Financing the Scalable Stage: Technology, Donations, and Earned Revenue in the Performing Arts

Christos A. Makridis

No 12892, CESifo Working Paper Series from CESifo

Abstract: This paper studies how digital distribution changes the financing mix of a nonprofit performing-arts organization when audience access becomes scalable but live production remains labor intensive. The organization chooses quality, live ticket prices, and digital access to maximize quality-adjusted service subject to break-even; a donor then contributes after observing earned revenue and the mission supported by each donated dollar. The model yields three results. First, higher live-production wages raise the contribution share but reduce donations, production, and mission output. Second, for a fixed digital strategy, better distribution technology lowers the contribution share while raising donations because earned revenue and audience reach increase the mission supported by each donated dollar. Third, the organization commercializes digital access when the monetization gain exceeds the donor-valued loss from narrower access. The commercialization threshold rises with Baumol pressure and falls as digital access becomes easier to monetize. Numerical experiments with endogenous quality, ticket prices, and commercialization generate open, mixed, and commercial regimes. Donations can therefore rise even as their share of operating resources falls, while digital distribution helps finance the labor-intensive live core.

Keywords: performing arts; Baumol cost disease; nonprofit finance; donations; earned income; digital distribution (search for similar items in EconPapers)
JEL-codes: D64 L31 O33 Z11 Z18 (search for similar items in EconPapers)
Date: 2026
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