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Arts sponsorships: what happens when tobacco butts out
September 11, 2000
According to a new survey of performing arts organizations, the impending withdrawal of tobacco sponsorships is forcing big organizations to run faster to please sponsors, and may have much more dire consequences for smaller arts groups. This spring, the Canadian Conference of the Arts (CCA) sent out a survey to performing arts groups across the country to gauge how they would be affected by new government restrictions on tobacco sponsorships. The new restrictions, which are still being finalized, are scheduled to come into effect on October 1, 2000 and will be phased in over the next five years.
The report finds two major consequences of the imminent withdrawal of tobacco funding:
"a migration by sponsors towards newly-available and attractive opportunities formerly supported by tobacco firms, and away from the performing arts groups they now sponsor; and
an overall devaluation of performing arts sponsorships, as money is stretched and more properties are quickly made available within a relatively short period."

Sponsorship is indispensable
The survey confirmed that sponsorships in general are an essential element in the funding success of performing arts organizations in Canada. In total, during the last fiscal year, companies spent $27.2 million on sponsorships. This amount accounts for 13% of the total revenue received by the 152 groups which completed the survey.
According to the findings, sponsors contribute more than eight times as much as foundations, more than four times as much as corporate donations, and more than three times as much as individuals to arts groups operating revenues. In all, 86% of responding groups reported that they received some level of sponsorship during the most recent fiscal year.

Tobacco money is not the only game in town
Although most media attention about sponsorship has focused on the tobacco companies, the survey confirms that tobacco money, while it is a major source of sponsorship dollars, is not the only source of cash and in-kind support for most groups. Media companies and the financial services sector both spend more than tobacco firms in cash and in-kind contributions on sponsorships of arts groups in Canada.
According to the findings, media industries far outstripped all other sectors, with support totalling $1,863,118 (cash) and $9,280,513 (in-kind support). The financial services sector and tobacco companies each pumped in another $2.6 million in cash and in-kind offerings.
The report also found, on the positive side, that private sector sponsorships of the performing arts are generally increasing in Canada. However, this growth seems to be coming from existing channels of support. Except for strong growth in the information technology sector, industries that are already involved in the performing arts seem to be the ones that are increasing their participation by the greatest amount.

Sponsor services on the rise
Publicity, free tickets and signage are the most common ways that organizations service their sponsoring companies. The survey found, however, that most organizations are also beginning to beef up their fulfillment duties. Two-thirds of organizations provide tickets for co-marketing programs such as contests. Nearly half (48%) put on special promotional events for sponsors, and 29.6% have placed a product or promotion for the company on stage. In a somewhat eerie admission, 6.6% of groups said that they had "changed artistic direction or content" because of a sponsor relationship.
The findings also suggest that performing arts groups are requiring more resources to service sponsorship programs and that this may pose some difficulty for smaller organizations with limited human resources. Some small and medium sized groups reported a decrease in title sponsorships as companies seem to be migrating toward larger arts groups that can offer a wider range of sponsor services.

Will other companies fill the tobacco gap?
Although not the biggest sponsor by industry sector, tobacco firms do play an important role in the Canadian sponsorship scene. Of the 152 groups studied, 61.8% had received or were receiving support from tobacco firms. The largest tobacco sponsorship reported by a single group was $1 million. The average value was $24,000.
The report does speculate somewhat on the interest or ability of other groups to fill the gap left by the withdrawal of tobacco dollars: "Theoretically, because sponsors outside the tobacco industry have greater choice and variety in the channels they use to reach their target markets, title sponsorships are less valuable to them than they have been for tobacco firms. If this is true, it suggests that the overall amount of money available for title sponsorships could be reduced when tobacco firms cease their participation."
More than half (55.3%) of arts groups in the study said that their organization would have to reduce its activities, or the size and scope of its productions, when tobacco funding is withdrawn. In particular, small groups were nearly twice as likely as their larger counterparts to say that they would have to reduce the size or scope of productions. Twenty percent of overall respondents also said that they would likely have to reduce the number of their employees following a tobacco pull-out.

So, what's to be done?
To help curb the withdrawal symptoms from tobacco sponsorship, the report recommends that "governments develop programs designed to help groups improve their overall fundraising capacity, and specifically their ability to secure and service corporate sponsors." It also calls for postal subsidies and changes to the tax system to encourage more corporate sponsorship of the arts.
It remains to be seen what will become of the sponsorship landscape for arts organizations in Canada. In the short term, it is most likely to become a buyer's market for sponsorships. With more data on the value of sponsorships, however, it seems likely that arts groups will be better-equipped to lobby for favourable changes to the tax system which will allow them to cultivate new sources of funding.
The full report of the "Performing Arts Sponsorship Survey" is available from the CCA. It is free for members and $5 for non-members. The report's executive summary is also posted on the CCA web site at www.culturenet.ca/cca.