One of the cardinal lessons taught in arts management classes is that, at the very least, the endowment of an arts institution must be equal to one year’s budget. After I published the first article of this series about the current state of the Metropolitan Opera, the company’s press office sent a document outlining management’s perspective as it entered contract negotiations with 15 of its unions.
In the Met Document (as I will call it), the company’s endowment and budget are revealed to explain why the Met management and board believe that cost reductions are essential.
In Fiscal Year 2012, the Met had expenses of $317 million and an approximate endowment of $236 million (it had been $336 million in 2007). For comparison, in FY 2012: Boston Symphony (endowment $380m/expenses $86m); San Francisco Symphony ($268m/$78m); Carnegie Hall ($249m/$67m); New York Philharmonic ($196m/$68m); San Francisco Opera ($154m/$70m). Of these, only the Met does not meet the minimum requirement for fiscal stability and health that comes when the endowment is at least equal to a year’s expenses.
The Met Document noted:
"Contributions have increased considerably over the past decade from $68.6 million in FY04 to $157.9 million in FY13, but donors are not willing or able to continue to finance the growing gap between flat revenues and growing expenditure. The Board recognizes that the organization is over-reliant on a small number of major gifts from a group of individuals, with the top ten donors contributing almost 20% of the annual operating budget, and have mandated cuts in expenditure as a condition of their building-up of the endowment.”
An article in the Wall Street Journal evokes the disagreements between management and unions about the expense of productions and makes evident the degree to which each side views the other as being at fault. Management says labor costs must be contained while union representatives say wasteful or profligate expenditure should be curtailed.
For background information, the Met has issued a financial statement detailing its financial condition; for a different perspective, the Met Orchestra musicians outline their arguments on their website.
The Need for a Healthy Endowment
An endowment for a non-profit institution, when well-managed, provides income that helps cover expenses and creates a buffer against unforeseen overruns. Many financial advisors recommend an annual draw of 5-6 percent of the total value of the endowment, depending on needs and the amount of income generated. In a bad economy, the endowment might shrink and fiscal restraint becomes more necessary. The principal of an endowment should only be invaded for a genuine need and not considered a well of money waiting to be drawn from when spending gets out of hand.
When an opera company does financial planning, some costs can be foreseen and others not. If contracts exist with musician, craft and stage union employees, the management knows what the basic cost of their compensation and contractually-agreed increases will be. One way to lower expenditure comes with the repertory. Longer operas with larger casts and choruses result in more overhead and overtime; new productions cost more than revivals.
Programming can and should be adjusted when economic hard times hit, especially when they are as protracted as the period we are in. You might say that a company such as the Met, which in the Peter Gelb era (2006–) has done six or seven new productions per season, should do fewer and favor more revivals. That seems logical, except that many deep-pocketed donors are more willing to underwrite new productions because of the glamor and prestige that attend them than to pay for revivals or the essential expenses of keeping the lights on, everything in repair, and the payrolls met for both union and non-union employees. An opera company usually has to meet those costs in other ways, including ticket sales and contributions from foundations and individual givers.
In FY2008, the Met had 92% attendance. In FY2013 it fell to 79%. I contacted the Met press office to find out what percentage of ticket purchases were on subscription and was told, “we don’t have sales figures broken down by method of purchase (subscription v. single-sale), just the overall box office figures.” Having high percentages of subscribers is essential for the health of arts institutions. The income that arrives ahead of time provides ballast that keeps the institution afloat. Subscribers enable a company to do budgeting and advance planning based on a more accurate projection of income.
While many American opera companies have reported a fall-off in subscriptions and ticket sales, the problems the Met faces are specific to the institution and are, in many ways, of its own causing. Because of disincentives created by the company, ticket-buyers have been discouraged to show the commitment and confidence that come with purchasing a full subscription.
The Rise of Premium Seats
Ticket purchasers and, especially, subscribers want pricing to be fair and clear. In recent years, costs of subscriptions and individual seats have become so complicated that people no longer understand or trust them. In the past, subscription brochures clearly indicated the sections and their prices, i.e.
Orchestra Center A-W and seats 1-8; A-V seats 9-16
Orchestra Side A-V seats 17-38
Orchestra Rear Row W seats 9-36; all seats in Rows X-EE
Center Parterre Boxes 13-29; Side Parterre Boxes 1-12
Grand Tier A-C; D-G; Boxes
Dress Circle A-G; Boxes
Balcony A-G; Boxes
Family Circle A-K; Boxes
In 2007, certain seats in each section were designated Premium or Prime. Their prices went up more than 30% from one season to the next while many other seats saw no increase at all. The seats affected belonged to long-time subscribers who were also the most loyal donors. When they discovered that the row behind them cost much less, they either moved or, if they stayed put, stopped giving donations. The Met has the right to raise prices to help cover costs, but it should have been done across the board rather than punitively targeting the people who were the most devoted subscribers.
Gradually, more seats were designated as Premium or Prime to boost income. There used to be 14 different sections; now there are now 27. The seating chart no longer specifies rows and seat numbers. Different operas and productions (even different casts) are priced differently and are described as A, B, C and (in the coming season) D. Confusingly, C is the most expensive, then B, then A, then D.
This system raises so many questions. One wonders why Falstaff on December 30 was a C while the same cast could be heard on January 7 at B prices. Or why La Bohème with Maija Kovalevska was a B, while the same opera with Anita Hartig or Barbara Frittoli was a C. Consider the cost of some Orchestra and Grand Tier subscription seats over the past two seasons:
- 2012-2013 season: $112.50 (flat cost)
- 2013-14 season: $104.50, $130.50 or $155.50 (depending on an A, B or C categorization)
The cheapest subscription ticket with a full view is a $25 A ticket in the Family Circle.
The current pricing chart for subscriptions can provoke a headache and eye strain. The 27 sections are divided into 25 different price ranges (based on the number of A, B, C and now D seats) for 29 different series. Subscription prices are lower than single ticket sales, which is meant to be an inducement to subscribe. Clever single ticket buyers have figured out how to game the system. The Met now has an official policy of “dynamic pricing” whose rules are described on its website. Someone thinking of attending a performance can look at the site and see how sales are going. Many people buy last-minute rush seats for $20 and then, using smartphones, look at the seating chart just before curtain and occupy an empty seat worth much more. Some people see nothing wrong with this while others do.
Dynamic pricing is intended to harvest extra money on ticket sales for popular works. This season, the excellent production of Madama Butterfly (right) was much in demand so the company raised prices on single tickets. The reasoning is the same as charging A, B, C or D prices: If you think an Andrea Chénier or Butterfly will be more desirable than a Wozzeck or Sonnambula, you charge more for it. This creates a class system that keeps potential buyers away if they cannot afford tickets to a C opera they might wish to discover.
Higher ticket prices are not due just to increased costs but reduced income because of another huge disincentive to buy a ticket to a live performance: the HD (high definition) transmissions that the Met has presented in cinemas since 2006. According to the Met Document, ticket sales for HD transmissions have plateaued in the past three years with approximately 2.5 million tickets sold per season that “generated approximately $17 million of net revenues to the Met bottom line while also contributing additional income to unionized employees through media guarantees and revenue sharing payments.”
Gelb declared, when he came into office, that the opera audience was dying and it was his mission to create a new, younger one. He promoted a production style deemed relevant or appealing to what that new audience was thought to care about. And outreach would be done through HD transmissions in cinemas at an affordable $25.
The old (which is to say, core) opera audience did not die. Most of them, anyway. I believe they simply opted out of increasingly expensive opera subscriptions with productions they did not care for and went to movie theaters. Because the Met presented HDs throughout the New York metropolitan area—including a block away from the opera house—subscribers and single sale ticket buyers chose to see opera at the movies. I am not exaggerating when I say that I have personally met or heard from a few thousand people in New York and elsewhere who now make attendance at a live opera performance optional rather than a part of their routine, their pleasure, and their sense of connection. The HD income cannot replace that.
It does not make sense, they say, to spend $100 for a Balcony seat in the opera house or more than $300 in some locations downstairs for a ticket (multiply that by two when a couple attends), plus all of the ancillary costs when you can see an HD for $25. If the Met does ten HD transmissions per season, that means one can see them all for a total of $250, approximately the price of one or two live opera performances depending where you sit.
There is almost no evidence that attendance at HDs inspire people to attend a live opera performance. And most of those attending HDs are the older cohort who used to buy tickets at the Met. I recall that Peter Gelb told The New York Times that HD transmissions in the metro area had “cannibalized a little” the ticket sales for live performances. Those figures can be discussed, but I think it is clear that the genie is out of the bottle and it is a big challenge now to get people to buy tickets to live opera at the Met.
Keep it Simple
I hope, in the contract negotiations now under way, that both sides discuss reigniting ticket sales, especially on subscription. Perhaps, within 100 miles of New York, charge Met subscribers $25 for HD tickets but $50 to non-subscribers. Maybe HDs should not be shown live in the New York area but gathered at the end of the season.
Ticket pricing must be simplified and made clearer. If people feel they are being taken advantage of, they are less likely to buy. Selling a ticket to an opera performance is not like selling an airplane ticket in which the price reflects what the market will bear. It is, for most people who live near the Met, part of an ongoing relationship in which ticket buyers become opera lovers and want to support the Met.
It might be time to consider Sunday afternoon performances. Right now, contractually, Sunday work comes at a higher price for musicians, stage hands, ushers and other employees and is untenable financially. Make it a work call like any other. Sunday is when many audience members might wish to attend. I would not abandon Monday performances because its subscribers are very devoted and it is a night when many other theaters in New York are dark. There could be a rotating dark night on Tuesday, Wednesday or Thursday so that the Met would still do its customary seven performances per week.
I invite readers to offer constructive suggestions on this page (rather than Facebook) about how the Met can stimulate ticket sales, rein in expenditures, build its endowment and get back on track.
The words with which I concluded the first article of this series are the ones I want to reprise here: May I—and we—call for a resolution that everyone involved in the current negotiations put the interests of the institution and its public (without whom there is no Met) ahead of any personal considerations and then try to find equitable solutions to each issue without a sense of winning and losing? It is about service to the Metropolitan Opera and to the art form, not to one’s self.
Photos: 1) Madama Butterfly 2) General Manager Peter Gelb in the HD production truck. (Ken Howard/Met)