Wednesday, December 11, 2013

Declaring Victory

The Minnesota Orchestra Association put out a press release today about its year-end financial results. The press release may be summarized thusly:

Look, we had a great year!

Even though the orchestra hasn't performed in 13 months.

Alex Ross quite rightly calls out the following bullshit:
'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,' said Board Chair Jon Campbell.
Jon Campbell, do you know what the purpose of a symphony orchestra is, in 25 or fewer words?

The entire press release is after the jump. Read it and weep. 

For Immediate Release


*Orchestra significantly reduces operating loss;*

*Community support remains strong with $5.7 million in donations;*

*Endowment draw for operations held to sustainable levels*

MINNEAPOLIS, MN (December 11, 2013)—The Minnesota Orchestral Association today announced year end results for Fiscal 2013, a season in which community support remained strong with contributed income totaling $5.7 million, despite an extended labor dispute. The organization held endowment draws for operations to sustainable levels and the $1.1 million operating loss was significantly reduced from the prior year’s $6 million deficit. The Fiscal 2013 audit was conducted and certified by accounting firm CliftonLarsonAllen.

“We are grateful to our many loyal donors who have remained with the organization over the past season. 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,” said Board Chair Jon Campbell. “We are hopeful that we’ve reached a point in negotiations where musicians will choose to join us in negotiating a compromise settlement that helps to address these financial issues and enables the players to return to concerts at Orchestra Hall soon.”

/Orchestra Hall Renovation/

Fiscal 2013 was the year in which the $52 million renovation of Orchestra Hall, begun in June 2012, was completed on time and on budget. “Despite having been cast negatively in the strife of negotiations, the renovated Orchestra Hall presents an opportunity to focus on what is actually the most important issue facing all orchestras today: retaining and developing new audiences and donors,” said President and CEO Michael Henson. “With its focus on expanded audience spaces and improved amenities, the renovation of this great but aging venue is a significant achievement, one that offers us the ability to increase incremental revenue annually, and one that will be recognized in years to come as a major positive milestone for the Orchestra and its audiences.”

Among the notable upgrades to the venue are an expansion and reshaping of the Hall’s public lobby spaces; an exterior designed to connect the Hall more directly to the city outside; more comfortable audience seating with larger seats and more legroom; greatly improved access and added seat locations for those with disabilities; new practice rooms, dressing rooms and other backstage amenities for musicians; a new stage floor and onstage acoustical adjustments that improve musicians’ ability to hear each other, while preserving the concert auditorium acoustics for which Orchestra Hall is known; an upgraded sound system for amplified performances; additional public restrooms; and numerous features to improve safety and energy efficiency.

*Financial Results*

The Orchestra’s revenues and expenses for 2012-13 were affected on many levels by the extended labor dispute.

/Revenue Summary, 2012-13/

 * Consistent with a pledge it made to the Minnesota State Legislature—in which it said state funds would remain sequestered until a contract resolution with musicians was negotiated—the Orchestra returned a grant of $961,000 to the Minnesota State Arts Board in June. “When we reached the end of the State’s fiscal year without having a contract settlement in hand, we held to our pledge and returned the funding,” said Minnesota Orchestra President and CEO Michael Henson.
 * In a season without concert performances, earned revenue totaled only $14,000.  (Because Orchestra Hall was under renovation, the season also did not include any Hall rental events.)
 * The Symphony Ball was moved from its traditional June time period to September, effectively reducing 2012-13 income by at least $600,000, the minimum the event typically nets. The timing change for the Ball was long planned. “For some time, we have wanted to transition the Symphony Ball from the end of our season to its opening,” said Henson. “This scheduling works on a programmatic level, enabling us to link each season opening to this major event. It’s also pragmatic, because if the Ball falls short of its revenue goals in any given season, we have an entire fiscal year in which to make up the difference.”
 * Despite the year’s many challenges, two thirds of all donors, 68 percent, maintained their support of the organization, with contributed income totaling $5.7 million, compared with $8.2 million the previous year. The difference is primarily due to the absence of a Symphony Ball and a $1.5 million reduction in donations from individuals, corporations and foundations, including the return of restricted grants for activities that did not occur*. *

/Expense Summary, 2012-13/

 * The Orchestra incurred expenses of more than $2.2 million for musicians’ salaries and benefits, because salaries were paid as usual for the fiscal year’s first month (September 2012), and following the October 1 work stoppage, unemployment compensation for musicians was reimbursed to the state for the remainder of the fiscal year.
 * A further $1.1 million in concert-related expenses was incurred as a result of advance marketing initiatives to sell the planned 2012-13 subscription season and non-refundable deposits on guest artist fees.
 * However, total expenses for Fiscal 2013, at $13.1 million, were down significantly from the prior year’s $31.5 million, obviously reflecting greatly reduced concert and musician costs. Due to significant reductions made to management and administrative staffing levels in the prior year, “non-musician” salaries and benefits were reduced by 24 percent. In addition to salaries and benefits and the concert expenses cited above, total expenses for the year included interest payments, negotiation expenses, repayment of the Minnesota State Arts Board grant and facility costs.

/Investment Summary, 2012-13/

The Orchestra’s total invested assets for 2012-13 increased from $137.3 million to $146.9 million, driven primarily by strong investment returns, new contributions totaling $5 million to the Building for the Future endowment, and a commitment to reduce draws from the unsustainable levels of recent years. In Fiscal 2013, Board-designated draws from investments to support operations totaled $3.7 million, down $800,000 from Fiscal 2012, based on a reduced draw of 5 percent for operations across all investments, endowments and trusts. "Holding to a prudent annual endowment draw allows the principal of the Orchestral Association’s endowment to be rebuilt to a level that will sustain the Orchestra over the long term,” said Campbell. “This is critical for the future.”


*Directors elected to a first term:*  Barbara Burwell, Jonathan Eisele, Jay Ihlenfeld, Douglas Kelley, Steven Kennedy, Martin Lueck, Anne Miller

*Re-elected Directors (second term)*:  Patrick Bowe, Susan Hagstrum, Philip Isaacson, Mary Lazarus, Allen Lenzmeier, Chris Policinski, John Wilgers, Paul Zeller

*Re-elected Directors (third term): * Jane Gregerson, Eric Mercer, Hugh Miller, Anita Pampusch, Eric Paulson, David Wichmann

*Retiring Directors: * Jan Conlin, Jayne Hilde, Mary Holmes, Jo Ellen Saylor

*Newly Elected Emeritus Director*: Harvey Mackay

*Executive Committee:*  Karen Baker, Patrick Bowe, Jon Campbell, Nicky Carpenter, Kathy Cunningham, Richard Davis, Jack Eugster, Ben Fowke, Luella Goldberg, Michael Henson, Karen Himle, Nancy Jamieson, Steven Kennedy, Lloyd Kepple, Douglas Leatherdale, Allen Lenzmeier, Nancy Lindahl, Ronald Lund, James Melville, Chris Policinski, Teri Popp, Gregory Pulles, Gordon Sprenger, Georgia Thompson, John Wilgers

*Chair *Jon Campbell *

*Immediate Past Chair *Richard Davis **

*President and CEO *Michael Henson

*Treasurer *                 Patrick Bowe

*Secretary * James Melville

*At the Board’s request, Jon Campbell agreed to be reelected to serve as chair through the conclusion of the labor dispute.

** Immediate Past Chair Richard Davis will also serve through the conclusion of the labor dispute.


Drew said...

"Endowment draw for operations held to sustainable levels"

So now all they have to do to shed that last $1mil in deficit is fire everyone in the admin offices except the CEO (and his assistant) and EUREKA, they've found the perfect operating model.

Michael Strickland said...

It's interesting to note that Chairman Jon Campbell is "Executive Vice President and Director of Government and Community Relations at Wells Fargo Bank, Minnesota." This is the institution which is always trumpeting its support for the arts and its good works for its less fortunate neighbors, most of which is a crock. Time for a little consumer pressure, methinks.

Lisa Hirsch said...

As Alex Ross said, words fail. I do not think I have ever seen a more misleading and self-serving press release than this one. (Not even the one for the Gordon Getty lovefest at SFS, which had me rolling my eyes very, very hard.)

cypressmedia said...

I really appreciate Michael Henson teaching me a new economics lesson. From his annual meeting I leaned that an orchestra does not make any money on ticket sales to concerts they don't hold. I hope word of this Hensonian economic theory spreads through the industry. Who knew?

kalimac said...

Alex Ross linked to the musicians' website, where they are busy holding a bunch of concerts without MOA's participation whatever, including some conducted by Vänskä. (One of which is all Sibelius: the First and the Fourth. Wow!) If I were in MN, I'd sure go to these: good music, estimable performers, support the band. No reason not to.

Dr.B said...

Short version: musicians make no money -- budget still not balanced. And you still want me to believe this is their fault?