The Peter Gelb furor (3)

I first thought I’d write this post on Peter Gelb’s two big failures. Or actually three:

– a prickly personality

– failure to look at things other than productions to make the Met lively

– and then, of course, the failure to make even the productions exciting

Which last, as I now see it, maybe shouldn’t have been a surprise, because in his previous position as head of Sony Classical, the big record label, his artistic initiatives weren’t successful. 

But I’ll save all this, because as I sat down to write, I thought it would be good to explain why — at least in my view — the Met is in trouble. The reasons go deeper than you might think. 

For those who haven’t read them, here my two previous Peter Gelb posts: 

The Peter Gelb Furor: About why Peter’s right when he says opera attendance is declining (I talk about the US, and will say something about other countries later).

The Peter Gelb Furor (2): About why he’s more right than the unions, when he says that pay for unionized employees is the biggest reason costs are rising, while the unions say no, it’s extravagant new productions.

So now let’s step back a moment, and ask why the Met is in crisis. At bottom, the Met is in trouble because almost all big classical music institutions are, the reason being rising costs and falling income.

rising costs blogThis is a long-term problem. The big orchestras have it. They suffer from what they themselves — in private — call structural deficits. For decades they’ve been spending more than they’ve been taking in, a condition masked by the business cycle, the alternation of good and bad economic times. During good times, the orchestras have (at least in the past) been comfortably flush, which — naively, perhaps — kept them from seeing that the bad times more than wiped out the gains the good times had made.

I first heard people who run orchestras talking about this a decade ago. Privately, once again. But by now, I’d think most people in the orchestra business know they have this extremely serious problem, whose existence was demonstrated in Robert Flanagan’s book The Perilous Lives of Symphony Orchestras, the only study of orchestra finances ever done by an economist.

The problem is serious because it means that orchestras — as they’ve functioned in our time — are unsustainable. Something has to change. It may not be possible to give lavish concerts three nights a week for half the year, with musicians paid what they’re paid now.

Or maybe it is possible, but no one has yet figured out how. Current thinking says that future orchestras will play a much more active role in their communities, with musicians doing far more outreach, educational work, and advocacy than they do now. But what will it mean financially if orchestra musicians spend more time doing smallish (though numerous) community events, and less time playing Mahler in their concert hall? How much income will that generate? How much can musicians be paid for it? I don’t think anyone knows. It’s a brave new world we haven’t entered yet.

The cost disease

All of this applies to the Met as well (except the community and education efforts, which I don’t think the company has imagined doing on the scale that orchestras envisage). But let’s step back again for a moment, and ask why structural deficits happen.

The first reason is the cost disease. This is a principle of economics, stressed in Bob Flanagan’s book, because as an economist he’d of course bring basic economic theory into his discussion. The cost disease afflicts economic entities that don’t show productivity gains over time, because even after decades have passed they need the same number of people to produce what they give to the world. Thus they fall behind financially. They have to compete with companies elsewhere in the economy that — thanks to gains in productivity — can produce more and more cars, toys, orange juice, whatever, at lower and lower cost.

These companies now set the standard. They have, just for instance, money on hand to retool their offices when new technology comes out. They can set the going rate for wages and salaries. Institutions afflicted by the cost disease have to keep up with all this, but because they can’t increase their productivity, they just don’t have the cash to do it easily. They have to keep looking for more sources of funds.

 

The classic examples of cost-disease enterprises are hospitals (which can’t cut back on the number of doctors and nurses), universities (which still need a large teaching staff, and many prestigious professors doing research). Plus orchestras, since you can’t decide you’ll now play Mahler with only one bassoon.

A drop in demand

Anyone with an eye to current headlines, reading this, might well say, “Bingo!” Because haven’t healthcare costs and university tuition been surging upward? The cost disease is a big reason why. And the current classical music crisis shows the cost disease slamming into orchestras , and also opera companies, which have the same kind of constraints. (Smaller ones can reduce their orchestras more than orchestras can, but not by much.)

Not, by the way, that the cost disease hasn’t hit classical music before. This hasn’t been adequately studied (I don’t know any writing on it), but in the 1960s, as far as I know, classical music institutions didn’t have fundraising staffs or fundraising budgets. And then by the mid-‘70s they’d developed at least the outlines of the fundraising structure we see now, in which institutions just about center their work on professional fundraising, executive directors spend around 90% of their time raising money, and the development department, which raises funds, is the largest one the institution has. Which means that by the mid-70s, these institutions were able to raise more money than they ever did before. Which the cost disease would force them to do.

But the cost disease isn’t the only problem. We also have lessening demand, making itself felt in declining ticket sales, all ultimately due to a society-wide loss of interest in classical music. Which, of course, is a perfect storm. Costs keep rising. Institutions, thanks to the cost disease, keep needing more money just to stay in the same place. And now fewer people are buying tickets! That means less income, less money coming in to meet the rising costs. (I’ve heard orchestra insiders say that the loss of ticket sales in the past two decades is large enough to create the persistent deficits that many orchestras now have.)

And if there’s less interest in classical music, then of course it’s harder to raise funds.

While at the Met…

All this of course slams into the Met. But Peter Gelb has one further problem. His productions haven’t been good. So at a time when costs are rising, and opera ticket sales are falling all over the US, they’re falling even more at the Met, because some not negligibly small number of people don’t want to see what Peter’s putting on the stage,

So no wonder Peter urgently feels he has to do something. Of course that means more than confronting the unions. The Met has to become hot again, as it briefly was when Peter first came there. It has to be buzzing with excitement that even people who don’t normally go to the opera pick up on.

But even then — and even if the productions were terrific — the confrontation would have to happen, as it’s happened elsewhere, because the cost structure isn’t sustainable. It would just be easier — much easier — if the productions were good.

To reuse some words from my last post: Wouldn’t Peter’s negotiating position be much stronger if his new productions had been triumphs, and a whole new audience — as was his original plan — came flocking to see them?

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Comments

  1. ariel says

    Mr. Sandow never ceases to amaze… he touches on so many truths and yet with all
    his insights seems to miss the mark .Mr.Gelb
    and the unions must do this public phony dance of death every few years to validate their positions in the public eye.
    The dance in past was of some interest to a
    segment of the population but now this
    population has shrunk to the point where
    opera ,and symphony orchestras mean very little to the general scheme of things .Mr.
    Sandow is not a new arrival on the scene
    he has enough mileage to perceive what is at the crux of this latest Met -union dance which is but a by product , yet he joins in the dance and avoids the crux of the problem.
    One wonders , why ?

  2. says

    I’d like to see classical organizations and their unions and supporters have more awareness of the cost disease. Much of the economic trouble is NOT the fault of greedy employees or wasteful administrators; it’s due to the impersonal force Greg describes.

    Here’s another way to think about it: average productivity has been rising since the industrial revolution, and as with any average, some sectors increase productivity faster and others more slowly. Symphonies and opera companies increase productivity more slowly than the average. (They can make some of their work more productive, but the core activities continue to take the same number of people and the same amount of time.) As a result, symphonies and opera companies see their labor costs rise faster than the rest of the economy.

    Cutting salaries is not a long-term solution to this problem, because those lowered labor costs will continue to increase faster than the rest of the economy.

    Greg told me about William J. Baumol’s book, The Cost Disease, and it offers one way to address the trouble. Productivity increases in the economy as a whole could more than pay the rising costs in those sectors most impacted by cost disease (universities, medical care, performing arts, etc.) But of course we would have to agree, as a society, to direct our wealth increases to those endeavors.

  3. Constantine A. Papas, MD says

    Congratulations. Excellent assessment! Your comparisons of the Met’s problems to healthcare and hospitals’ is right on target. And I know a little bit about healthcare and hospitals. Every organization, for profit or nonprofit, has to abide by the cardinal paradigms the entire industry lives by in a free, completive market: economy: supply and demand; price per unit of service or product; how many units need to sell to recoup the cost of production, hoping to incurring some profit; how much is the customer willing to pay, etc. Extensive and diligent market research is a must before any capital is invested..
    Unfortunately, nonprofit organizations such as the Met and hospitals have excepted themselves from the rules of the game. Why? Because the product is of the highest human value possible: Art! Selling this narrative for a long time attracted big time donors, some of which use arts for social climbing, caring less about music. When donations start falling, cash shortages will compromise the bottom line and threaten the existence of an institution, especially if revenues do not meet expectations.
    When there’s a financial crisis in an organization, finger pointing is counterproductive, denoting lack of leadership on both sides: management and labor.
    Again, following the dictum of business world, Met management and labor have to initiate and intensive brainstorming, putting on the table an institution their lives depend on. Name-calling, arrogance or ignorance from either side will accomplish nothing positive.

  4. says

    Before we commit to shadowy economic forces and cultural trends destined to doom classical music, shouldn’t we be looking at the elephant in the room, e.g. the massive recession the U.S. just went through and is still recovering from? I’m certainly open to other possibilities, but if you’re looking for an immediate reason why a “luxury good” like classical music is in trouble right now I think you first need to explain why that is NOT mostly due to incomes/employment being still being well below trend. Given the recent inverse example of great ticket sales/proliferation of classical music orgs during the 90s boom it seems like that’s the story to beat. Now, New York may have escaped longer than most given a core of recession proof rich people attending and donating, but eventually that marginal ticket buyer spending their dollars on improving their household debt position rather than an opera subscription is going to take a toll.

  5. Jim Van Sant says

    Music Education.

    This is a root factor in why demand for live classical music
    is declining in most areas – not all, but most. I am surprised
    Mr Sandow overlooked it.
    Many private schools and some public schools still offer
    applied music education as well as ‘music appreciation’
    studies. But the vast majority do not. Classical music is
    over and done with in the large majority of schools
    When I was a kid, more than half a century ago,
    we studied music routinely several days a week in a small
    mid-west town’s public schools, something unheard of
    these days. Remember Tonets? Little tiny wind
    instruments? They taught us notes. We listened to records
    of Schubert’s music and the teacher talked about it and
    it’s context. And so on; most older adults now either enjoyed
    the benefits of such or heard about it from their parents.
    Here is the point: Music education worked strongly in
    favor of sustaining attendance at classical music venues,
    including opera.
    As I said: It’s a root problem. I do not think improvement
    will come in the fortunes of classical music institutions
    until this matter of educating young children in music is
    addressed, and I am not optimistic that it will be.
    # # #

  6. says

    Thank you for Greg for the information about this case. Its most interetsing. Today is August 2nd in Australia so I wonder whether the parties came to the table. Productivity gains can be made by organizations if each party agree to give up parts of their conditions. Some of these are stepped in time and unions use them as bargaining tools. eg- overtime provisions, working different hours and locations, losing some special provisions. (eg touring provsions, tools, no Sunday working,) There can even be an exchange of some provisions to include more friendly provisions such as family, leave or other provsions that todays workers want to balance their working and family or life styles. Also another way to gain productivity is via pay rise dependant on performance targets. Its a touchy subject and unions fight against it, but many work places now have them and flourish with them. From an Australian perspective the wages of choiristers at the Met do seem extremely high. Would choiristers be earning large overtime fees which boost their earnings? In which case the management of schedules and personel needs assessing. Well its making for good copy from the American press!

  7. John Schuster-Craig says

    Symphony orchestras are dying. Opera companies are not – all one has to do is look at Opera Philadelphia, Opera Theatre of Saint Louis, Minnesota Opera, Cincinnati Opera – in the hinterlands, opera is alive and well, because companies are not afraid to do new music. For the last three years, my wife and I have traveled some distance to St. Louis – we’ve seen Unsuk Chin’s Alice in Wonderland, Terence Blanchard’s Champion, and Ricky Ian Gordon’s 27. Full houses, and a generationally diverse (for the Blanchard, a racially diverse) audience. Outside of New York, opera – and *new* opera – is alive and well.
    Symphonies are not alive and well, because they’ve never grown beyond a heavily Germanic repertoire, and because they have heavier fixed labor costs (you’re bassoonist is with you all year, and you need to pay him benefits; your soprano for your season-opening opera is gone after the curtain goes down). The Met, of course, is a special case: it has to pay salary and benefits for a huge orchestra, chorus, and staff, it’s aging audience wants traditional repertoire, and Gelb’s “experiments” – more theatrical than musical – have often misfired (Ades The Tempest was an exception).

  8. ariel says

    Mr.Van Sant is spot on in his observation, and sadly more so in his final thought . Mr.Sandow
    is to be commended in giving this space to Mr. Van Sant but why he himself does not touch upon this observation is a mystery . The current Met problem is not all about money and union greed -it has much to do
    with the” culture “of the times = “education”
    and the little””culture” that came with it was once the property of universities which now are job placement factories.The arts
    are secondary if any standing at all .One has to take note that the Met( classical music) is considered “elitist ” the word used in a derogatory sense by most citizens
    but not so when referring to men who run up and down a field with a football. Mr. Van
    Sant must note that football, basket ball,
    soccer ,etc. take precedence over any
    music class. so much for the future .

    • Philip Arlington says

      He has mentioned the issue many times before, but he can’t cover every relevant point in every article.