Friday, July 01, 2016

It's Déjà Vu All Over Again: Cost Disease, Round le 47th, or, A Tale of Two Opera Houses

This time it is the normally sensible Terry Teachout running aground in the Wall Street Journal on the shoals of the so-called cost disease and its effect on musical organizations. "Cost disease" is a term that some economists apply to a situation where costs go up, but for various reasons, productivity can't go up, leading to a spiral of increased costs.

I've heard the term applied to classical music off and on for the last ten or so years. The argument runs something like this: it takes four musicians to perform a string quartet, and that's the same number it took in [some year in the past], but they are getting paid more and they can't increase their productivity.

Well, it depends on how you define productivity. Every time this argument comes up, I point out that, in fact, there has been an immense increase in productivity in classical music. Musicians these days have incredible chops, vastly more technical ability than even 50 years ago. Listen to recordings of Le sacre du printemps from the late 20s - there are three - or even from the 50s, then compare to the quality of what you get now, when college and even good high school orchestras can play the piece more competently than professional orchestras from the 1920s.

If you can learn music faster, and play it better, you have an increase in productivity. That 18th c. string quartet may have taken the same four players for a Haydn quartet that the Takacs takes today, but could they play the Bartok quartets?

Beyond this, Terry has chosen to address the problems of the Metropolitan Opera through the lens of the cost disease. The Met has major financial issues, but I just don't see them as having a damn thing to do with the cost disease.

Here are the critical numbers:

Metropolitan Opera expenses, FYE July 2003: $201,000,000
Metropolitan Opera expenses, FYE July 2013: $311,900,000
(Sources are the 990 forms right here.)

Percentage of tickets sold, 1995-96: 90%
Percentage of tickets sold, 2015-16: 66%
(Source: Terry's WSJ article)

Who needs the cost disease to explain this? Expenses went up 50% -by a cool $100 million - during a period when ticket sales were falling. A 50% cost increase is nearly impossible for an arts organization to absorb; if your tickets sales are falling on top of that, your fund-raising requirements go up and up and up.

I'm going to further note that all the smaller-scale productions in the world will not reduce overall costs at the Met because of the union contracts.

And the cost disease, which should apply across the board to all opera companies, does not explain why a company such as San Francisco Opera should manage to approximately break even annually and avoid that 50% cost increase that the Met has incurred. It's not SFO has gotten a whole lot more efficient than the Met.

In this case, I'll just go ahead and state what should be obvious: SFO has far better management than the Met! We have had a decade of labor peace; the size of our endowment has tripled under David Gockley; he has held costs under very tight control; and he has introduced some operational efficiencies by consolidating certain operations across the courtyard from the opera house; he has built a new, 299-seat theater and an archive, and turned all of this into a great fund-raising opportunity.


kalimac said...

If the comparison is between today and the 19th or 18th century, then productivity of a string quartet has gone way up: there are far more venues and opportunities to hold concerts, and more people who can afford to go. But even that is minuscule compared to the increase in productivity available by making a recording. A concert can please a few hundred people for two hours: a recording is somewhat more trouble to make but can please thousands for years.

Lisa Hirsch said...

Those are excellent points, thank you.

kalimac said...

I'll also agree with your last point, and offer as example my local orchestra. The old San Jose Symphony spiraled into disaster its last decade; the Symphony Silicon Valley that replaced it has puttered along securely for well over a decade now.

The musicians are largely the same people, and so is the audience. What's the difference? Solely and clearly, better management.

Lisa Hirsch said...

Yep, yep, yep.