Here I’ll give the second of my reasons why I think the classical music era may be ending. The first was that the audience is disappearing. And the next reason is…
2. Classical music institutions may not be able to sustain themselves
Prelude
In my l last post, I showed that the classical music audience may well be disappearing. If that was really happening (or at least starting to happen), we’d expect to see a fall in ticket sales to classical events, and that in fact is going on.
As I’ve said before, orchestra attendance has been falling since the 1996-97 season, according to the American Symphony Orchestra League. Private figures from the largest orchestras show ticket sales declining since 1990 (when the data I’ve seen begins).
I don’t have comparable statistics for opera. But look at the Chicago Lyric Opera, which used to be a ferocious operation, selling more than 100% of its tickets (because subscribers would return tickets they didn’t use, and these would then be sold again). It’s nowhere near that level now. The Metropolitan Opera, too, has sold many fewer tickets in recent years.
There also aren’t figures (or at least none that I’ve ever heard of) for chamber music. But I’ve talked to many people who run chamber music series in various parts of the country, and almost all of them report than ticket sales have badly fallen.
Recently there’s been some good news. The Metropolitan Opera, under Peter Gelb’s impressive leadership, has sold more tickets. For orchestras, too, last season saw an uptick in sales and attendance (which are two different quantities, let’s note, since attendance figures count people at free concerts in parks, schools, and elsewhere; ticket sales are a more sensitive measure of what orchestras are facing, because they reflect a more serious interest in classical music than going to a parks concert does, and also because orchestras need the income that they generate).
But nobody knows what these increases mean. Look at the Met. They had a problem; Peter started to address it; they sold more tickets. The increase last year in orchestral ticket sales may have the same cause. If you address the problem — if you do smarter, better, more intensive marketing — you’ll make some gains. But how far can these increases go? Can they reverse the losses of the past 10 years, or maybe even the past generation? Or will they sooner or later hit a wall they can’t go through, as interest in classical music declines even further?
The financial crisis
Let’s start with some very simple, but very telling numbers.
In 1937 (when, as I’ve said, a major study of American orchestras was done), orchestras got 70 to 90 percent of their income from earned income, which mostly meant ticket sales.
In 1962 (according to a report made to the Big Five orchestras by McKinsey, the management consulting firm), orchestras earned 58% of their income.
In 1972, the figure (again from McKinsey) was 47%. And now it’s somewhere between 25 and 33 percent, depending on the orchestra. (Note by the way that ticket prices in the past few decades have increased far more than the inflation rate. And even then the percentage of income that they represent has fallen!)
What does this show? Clearly, it shows that for the past 70 years, orchestras have consistently needed to find new funding sources. Seventy years ago, they funded themselves largely from ticket sales. Now they mostly fund themselves from other sources. They had to find these other sources.
And let’s stress how long this has been going on. Seventy years! This isn’t any trivial, short-term development. There have to be deep, persistent reasons for it. The growing need for money, moreover, over all this time, has been sharp and serious, and has fundamentally changed the way that orchestras operate.
Look, for instance, at the financial picture at the Big Five orchestras in the 1960s. (I’ve gotten this information from the McKinsey report I mentioned, and also from some orchestra budgets of the time.) Back then, the Big Five orchestras sold 100% of their tickets. They did this with very little marketing; marketing and advertising costs are a trivial entry in their budgets. (That’s because all they had to do was tell people what music they were playing, and who the soloists and conductors would be. There’s something about this in the 1937 study; the most effective forms of advertising back then, the study said, were simple concert announcements, sent to mailing lists and distributed at retail stores. Most orchestras only hired (in the now-quaint language of the study) “part-time publicity men.”
These orchestras also did very little fundraising in the 1960s. People gave them money, of course. How else could the orchestras survive, since they met only 50 to 60 percent of their costs from ticket sales and other earned income? (The other earned income, if anybody’s curious, came largely from broadcasts and recording. Classical radio and recording, in those days, were profitable enterprises.)
But they didn’t have to work hard at fundraising. There are hardly any fundraising costs in their budgets. Whatever patrons the orchestras needed were (or so it seems) easily reachable. Compare the situation now.
Orchestras spend large amounts on marketing. They spend even more on raising money. Typically, the largest department in any large orchestra — the largest part of its staff — is the development department, which spends all its time raising funds.
Nor are orchestras the only institutions affected by whatever’s going on here. I’m stressing orchestra statistics, because I happen to have them. But the history of the Metropolitan Opera shows the same trend (as recounted in Irving Kolodin’s marvelous book, The Metropolitan Opera, 1883-1966: A candid history). In the 1920s, the Met got most of its income from ticket sales — and it made a profit! In the ’30s, the depression hurt the Met’s finances. So for the first time the company started raising money in an organized way, by forming the Metropolitan Opera Guild, a membership organization whose members’ dues helped the company survive.
Note, though, that this was an amateur effort, compared to fundraising today. The founder of the guild was a patron, not a professional fundraiser. And, desperate as the need for money seemed back then, it didn’t consume the institution as fundraising does now. The Met didn’t even have an endowment until 1966, when it sold its old building at Broadway and 39th Street, and moved to Lincoln Center. The funds from the building sale were the seed of the endowment. The endowment then grew, tremendously. But all that happened after 1966, which is also, roughly speaking, when orchestras (as we’ll see) began their serious fundraising.
Why there’s a crisis
So why do orchestras (and opera companies, and in fact all large performing arts institutions) need to keep finding new sources of money? Many people point to changes in the way orchestras operate — the expansions of their seasons during the 1960s, and the move, starting at around the same time, to pay musicians more. But developments like these were pushed by larger economic forces, and the most crucial one was first noticed in the early 1960s by William Baumol, now one of the world’s leading economists, working with a colleague named William Bowen. This economic principle — now a standard part of economic theory — is sometimes called “Baumol’s Dilemma,” or even “Baumol’s Curse.”
What it says is that service industries — industries that offer services (including art or entertainment), and don’t produce anything tangible —- over time will have financial difficulties, especially when they’re compared to the rest of the economy, and above all with profit-making companies that manufacture things. The reason for this is simple. Thanks above all to improvements in technology, manufacturing concerns show gains in productivity.
Over time, they’ll produce more and more goods, at lower and lower cost. But service industries don’t have productivity gains. The classic examples are orchestras and hospitals. It takes as many people now to play a symphony or to staff a hospital as it did 20, 40, or even 60 years ago.
So these organizations constantly grow more expensive to run, compared (again) to the rest of the economy. To see why this is, look at labor costs. A manufacturing company can afford to raise its workers’ raises, because as time goes on, the workers keep producing more and more goods with the same amount of work. This doesn’t mean, by the way, that corporations were thrilled to raise wages, or that they did it willingly. That’s why unions were formed, and their struggle for recognition and for higher pay was really bitter at first. But even so, manufacturing concerns can afford the higher wages.
And so look what happens as the economy expands. More and more things are produced. We start taking these things more and more for granted. They become a normal part of life — things like central heating, running water, radios, TVs, cars, fresh vegetables in winter, and now iPods, computers, Internet access, college educations, and cable or satellite TV. Workers’ pay goes up, generally speaking, so that people can afford these things. And employers, once again, can afford the higher pay, because their productivity is rising.
But now look at an orchestra. It has no gains in productivity. But it, too, has to pay employees more, because higher pay is now a given in every other industry. Why should orchestra musicians live without cars or TV, when everybody else has them? Orchestras had — in the larger economic scheme of things — no choice but to raise musicians’ salaries, and in fact (in the case of the largest orchestras) to give musicians fulltime employment. How else would musicians have been able to hold their heads up in the expanding economy?
And that’s why orchestras (and other performing arts institutions — Baumol and Bowen stressed that their principle applied to all the performing arts) are always needing new sources of money.The old sources are never enough; as time goes on, orchestras and other classical music organizations fall more and more behind the rest of the economy. So they’re always — potentially, at least — in economic crisis.
Naturally, in the real world, this crisis ebbs and flows. Sometimes (as in the late 1990s) orchestras feel flush. Sometimes (as in the early ’90s), orchestras feel strapped. (Again, please remember that I’m using orchestras only as an example here, because I have their data. Other large classical music institutions will show approximately the same profile.) They recover from their crises, usually by doing something new. And that makes it very instructive — crucially instructive, in fact — to see how they got out of the most serious crisis they had in the post-World War II era, a crisis that hit them in the late 1960s. This crisis was the reason for the McKinsey report I’ve mentioned. Orchestras got into trouble. They didn’t know how they’d survive, and so the Big Five (led, if I’m not mistaken, by the New York Philharmonic) hired McKinsey to help them figure out what to do.
The crisis, as McKinsey pointed out, had a very specific cause. This is important to understand, because people often say, these days — in response to the current classical music crisis — that things can’t be as serious as I or others might say they are, because, after all, classical music is always having trouble. But this, I think, is unfortunately a rather superficial view. Classical music (or, rather, classical music institutions) are sometimes having trouble, and sometimes aren’t, but when they are, there’s always some specific reason. In the early ’90s, it was an economic slowdown.
And in the late 1960s, it was — for large orchestras — the expansion to a 52-week season, and a rise in musicians’ pay. These things, as I hope I’ve shown, were more or less inevitable. Orchestras had to pay competitive wages to musicians (a concept that includes full employment all year long), or else musicians would drop through the floor of the growing economy. Orchestras had to pay their staffs competitively, too.
But they couldn’t afford to do this. They were running at a loss already; not a great loss, compared to where they’d be now, if they didn’t have much income beyond ticket sales, but still a loss. When they expanded their operations, the loss of course grew, and it turned out, McKinsey found, not to grow proportionately to the expansion. For all sorts of reasons, orchestras’ expenses were growing faster than their income, and so the loss seemed to mount gigantically. In 1969, McKinsey estimated that orchestras would have to double their “nonperating” income — income not derived from ticket sales, or for payments for broadcasts and recording — in order to survive.
So how could they do this? McKinsey thought it had an answer. The federal government should step in, and contribute 25% of every orchestra’s budget. Somehow this seemed plausible, though the reasons McKinsey gave now seem naïve. European governments, McKinsey said, supported 90% of their orchestras’ expenses, so why couldn’t the American government offer a mere 25%?
It never happened, obviously. Instead, orchestras developed the funding apparatus they have now, in which money comes from many sources — donations, both large and small, from individuals; donations from corporations and foundations; some money (though often not very much) from government agencies; and income earned by endowment funds. Orchestras work overtime, 52 weeks a year, to raise this money. And note that they have to raise two kinds of money at once — money for operating expenses, and money for their endowments, which always need to be bigger. (Some orchestras, in fact, have very small endowments, and as time goes on have realized that they need to make them larger. Which means they have to fundraise even more vigorously.) Sometimes they have to raise yet another kind of money, funding for one-time projects like new concert halls. The fundraising never stops.
The crisis now
And now there are signs that the current funding model isn’t working any more. It’s striking, to say the least, to hear a major orchestra say (as I’ve heard one say in private) that its funding sources in its home city are tapped out. I’ve noticed, as I’ve worked inside the orchestra world, five orchestras that, pressed for funds, are trying things that never have been done before:
The Philadelphia Orchestra –I can name it, because its new president spoke of this idea in public — hopes to raise 10% of its budget from sales at its store, including online sales. Nobody has ever done that.
Another orchestra hopes to fund its entire budget from endowment income. Nobody has ever done that before, and the money that would have to be raised is staggering. Suppose an orchestra had a budget of $30 million each year. To generate that much money at 5% interest, the endowment would have to be $600 million, which is vastly larger than the endowments of even the very largest orchestras. And the orchestra in question here isn’t one of the very largest.
One orchestra wants to perform as much as possible outside its home city.
Another one wants to raise more money from its subscribers than any orchestra has ever done. More specifically, they want more of their subscribers to donate money, and they want the donation rate — the percentage of subscribers who donate funds — to rise far above anything seen among orchestras before.
And finally there’s an orchestra that wants to raise subscription rates above the industry average. The number of subscribers has been falling, over time, and many orchestras think the era of subscriptions is ending. This orchestra thinks it can reverse that trend.
The end of subscriptions, by the way, would be a serious thing. Subscriptions have been useful, even essential to orchestras. They’re cheaper to sell than single tickets, because a single effort yields many sales at once. And subscribers turn into donors; without subscribers, orchestra managers say, the pool of donors will be much smaller. And yet subscriptions really do seem to be vanishing. The proportion of tickets sold in subscriptions gets lower every year, and subscriptions themselves are shorter. Decades ago, people would subscribe to entire seasons, or half-seasons. Now they might buy three or four concerts at a time. The subscribers, of course, are the dependable, core audience for any orchestra. If they disappear, orchestras might wonder where their future core audience will come from. And in fact one orchestra I know of — as it looks toward its future — has officially (if privately) projected fewer sales to its core audience. Bravely, it hopes these will be replaced by single-ticket sales to people who’ve never come to the orchestra before. Though how these new people can be attracted isn’t quite known.
But back to the new things orchestras are trying, to find more money. If five orchestras are trying to push at their financial barriers, that suggests there really is a problem. If each of them is trying something different, that suggests the problem isn’t yet quite understood, and that solutions for it are in a preliminary stage. To me, this looks like the most serious financial crisis orchestras (along, I think, with the entire classical music business) have faced since the late 1960s. That 1960s crisis forced orchestras to break their mold, and find new ways of getting money. The new one may well do the same.
But note a crucial difference. In the 1960s, as I’ve said, the biggest orchestras were selling all their tickets. Now they’re suffering (as I’ve said) from a long-term decline in ticket sales. On top of that, classical music is far less central in our society than it was in the ’60s, which makes it harder to attract both audience and funding.
The existing audience, moreover (as I showed in my last post), may well be disappearing. There’s never a good time for a financial crisis, but this looks like a spectacularly bad time to have one.
How can classical music institutions find a new financial paradigm — a way to raise more money than they ever raised before — when the odds are stacked that much against them? It’s hard to believe that they won’t have to cut back their operations, if they can survive at all.
(Coming next. My third reason for thinking we’re at the end of the classical music era — our culture has changed.)
interesting thesis, and on the surface at least, you may be right. but i wonder if the real issue isn’t that the audience is disappearing, but rather that the audience is poorly served by our existing institutions, or they have yet to fully adapt to the new business paradigms of the digital world (a failing that afflicts almost all traditional music companies. for instance, in the physical world, classical music accounts for somewhere around 3% of all CD sales. yet at iTunes, which sucks as a classical experience, the figure is 12%. imagine what that figure could be if a store offered high-quality audio, iPod compatibility, and a coherent, classical music centric navigation scheme?
The fourth orchestra you mention wants to raise its donation rate among subscribers. Do you have any idea of the median donation rate? (i.e. what percentage of subscribers normally donate?)
Dear Greg,
Thanks for your work bringing all these facts together and streamlining them into one long argument. Reading through these last several posts is proving revelatory to me.
In the first entry of this series you talked about the new kind of classical performances that you think will eventually replace the concerts given today. You wrote, “This doesn’t mean that nobody will study Beethoven sonatas, prizing out their meaning with every tool available. (Very much including structural analysis.) But those same musicians might also play country songs, or jazz, or techno; they might compose. And when they play Beethoven (or Bach or Berg or John Corigliano) what will matter most is what they think about the music — what it means to them, what they’re saying with it, what they think it might just mean to everybody else.” I was moved by this description and assume that you were too. It sounded, in fact, a lot like the kind of concert you’ve written before that you’d like to attend, and that you wish classical concerts more closely resembled.
My question is, do you think the format of these imaginary concerts could be combined with the kind of classical concert given today? And do you think it would make any difference in ticket sales if it were? How, to you, would these changes be manifested? More of performers talking, explaining their program choices? (Last summer I saw Colin Carr play Britten’s third cello suite; before playing, he addressed the audience with such sincerity and evident love for the music in his voice that, when the piece began, the quality of silence in the audience was clearly something much different than rote behavior). Less formal wear? Genre-mixing?
Let me bring up, on the latter note, a couple ideas that are close to my heart. On his album “Gershwin’s World,” Herbie Hancock plays the middle movement of the Ravel concerto with the Orpheus Chamber Orchestra; the result, part-strict, part-improvisation, is so lovely that, since first hearing it, I’ve wished jazz players would be brought in as concerto soloists from time to time. A lot of pieces (at least those that provide the kind of space in which soloists could improvise) might have much new brought to them. Maybe the concerto in question could be played twice on the same program, by classical and jazz players respectively.
Also — I really like the fact that the NY Philharmonic sometimes does concert versions of musicals (“Candide” and “Sweeney Todd” in the past; I believe “My Fair Lady” is coming up). As a lover of musical theater, I’d be thrilled to see such programs done by other orchestras (maybe scores by Sondheim or Guettel, though “Floyd Collins” isn’t orchestral). It would be nice if this could be done without being labeled a “pops” program and implicitly relegated to second-tier status.
Above all I think people need to be reminded that classical music, like all great music, should hurt, should make you laugh, should give chills. Maybe it’s naive to imagine that simply giving concerts in which the layers that seem to separate the audience from the music were stripped away, would be any long-term boon to the kind of economic problems you’re describing. But it’s sure worth doing, if only for musical reasons.
After seeing the age of the audience at some of the events I attend, I do sometimes think that one big flu scare will wipe out many presenting organizations. I still remain optimistic, hoping for some hidden strengths. It is similar to health statitics in America; the obesity rate increases while the number of marathon runners also increases. There is no single trend. Change will come. I’m glad I don’t have to predict it!
I’d like to add a further note to my last comment. It seems to me that performance traditions that add up to a sense of distance and remoteness — the dress code, the musicians’ pretense that the audience isn’t there, no clapping between movements — have a lot to do with an old classical fetish for the monumental. Beethoven, Wagner, Bruckner, Mahler, less so some others (even Beethoven doesn’t quite belong in that category) wrote works that are long, mystical, and full of awe. Bruckner’s seventh, for example, is so vast and so far from worldliness, that pre-piece remarks by a conductor would seem trite. This sense of reverence might be exploited by conductors who want to be lionized or score-followers who don’t want anyone to move in their seats, but it really is there in the music. And the way the music is presented today is more or less appropriate, I think — an austere frame for a huge painting.
The trouble is that this kind of presentation is applied all across the board, and most of the standard repertoire, whether orchestral or vocal or chamber, is more intimate, more worldy — in some ways, one might say more personal. A profile of Christian Tetzlaff in the NY Times last year ended: “Perhaps part of what ails classical music today, he continued, is that many events ”are made way too big, when maybe the music should be about something really small.'”
You’ve been posting about “The Death of the Classical Music Business” (your publisher will probably make you call the book, “The Death of Classical Music”) but aren’t you really talking about “The Death of the Orchestra”? What you have been discussing sounds analogous to the late 1940s, when the big bands largely went away and the focus of jazz largely shifted to the small bebop outfits. It was a big change, yes, and it occurred as jazz became less of a form of “pop music” and more like “art music,” but it wasn’t the death of jazz. I wonder if people who enjoy contemporary classical music will be less affected; i.e., the Cleveland Chamber Symphony seems better equipped to deal with the new era than the Cleveland Orchestra. Blogger Phillip Bush has pointed out that the present is a golden age for string quartets. He writes, “Never before have so many quartets made a decent-to-good living in this country, and never before have so many quartets existed who play at such a high technical and artistic level.”
I had another question.The Cleveland Orchestra hasn’t released new recordings for several years now. Is that because they would lose money if they actively released recordings, i.e., they know they’d have to subsidize them?
I don’t know what it means, but the traditional civic clubs (Lions, etc.) are just like the classical music audiences — they are collections of old people who have little ability to recruit the young.
Hi Greg,
It’s great to hear you talking explicitly about Baumol’s Cost Disease. A few thoughts:
First, I’d love to see your source on rising ticket prices — I’ve been wanting to look at that data for a while. My concern about the historical increase in ticket prices compared to inflation (which until now I had to simply assume existed becasuse logically they had to) is that we may be hitting a ceiling — ticketbuyers may not be willing to pay even more when their other costs of entertainment are going down. The critical data on ticket pricing would be a comparison not to inflation but wage increases. The fact that tickets are difficult to sell seems like clear evidence that the price-point is set wrong with respect to demand, and I suspect that part of the reason is that ticket prices are not shrinking compared to wages in the way other “entertainment” prices are shrinking. This is all conjecture, I don’t have data to support or contradict it.
Second, there are a few ways in which orchestras might create productivity gains, but most of them don’t actually pan out. The definition of “productivity gains” in this case would be “reach more paying customers with a given performance.”
Increasing audience size for live concerts would work, and the cavernous size of modern concert halls clearly stems from a desire to follow this model, but as you say it’s getting hard to fill the seats. Increasing live audience size is unlikely to happen.
Selling recordings seems, on its face, like a tool for accruing productivity gains, but of course it turns out that recordings usually cost more than they bring in. Part of the problem is the increased costs of making the recordings, but the biggest problem is that most people don’t need another recording of Beethoven’s 5th, and if they do they have many different versions to choose among and no particular reason to choose yours.
Broadcast television and radio seems like a possibility, but as we know there is less and less classical music on the airwaves. If the Met’s simulcasting to movie theatres works as a long term strategy (as opposed to as a short-term gimmick) that would be great, but it seems unlikely. On the other hand, as television and radio gets more and more segmented and specialized, the possibility of a small for-profit cable/satellite tv channel seems more and more real. Such a channel would bring in a national audience and pay for itself with advertising, channeling those revenues back to the ensembles. The existing orchestras would have to compete for airtime, though, and only a few of the biggest ones would really benefit. The market would ultimately sort this out by driving some orchestras out of business, leaving a healthier industry behind, but also a lot of disappointed musicians who used to be able to make a living as musicians but can’t anymore.
Fundraising has some real advantages over ticket-revenue. First, Development as an industry _does_ see productivity gains — the knowledge and technology that drives fundraising is increasing all the time. Better database software, better techniques in direct marketing, etc. can more effectively reach larger numbers of donors. The big question about fundraising, I think, is whether donors are happy to give the same proportion of their wages to charity over time, or if they expect to pay less for charity in the same way that they expect to pay less for tickets, i.e. is giving forced down by Baumol’s Cost Disease, or does it track with wage increases? The other problem with fundraising is that more and more organizations are running fundraising operations, and so the competition for the available funds is greater than it used to be. The good news is that research indicates that donors would like to give more than they do, but don’t yet get treated in ways that make them actually do so. Productivity gains in the fundraising industry will presumably help with that problem.
Thanks again for the insights and the data to back them up 🙂
Maybe the future classical music audience will be made of young people who do not live in major cities and do not travel to major cities to hear concerts. Maybe the future clasical music audience will be an audience for chamber music rather than orchestral music.
There are probably more first rate chamber music groups living and working in small cities than there ever were in previous decades. Music students in conservatories are also being taught (finally) how to market themselves and to use their intelligence and energy to find and engage new audiences.
Musicians have known for a long time that the chances for getting an orchestral job (playing any instrument extremely well) is a relative impossibility, even in the best of circumstances. With the majority of well-trained musicians not being members of full-time orchestras, there are already interesting changes happening in the musical world, and some of them might even be good ones.
I have a suggestion for orchestras that lament the decline of the subscription buyer: Don’t call me at work. Not that this is on topic, but calling me at work is a great way to make me resolve never to buy your product.
“I think the problem with development isn’t productivity so much as supply (so to speak). How much money is out there? When do they reach the end of what they can raise?”
That’s certainly an important issue, but the research I’ve seen indicates that we have a long way to go in improving fundraising strategy and technique before we exhaust the supply of available money.
According to Penelope Burke, who does a lot of very interesting research on fundraising, “70% of donors would increase the overall value of their philanthropy if charities were more effective at acknowledging their gifts and communicating results.”
According to that statistic, a majority of donors are giving less currently than they would like to give, but they don’t because standard effectiveness of fundraising is too low.
According to the AFP, “Only 11% [of donors] believe nonprofits spend money
wisely.” I don’t know the date for this figure, but it’s some time since 2001, and apparently this is 10-15% lower than it was before 2001. People don’t give to organizations that they don’t trust to use the gift wisely, and there’s a tremendous amount of room for improvement in that confidence level.
Thanks for the source of the ticket pricing — I’ll check it out.
-Galen
“ticket sales are a more sensitive measure of what orchestras are facing, because they reflect a more serious interest in classical music than going to a parks concert does”
Here, I believe is the bulk of the problem. By labeling ticket purchasing patrons as “more seriously interested,” the average American is alienated even further from the classical music world. Why should their interest be less important than that of the white haired, long-time subscriber? If the goal is to build audiences to their previous splendor and youth, those park attendees are the ones we should be concentrating on. In the short term it means instability and fear, perhaps, but in the long term an overhaul of the attitude of the classical music institution to cater to the “contemporary” (for lack of a better term) American will be far more lucrative than to pacifyingly oblige the wishes of the currenty established audience. In short, we should be taking the institution out of the classical world rather than trying to mantain it.