This post is the second of six installments on the American Alliance of Museums’ TrendsWatch 2020: Financial Sustainability. Read last week’s post here: Museum TrendsWatch 2020: Financial Sustainability Introduction. This post will focus on “earned income” for museums, an income stream that (on average) makes up 33% of revenue for most museums.
Earned income encompasses the following revenue generating activities: membership, admission, events, paid programming, retail, food and beverages, and rental space. For museums focused on earned income there can be a tendency to behave as “capitalist nonprofits” as there is a necessary tailoring of program offerings to keep consumer interest. Focusing on earned income activities can result in those activities receiving more attention and prioritization over others that may be more aligned with the museum’s mission. Such non-mission related, but still income generating activities can also take away staff focus as they work to try and support all museum activities—those that directly and indirectly generate revenue. Finally, there’s the additional pitfall of staff facing pressure to find the next “hit” whether it’s a blockbuster exhibit or special programming event.
There are a few challenges that come with earned income. Many of the activities that lead to earned income are ones that require people to attend the museum in-person. This has become increasingly difficult as museums compete with on-demand cultural activities that can be enjoyed while we’re sitting on the couch. We have only to look at how movie theaters have struggled to understand the very real pull of digital culture delivered on-demand. The challenge here is two-fold: 1. There is a wealth of entertainment to choose from; and 2. We’ve become used to receiving such entertainment at the click of a button and in the comfort of our own homes. And this has been re-enforced during the stay at home orders to help contain the coronavirus pandemic.
In contrast to the culture on-demand trend, there’s evidence that millennials seek out experiences and value an experience over acquisition. This is referred to as the “experience economy” and it’s something museums can tap into. This does require some shifting of a “traditional museum visit” as experiences require interaction and are meant to be documented and shared. As AAM explains, “people want to take pictures, share their experience via social media, socialize, and generally not behave like a stereotypically reverent, quiet visitor.” For more on the millennial museum visitor, please see ‘What Does the Millennial Museum Visitor Want?’ Finally, AAM reports there’s a rise in the value of the museum brand and museums can use this to their advantage.
There are several innovations with the potential to positively impact a museum’s earned income:
- Use data to make smarter decisions on programming and drive up revenue
- Offer co-working spaces within the museum for rent
- Serve as an incubator in exchange for business equity
- Become a content creator and provide a media channel to generate ad revenue
- Add on hotels and become an entertainment destination
Some of these items can be started right away while others require a significant investment of time and money before any revenue is realized. The point here is to think creatively about what the museum has to offer, how it can capitalize on assets (such as content, space, or inspiration), and who it can partner with when there is a mutual benefit.
Earned income has been and will likely remain a majority player in a museum’s income streams. With that in mind, it’s important to diversify where the earned income is coming from and account for areas that can (or should) disappear. An obvious example is cutting museum general admission to $0 in exchange for the county passing a municipal bond. This is exchanging a portion of earned income for government-based income. The benefit being that government provided income is less variable and is more resilient to the harsh financial challenges a museum may face—such as a long period of closure due to a pandemic. I recommend you begin with reviewing earned income activities and the data you have on them. Ask yourself and your staff the following questions as you review each activity:
- Does this service, product, or activity directly align with our mission?
- Is there a way we can exchange this earned income element with a more reliable income element?
- How can we lessen our risk by diversifying?
- What assets does the museum have that we’re not capitalizing on?
- Are there opportunities for creative collaboration?
It’s critically important that a museum understand where its earned income is coming from, how it can be impacted due to shifting markets or current events, and where it should be adapted or innovated upon. This is something museum staff should think of often, and especially so now that our financial reality is on the precipice of financial disaster. So, gather the data, roll up your sleeves, and dig in.
Rachael Cristine Woody
Consultant, author, and blogger Rachael Cristine Woody advises on museum strategies, collections management, grant writing and the future of museums for a wide variety of clients. Read Ms. Woody’s other blog posts, and check out Lucidea’s unrivaled CMS, Argus, that empowers museum professionals to make their collections more visible, accessible and engaging than ever before.
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The second post in a series on the Harryhausen Titan of Cinema Experience analyzing the specific pivot to an online virtual exhibition during COVID
The first post in a miniseries on the Harryhausen Titan of Cinema Experience analyzing the specific pivot to an online virtual exhibition during COVID