Steppenwolf's Dramatic Arc

Three decades ago it was a little off-Loop theater. Now it's a big company, facing some big challenges

What would Hermann Hesse say? Chances are the late German author of philosophical novels would be startled to find a celebrity golf tournament named after one of his books. But there it is: the Steppenwolf Celebrity Golf Classic, played near Palm Springs, Calif., each March since 2004.

The event honors Hesse only indirectly, of course. The beneficiary is Chicago's Steppenwolf Theatre, whose three founding members were inspired by Hesse—even though none of them had ever read him—as they searched for something cool to call themselves back in 1974, when they were all on the cusp of 20.

The Business of Plays

Founders Terry Kinney, Jeff Perry, and Gary Sinise probably would have been startled, too, had somebody told them then that there would be an annual golf fund-raiser in their future or that their theater would turn increasingly to marketing ploys and gifts to make ends meet. "Our first business manager, years and years ago, said we needed a five-year plan," Sinise recalls. "This is when we were all kids, right? And thinking five years ahead was something we couldn't do, so we all kind of laughed."

Steppenwolf has grown up. The theater is Chicago's second-biggest by budget, trailing only the Goodman Theatre, and among nonprofits nationally it ranks among the top six. The light-footed little off-Loop ensemble that built its reputation on acting—and acting like there's no tomorrow—has turned into a formidable not-for-profit corporation that 84 full-time staffers and 406 occasional workers rely on for their tomorrows. The company's annual budget approaches $14 million, and over the last season it produced an average of two performances a day, with shows in New York, La Jolla, Calif., and Galway, Ireland, in addition to Chicago. The company, in other words, has become exactly that: a company.

The struggle for Steppenwolf, as it is for any business, is balancing the books. Size hasn't made this easier. While revenues have been stagnant since 2005—notwithstanding celebrity golf outings—some of the company's basic costs are rising, forcing the organization to be creative offstage as well as on the boards.

Executive Director David Hawk­anson says wages have been going up 5% a year since he arrived four years ago and set out to bring salaries out of the arts cellar. In fiscal 2006, the latest year that has been audited, Steppenwolf spent $3 million on artist payroll, with production costs adding nearly $2 million more. The company has offset the extra expenses with such strategies as job cuts, lowered workers' compensation payments, and more use of the Garage Theatre, the cheapest to run of Steppenwolf's three performance spaces.

Diversifying Income

Marketing has also been a subject of more intense focus during Hawkanson's tenure, since Steppenwolf—like its peers all over the U.S.—faces a decline in new subscriptions. The number of new season ticketholders has dropped 20%, to 19,000, from an all-time high of 24,000 in 2002. To keep the numbers from falling further, says Hawkanson, the theater has spent $1 million to enhance Steppenwolf's online offerings. A select-a-seat feature already exists; a select-a-season option, making it possible to shape your own subscription package, is expected in another year.

The theater's inflows are changing, too. Back when the founders were still laughing at the concept of a future, Steppenwolf's revenues could be reckoned simply in dollars per seat. By 1988 each of the 211 seats in the company's rented space produced $5,400, notes a 2003 monograph published by the Nonprofit Finance Fund, or $1.1 million altogether. But the construction of Steppenwolf's Halsted Street complex—including a 500-seat mainstage, a studio space, parking garage, and offices opened in 1991 for $9 million—raised Steppenwolf's needs. By fiscal 2004, ticket sales were up to $5.8 million. But, while still the theater's biggest revenue source, these sales accounted for less than half of the company's overall income of $12 million.

Today they come to even less. Gifts from individual donors and grants from corporations, foundations, and governments totaled $5.9 million in 2006, while subscription and single-ticket sales earned $5.7 million. An additional $1.4 million derived from rental property, concessions, gift shop sales, royalties, and touring and transfer fees. And a newly enriched endowment generated $910,000.

Steppenwolf's biggest draw and asset, of course, remains the ensemble. Obviously, it helps that veteran company stars such as Sinise and Joan Allen can be trotted out to host events like the golf tourney, which earned $240,000 in 2007. But there's also a benefit in the fact that, for instance, ensemble member Tracy Letts wrote a play called August: Osage County that was performed this summer with a cast that included seven ensemble members under the direction of an eighth. It won this year's Joseph Jefferson Award for best play—and opens on Broadway Nov. 20.

That's great for next season's brochure. It also confirms that Steppenwolf is a place where art is made.

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