So we’re often told that orchestras run deficits. Sure, ok–but how often do we hear that orchestras in countries with a higher level of subsidies actually run bigger performance deficits? Here’s what Flanagan says:
Symphony orchestra bankruptcies, an unwelcome feature of the U.S. classical music scene, are essentially unheard of abroad, although foreign orchestras are no more likely to cover their expenses with earned income than U.S. orchestras. In fact, most foreign orchestras report larger performance deficits. (Flanagan 2012, pg. 145)
And also this:
The evidence that U.S. orchestras generally report smaller performance deficits than orchestras in most foreign countries may surprise some readers. At the least, it signals possible moral hazard in countries that subsidize the arts substantially. (Flanagan 2012, pg. 155)
Then we are left with the issue of musician compensation. Regarding the salaries of orchestral musicians in the U.S. and abroad Flanagan states
In dollar terms, it is clear that orchestra musicians in other countries earn considerably less than U.S. symphony musicians. Musicians’ salaries at the top U.S. orchestras are at least twice as high as salaries at top orchestras abroad, some of which are rated as the best orchestras in the world. (Flanagan 2012, pg. 163)
After spending some time discussing how subsidies may actually create an environment that can lead to deficits, Flanagan states that
In short, f0reign experience shows that subsidies are not necessarily an instant cure for financial strain. A subsidy policy may induce further need for subsidies, raising the question of how far a government is willing to support orchestras. (Flanagan 2012, pg. 152)
The search for alternatives include greater financial participation by private parties–an approach that resembles the U.S. model described in earlier chapters. While many in the United States see greater government support as a solution to orchestras’ financial challenges, classical music lovers in foreign countries envy the private support that keeps many orchestras performing in the United States. (Flanagan 2012, pg. 153)
We hear all the time that the single biggest cost in orchestras are the musicians salaries–which is uncontroversially true and makes perfect sense, right? We also hear all the time how often the musicians sometimes have to fight tooth and nail to keep their salaries.
The question here is, if we have lower artistic expenses (the orchestras abroad examples) while still having larger performance deficits, then maybe we should question the simplistic calculus which tells us to cut artistic costs (i.e. musician compensation) to decrease a deficit?
So where might these deficits be minimized? Flanagan talks about both artistic and nonartistic costs in Chapter 6. Here are a few snippets:
At the beginning of the 21st century, the concert programs of major symphony orchestras would list around 100 musicians and an even larger number of administrative staff. The fundraising and development staff would approach three dozen people. Marketing and communications would account for another two dozen employees. Other staff would be engaged in managing concert production, finance, domestic and international touring, and orchestra personnel. Much less is known about their pay. Nonetheless, orchestra tax returns normally provide information on the compensation of the highest paid staff members.
Roughly speaking, orchestra managers receive about four times the annual salary of musicians receiving minimum scale, while development and fundraising directors receive about half the orchestra manager’s salary.
In comparison to foreign orchestra counterparts–the pay differential is much smaller. While CEOs of UK orchestras aver 2.5 times the average pay for their musicians, in U.S. orchestras the differential is about 4 times the average pay. The heads of financing, marketing and development earn 1.3 and 1.2 (respectively) the average musicians pay (compared to the 2 times mentioned in the quote above). In Finland the orchestra managers receive roughly 1.5 times the average musician’s salary (Flanagan 2012, pg. 164).
Similar levels of pay differentiation may be found for conductors between U.S. orchestras and orchestras abroad though in the U.S. the differential is relatively large
Perhaps the biggest difference between orchestras with relatively large and relatively small budgets is in the pay of the conductor. In the large-budget orchestras, conductors receive between eight and 24 times the annual pay provided by minimum scale, while in small-budget orchestras the differential is a more modest five to seven times minimum scale. Differences in pay per service are even larger, as most conductors only spend a fraction of the season with their “home” orchestra. When they are conducting elsewhere, the home orchestra must hire and compensate guest conductors. (Flanagan 2012, pg. 75)
So maybe a different way of looking at cost-cutting would be to eliminate the relatively larger cost differential we find in U.S. orchestras that we don’t find in foreign orchestras?
Sure we could argue that the overall better financial performance of U.S. orchestras is precisely why managers, heads of financing and marketing should be compensated more than their foreign counterparts.
Ironically, Flanagan also looks at the issue of diminishing returns for many of those departments, e.g., marketing and promotion of an orchestra may be at the upper limit and any further money spent for specific events, seasons, or the orchestra itself would provide diminishing returns on the investment. It remains to be seen if many orchestras haven’t already dipped significantly into diminishing returns territory, in which case it can be argued that the manager as been doing poorly so should, indeed, have his or her compensation cut as well as the cutting the budget for marketing.
Flanagan, R. (2012) The Perilous Life of Symphony Orchestras:Artistic Triumphs and Economic Challenges. Yale University Press