Why did the Big Five commission McKinsey to make these reports? (See my previous post.)
Because by the end of the 1960s, orchestras were having bad financial problems. The Big Five first pondered this alone, then convened a conference of many orchestras, and brought in McKinsey. I learned this from Howard Shanet’s book Philharmonic, a history of the New York Philharmonic. I then asked the Philharmonic’s archivists if they had the report, and they got me a copy. (Thanks, Richard and Barbara!)
And what the report says is fascinating. Large American orchestras, McKinsey decided, were in a financial bind in part because of their expansion to 52-week operation early in the ’60s, and in part because they’d raised the weekly minimum musicians’ pay. This last, of course, was a double whammy. The musicians were getting more each week, and they were also being paid for more weeks. The report notes, however, that this wasn’t the only increased cost from the 52-week operation, so expenses ballooned even more than musicians’ salaries would account for. The basic point is pretty clear. Concerts didn’t pay for themselves; ticket sales didn’t cover their costs. So the more of them you gave, the more money you lost, and the worse your finances looked.
What solution did McKinsey propose? Here we breathe the air of another era. They mention, more or less in passing, the revenue from “private support” (a category they don’t break down into further subdivisions). But they don’t suggest that it could be increased. And they reject raising ticket prices, because that, they say, “would be inconsistent with [the orchestras'] objective of making orchestra performances available to a wide range of people.”
Instead, they offer what now seems like a fantasy, an increase in federal government support. The federal government, they say, should pay 25 percent of all orchestral expenses. This, they add, ought to seem perfectly reasonable, since European governments pay 90 percent!
Needless to say, this never happened. Instead, orchestras increased their private support. I’d love to know more of that story — how it happened, what stages it went through (and when those stages happened), how hard or easy it was, what people thought of it.
But here’s a reason why this history is especially interesting now. I’ve sometimes been told that the current classical music crisis can’t be as bad as I and others think, because “people always say classical music is in trouble.” I’ve even had the orchestral financial crisis in the 1960s thrown in my face. “See? They thought they’d die then, and they didn’t! So why should they be dying now?”
The reasoning here is sloppy, to say the least. How do we know there’s any relationship between the two crises? Maybe they had different causes. We have to look carefully at the facts in each era, before we can draw any conclusions. And we also have to look at the challenges faced each time. Even if the problems were similar, what were the solutions last time? Will they work now? Are other solutions possible now?
The McKinsey report shows that the 1960s problems had a different cause from the problems now. In the 1960s, orchestras got in trouble because they expanded their operations. Now they’re in trouble because they’re having problems simply staying where they are. Today’s troubles, we might conclude from that, are very likely worse.
But in one very basic way, the problems are similar. Both now and in the ’70s, orchestras need to find more money. In the ’70s, they did that by increasing private contributions. Can they do that now? I spent some time recently with one very well-run orchestra, which looked into its future and concluded that it couldn’t thrive unless it increased private donations to a rate for which there isn’t any precedent in orchestral history. They were talking specifically about the percentage of subscribers who contribute money.
The industry average seems to be — we need better stats for this — between 35 and 40 percent. This orchestra thinks it needs to raise that far beyond those numbers. Can they do that? How can they do that? And is there a limit to how far they can go?
That last question is very important, because of a theory floated many years ago by William J. Baumol and William G. Bowen, and published in their 1966 book, Performing Arts: The Economic Dilemma. According to this theory, the performing arts don’t show the increased labor productivity found in other sectors of the economy. That’s clearly true of orchestras — while manufacturing concerns keep making more and more goods with the same number of workers (or fewer), orchestras still need the same number of musicians to play the same concerts.
And so the performing arts over time get more and more expensive, compared to other activities. Corporations can pay their workers more and more, because the workers produce more and more. (Well unions played a part, too; the corporations would have been happy to keep paying their workers at the old rates.) Orchestras have to pay musicians more and more, too, over time, to keep up with the income other highly qualified professional people earn. But their activities can’t sustain these pay increases, because the musicians aren’t producing any more than they previously did. (And there of course are other cost increases, too.)
So there’s always a struggle to find new revenue. A corporation just sells more, or introduces new product lines. An orchestra has to find new and previously unheard-of ways to get money. We’ve seen them struggle with that over time. That’s one big reason why the orchestra business has recurring crises.
But the present crisis, I’d suggest, is particularly bad. Orchestras now have two problems they never faced before. One is declining ticket sales. Wouldn’t you rather have a crisis when your halls, at least, are always full? And the other new problem, surely related to the first, is a decline in interest in classical music throughout our society. In 1972, when McKinsey made its report, Time magazine wrote far more about classical music than it did about pop. I mention Time only because I once sat in their library, counting the number of classical and pop music articles in every issue from 1980 to 1990. In 1980, there were approximately twice as many classical articles as pop; by 1990, the proportions had reversed. And now, of course, Time hardly mentions classical music at all.
We can all supply other examples. There are far fewer classical radio stations than there used to be, big classical record labels can’t make a profit any more from classical music, classical record stores are dying out. And pop culture rules our world today in ways that nobody could have imagined in 1972. I’m not going to say that orchestras can’t solve their problems now, but at the very least, they’re up against barriers they never had before.