Delegates attending the 2004 ICSOM Conference in Salt Lake City will remember a discussion forum headed by ICSOM Counsel Leonard Leibowitz and then-Member at Large Richard Levine. The topic was structural deficits, a buzzword that had been appearing at bargaining tables around the country. That discussion, which centered on whether orchestra financial problems were cyclical or structural, was quite similar to the dialogue begun in late spring of 2003 by the Elephant Task Force (ETF), a subcommittee of Mellon Forum participants (funded by the Andrew W. Mellon Foundation).
Following a year of discussions, the entire ICSOM Governing Board was invited to attend a presentation of the findings of the ETF, much of which concluded that each orchestra’s financial situation is unique and that each orchestra has a unique place in its own community. The ETF also identified four areas for individual orchestral self-assessment: community relationships (how the orchestra meaningfully connects with the community to create true public value), internal culture (how orchestra constituents can work together in mutually supportive and cooperative ways), artistic activities (how the orchestra uses resources in service to the community, to orchestra constituents, and to the art form), and financial structure (how an orchestra secures its revenues and handles its expenditures to achieve balance and fiscal viability). At that point, the ETF had devised a financial structure model for orchestra self-evaluation.
Once this information was presented, the ETF appeared to have completed its task. Many months later, however, Mellon reconvened ETF members—though by this time some members, including ICSOM President Brian Rood, no longer participated in the ETF or other Mellon activities. Their task, as funded by Mellon, was to identify an economics scholar who could assess the “cyclical versus structural” question. As a result of their discussions, Professor Robert J. Flanagan of Stanford University’s Graduate School of Business was commissioned in March 2006 to conduct an analysis of the economic health of orchestras, with the objective of assessing the cyclical and structural influences thereon.
Needless to say, there are no earth-shattering conclusions in “The Economic Environment of American Symphony Orchestras,” released by Flanagan in March 2008. (Mellon chose not to publish the report and requested that its release be delayed, but that request was disregarded.) The report itself goes into great detail about the so-called performance income gap, which is the shortfall between performance revenue and performance expenses that orchestras sustain. Flanagan notes that when orchestral salaries and expenses rise, the performance income gap increases. (Surprise!) In addressing the many issues that lead to this gap, his report gives an overview of trends in concert attendance, artistic costs (i.e., musician costs), and public and private support and endowments. Some of the newer charts show changes in distribution of expenses, but, again, there are no big surprises. The financial and operational data on U.S. orchestras used by Flanagan, which were supplied by the League of American Orchestras, were controversial. For more than three years, representatives from the League, ICSOM, ROPA, and the AFM have been meeting for the Collaborative Data Project, trying to reconcile the different financial reporting methods used when data is submitted to the League. So far, there has been no resolution in this project. Flanagan’s conclusions are culled from data provided on 63 sample orchestras, but only 32 had the full 17 years of data covered by the report (from 1987 to 2003). Those 32 orchestras are: Atlanta, Baltimore, Boston, Chicago, Cincinnati, Cleveland, Dallas, Detroit, Fort Wayne, Fort Worth, Grand Rapids, Indianapolis, Jacksonville, Kansas City, Knoxville, Los Angeles, Milwaukee, Minnesota, National, New Jersey, New York, Omaha, Oregon, Pacific, Philadelphia, Phoenix, Pittsburg, Richmond, Saint Paul, San Francisco, Seattle, and Utah. Other sample orchestras had gaps in reported data occurring at different times. Those orchestras reported between 4 and 16 years of data.
In July 2007, ICSOM Chair Bruce Ridge, President Brian Rood, and I attended a two-day meeting to critique an earlier draft of the report titled “American Symphony Orchestra Finances at the Turn of the Century.” I can report that certain changes were made, including the removal of some graphs and exhibits, as well as language changes and the arrangement of the document. However, our key concerns, that there are so many unmentioned and unexplained idiosyncrasies in our industry that fair comparisons cannot be made without misinterpretation and misrepresentation (as has occurred in the past), as well as concerns that publication of the document could do damage to our industry, fell on deaf ears.
I also found that certain references in the report have been changed. For instance, comparison groups, which were previously classified as “professional white collar,” “blue collar,” and “service industry workers,” are now identified as “unionized workers in the United States,” “nonunion workers,” and “other professional service workers.” There are also references to the fact that musician wages, benefits, and terms and conditions (including orchestra size) are negotiated through collective bargaining and that the resulting agreements cause an impediment to adjustment or change during economic and financial downturns. (At this point I ask myself how many times musicians and unions have reopened their contracts when all parties are convinced it is the appropriate thing to do. Unions are not as intractable as Flanagan would have others believe.)
One of Flanagan’s key mistakes in this report (aside from appearing to go well beyond the scope of his original mandate to assess the cyclical and structural influences) is his attempt to compare the orchestra industry to the manufacturing industry, especially when productivity cannot realistically be a comparable factor. As orchestral musicians know, we are the product. If you cut weeks from a season or reduce the size of an orchestra, it is comparable to selling a car without doors or seat belts. Who would buy that?
There is one important point we noticed buried in the report’s Executive Summary. Holding the influence of general economic conditions on symphony orchestras constant, it says that “there was a modest trend improvement in the overall surplus/deficit position of orchestras in the late 20th century.” (Yes, improvement.) Also, there is interesting information contained in a statement from the Stanford Graduate School of Business that accompanies Flanagan’s release of his report. It first mentions that most orchestras ran deficits with endowment money excluded. The statement then has this to say about the 17 orchestras in the report that normally remained in the black even with that important resource excluded: “Flanagan said the study’s scope did not try to identify similarities among the 17 symphonies that usually did have surpluses. Overall, he said, he noticed how widely all orchestras studied varied in terms of expenses, sources of income, and even how they invested their endowments.” Now, that’s food for thought.
Missing from this document, over serious objection by ICSOM, ROPA, and the AFM last July, are: comparisons of administrative salaries; the rapid and significant increases in music director salaries, which, in terms of percentage, are well in excess of those of musicians (this reference was removed from the draft viewed last July); recognition of the massive amounts of free education and community performances provided by our institutions; and the recovery that seems to have occurred since the devastating effects of the bursting tech bubble and of the 9/11 attack (the report’s data ends only two years later).
I suppose the only consolation we can take from our two days spent in Chicago last July is in the Acknowledgement section of Flanagan’s report: “… while I have benefited immensely from the comments of these parties, I have not always accepted their suggestions.” No kidding!