Eighty-one of the world’s top classical musicians were locked out of symphony hall during a rancorous labor dispute. Donors deserted in droves. Faced with a massive deficit, the symphony’s board of directors raided the endowment and demanded hefty pay cuts. The public sided with the musicians. The orchestra’s imminent death was widely prophesied.
And yet, nearly seven years later the Minnesota Orchestra is thriving.
The BSO’s players have been locked out of Meyerhoff Symphony Hall since June 17. An audit released in July concluded that there’s “substantial uncertainty” as to whether the BSO has sufficient financial resources to remain in business for another year. Management and the players are embroiled in a contract dispute that would shorten the season and impose a roughly 20% pay cut on the performers
Experts say symphonies have intrinsic structural flaws that result in costs significantly outpacing revenues. They predict that orchestras will edge closer to the abyss unless a new business model can be devised that rethinks every aspect of how orchestras function, from their role in society to where they perform.
“This is not just a Baltimore problem,” said Michael Kaiser, chairman of the DeVos Institute of Arts Management at the University of Maryland and author of the 2015 book “Curtains? The Future of the Arts in America.”
“This is an American problem. Many symphonies have gone bankrupt. Miami has no major symphony. San Antonio’s symphony almost closed a year ago. The next 10 to 20 years are going to be a transitional period for orchestras.”
Among those casualties: the Bethesda-based National Philharmonic Orchestra, which announced July 16 that it was closing after more than 40 years.
Orchestras have been performing classical music for more than 400 years. So why in the past two decades has it suddenly become so difficult to keep symphonies afloat?
The survival of the Minnesota Orchestra demonstrates that what economists have dubbed “the cost disease” isn’t always fatal. But before a cure can be found for what ails the BSO, it is necessary to first pinpoint the cause of the illness.
Kaiser writes in “Curtains” that symphonies have never been self-supporting. From the 17th through 19th centuries, the primary arts patrons were kings, aristocrats and the church. Today, European symphonies are supported mostly by governments, while American orchestras rely primarily on donors.
“Baumol’s cost disease“ — a pattern that tracks the rise of salaries in industries lacking a corresponding increase in productivity — was first described in the 1960s by economists William J. Baumol and William G. Bowen.
In his 2012 book, “The Perilous Life of Symphony Orchestras: Artistic Triumphs and Economic Challenges,” Robert Flanagan applied that theory to U.S. orchestras between 1988 and 2006.
“Patrons expect concerts to feature a repertoire featuring the beloved classical canon that was written hundreds of years ago," he said. "But the number of musicians required to perform Beethoven’s Symphony No. 5 is the same today as it was when it was composed.”
A large labor force — and with 75 musicians, the BSO is on the skimpy side — generates a big payroll. Salaries are the greatest expense for most industries (including symphonies) and often rise to keep pace with the cost of living.
Salary inflation isn’t a problem for industries that use technological advances to increase worker productivity. But no technology will ever help an orchestra perform Beethoven’s Symphony No. 5 more efficiently.
“As a result, costs in the performing arts rise more rapidly than costs in much of the rest of the economy,” Flanagan said.
The cost disease isn’t new. But for decades, it was masked by a landmark act of generosity.
From 1966 to 1976, the Ford Foundation made a one-time gift of $80 million to 61 American orchestras. The Baltimore Symphony Orchestra received $1.75 million — the equivalent of nearly $14 million in 2019 dollars.
In a Ph.D. dissertation for the University of California, Santa Cruz, Ben Negley concluded that though the windfall benefited the musicians, it may have done the organizations more harm than good by creating unrealistic expectations of future largesse without addressing the source of the orchestras’ financial instability.
“The Ford program failed to stabilize many orchestras,” Negley writes, “and in some cases led to dire consequences.”
Kaiser writes that when an orchestra’s finances inevitably worsen, music lovers predictably divide into conflicting camps:
“Arts enthusiasts," he writes, “don’t really care about balance sheets and believe fervently that artistic accomplishment is worth any financial challenge. They remain convinced that the organization will get by despite cash shortfalls.”
Opposing them are “deficit hawks who believe that the only way to truly protect the organization’s mission is to ensure that organization itself survives,' ” he writes — a fancy way of advocating "cutting costs to the bone.”
Jim Ward, president and CEO of the Phoenix Symphony, said both strategies are at best short-term solutions.
Orchestra leaders “need to step back and think through the vulnerabilities of their organizations,” he said. "Otherwise, the cycle will continue. Someone will bail them out and in a few years, they’ll be in trouble again.”
Orchestra’s financial problems sometimes are attributed to shrinking audiences. That’s not entirely true — at least not of the BSO.
Statistics provided by the organization reveal that the BSO’s audience inched up from 209,000 for the 2010-11 performing season to 214,000 this year. Partly, that’s because more concerts were performed. Nonetheless, both Meyerhoff Symphony Hall and the Music Center at Strathmore (which have a combined 4,400 seats) were three-quarters full on average.
Flanagan pointed out that increasing attendance will never solve the problem, since the number of seats in any venue is fixed, while the costs to perform in them keeps soaring.
“Even if every seat in every symphony hall was filled for every concert, the vast majority of U.S. symphony orchestras would still would face significant performance deficits,” he said.
Baltimore Symphony Orchestra musicians protested a lockout by the orchestra’s board of directors. (Kevin Richardson / Baltimore Sun video)
As a result, symphonies must depend for survival on the generosity of governments and donors — which typically provide 43 percent of orchestras’ total income, according to a study commissioned by the League of American Orchestras.
Competition for donations intensified during the 2008 recession, when a vast array of worthy causes competed for limited charitable dollars. The arts took a second hit last year, according to Heather Iliff, president and CEO of Maryland Nonprofits, when changes in the tax code removed an incentive for charitable giving for many taxpayers.
A new study shows that when American philanthropists reach for their wallets, they rarely do so for cultural projects. Giving USA recently released an analysis of U.S. philanthropy in 2018 that ranked contributions to different types of charitable causes in descending order.
Arts organizations were nearly at the bottom of the list, ranking eighth out of nine. The $19.5 billion given to culture in 2018 represented just 15% of the sum contributed to religion ($124.5 billion) and a third of the monies donated to education ($58.7 billion).
Flanagan fears the number of U.S. symphonies inevitably will decline. Many losers, he said, will be mid-sized cities with few Fortune 500 companies. (Baltimore has none). Flanagan thinks music groups will be located in large cities where wealth is concentrated.
Kaiser predicts that orchestras in cities separated by fewer than 100 miles might merge.
“It is likely that demand in one of these cities will be insufficient to support a full-time orchestra," he writes in “Curtains.”
“Some logical partners in the United States include Dallas and Fort Worth, and Washington, D.C., and Baltimore." (The National Symphony Orchestra is headquartered in Washington’s John F. Kennedy Center for the Performing Arts.)
Kaiser and Flanagan love classical music and hope that their gloomy predictions will prove false. Their warnings also come with a caveat —these dismal scenarios are what might happen, they say, if orchestras’ business models don’t change.
“In business, the way to stop a downward spiral is to create a new model for how to operate," Ward said.
"Leaders of symphonies have to be imaginative enough to revisit their original vision. Boards have to be brave enough to embrace it. The musicians have to be willing to experiment. And communities have to support these attempts even knowing that they might fail.