The Imminent Death of Orchestras - Yet Again
In the 45 years that I have been professionally associated with symphony orchestras in America, I have lost count of the number of times an alarm has been sounded about the state of crisis in which they exist, sometimes with warnings of the imminent demise of the industry. So far, at least, those alarms have proven to be false ones - and for the most part, symphony orchestras are more vibrant, healthy, and vital now than they have ever been. That does not mean that they don't have challenges, much like the entire non-profit field, but it does mean that they have learned how to address them.
The latest alarm bell is a study produced by Prof. Robert J. Flanagan of the Stanford Graduate School of Business. The report was commissioned by The Andrew W. Mellon Foundation, and it studied statistics from the largest American orchestras between 1987 and 2003. Data was provided to Prof. Flanagan by the League of American Orchestras. There is no question that there is much very valuable information in the report. It adds considerably to the body of knowledge about the field of orchestras, and it can and will be an extremely useful tool for advancing our understanding of our business model, stimulating debate, and ultimately helping the field to develop and implement adaptive strategies for the future. Most importantly, it provides a platform for serious future research.
Prof. Flanagan's study provides an opportunity for orchestras to continue to discuss, as they have been doing, the value of understanding the dynamic environment in which they exist, and adapting to it. It confirms what we already know: that orchestras do not operate in a vacuum but are intimately tied to the health of our communities. We at the League of American Orchestras are continuing to intensify our efforts to gather best practices and disseminate them throughout the orchestra field. The League is, in fact, already in the process of significantly increasing its efforts to carry out some of the research that the report recommends.
The report is very thorough, very dense (as economic studies tend to be), and one can draw a wide range of conclusions from it. Here is my take on some of its points. The study reaffirms what was suggested by a study done by Baumol and Bowen in 1966, which noted that symphony orchestras do not enjoy the productivity gains achieved in the private sector. It took about 80 musicians 45 minutes to perform Brahms's First Symphony when he wrote it, and it still does, and always will. In the absence of the private sector's productivity gains (like making five times as many widgets in one-half the time), it is logical that operating costs may rise faster than earned revenues. Indeed, what Prof. Flanagan calls the "performance income gap" has widened over the years, and is likely to continue to do so. But orchestras have continued to exist and in many cases even thrive by changing the mix of income streams, through endowments and annual fundraising.
The final two-to-three years of Prof. Flanagan's study (2001-2003) coincided with a severe economic downturn, and the psychological damage done to our country by the events of September 11, 2001. No one will dispute that a majority of our non-profit organizations in America suffered economic troubles in that time. It is unfortunate that the post 2004-05 period did not comprise the final period of the study, because the trends were far better in those years. Over the past few years not only have fundraising and overall fiscal performance improved, but ticket sales have as well. After a few years of flat or declining ticket sales during the early 2000s, there was an 18% increase in ticket sale income to orchestra concerts between the 2004-05 season and 2005-06. And, equally encouraging, paid attendance at classical concerts for American orchestras in 2005-06 was 11% up from the previous year, again after a few years of flat or declining attendance. Attendance for all concerts given by orchestras - including family, education, pops, chamber, summer, and youth concerts - was also up 11%.
Prof. Flanagan points to the fact that musicians' wage increases outpaced inflation during the period of his study. I think it is important to note that the 3.8% average annual increase in the salary of the orchestras he studied is 0.1% over the rate of increase for liberal arts college faculty during that same period, 0.2% under the rate of increase for employees of hospitals, and precisely the same rate as other health-service industry employees (these figures are from the U. S. Bureau of Labor Statistics). Thus, musicians' salaries track extremely well with those of other employees in the non-profit sector. It is also very important to note that Prof. Flanagan excluded musicians in hundreds of orchestras with budgets smaller than his sample (which consisted of the 50 largest orchestras).
The issue of price elasticity is raised in the report; interestingly, for the past three or four years this issue has been in the forefront of the minds of orchestra administrators. A number of orchestras have explored ways of significantly reducing some or all ticket prices, which has resulted in both much fuller houses and a greater level of excitement about their orchestras in the donor community, in turn resulting in increased contributed income.
What I have learned, in four years of visiting and spending a day with 125 different American symphony orchestras, is that it is impossible to generalize - but that a great many of them have been very smart, very flexible, and dynamic in dealing with different economic conditions. Orchestras that are attentive to changing demands and the very nature of their audiences are not only maintaining but increasing attendance. Orchestras attentive to their entire communities (beyond just their subscribers) are also raising more money, and operating in fiscally balanced ways. As I said earlier, Prof. Flanagan's report is a valuable addition to the research that has been done about orchestras, and will provide the field with useful information that will be of use in continuing to adapt to our environment as it changes. But anyone who draws from it the conclusion that orchestras are in peril runs the risk of subjecting themselves to Mark Twain's famous quote: "The report of my death was an exaggeration."
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