rated “clarifying strategic direction” among their top three priorities for the coming year. For some, the pandemic pause has provided an opportunity to consider broader questions about working with other organisations in the same sphere. Opera Australia, for instance, is seeking opportunities to work more collaboratively with state-based opera organisations to reduce the competition for resources and audiences.

Some mergers in sporting organisations occurred as clubs fought for survival. For example, in February, an all-female soccer club in Western Australia, the Northern Redbacks, united with ECU Joondalup to form Perth RedStar. Club spokesman Neil Bennett told the ABC that increasing financial demands drove the merger. “In order to continue to compete at the very highest level, we had to reach out and try to find partners from the men’s game,” he said.

But, for the most part, mergers were still not on the agenda, with only five per cent undertaking, and 18 per cent considering, mergers with related organisations.

One of the most surprising findings to emerge from the study was that one in five NFP directors are now being paid. This suggests that the days of the volunteer might be coming to an end, as the risk and requirement levels of knowledge and skills continue to rise.

For example, the study also found that 33 per cent of directors spent “somewhat more” time on their role over the past year, whereas 12 per cent spent twice as much time on their role. Meanwhile, quality of governance has also increased, with 39 per cent of respondents rating it as “somewhat better” and 44 per cent rating it “much better”.

“In the future, if you want good people, you may need to remunerate them,” says Richardson. “That, of course, will depend on the size of the board, your company resources and the skillset you’ve got.”

The shift may also reflect a greater level of board involvement at the operational level at the height of the COVID-19 pandemic. In the AICD study, one third of organisations reported active involvement with operations in terms of providing specialist advice, working with staff or helping to deliver frontline services.

Digitising the dark arts

The Melbourne Symphony Orchestra (MSO) had a highly successful business model largely based on earned revenue, but as pandemic lockdowns ravaged the arts sector, the organisation lost 80 per cent of this overnight, said managing director Sophie Galaise GAICD, one of the panellists on Dark Arts: Governing the Creative Recovery, held as part of AICD’s Australian Governance Summit 2022. “We suddenly found ourselves... facing insolvency quite quickly, so [there] were big decisions for the board.”

As show after show was cancelled, Jane Hansen AO MAICD, Melbourne Theatre Company (MTC) chair and Opera Australia director, said boards’ initial focus was on mitigating risks and containing costs. “We learned a lot about governing for risk and compliance rather than growth and strategy, which is typically what a board thinks about.”

Despite this, the MTC lost $20m over two years. Many lessons were learned at board level about the importance of caution. “That will be a permanent change — boards will always have to think about that in the arts because we all survive so narrowly,” said Hansen.

Meanwhile the MSO prioritised keeping its 300 musicians and 100 other staff employed, before turning its attention elsewhere, including to digital performances. “We (also) used the time to think about the future and reinvent the orchestra,” said Galaise.

Other panellists noted the pandemic has wrought enduring changes in the way people engage with the arts, meaning organisations need to rethink their strategy. For example, organisations saw subscriber numbers drop off. Attendance numbers were still down after lockdowns ended and people were booking tickets at the last minute.

Penny Fowler GAICD, National Portrait Gallery chair and The Australian Ballet director, noted the gallery had expanded its hybrid attendance options, introducing live-streaming events, virtual public programs and online art classes to re-engage existing subscribers and attract new ones. “Your whole strategy as an arts company has to include that online and virtual offering.”

Hansen said COVID-19 highlighted the importance of philanthropy. “The cost of a good development team is something you need to invest in... resourcing is terribly important and boards have to be prepared to commit those funds.”

Numbers game

• 32,000 Number of live gigs cancelled due to COVID-19 since 1 July 2021
• $94m Value of lost income arising through cancelled gigs since 1 July 2021
• $36.5m Value of live entertainment events to Australia’s economy in 2019
• 38.2% Proportion of Australian adults who attended a live performance in 2017–18
• 82% Proportion of NFPs calling for more financial help from government
• 1in10 Australian workers are employed by NFPs

Sources: AICD NFP Governance and Performance Study 2021, I Lost My Gig, Live Performance Australia, Australian Bureau of Statistics, Australian Charities Report