The Decibel - Funding for the arts in Canada is broken

Episode Date: June 7, 2024

Canada’s cultural institutions are coming up against serious economic challenges. Theatre companies say they’re facing a crisis as they struggle to recover from pandemic closures. The Montreal-based ‘Just For Laughs’, one of the world’s biggest comedy festivals, has canceled their 2024 festival and filed for creditor protection. In May, Hot Docs, an international documentary festival, announced they would temporarily close their theatre due to financial constraints.Globe business reporter Josh O’Kane has reported on a number of arts organizations cancelling shows, closing their doors, and announcing they’re on the brink of collapse. He joins the show to break down what factors lead up to this moment and what hope the arts industry can look towards.Questions? Comments? Ideas? Email us at [e-mail]

Over the last year, arts organizations and festivals in Canada have been facing financial pressure in ways we've never seen before. The Vancouver Folk Festival nearly dissolved a year and a half ago. It's back now. And then very quickly thereafter, this other major music festival in B.C. called Faded in the Park had to cancel its 2023 edition. Josh O'Kane is a Globe reporter covering the business and policy that shapes arts and culture in Canada. And then you're seeing other organizations like Hot Docs, Just for Laughs, and the Contact Photography Festival all come forward saying we've got some pretty serious financial trouble. There's a lot at stake. Not only the role of the arts in reflecting our culture, but also the jobs of more than 600,000 artists and workers. They make up Canada's $64 billion a year culture industry. Today, Josh is here to talk about the economic challenges putting the survival of arts organizations at risk.

I'm Maina Karaman-Wilms, and this is The Decibel from The Globe and Mail. Josh, thanks so much for being here. Thanks for having me. So there are arts organizations in all sorts of different mediums and across the country that are really facing difficult times, Josh. Let's start with the example of Just for Laughs. I think people recognize this, right? Montreal-based comedy festival. What happened with them?

Yeah, I mean, yeah, this is one of the world's biggest comedy festivals. It's huge for the comedy world. And its parent company filed for creditor protection back in March, after which it was revealed that it was millions of dollars in debt. You know, it looks like another company did just buy a lot of its assets on the last few days. So we'll see if someone does resuscitate the brand just for laughs. But the festivals, at least this year in Montreal and Toronto, likely won't be happening. And we don't know what it's going to look like if and when it comes back. And there's also Hot Docs. This is an international documentary festival. It wrapped up its 31st

festival in this spring. But what's been happening with them over the last year? Just last month, after eking out a festival and a lot of financial uncertainty and a mass exodus of programmers, which is a whole separate matter, Hot Docs said it's going to be closing its flagship theater in Toronto for three months. And, you know, our colleague Barry Hertz reported about a month ago that Hot Docs had a deficit of about $2 million as of roughly a year ago. And Murray Nelson, the president of the organization, has acknowledged that it was under pretty deep financial strain. What's interesting about Hot Docs is that they say they've exceeded their box office targets at this year's festival. What that tells you is that this situation is much

bigger than just this year or this organization. Hot Docs is one of many organizations that, in spite of successes based on the targets that they've set, are being spread extremely thin. And after just a few extremely rough years during pandemic lockdowns. We've been talking about these kind of on a big scale, but when we're talking about these arts organizations, Josh, how many people are employed? How big is this industry? Can you just give us a sense of the scale? Yeah. So, you know, depending on which version of the StatsCan data that you're looking at, most recently, if you combine some quarterly totals, this is about a $64 billion industry annually here in Canada. It employs more than 600,000 people. This is an enormous part of the Canadian economy, but it's also the sort of centerpiece of how we learn about

ourselves and the generation of Canadian culture and how we see ourselves in the world. There's a lot at stake here when you really zoom out and realize that all of these cultural organizations are struggling at the same time. So big question, of course, is why are we seeing this happen? Why are we seeing these organizations all kind of falter right now, or many of them at least? We came out of COVID-19 lockdowns to a much more expensive world, like inflation is hitting everyone. You know, the cost of everything is up for, again, everyone. Just to put a roof over your head is probably the most universal and biggest struggle that's happening, not just in this sector. But government emergency programs that were helping a lot of organizations just

try to survive during the lockdown era came to a close. Savings accounts and surpluses, they have dried up in a lot of cases. And then what you have is all of these sort of surpluses and extra cash disappearing at an exact moment where everything has become more expensive. Then you've got audiences at the same time. They're more reticent. There's 46% fewer people attending at least some theater organizations, according to some of the statistics that I've been researching the last few months. But you've also- Compared to before the pandemic? Compared to 2019.

So yeah, from before the pandemic. Philanthropy is changing. The nature of corporate sponsorships are changing. And in a lot of jurisdictions, including federally, we are looking at stagnant, if not declining, government grant programs. Because Canada is also a kind of country that, because it's so small, is a bit dependent on the kind of patronage that arts councils will provide. Because the market is often very small, but we want to create Canadian culture. But those granting bodies, if you compare what they've been, you know, offering to artists on a year to year basis with the rising cost of living, they're functionally declining in terms of the amount of money that artists and arts organizations could tap into. So you put all of these things together. You're looking at just the math of this entire sector being fundamentally broken right now. All right.

So we're going to dive into all of these different aspects here, Josh. So you mentioned a whole bunch of things, right? You talked about government grants, corporate sponsorship, philanthropy, audiences. So we're going to break this down, but I want to start with the cost of living because you talked about how everything is just more expensive for everybody these days. We went through a period of really high inflation. How have people's spending habits changed as a result of that? I guess, like, do people have money to spend on the arts? Some people do, but not a lot of people. What we're really seeing is for at least the broad middle class, according to a TD economics study that came out a couple of months ago, the middle class incomes and wealth generation hasn't grown with the cost of living, with CPI.

And the TD study identified cultural spending as one of the things that is likely going to be declining because of this sort of erosion of income, basically. I mean, you have to spend on groceries, but you don't necessarily have to go see that concert, right? Well, Swifties might argue otherwise, but that's a separate argument. But you're also seeing, again, speaking of Taylor Swift, people are spending a lot of money on big ticket shows. There's this phenomenon that people have been talking about for the past year also called funflation, where because we are seeing a lot of the cost of things going up, say you've got a couple thousand bucks to spend on fun throughout the year. Are you going to spend that on one set of Taylor Swift tickets or are you going to go to your local theater five, six, seven times? These are the kinds of decisions that are being made where the costs of living are affecting the spending

habits, which are affecting where the money is flowing to all these different cultural organizations. So yeah, so I guess at the high end of the spectrum, then it sounds like some artists, some arts organizations are still doing well. Yeah, exactly. At the high end. And you're also seeing, you know, some of the sort of more established nonprofits as well, really thinking about their programming and how they can find a mix of programming to draw audiences back. Stratford, the festival, is probably one of the most prominent examples of that where, you know, in particular in the 2023 season, you know, they had a surplus. They're kind of buoying their traditional Shakespeare with,

you know, Broadway hits like Rent, but also some new contemporary Canadian plays that were selling quite well. Stratford, for people outside of Ontario, right? This is a theater festival in Stratford, Ontario that runs in the summer. So this is interesting. I guess the point of this, just to kind of round out the circle is if audience numbers are down, that means revenue is down because they're not selling as many tickets? Exactly. Yeah. Okay. Let me ask you something else about, I guess, our habits and how they've changed. Because I wonder about the impact of the pandemic.

There was a solid year or more, actually, when we didn't really have the option to go to in-person events. Right. So is this affecting things like have people come back in a way that we would expect? You know, it's funny. Before I cover the art sector, I covered the tech sector and I wrote a lot about algorithms and the sort of ways that algorithms continually serve up stuff that are based on your interests, and therefore keeping you on a given streaming service and that sort of thing. Something that I was naturally aware of. But then I spoke with the lead researcher from the Canadian Association for the Performing Arts a couple of months ago.

And one of the things he said was, people are more likely to want to stay on their couch. This is a theory that he has. They want to stay because they're being served the stuff that they like and say, hey, we're saving money. We're already paying for Netflix or Apple or Amazon Prime. They're now used to this. It's now been more than four years.

I think habits are now becoming a bit ingrained as a result, which again, if you're trying to save money, kind of is win-win from a consumer spending standpoint, but not necessarily from a, hey, money flowing into the actual domestic culture for in-person events standpoint. Let's break down some of the other aspects you were talking about, Josh. You mentioned corporate sponsorship, which can be millions in some cases for arts organizations. I guess to start, why is it attractive for big companies to sponsor arts organizations

in the first place? Yeah. So for decades, it was attractive for the boards and executives of big companies to want to sponsor festivals or galleries or organizations they wanted to be aligned with, where they could take their clients or their friends to be like, hey, we're part of this. This is something we believe in. But over the course of starting in roughly the 90s, it just became more obvious that there would be more granular

data available, particularly through digital measurement. Marketing departments of large organizations started taking over more and more of the responsibility for sponsorships. And as a result, you're seeing more push towards brand alignment as well as heavy data usage. So brand alignment might be things like there's a social justice cause that someone or, you know, marketing department may want to align their brand with. And then you're also looking at sports. Sports, there's just so much data available when you're packing arenas and stadiums. These are the things that are much more attractive to marketing departments. A demonstrable enough amount is coming out that we're seeing some pretty big name sponsorships on the title side, like the Scotiabank Contact Photography Festival, as an example.

This past edition last month was going to be the last one with Scotiabank as the main sponsor in the title of the actual event. TIFF lost Bell last summer, and it was a you know, a large portion of its roughly $14 million annual sponsorship money came from Bell. And now they're trying to figure out exactly what comes next. You know, this is, again, one of the most prominent cultural organizations in Canada with an international audience. And it's even struggling to maintain these kinds of relationships. And what, I guess, what kind of impact does that have on these festivals? Like how much of a hit do they take when a corporate sponsor leaves?

Sure. So I spoke a lot with Darcy Killeen, who is the organizer of the Contact Photography Festival here in Toronto. It's a month-long photo festival. It's arguably one of the biggest festivals in the world celebrating photography as an art form. And Scotiabank gave them more than a year's notice to saying they were going to leave. The organization is struggling to get nearly

the amount of money that Scotiabank was funding it. So this is not a huge, despite being an international festival, their annual budget, according to their filings, is like maybe around one and a half million dollars. At any given point, Scotiabank was funding like between a third and half of that. And when I spoke with the organizers, they told me that they are struggling to get any even 10% of that level of commitment that Scotiabank was giving

because the attitude is just different in corporate Canada now than roughly a decade, decade and a half ago when Scotiabank really pumped up its interest in what was happening with the Contact Photography Festival. We'll be back after this message. So, Josh, arts organizations in Canada are seeing this decline of corporate sponsorships. And you mentioned that sometimes that money goes to other causes like social justice causes, things like that. Are we actually seeing that play out? Yes. And depending on what organization you're talking

with, they will say that these are actually separate budgets. But you do see, like with example of Scotiabank, that they spent, I think it was $800 million of their efforts in just the naming rights for the Scotiabank Arena, the former Air Canada Center here in Toronto. And then you also see that they, in 2020 or 2021, launched the Scotiarise social justice campaign where they were investing in social justice causes close to what they wanted to be aligned with their brand. And so they're investing massive amounts of money in those other areas. And they are still, by the way, still, as far as we know, sponsoring the Scotiabank

Gilder Prize for Fiction. But we don't know exactly what their interest is in the long term in the arts anymore. And we should say we've been talking a lot about Scotiabank. This is a corporation that has taken a lot of criticism this year, right, because of their investment in an Israeli arms manufacturer. Josh, I guess I just want to just linger on this point for a minute. Like, how do we think of that in relation to this issue of Scotiabank's sponsorships? There's an interesting, I guess, balance that's happening here. Yeah, this is creating a great deal of tension, I think, between particularly a lot

of progressive artists, as well as arts organizations that are dependent on this kind of money, because you've got three major Scotiabank sponsored events that have been facing criticism for one of its asset management subsidiaries has a stake in the Israeli arms manufacturer, Elbit Systems. And, you know, you've got contact photography, you've also got the Giller Prize and hot docs as well, separately, also as a major sponsor from Scotiabank. And, you know, this is raising a lot of discussions basically about, you know, art's role in challenging powerful institutions at a moment when the sector is dependent on institutional money in a lot of cases in order to survive. I certainly do not have an answer to that extremely thorny debate,

but it's certainly something that is ongoing. It's something that we've been watching. Let's talk about philanthropy as well. You mentioned this is kind of, you know, another piece of the pie of how arts organizations get their money. This is private donors, essentially. So what changes are we seeing there? Yeah, we're in the 11th straight year of fewer Canadians giving, according to Canada Helps, the online donation platform. You know, there have also been some tax reforms that we could spend an entire podcast episode that's left a lot of charities and philanthropists frustrated that it's going to cost them more to make large donations of publicly traded securities. So there are just some structural barriers that are coming through on the sort of high-end

donation side that has been making some philanthropists quite frustrated. But also just think about the fact we've just been talking about the lack of disposable income in a much more expensive world. People don't have as much money to donate. So the average person who might have said, you know, I love this theater company. I'm going to give them $50 a month. They might need to spend that $50 a month on groceries now versus 2019. The final piece here when we're talking about money is government funding. And this is interesting because the federal government has actually increased its funding since 2015. The

budget for the Canada Council of the Arts has roughly doubled since the liberals came to power. So why is that not keeping pace with the needs for funding? Well, if you look at the structural issues that have happened since that promise began in 2015, the economy is completely different. We're now on the other side of COVID-19 lockdowns. Everything is much more expensive. But even during those lockdowns, a bunch of things happened, which is perhaps arts organizations, when they were shutter but there are certainly more people applying because the Canada Council went public earlier this year saying that applications for its sort of mid-level Explore and Create program had tripled between 2017 and 2023, which resulted in only 16.6% of the latest round of applications becoming approved. So that's like close to what, 84% or something of people are not actually getting those grants. Yeah.

And we're talking like there were 6,750 people who applied for that last round of applications. And these are people who are hoping they can get access to this to survive. And I guess what's the result of that, Josh? What's happening to organizations, to artists who are not getting the funding they need? These organizations are really struggling to try to adapt to the expectations that they've always had. You know, I was speaking to a dance agent in Vancouver who represents a number of organizations and said that one in particular, a pretty prominent one, had actually lost funding to the point where they had to put people up in

billets on tour. They couldn't afford hotels anymore. You're seeing a lot of crowdfunding. You're seeing a lot of, you know, pleas for help. It's not exactly a great situation for these organizations. So, Josh, I mean, we've laid out a lot of difficulties that are happening here in our art sector. What can be done? Like, what kind of solutions are you seeing people put forward in order to make this situation better?

I try not to be all doom and gloom. And I do think there are some interesting organizations who are doing some stuff that could make life a lot better for artists. Like one example would be the Vancouver-based nonprofit 221A. They're working on securing properties with a land trust so that they can then rent them out to arts organizations down the road to shield them from rising real estate costs. So that even if the rent is tough today, I imagine what's going to be like 20 years from now, if they can stabilize those prices for arts organizations, then that gives those organizations a greater chance to survive.

I spoke with Brad Lepp, the executive director of the Professional Association of Canadian Theaters. The way that he described it is we need a new deal. The current business models just aren't serving the organizations that sort of underpin the arts in Canada. And one solution he was suggesting is, you know, why don't the governments offer the performing arts similar tax credits as the screen sector, which, you know, benefits quite greatly in terms of the number of productions because of tax breaks that they are given. Several people have made that argument to me in recent months as this could be a really great way to help spur on investment in the arts here in the country. Okay. Yeah. Just before I let you go here, Josh, can we just look at the broad ramifications here?

Like what are the consequences if we see these trends continue and we see our arts sector really, you know, have a lack of funding? I mean, the dwindling of the arts could have an impact on Canadian identity and how Canada sees itself in the world. We've been struggling to find our place in the world for decades with a massive cultural juggernaut immediately south of us. Investing in culture is a way of helping establish who you are and how you see yourself. And as culture becomes more expensive and harder to produce, then we lose the opportunity for Canadian stories to be generated, especially by new generations. Josh, thank you so much for taking the time to be here. Thanks for having me. That's it for today. I'm Maina Karaman-Wilms. Our interns are Aja Sauter and Kelsey Arnett. Our associate producer is Manjot Singh. Our producers are Madeline White, Cheryl Sutherland, and Rachel Levy-McLaughlin.

David Crosby edits the show. Adrian Chung is our senior producer, and Matt Frainer is our managing editor. Thanks so much for listening, and I'll talk to you soon.