I stumbled upon this article about a study done by Robert J. Flanagan, an economics professor at Stanford. The complete study is also linked as a PDF.

It poses some new ideas, and other things that are not news to most of us.

It does add another interesting 3rd party perspective to the mix among the discussions about the Columbus and Shreveport Symphonies.

I'm curious to hear your thoughts about it.

This message has been edited. Last edited by: flyingtom,

Without dismissing the report entirely, I just want to point out that this is essentially the same report that the Mellon Foundation's so-called "Elephant Task Force" commissions every few years. They get the report they're looking for every time, because they (and associated groups like the League of American Orchestras) supply the bulk of the information, and more importantly, they define what they want studied. While ICSOM has occasionally participated in the task force's discussions, there have always been strong concerns among orchestra musicians that the task force exists to seek out statistics that will support orchestra managements that want to claim the sky is falling and slash organizational costs in response.

In particular, this Stanford report, while I don't doubt its independence and scholarly pedigree, seems like it's basically attempting to analyze a non-profit industry using for-profit business criteria. For instance, the idea that orchestras should choke off salary growth because it's impossible to grow worker productivity the way giant for-profit corporations do shows a real lack of understanding of cultural business models.

I think there are some valuable pieces of information contained in the report, but the overall analysis is seriously shoddy. Of course, that's more or less how I felt about the last Mellon-funded study, and the one before that, and...

What I find most disheartening about the study is the claim that boards and managements AVOID getting tough in negotiations to cut costs. I think we can see that the opposite has been true on many, many occasions - especially in the past few years.

I find myself siding with Robert Levine's analysis pretty strongly.
http://theafmobserver.typepad.com/abu_bratsche/

In essence, there's really nothing "3rd party" about this study.

Of course orchestras spend too much. I don't know of any other industry that lives beyond their means then expects the public, corporations AND government to "bridge the funding gaps" (i.e., make up the big budget deficits with donations). And not only does this apply to orchestras, but all other "non-profit" performing arts organizations (although "non-profit" is a term should be addressed when some musicians, conductors, soloists and administrators are HUGE wage earners. But, since they are "artists," I guess that's supposed to make it right). "Non-profit" arts organizations will not continue to survive as employees and "star" soloists demand the sort of payments they feel they are entitled to. Until "non-profit" arts organizations learn to live within their means, we will be asked to bestow sympathy upon situations such as those in Columbus and Shreveport. I, however, will continue to turn on my laptop and download the music I like.

I agree, Sam. Just in the very first pages of the study, the source of the data seems like a red flag. But Sam, what is your definition of a cultural business? Isn't a business a business?

The sentiments expressed by elvin.chamberlain are unfortunately the sentiments I hear all too often when the current business model of orchestras are presented to non-musicians: it just doesn't seem to match up with the evolution of society, and the only people who think it does (or should) are the the people whose livelihoods are at stake.

I think Robert Levine sums it up...

"I’ve always believed that, in the end, what will determine the future of orchestras is whether or not anyone will want to hear us – not how much we cost."

In other words... supply and demand. But it seems that we keep turning that into a (usually hostile) "all or nothing" mindset when things start to break down. Is such a position really the only way to make this work?

This message has been edited. Last edited by: flyingtom,

Perhaps the author of the study, Professor Robert J. Flanagan could participate in this discussion to further discuss his findings. Has anyone thought to contact him?

Now that I've trashed the study as a whole, I should say that the bits I find most interesting and potentially useful are the ones that concern fundraising expenses and the way we raise money as an industry. We expend so much time and spend so much money to raise the funds we need to meet our budgets, and I know that it's frustrating to our development officers that so little is known, quantitatively, about what does and does not work in engaging the interest of donors.

What the Stanford study seems to suggest is that the big, lavish spending we do on gala celebrations, society ball-type parties, etc. is frequently greater than the dollar amounts we realize in return. If true, this could lead to a very real and substantial reassessment of the orchestral fundraising apparatus. And that is the kind of fresh thinking that, if applied correctly, could actually help orchestras in the long run.

quote:

What the Stanford study seems to suggest is that the big, lavish spending we do on gala celebrations, society ball-type parties, etc. is frequently greater than the dollar amounts we realize in return. If true, this could lead to a very real and substantial reassessment of the orchestral fundraising apparatus.

In some cases this is certainly true. I cancelled an annual gala event which the Bellevue Philharmonic had for over 25 years because it no longer made any money for us. In other cases, some non-profits make handsome sums of money through special events.

In Seattle there is a non-profit organization called PONCHO whose sole mission is to sponsor three high-priced auctions per year, then give the proceeds to local arts organizations in a two-county area.

Strange as it may sound, some people will only give if they get something in return. Take it from a guy who has been raising money for the arts for over 20 years!

The Pittsburgh Post-Gazette's music critic, Andrew Druckenbrod, is calling shenanigans on this whole study:

http://www.post-gazette.com/pg/08081/866768-386.stm

I appreciate the opportunity to participate in the discussion of my recent study of “The Economic Environment of American Symphony Orchestras” at the end of the 20th century. After reading the previous comments, there four points that I would like to make.

1. This was an independent research project, not a consulting project with a predetermined conclusion. Those familiar with independent academic research understand that neither Stanford University (my employer) nor any organizations that facilitated the study take any position on its results. I am solely responsible for the findings and I am happy to discuss them with the participants in this forum.

2. The report is an orchestra industry fact-finding study, which is intended to provide all who value live performances by symphony orchestras (as I do) with some basic information that can be used to develop approaches to ensuring the continued economic health of symphonies. I encourage those with an interest in the subject to read the report (with apologies for its length – at least the appendices can be skipped). The report can be found at:
http://www.gsb.stanford.edu/news/packages/pdf/Flanagan.pdf
(For better or worse, relying on the brief press release risks taking some issues out of context.) I believe that those who take the time to read or even skim the study will find that catchy phrases, such as “The imminent death of orchestras” have nothing to do with the actual content of the study. As many recognize, the basic economic challenges are not new, but the fraction of performance expenses covered by performance revenues continues to decline (even after adjusting for the effects of business cycles), so that the amount of nonperformance income that orchestras must raise to achieve financial balance will continue to increase.

3. The study describes changes in the structure of symphony revenues and expenses and relates these financial flows to three influences: (a) Orchestra policies (including ticket pricing, marketing expenditures, and fundraising expenses); (b) economic characteristics of the area in which an orchestra is located, and (c) competition for audiences and donations with other performing arts. I believe that one contribution of the study is in its description of how sensitive revenues and expenses are to these forces. In addition, there is a discussion of endowments and endowment policies—a subject that I believe will be of increasing importance in maintaining future economic balance in symphony orchestras.

4. Each group in the orchestra community may discover findings in the study that they take exception to or wish were different. For example, I know that some managers have reservations about the finding that fundraising expenditures may not pay for themselves in some orchestras. Similarly, some musicians may prefer a report without a discussion of artistic costs, and some board members may not be comfortable with the evidence on endowment practices. At the very least, such ferment signals the independence of the report. But these same findings also signal something far more important: No single “villain” emerges from this analysis, nor does any group get a free “pass.” Some readers may claim that the finding that no single “solution” will solve the economic challenges is “obvious,” but how many times have we heard one or another orchestra claim that "the" solution to its problems was "building an audience" (raising marketing expenses to “fill the concert hall”), or increased contributions (more fundraising expenditures), or building an endowment. In my opinion, all parties interested in the continued economic health of symphony orchestras can use the information in the report to devise combinations of orchestra policies that fit their local situation best.

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Originally posted by Tired Arms:
But Sam, what is your definition of a cultural business? Isn't a business a business?

No, a business is not just a business, and I shouldn't have to explain why on a message board devoted to arts issues. Microsoft is different than the Boston Symphony is different than the sandwich shop down the road from your house. The legalities are different, the business model is different, the very definition of "business" and the reason for the existence of the company is different.

I'm usually the first to say that orchestras could stand to reassess some of the particulars of our business model. But yet another voice from way outside the industry claiming that all we really need is to start acting like Fortune 500 companies is, frankly, a useless voice. I'm with Druckenbrod all the way on this one.

A business IS just a business. Yes, Microsoft is different than the Boston Symphony, the Columbus Symphony, and the Shreveport Symphony. However, I bet if Microsoft had a deficit or no demand for a product, I bet they would make cuts - as any business would. Only in the "non-profit" world is a business permitted to fail than expect the public, corporations, and businesses to bail it out. Orchestras should be expected to live within their means just like the REAL WORLD.

quote:

Originally posted by elvin.chamberlain:
Only in the "non-profit" world is a business permitted to fail than expect the public, corporations, and businesses to bail it out.

This is so wrongheaded and disconnected from capitalist reality that I need only two words to discredit it:
Bear Stearns.

quote:

A business IS just a business.

"Business" as we are using it here is defined as "the purchase and sale of goods in an attempt to make a profit." The whole point of Microsoft and your local sandwich shop is to make money. Software and sandwiches are simply the means to achieving that goal. If there is no demand for their product, there is no money coming in and their reason for existence is not met.

A non-profit business does not exist to make money. It raises money expressly to spend it in service of its mission, whether that mission is symphonic (which is far more than just performing subscription concerts), scientific, or the prevention of cruelty to those who cannot defend themselves, for example. Even the IRS, through its awarding of tax-exempt status to public charities, recognizes that the non-profit model is fundamentally different from the for-profit. The non-profit's mission IS its reason for existence - the raising of money is done in service of the mission, not only for the sake of making money.

Apples and oranges

The last paragraph of Mr. Flanagan's comment above I think is the issue we need to focus on. If we want this to get better, it takes work from EVERYONE, and not in this hostile finger pointing way that we all seem to be comfortable with.

It's clear that no one here actually read the entire study as he pointed out. Andrew Druckenbroad certainly didn't, which is why he doesn't quote the study at all, only an article ABOUT the study. That's pretty shoddy journalism, but many people are OK with that, because it rationalizes their opinions (like I'm sure the management of the Columbus Symphony felt about the Dispatch). Everyone is so one-sided about this issue (musicians and management alike) and we need to grow up.

I've read the whole study. And Druckenbrod wasn't basing his thoughts on an article about the study, but on the summary of the study that was released by the author for press use. Since such summaries are standard practice in academic circles, it is assumed that the primary conclusions of the study will be explained in the summary, and if there are specific questions a journalist needs addressed, s/he can refer to the full text.

quote:

The non-profit's mission IS its reason for existence - the raising of money is done in service of the mission, not only for the sake of making money.

To amplify on Ms. Freudigman's excellent post, every non-profit arts organization -- symphony, opera, theatre, dance, museum, whatever -- also makes a deliberate choice not to charge its public what it actually costs to produce those programs. Why? Because we believe the arts should be accessible to everyone in our communities.

In other words, if we charged people what it really costs us, the tickets would be three times as expensive, thus (most likely) diminishing our audience and (most likely) diminishing our ability to raise money in the community.

I saw that soloists and conductor's salaries have increased about the same rate as the musicians but what are the relative rates and percentage of the total expenses? Am I wrong in believing that the solists and conductors are paid at substantially higher rates? Could the MD do more for the high salaries received? What is the real draw of the solists? Do we need a solist for every concert? Couldn't orchestra members do more of the solist slots? Could we see more non-violin and non-piano solists to break things up a bit? What affect would this have on the expense line?

quote:

Originally posted by elvin.chamberlain:
A business IS just a business. Yes, Microsoft is different than the Boston Symphony, the Columbus Symphony, and the Shreveport Symphony. However, I bet if Microsoft had a deficit or no demand for a product, I bet they would make cuts - as any business would. Only in the "non-profit" world is a business permitted to fail than expect the public, corporations, and businesses to bail it out. Orchestras should be expected to live within their means just like the REAL WORLD.

Before the blind invocation of so-called "Real world" "business" techniques, some understanding of the principles and case studies of business need to be understood.

Lesson #1 for people who want to use corporate lingo in the management of orchestras.

Microsoft does not obsess about company deficits or no demand for software product. If there is monetary loss, it is made up somewhere else in the company. The focus (and success) of Microsoft is on innovation/new products, growth, and capturing of market share in emerging markets. Fortunately, there are many orchestras that have adapted this portion of the corporate business model. Unfortunately, the boards/management of Shreveport, Columbus, and Jacksonville do not.

quote:

What is the real draw of the solists? Do we need a solist for every concert? Couldn't orchestra members do more of the solist slots? Could we see more non-violin and non-piano solists to break things up a bit? What affect would this have on the expense line?

There are wonderful soloists who can be engaged at very affordable fees. From a marketing standpoint, it is actually easier to sell a concert with a soloist than an all-orchestral program. Certainly many orchestras around the country feature their principal players as soloists. There are only a handful of classical "stars" who can sell tickets strictly on the basis of their name/reputation.