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Minnesota Orch loses $1.1m despite not paying musicians

There have been no performances for 14 months and they managed to lose a fortune.

Board chairman Jon Campbell said: ‘The fact that the organization’s deficit is substantially smaller in a year without any performances indicates the degree to which this business model is out of alignment.’

He was duly re-elected as chair by the annual meeting.

What planet do these people live on? Read a report here in a newspaper published by a member of the orch board.

musicians for minn

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Comments

  1. Sanda Schuldmann says:

    No performances for 14 mos and where is the money going? This is incredible.
    I hope that the orchestra did not have trustees’ insurance and they get sued and pay out of their pockets for what is owed.

    • It’s a nice idea, but (other than the State, for the money it gave toward the renovation of Orchestra Hall) who would have legal standing to sue? What compensatable damages could they claim?

    • To Michael Henson. Get rid and save 600,000dollars at least.

  2. How about a business model that does not include paying about $900,000 to labor lawyers? Looks like one that is just about breaks even. Seriously, nearly $1M to lockout lawyers? In my opinion, there have been strategic errors made by both sides, but using donated money (which was the only income last year) for ‘lockout expenses’ is unconscionable.

  3. As an outsider, it seems like there’s a lot of financial mismanagement going on. I hope that they have a good reason for losing so much money.

    • Building an orchestra costs quite a bit of money, but deliberately destroying one seems to be expensive as well.

  4. Pay no attention to those men behind the curtain. They still think they’re in control of the situation, but are simply “playing chicken with themselves” as one blogger has written. In due course, they will fade from the scene or will be forced to do so by state authorities. Meanwhile, the incredibly strong and resilient Musicians of the Minnesota Orchestra continue planning their upcoming Winter/Spring season of 8-10 concerts featuring “household name star performers” who have offered to support the musicians. Keeping the Music Alive!

  5. eh? This seems fairly reasonable.
    1. no performances = no income (from ticket sales or sponsorship for performances), therefore, with a staff still to pay and facilities to maintain, predictably a loss is made
    2. if a loss made when ‘nothing’ happens is *smaller* than a loss made when income-driving activities are happening (i.e. concerts), then it does indeed suggest that something is awry with the basic, existing business model of concert-giving, which is what Mr. Campbell has said.

    We can argue over what needs to change in the “basic business model” to make it more successful and therefore sustainable (higher ticket prices? greater income from elsewhere? spend less by reducing wages? spend less by reducing the size of the orchestra? spend less by other cuts?) but as a statement of fact I don’t, on the face of it, see much inaccurate with Jon Campbell’s assertion.

    • You seem to be unaware that the MOA consults with their PR firm to decide what size deficits to report. The numbers are smoke and mirrors.

      • Steve Foster says:

        The numbers are everything, and since some choose not to consider that is why they’re in this mess.

        • Yes, the numbers are everything. (Or, if not everything, certainly crucial.)

          That’s why it’s so important that they be accurate. And if a PR consultant, rather than an accountant, is the one leading the MOA in deciding when and how to report those numbers, it’s a pretty good bet that accuracy is not the MOA’s top concern.

          In fact, since the MOA has been caught lying about the state of its finances over the past three or four years, we already know that accuracy isn’t their top concern.

          The musicians have indicated that they’re prepared to accommodate themselves to financial reality. But they want to be able to look at the books, with an auditor not in the MOA’s employ, so they can confirm what the financial reality really is.

          Not unreasonably, the Minnesota Orchestra musicians aren’t interested in taking pay cuts just so that Michael Henson can get some more $200,000 bonuses. Especially not if they’ll be expected to play back-up band to second- or third-tier pop stars and accompany receptions at Board members’ homes in the bargain.

    • Indeed Anon,

      They couldn’t avoid these other costs, although they weren’t receiving any revenue during this time. However, any average accountant would forecast it 14 months ago and very precisely especially since they are fixed costs.

      This figure shouldn’t be a surprise to any one of the orchestra administration, but just to outsiders and only due to the end year balance sheet necessity to be publicized (For some kind of enterprises, I don’t know about an orchestra). They were absolutely running onto this risk since the very beginning of their decisions. I think that Jon Campbell is trying to say that even with all revenue expected during these 14 months, the deficit would be higher because it wouldn’t cover the variable costs. However and again, Mr. Campbell didn’t need to arise at this point to identified it, since any financial planning and accounting forecast must indicate this problem that must the solve before the business even start. If the administrator and team don’t know the solution, they must be changed. However, he is saying that doing nothing cause less deficit and he is re-elected. I want to be under this board!

  6. Somehow, they will still find a way to try to blame the MO musicians…not this time!

  7. Unbelievable. I’m living in an alternate universe. This whole affair has moved into a sinister reality that goes way beyond a mere labor issue.

  8. But wait! What’s this?

    “Significantly for the course of labor negotiations, the board re-elected Campbell as chairman. Richard Davis remains as immediate past chairman. Those two — who have spearheaded the board’s efforts to secure pay cuts from musicians — will remain in office until a settlement is reached. They then will step down and new leaders will be elected, spokeswoman Gwen Pappas said.

  9. Nearly 20% of the deficit can be attributed to Michael Henson’s 2012 bonuses…

    • And a full 100% of the deficit can be accounted for by just half of the amount paid to the MO players during this period. ($2.2m was paid out to the players and I suggest quite rightly so.) What is your point?

  10. This board is a complete embarrassment to Minnesota. The only hope now is legislative intervention.

  11. ” … business model is out of alignment.”

    That, alas, is the extent of his thinking.

    If Western art music had depended on business models, it would not exist. We would have no musical notation, no polyphony, no opera, no classical forms, no symphony orchestras.

    How does Jon Campbell think these came about? If he knew, he might grasp his chairman’s responsibility to maintain what earlier Minnesota patrons have (had) built up.

    But he is on the board for social reasons and does not understand patronage. Instead he brings only the skills he uses at work.

    And the piece of paper that sent him — is it Wells Fargo Bank? — lacking a mind, obviously cannot function as patron.

  12. I would suggest looking no further than Detroit for a viable business model. Last year, the DSO had ticket sales of $6m and fundraising of $18M from 10,000 donors. According to Wikipedia the GDP (2012) in Minneapolis metro is $220 billion, and in Detroit metro $208 billion. MOA had ticket sales of $6M in 2012 but only raised $12M. My instinct tells me that the MOA should be able to at least match the results in Detroit.

  13. As no one else has corrected you, Norman, I feel compelled to say that your headline is incorrect as the musicians were in fact paid 2.2 million dollars for the fiscal year.

    • Robert Fitzpatrick says:

      IMHO, the headline IS correct. The deficit of $1.1M is the difference between expenses (including $2,2M for one month of musicians’ salaries & benefits in September 2012) and income for FY2013 which closed on August 31.. The musicians were NOT paid for the remaining 11 months of the fiscal year. Someone has already mentioned that this is a PR ploy and I agree. By showing a deficit based on a 5% draw on the endowment, management is trying to prove that their “business model” must be adjusted. They could have chosen to show a surplus, break-even, or a bigger deficit by manipulating the endowment draw and by not taking all those charges (lawyers, etc) in the year that just closed. In the orchestra world, some are virtuosos and some are fakers. I think it’s clear where the MOA management fits. Virtuoso fakers?

      • I take your point, but, in the interest of accuracy, the 2.2 million was for September and eleven months of unemployment expenses. So at least some of the musicians were paid during the lockout.

  14. Robert Fitzpatrick says:

    Yes, they were partially compensated by the State of Minnesota unemployment fund as of the beginning of the lockout; MOA direct payroll and benefits for the musicians ceased on Oct. 1 2012. Employers are required to make payments to support this fund, I believe, especially when 100 of their employees are suddenly claiming State benefits. I suggest that you read this: http://www.polyphonic.org/2013/12/12/another-missed-opportunity/

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