The cost squeeze

Following my previous post about the unfortunate Philadelphia Orchestra — and why their bankruptcy could be a tipping point for the entire classical music business — here are some gloomy details. Sorry for the gloom, but it’s important to understand what’s going on.

Orchestras are caught in a cost squeeze, a spiral of financial distress. Nor are they alone. Our economy is clearly going through what we might politely call a major reorganization. And other cultural organizations feel the pinch. Today ArtsJournal linked to a story about financial woes at the New York City Ballet, in which we read about “the tough economic conditions affecting all cultural organizations, namely a drop in repeat attendance and flat fund-raising.”

For another overall description of what’s happening, here’s what the Philadelphia Orchestra said in a message to its patrons: “Our structural deficit has been created by a decline in ticket revenues, decreased donations, eroding endowment income, pension obligations, contractual agreements, and operational costs.” Note the term “structural deficit.” This means not just a history of losing money, but a built-in guarantee that you’ll lose money, because what you do — putting on concerts — costs more money than you’re able to take in.

The structural deficit, said the orchestra (in the document linked above), is $14.5 million each year. The Philadelphia musicians, we know, think these problems could have been avoided, that they stem from bad management. But other organizations have them, and in fact they’re endemic throughout the orchestra business, whether orchestras choose to talk about them publicly or not. I first heard about structural deficits years ago, at a private meeting, from people who ran major orchestras that weren’t Philadelphia.

Next: the causes of the problem, in more detail. (I’ll also post some things that aren’t as depressing. Though remember that I’ve also said this should be a time when we inspire ourselves even more strongly with our love for classical music. This will see us through the crisis, and help resolve it. 
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Comments

  1. says

    Greg, I’ve always found what you said about orchestras very enlightening and poignant. Joe at http://www.joemusicology.com seems to disagree with you and me (my blog’s most recent post is on this same subject.)

    I don’t know if some people just don’t want to come to grips with reality and think we need to prop up orchestras arbitrarily for the “greater good.” There seems to be a knee-jerk reaction in the community to save a ‘sinking ship’ as it seems.

  2. says

    I think it’s a classic case of denial on the part of orchestra musicians.

    As Steven points out on his blog, there are more cost effective ways to access great performances, both archival and current productions. We’re in the era of instant gratification; for better or worse, technology has altered our lives.

  3. Drew Cady says

    Greg:

    Thank you for saying it! ‘Structural deficit’ was a dirty word (phrase?) for too many years in the board rooms and negotiating meetings of the orchestra business. Now the expected economic outcome is occurring based upon the evolution (if you can call it that?) of our ‘cultural world’. When a classical art form exists for so many years on the very fringe of the popular culture, how is it possible that major change such as we are now seeing would not have been anticipated…decades ago? Old patterns are hard to erase and supplant with more realistic ones. Re-imagining the Symphonic experience within the context of this popular culture is likely the only answer, if orchestras are to survive into the future. Decisions made at the top of these ‘archaic’ institutions are rarely long term. They are studied to keep the orchestra in business… for the short term. What is needed is a trend and evolution savvy structure, which allows the orchestra to revive its former role as a place of musical experimentation, while at the same time offering performance of a well rounded array of great classical treasures. Education from within is essential; waiting for public education is naive . Not an easy solution in these austere times, but critical for long term survival. There are examples of this all over the industry now. Disseminate (and fund) these creative archetypes~!

    Drew

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