Funding the Future: Hybrid Models at the Forefront of Arts and Culture Financing
The recent debates regarding support for small concert venues in the United Kingdom and funding for France's primary music institution highlight the difficulties in establishing a reliable funding model for arts and culture. These activities often face a shortage of financial resources, despite their capacity for generating new content and driving creativity.
The Deaf Institute in Manchester, pictured hosting a Girli gig in 2018, was saved from closure | Getty Images
This inadequacy is linked to significant production costs and the unpredictable response from the audience, making most cultural endeavours a risky business. To address this, funding traditionally relies on a combination of private and public resources. Private capital is typically focused on the less risky products, while sometimes financing more innovative projects. Public funds are commonly used to provide alternatives to commercial approaches, fostering diversity and heritage. However, both models seem to be in crisis today, as shown by the growing trend towards an entrepreneurial-focused approach to public funding, coupled with the digital disruption and the comings and goings of new private funders.
A creative turn in the public sector
In the public sector, founder loans, tax credits, support to attend trade fairs, and entrepreneurial training focused on improving revenue are increasingly used to support the cultural and creative industries (CCI). National and regional music export initiatives in Europe are a good example of this trend. Programs for incubation and start-up funding, spearheaded by national or regional economic development bodies, are also increasingly available, aiming to assist commercial entities operating in the CCI. Government-backed venture capital funds are anticipated to generate financial returns and societal advantages, such as regional growth, job generation, and other positive external effects. This is the case of the French public bank of investment (Bpifrance) who is also in charge of the creative industries export program.
Local authorities have begun collaborating with networks comprising impact-driven financiers, private investors, banks, foundations, and venture capital firms, with the aim of effectively empowering local entrepreneurship ecosystems, hubs, and clusters. In this sense, local governments have become crucial players in CCI funding. For instance, in the UK, local governments were still the largest arts funder in 2019-2020, providing over half of all public spending on arts. According to the Organization for Economic Co-operation and Development (OECD), regional government spending on cultural services significantly surpasses national shares. In 2019, OECD subnational governments accounted for nearly 60% of total public expenditure on cultural services and allocated an average of 3% of their total spending to these services.
Reluctancies in the private sector
Equity Protests
On the private side, the landscape is more ambivalent. Private funders typically contribute the largest amount to cultural institutions, especially in the United States and the UK, and when these institutions can prove their social impact. Before the pandemic, the total private investment in the not-for-profit cultural sector in England was estimated at £799.8 million: £327.8 million (or 44%) in private income received from individuals (including individual memberships); £309.3 million (41%) in grants from trusts and foundations; and £116 million (15%) in corporate giving (donations from corporations, businesses, and corporate memberships). However, professional funders external to the cultural sector demonstrate an ongoing lack of trust in artistic and creative producers, especially when they are not located in the same area. New market entrants remain limited except under the conditions of quick financial returns and low-risk, as shown by the financialization of music catalogues, or influence, as shown by the emergence of new media conglomerates led by magnates. Besides, while digitization has disrupted many traditional funding practices of the private cultural sector itself, the high tech ecosystem has often proven inadequate, as evidenced by the unfulfilled promises of NFTs and the collapse of FTX.
From passively blurring to actively hybridizing funding schemes
What's particularly noteworthy is the structural blurring line between public and private support, with various funding mechanisms blending aspects of grants, debt, and equity financing. For instance, government venture capital funds operate through hybrid private-public structures, and social venture capital funds offer seed funding to entrepreneurs with the goal of achieving both financial returns and social impact. Accelerators and incubators use mixed financing to provide startups with financial resources, workspace, mentorship, networking opportunities, and other advantages. However, if this trend is particularly visible in social entrepreneurship, it has yet to be systematised for the CCI.
If these hybrid models are sometimes criticised for their disruptive potential, especially towards more traditional cultural funding schemes and institutions, they should rather be considered as a complementary tool. Indeed, the work of cultural policy makers should be to make them coexist, in order to accommodate the diversity of values attached to arts and culture: an economic driver, a form of cultural heritage, a tool for soft power, a platform for cultural diversity and inclusivity, etcetera. From Puerto Rico to Alaska, Niagara Falls to Lexington, Sound Diplomacy works towards a better acknowledgement of the necessary multiplicity and hybridity of funding channels, while advocating for strong and inclusive public cultural institutions and regulations in the long term.