Scene Change
Optimising business model innovation in the performing arts
The National Theatre has commissioned an industry-wide research report providing a ‘behind the curtain’ look at performing arts business models – how they operate, the value they deliver, and the challenges they face.
The nine-month research project was delivered in partnership with Intelligence Agency and Erskine Analysis sets out a series of recommendations exploring how new approaches to traditional business models could unlock how performing arts companies in the UK create greater economic and social value.
In recent years the performing arts have had to endure substantial challenges, including successive funding cuts and the impact of a global pandemic. These have put the sector’s success in jeopardy. Now, organisations that provide essential public benefits are struggling to stay afloat, financial reserves have been exhausted leaving no funds for critical innovation or infrastructure upgrades, and generating cash flow to support new projects is a significant challenge.
This executive summary outlines the key findings, challenges, and recommendations from a new and comprehensive study of business models in the performing arts sector, drawing on the insights of over 140 organisations.
Key challenges indentified
54% of the performing arts respondents we surveyed regarded it as very important that they innovate their current business, with 92% of respondents thinking undertaking business model innovation either somewhat or very important. However, many were struggling to see how business model innovation could be realised. Our work revealed five key challenges inhibiting their ability to innovate:
Fragile Business Models
Performing arts organisations, particularly those in the non-profit sector, struggle with depleted reserves, declining public funding and rising operational costs. For-profit and non-profit organisations both face challenges in short-term cash flow management, limiting their ability to develop new projects.
Under-investment in Capital
The current need for investment in bricks-and-mortar is undermining organisations’ potential for revenue creation and their ability to deliver social impact. Recently introduced capital funds have often been competitive processes which invest in specific areas for set periods of time and therefore do not substitute for stable investment in infrastructure across the country.
Impact of Technological Gaps
Digital adoption and IT infrastructure are significantly underdeveloped across the non-profit sector. While some large-scale organisations experiment with digital revenue streams, widespread technological inefficiencies hinder innovation and audience engagement.
Hybrid Value Creation
Organisations increasingly blend cultural, social, and commercial value. Community-driven activities and educational outreach have become central to non-profit operations, but these add layers of complexity to already stretched resources. Many performing arts leadership teams face a structural battle in aligning interlocking mandates of cultural and social purpose with sustainable commercial performance.
Barriers to Innovation
Structural impediments, including risk aversion, short-term funding cycles, and a public funding system which expects predictable outputs, constrain organisations’ ability to explore new business models.
Business model and innovation opportunities indentified
Through data analysis and detailed case studies, our study identified – for the first time – five prevailing business models for organisations in the performing arts:
1. Our House: Producing/presenting venues focused on a singular art form, reliant on ticket sales.
2. Big Tent: Multi-artform venues serving as community hubs.
3. Footloose: Organisations producing/presenting work across multiple venues.
4. The Social: Entities using performing arts for social impact, such as education and wellbeing.
5. Digi-enabled: Models incorporating digital activity for income generation.
Each model offers unique strengths and opportunities for transformation through tailored interventions, including through:
- Development of long-term funding mechanisms to support experimentation and sustainable growth.
- Development of long-term funding mechanisms to support activities which offer low-cost and effective ways of contributing to the UK Government’s missions.
- Collaborative resource sharing across models.
- Investment in digital capabilities.
Recommendations
Recognising the need for a multifaceted approach to innovating business models in the performing arts, the study provides a novel response by recommending a series of measures the sector can implement alongside advocating for a suite of interventions and funding initiatives.
This table illustrates the connections between the challenges the research identified and our recommendations. It also highlights the areas of the sector these interventions are likely to impact the most and describes the desired transformative outcomes they aim to achieve.
Sector-led
Projected transformed state by 2028
1. Tech Roadmap for adoption and efficiencies
A sector-led tech roadmap would set clear benchmarks for technology adoption, driving efficiency and sustainability across performing arts organisations.
- Organisations have improved infrastructure and capabilities
- New projects created to engage young people, foster connections with different communities and reach broader audiences
- Tech-based efficiencies found
- Lower cost or free joint procurement of technology
- New training opportunities for the workforce
- New products better serve customers and participants
2. Sector Playbooks to unlock revenue and support cost-saving
The first of these would highlight best practice and practical advice for approaches to shared procurement and strategic mergers, reducing operational costs and establishing best practice in cost efficiency. Private sector funders may need to support the sector to ensure the development of these playbooks is properly resourced.
- Improved business practice around many areas of cost saving and revenue practice (e.g. shared services, mergers)
- Benefits to commercial and non-profit organisations
Partner-led
3. Leveraged Capital Fund for sustainable infrastructure
A once-in-generation leveraged capital fund, combining government and private investment, would support arts organisations in building and maintaining sustainable infrastructure.
- Performing arts sector infrastructure is more stable after maintenance and upgrades
- Government investment and convening power has helped unlock philanthropic funds
- UK infrastructure is recognised as the most environmentally sustainable in the world
- Capital upgrades have driven local placemaking, social capital, tourism and soft power
4. Pro Bono Tech & Financial Advisor Network
A network of pro bono tech and financial experts would support small performing arts organisations with tailored advice and strategic guidance to enhance resilience and growth.
- Step change in the skills and experience on boards of trustees
- Fresh talent drives innovation and business development, increasing revenues and social impact
Policy-led
5. Urgent Stabilisation Fund
An urgent stabilisation fund would support successful performing arts organisations in regions affected by funding cuts, ensuring long-term stability and continued public benefit.
- Key local cultural infrastructure is retained
- Performing arts organisations have deepened their role as ‘anchor’ institutions for civic and place-based regeneration
6. Arts Business Model Innovation Fund
A two-stage innovation fund would enable arts organisations to generate new streams of revenue, providing seed and follow-on funding that would allow them to experiment with new sustainable and socially impactful business models.
- Higher levels of experimentation, development of new revenue streams and movement between business models
- Greater ability to drive social change in areas like health and education; boosted income; increased use of alternative finance
- Organisations who were not seen as investment-ready have been able to pilot initiatives, collect evidence, and unlock investment
7. HMRC Service Level Agreement
A service level agreement with HMRC would streamline tax credit claims and improve cash flow for performing arts organisations, ensuring timely processing and supporting financial stability.
- Sector has reduced cash flow issues, as they have greater security on timelines for tax reliefs
- Treasury-led work with financial providers and the cultural sector has broadened the range of cash flow financing available to the performing arts
- Increase in product investment and agile business model development