The Challenges of Good Arts Management

Image

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 Full and brilliant article can be found here: http://www.wqxr.org/#!/story/bottom-line-costs-metropolitan-opera/