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An Indexed Financial Model for Symphony Orchestras

1 Michael Drapkin
holst Editor's Abstract

By now those of us who are interested in symphony orchestras and their business models are quite familiar with the inherent problems of putting 90+ musicians onstage day after day and providing them with a paycheck. We can articulate the problems but we have difficulty offering solutions. Michael Drapkin has had a varied career that includes orchestral clarinetist, educator, and entrepreneur. In the article that follows he offers his thoughts, and just maybe his solution or some version of it could help. Read it and let us know what you think.

Ramon Ricker

This paper outlines a financial model for symphony orchestras that addresses both the Baumol Effect and allows orchestras to remain fiscally healthy despite high fixed labor costs and uncertain economic times.

The last few years have seen unprecedented turmoil amongst professional symphony orchestras in the United States. We have seen retrenchment or bankruptcy, both Chapter 7 (Honolulu Symphony) and Chapter 11 (Philadelphia Orchestra). Among others, there has been significant reorganization in the orchestras of Detroit, Louisville – even the New York City Opera Orchestra. Many others have completely ceased to exist.

Blame is easy to dole out, although generally the reasons for these failures are usually quite different than those given. Symphony orchestra musicians point blame at the administration, particularly vilifying orchestra executive directors as being ineffective or nefarious, and not fulfilling what the musicians believe their role to be: to raise money in order to pay the musicians more money. In contrast, many orchestra administrations view the musicians as being “savants” that only understand how to play music and instead make unreasonable or unrealistic demands.

Neither is correct.

The economic model of many of today’s symphony orchestras can be traced back to the Ford Foundation matching grant system that was established and proliferated in the 1950’s. The traditional model of orchestras being supported by the elite and wealthy still exists today, examples being the exclusive boards of directors in Lincoln Center and Carnegie Hall in New York City. However the Ford Foundation system helped subsidize the creation of orchestras in secondary markets and attracted more community giving that established a broad base for these organizations. This worked well until the Ford Foundation turned their philanthropy elsewhere, citing poor financial performance and debilitating labor disputes, leaving these orchestras to fend for themselves and compete with all other arts organizations for both private and government funding and grants.

What this did was expose the basic challenge that faced symphony orchestras once they were on their own, and has led us to the crisis that orchestras confront today: the Baumol Effect. American economist William J. Baumol, professor of economics at New York University, first described this phenomenon in 1966 in a study performed for the performing arts sector. Baumol and William G. Bowen observed that it takes the same number of musicians to perform a Beethoven string quartet now as were needed back in the 19th century, so there has been no increase in productivity. This is a critical point, as rising salaries in industry are normally associated with labor productivity increases. Hence we have the basic conundrum: symphony orchestras, by definition, have large fixed labor costs and little opportunity for increasing productivity, aside from cutting down the number of players, which degrades the quality of the product. Yet at the same time, the musicians have the same wants and desires as workers from other industries that have experienced productivity gains. They want to live in good neighborhoods and own homes, afford cars and the ability to send their kids to college, even though they are not returning higher productivity to their orchestras. Instead, the funding increases that have been observed in the cost of running a performing arts organization has been attributed to increased spending in entertainment by consumers due to rises in the overall cost of living in our society.

So symphony orchestras have benefited from the general increases in the standard of living without contributing themselves, and this is where the problem lies. With the general organization and unionization of symphony orchestra labor under the American Federation of Musicians, many symphony orchestra musicians have demanded and received multi-year labor contacts with orchestra management. Again, they have generally pushed for longer seasons, and higher salaries without contributing to the growth of the organization, beyond their artistic contributions, and have relied heavily on the orchestra’s board and administration to raise more funds to pay for these contracts. The net result of this has been the growth of tremendous fixed labor costs relative to the budget of the organization, somewhere in the nature of 55-65% of total expenses.

In many ways, orchestra musician labor cost is the sensitive factor often responsible for the health of the organization, much like the cost of fuel often determines the economic health of an airline. But unlike airlines, which use commodity futures as a way of evening out price fluctuations in the cost of oil, there is no commensurate vehicle available to symphony orchestra management. Hence, the oil of a symphony orchestra – revenue from tickets sales, grants, fundraising and endowment income – is subject to the whims of the economy, with no way to weather the change in revenue stream that inevitably occurs during an economic downturn. When the economy goes into recession, discretionary spending on items like ticket sales goes down, as does fundraising, and income from endowments suffer as well. The clash occurs when the economy falters and an orchestra is locked into a multiyear contract guaranteeing salaries and income to the musicians. When the cost of operations starts to exceed income, then the orchestra starts to lose money. When the orchestra runs out of cash or access to cash sources, they go bankrupt, as we have been seeing with increasing frequency during this current downturn.

Take the recent Philadelphia Orchestra bankruptcy filing. Here are their numbers for the years 2006 and 2007 and for 2008, when the economy went into recession (in $ thousands):

Year 2006; 2007; 2008

Revenue 46,954; 52,108; 29,484

Labor 25,582; 27,150; 28,313

Tot Exp 43,254; 46,915; 48,842

Ratio: labor to expenses 59%; 58%; 58%

Net: 3,700; 6,193; -17,358

As can be seen, revenue dropped precipitously in 2008 (highlighted), but even more significant is that their expense rate stayed the same as it was the previous two years, even though the U.S. economy had gone into deep recession.

This phenomenon has nothing to do with evil management or boards wanting to destroy the orchestra or greedy musicians demanding unrealistic salaries. The economic model of the symphony orchestra is inherently flawed and does not take the Baumol Effect into consideration, nor does it take fixed labor costs into consideration either. Neither side is responsible for our cyclic economic downturns or recessions, yet the model itself is sufficiently inflexible that the organization itself may fail depending on the severity of the recession and the toll that it takes on orchestra income. When other industries face a significant loss of revenue, they take action and cut expenses by reducing production costs and/or implementing layoffs. In the case of the Philadelphia Orchestra, they maintained the same rate of spending even though their revenues continued to lag, and they eventually ran out of cash and filed Chapter 11.

There are a number of ways that orchestras can and do attempt to react to increases in musician labor costs or decreases in income, including raising the cost of ticket prices, using more volunteers for administrative positions, shortening seasons and number of concerts and – as a last resort – decreasing quality. Many of these are ineffective or counterproductive. Ticket sales only represent a fraction of operational costs; shortening seasons are a visible sign of organizational retrenchment and will be vigorously opposed by musicians who base their incomes on playing concerts. Finally, cutting down on musicians or hiring less qualified musicians results in a lower quality product that will spark poor reviews by music critics and decreased attendance.

This, unfortunately, brings us back to square one: how to manage a huge fixed labor cost in an organization with income that is sensitive to changes in the economy. This can be achieved by indexing these expenses against the variable revenue that orchestras receive over time. What this entails is setting each employee’s income against an index that represents the even cash flow of the organization.

Under this model, all salaries are based on a break-even orchestra run rate (“The Index”), and each employee would have a salary that is relative to that index. The index would be based on a moving average of the organizational run rate, so if expenses start to exceed revenues by 5%, for example, then all employee salaries would decline by 5% as well to keep the orchestra breaking even. If revenues increase, then salaries would increase as well. Here’s how it would work:

Individual Salary/Total Labor Cost x 100 = Percent of Labor Cost.

For example, if an employee’s salary is $50,000 and the Total Labor Cost is $1 million, then 50,000/1,000,000 x 100 = 5, or that employee represents 5% of the labor pool cost. That percentage should not change unless the total labor cost was to change, which would result in a recalculation of each individual’s portion. Therefore, if the change in indexed revenue goes from $1 million to $900,000 (down 10%) then the $50,000 salary would drop to $45,000. If the opposite happens, then salary would rise 10% to $55,000. Since salaries can move in both directions, this model entails both risk and reward.

In order for this model to be successful, a number of factors would need to be agreed upon:

1. This model would need to apply against all labor, not just the musicians. This includes the administration, executive director and even (and especially) the conductor. To ask the orchestra musicians to bear the weight of the orchestra’s financial health solely on their backs is unreasonable and would never be accepted. Every employee in the organization would need to buy into and agree to this model.

2. Certain fixed costs would not be possible to index. For example, it may not be possible to cut down on the cost of renting a concert hall. But what this does do is focus attention on non-indexed expenses as to their relative merit and the return on investment they bring to the organization, and everyone would be highly motivated to lower those costs before they have their salary reduced. Beyond that, however, this means that changes to the expense basis not addressable through non-labor cost reductions would be borne by the entire labor pool.

3. This model would largely eliminate the need for unionization, since all employees would be equally affected when the organization finds itself dipping into the red. Musicians and management would suddenly find themselves on the same side, so there would be nobody to negotiate against.

What this does is give everyone an incentive for the success of the overall organization. If revenue goes down, then everyone’s salary would decline in order to maintain an even balance between revenue and expenses. But the change would be even more far reaching:

1. It guarantees that the organization is always breaking even, especially during challenging economic times. While it may mean lower salaries during these recessionary periods, this would certainly be preferable to the extreme draconian measures that often occur when losses are allowed to toxically accumulate during lean times, such as lockouts or strikes. To be blunt, it would be better to have a healthy balance sheet in tough times where the pain is spread across the entire organization rather than having the orchestra go bankrupt. The downside is that there is obviously some threshold below which some musicians may decide to leave. But given the extreme lack of movement of musicians between orchestras due to the dearth of openings at any given moment, it would probably be preferable to tough it out and work with one’s colleagues towards the success of the organization with the hope of better times eventually, from which everyone would directly benefit.

2. The financial decisions being made in the organization would come under greater scrutiny by all of the employees. Greater accountability would be demanded, since these decisions would affect everyone’s pocketbook personally. On the other hand, higher return activities would be become more attractive. In other words, if “pops concerts” are very profitable, then perhaps everyone might want to do more of these, encouraging greater outreach between the orchestra and their community. Often orchestra members merely tolerate these as necessary evils. Under this model, similar profitable musical activities might be welcomed rather than resisted.

3. Similarly, higher profit activities may be used to subsidize less profitable musical activities that are perhaps more esoteric, and generate less revenue, but are more artistically satisfying to the musicians. On the other hand, it may mean fewer Mahler symphonies requiring the hiring of additional musicians and more pieces that make use of the core orchestra players, as the larger works would be more expensive and have a deleterious effect on the orchestra’s index.

4. This model would spur greater entrepreneurial thinking on the part of the orchestra, as everyone would have a personal stake in coming up with ways to increase revenues or cut expenses. New models for orchestras may emerge as musicians are motivated to apply their creativity to building financially successful organizations.

This indexed model, while allowing the financial health of the organization to be maintained during times of variable prosperity, would not solve every problem or even guarantee that the orchestra would be fully insulated from failure. Bad decisions about investments, whether financial or in the type of concert activities or repertoire that the orchestra decides to present, can still result in catastrophic financial loss. Similarly, nothing can insulate an organization from a really bad economy, or a geographic area that experiences devastation or blight.

There are a number of reasons why there may be resistance to the adoption of this index model. Many musicians have traditionally been passive about the operation of their arts organizations, and many prefer to merely show up and play rather than be involved in the larger success of the organization. The role that labor unions play would be greatly diminished or eliminated. Orchestra administrations would become much more accountable to the musicians, as would be the board of directors.

This model also doesn’t apply to professional orchestras on either extreme of the spectrum. Highly funded and well established orchestras like the Chicago Symphony might not need this model, as their funding supply is able to cover them through economic declines, although even top 5 orchestras like the Philadelphia Orchestra are not immune to bad times and bad management. On the other end of the scale, small regional per-service orchestras can merely scale their schedules up and down depending on their financial situation.

Finally, adopting this model would be a tectonic shift in the way that orchestras have been traditionally organized and managed. Some smart financial people would be needed to set up the indexing system in a fair and effective manner. New systems of governance might need to be established given the new index model. Finally, the musicians themselves would need to be better educated in the larger operational model of an arts organization so that that they can contribute to the direction and major issues at hand with their orchestra.

All of these will require some complex changes and periodic tweaking in order for the model to work efficiently and effectively. But given the massive failure of the traditional model for symphony orchestras in use today, at least this gives them a fighting chance.

Originally published by The Drapkin Institute for Music Entrepreneurship

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Wichterman , Catherine, The Andrew W. Mellon Foundation (1998): “The Orchestra Forum: A Discussion of Symphony Orchestras in the US”

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  1. Comment by Anonymous
    November 28, 2019 at 6:30 AM

    Going To The Limit: In Defense of the Orchestra Virtuoso- by John Axelrod ©2012

    Recently I toured with the incomparable phenomenon from Salzburg known as “The Groovinger.” Martin Grubinger, the multi-percussionist and Deutsche Grammophon recording artist, performs at a level that most musicians, soloists and orchestral, can only dare to reach.

    I recall our first collaboration, in 2007, for the Mozart Jahr program with the ORF Radio Orchestra Vienna in the GoldenerSaal of the MusikVerein: 6 percussion concerti, 3 of which were world premieres, and in between Grubinger played Xenakis and performed other incredible feats of musical virtuosity. The public was larger than that of the Vienna Philharmonic New Year’s Day concerts. There were 2 pauses during this 5 hour concert, and standing ovations at each interval and after the concert. Many people came because they knew they would experience something unique: An artist going to the limit, pushing others to reach the summit of musical performance. Playing, as my teacher Bernstein once said, as if he would live or die so that one note should inevitably follow the other. When we see such artists perform at such a level, we are inspired, rejuvenated, and reminded of that which is possible in the human spirit and body. And when we see the orchestra engage themselves, each and every musician, individually and collectively, to accept that challenge, it is more than simply playing music. It is being rewarded for those moments in which our humanity becomes something more than simply being human; when we are, to be less Nietzsche and more Whitman, contributing indelibly to the powerful play of life.

    At the press conference for this 2007 concert, Grubinger explained how he practiced 14 hours per day and memorized over 400,000 notes. The press were incredulous. How is this possible? I answered with a smile: “I know the answer. Martin lives next to the Red Bull factory. He eats, drinks, bathes and brushes his teeth with Red Bull!” Laughter aside, the real truth is that Martin shares, at least from what what he know historically, what that other phenomenal wunderkind from Salzburg had: Virtuosity. Mozart’s herculean feats on the piano may have become mythical, but Grubinger is very real. And his performance is contagious. The public experiences something they never thought an orchestra or soloist could do. The orchestra is pushed to their limits, sometimes more than they would want, yet no one complains. Routine has no place in the realm of the virtuoso. In the end, exhaustion sets in, but so does pride. The feeling is similar to what a climber feels once the summit of Mt. Everest is reached. And what does one do after the mountain is climbed? He climbs it again. And it helps having Red Bull by your side.

    Austrians are becoming more and more famous for going to the limit, and not just in bodybuilding. That an Austrian man, Felix Baumgartner, sponsored by the ubiquitous Red Bull, has shown in 2012 that a human being can jump from the stratosphere in a space suit and parachute and survive the free fall past the speed of sound pushes the litmus test for us all. Now all human achievement will be measured by this astrophysical accomplishment. This was more than a giant step for Mankind. This was a forward thrust to dare others to take similar risks. As the mythologist Joseph Campbell once wrote: “Jump! It is not as scary as you think.”

    The Camerata Salzburg, who made this recent 2012 tour with Grubinger and I, are a group of highly skilled and dedicated musicians, willing to take such risks. Like most professionals, they have become experts on their instruments after many years of training, passed auditions, continue to play solo and chamber music and teach in their spare time, and commit themselves to a life of music in service to the composer and the public. But, most of all, and beyond most others, they are, as noted above, willing to jump. With each rehearsal, Grubinger would ask for more. More intensity. More precision. A sublime pianissimo. An urgent crescendo. An exact 16th note. And, despite heat and fatigue, the orchestra willingly complied. Ideas were exchanged. Tutti members, soloists in the orchestra, concertmaster, conductor, soloists-all of us were enveloped in the laboratory of music making, realizing the creating something together was greater than making nothing alone. Like Parsifal, it was jumping with confidence, without the doubt in our hearts. The Grail was found. It was idyllic, a utopian experience of making music, a fresh reminder of why we make music our living.

    But, sad to say, it was far from usual.

    I have written in my recently published book, “Wie Großartige Musik Ensteht…Oder Auch Nicht,..Ansichten eines Dirigenten” (the original English version is not yet available, but hopefully soon) that the system and paradigm of orchestral classical music performance has become outdated and is struggling to meet the challenges faced with surviving in the 21st Century. Understanding the chronology and anthropology of the orchestra is critical to recognizing that the way it has been done does not necessarily mean it is the way it should be done. Especially now. And I want to be clear about my defense of the orchestral musician, because several quotes from my book were taken out of context online and created unfortunate misunderstandings. So let me be clear once and for all: I support all professional musicians and, indeed, hope to contribute to the debate and dialogue to ensure their careers are protected, not destroyed.

    Musician’s salaries and livelihoods are under attack. In 2012, 6 major orchestras in the United States, from Minnesota to St. Paul to Atlanta to Indianapolis to Chicago to Detroit faced either musicians strikes or lock-outs, some resolved as of print, others still in stalled contract negotiations. Boards and administrators wanted musicians to take 30-40% cuts in wages and healthcare. After 2 years, the famed Philadelphia Orchestra finally resurfaced from chapter 7 bankruptcy. In Germany, orchestras have either consolidated, such as the SWR orchestras in Stuttgart and Baden/Fribourg or they face looming budget cuts. The Arts Council of England reduced its cultural budget by 30%. Cultural budgets in France will be further reduced in 2013 in order to meet the new President’s budget goals of 3% of GDP. Many orchestras in Spain, Portugal and Italy have difficulties making payments to its musicians and artists, let alone surviving. Despite some statistics showing that audience attendance and classical music sales have increased, the global economic crisis has given politicians the excuse to make that familiar reaction: Cut Culture. In other words, the first line item to be affected when expenses need to be saved is usually culture. And in my book, I offer some idea that could help integrate the public into the process and ensure a greater role and relevance for the orchestra organization to its community.

    However, what needs to be justified is the large cost. Indeed, orchestra and opera are the costliest performing arts that exist. Recently in November 2012, Opera Madrid cancelled a Magic Flute to be performed by a touring SIr Simon Rattle and the Berlin Philharmonic in order to save 800,000€. Kölner Oper cuts its budget and lost its Intendant in the process. Teatro alla Scala operated at a deficit and lost its Intendant to Paris. Indeed, a Wagner Ring Cycle can cost an opera house over 1 million Euro or more.

    Salaries for orchestra musicians in a major orchestra can represent over 35% of an orchestra’s operating budget. However, receipts from ticket sales might represent only 35% of an orchestra’s revenue. Where does the other 65% come from? Usually government subsidies, foundation grants, corporate gifts or tax deductible donations. Can the governments afford it when they cannot make pension payments? Do the rich want to keep paying for it? And the larger question is what can an orchestra do to ensure that the salaries and benefits for the musicians who actually make the music are protected, regardless of whether governments or corporations or foundations slash their contributions to an orchestra. The question I often hear from my colleagues is: “Making music is a right, not a privilege.” But as I point out in my book: “When musicians speak about their jobs as a right and not a privilege, it is hard to convince a 50 year old who has been laid off and unable to find work for a year that a violinist deserves his paycheck till he retires.”

    Yet, the point of this manifesto is just that. The violinist does deserve his or her paycheck. And this is why: They are virtuosi. They do something that less than .1% of the population does, regardless of whether it is only the 1% who can pay for it. They are asked to play everything well, from Bach to Beethoven to Brahms to Berlioz to Bartok to Britten to Bernstein to Boulez (and these are only the B’s…). And in doing so, they are among those who represent the highest level of individual and collective human achievement. A professional musician has an education and skills as valued as a nuclear scientist, is as trained physically as a professional athlete, and is as psychologically focused as a combat soldier. The professional musician does everyday on stage what Baumgartner did from the stratosphere. They jump. They risk their health and welfare not only to make the music that feeds their souls, but also as a civic act for the public they serve.

    Still not convinced?

    When we value the sports athlete for millions of dollars and actors for even greater sums, the sponsors pay because it draws a bigger audience. Classical Music does not. Classical Music has always been for the well to do, educated, cultured middle to high class. Patronage was a sign of cultivation. But that patron middle class is shrinking. And so are salaries for the orchestra virtuoso. As I write in my book:

    “The excellent writer Anand Giridharadas wrote at the end of the 2011 in The New York Times on the political rise of the Middle Class:

    ‘A long line of thinkers, going back to Aristotle, had spoke, of the middle as an enforcer of democracy and the rule of law. But here was a new secessionist bourgeoisie, enthralled by globalism, freed by gadgets and gated communities to disconnect from their compatriots and live with few responsibilities to their surroundings in a flashy globoscape.’

    If classical music in the concert hall is meant to be a shared experience, touching both the universal and the individual, it cannot mean very much when its future public is more online than inline buying tickets and when they have less and less to do with each other on a socially connective level. How does an orchestra touch its public when the public cannot touch each other? YouTube may expand appreciation, but it does not measurably increase subscription sales. More people are following revolutions on Twitter and Facebook than feeling revived by a classical music concert.

    All signs point to an emerging middle class civil society fed up with business as usual, with politics that are self-serving, and with religious institutions failing in their traditional roles. The orchestra has been linked to the exclusive establishment for too long and will be rejected by this new public, unless the orchestra once again begins to listen to its public and serve their needs.

    The Middle Class is demanding a new customer-supplier relationship with its governments and businesses, expecting a better return on investment and entrusting a better provision of services for which they pay with their taxes. Classical music, included.”

    The excellent music critic and composer Greg Sandow has written a rather dismal picture of the downward spiral of subscriber statistics, suggesting in his article “Sobering Statistics” that as time has passed the number of subscribers for a classical concert has been globally reduced to a minority of the civic population. What was once an age of immigrant and middle class expansion, has become a unfortunate indication that fewer people care about classical music. What happened? Baby Boomers stopped coming to the concert hall and Generation X’ers tuned out. MTV and Internet took its place. Music videos and free product. Does an orchestra have relevance in the age of YouTube? And if the Detroit Symphony can break Pops records with revenues of “The Music of Queen,” as it did recently in November 2012, does that mean less Beethoven and Mahler? I am not against this as it proves the viability of the instrument of the orchestra in various formats. My own project ClassicalRock (www.myclassicalrock.com) combines classical music with classic rock and is a proven success. A concert of John Williams’ film music at Tanglewood can also help pay for the BSO classical series concerts. The same musicians must play Queen as well as Beethoven’s Eroica. Thus, virtuosity has no limits. But, virtuosity must not be limited.

    What makes the virtuosity of an orchestra musician any less valuable than the athlete or the Popstar? If market share values the art, then orchestras must seriously consider themselves at risk. The classical music market share, focusing primarily on core and contemporary classical repertoire, at less than 2% of recorded music to less than 20% of the population, is becoming endangered, if not yet extinct. We cannot keep playing to the converted at current costs. The next audiences must be developed to sustain the instrument of the symphony orchestra, but it hopefully is not only via revenue generating Pops concerts.

    How? Are concerts as events the answer?

    In my book, I propose several ideas, from the establishment of a middle class orchestra meeting the needs of a changed public to a new business model similar to that of a sports organization with contract term limits, multiple ensembles from youth to senior, merchandising deals, and a vibrant outreach and education program. I have also extolled the virtues of the El Sistema program and its counterpart in Los Angeles, and its mission statement as an orchestra with an inclusive social and humanitarian vision, not only artistic. Everything from the Orchestra for World Peace to The East-West Divan Orchestra are successful examples, albeit exceptions to the rule. These are all systemic paradigms that would require unions, administrations, boards and government officials to understand that a reformed business model makes good business sense. But there are also other ways to reduce costs without compromising quality, changing repertoire or cutting jobs.

    Opera houses often share productions to reduce costs. Tour presenters also share the costs of a touring orchestra. Agents package their artists to orchestras and opera houses. Why do orchestras continue to ignore the possibility of packaging their own musicians? With consolidation occurring in orchestras in Germany, the ideas of packaging may seem anathema to the individual identity and stability of an orchestra, but costs can be shared and expenses reduced.

    Let us look at some examples that work. The Lucerne Festival Orchestra, (not to be confused with the local Lucerne Symphony, of whom I was Music Director from 2004-2009), is considered by some to be the best orchestra in the world. The foundation of the orchestra is the Mahler Chamber Orchestra, itself a democratically governed, collective of young, freelance professionals, founded by Claudio Abbado, and self-financed through concert touring revenue. The majority of soloists in the LFO are from the best orchestras around the world, all chosen by Abbado. Though the orchestra only plays during the summer, it has recently toured during the subscription seasons. Of course, the Lucerne Festival can afford to bring all the other great touring orchestras to its concert hall. But the LFO (as is the MCO) is unique in personality and sound, still driven by the artistic vision of its conductor. There is a long tradition for this festival orchestra, going back to Toscanini and Fürtwangler. But the current format of the orchestra works well not only for the festival business model, but also for its identity. The public keeps coming, the DVD’s keep selling, the media keeps broadcasting. Could other orchestras do the same?

    Here we reach a most sensitive issue. Most musicians, once they win an audition and are approved after their first probationary year, believe they have their jobs till retirement. They have worked their whole lives to reach this point of engagement and do not feel the market should be flooded with freelance musicians just to save money. And after several centuries of less than acceptable social status, musicians, with the support of the Musician’s Union, have protected their benefits and rights to be valued at a more appropriate social level. As I note in my book, the white tie and tails symbolically represent a higher social rank; like the roman collar of the priest, the musician is one step closer to Musica Celestis in the Kingdom of Heaven. Why would they want to change what they have collectively achieved? It is, of course, in the interests of the Unions to increase membership. And I want to be clear in this point so there is no confusion: I support the Musician’s Union and its position on salaries, conditions and benefits for orchestra musicians. Without the union, musicians would not be able to remain as virtuosic in defense of the music.

    However, let us take a closer look at some numbers, because the moment there is discussion about musicians losing their positions or conditions, emotions interfere with a larger, rational picture. According to the American Symphony Orchestra League (see 1998 Mellon Foundation report), in 1997, there were 78,000 professional musicians employed by orchestras on a permanent basis, 11,000 administrative staff, and they gave 27,000 performances annually for 32 million people. While that number sounds impressive, 32 million represents nearly only 10% of the 312 million people in the Unites States in 2012.

    78,000 professional musicians in the USA in 1997. Today, with fewer orchestras, that number has certainly declined. Among the top ten salaried orchestras, with each averaging around 120 musicians, that number representing the best orchestra musician is astonishingly low. 1200 out of 78,000? That number represents the rarity that is virtuosity. But it also shows there are many more jobs to save. I make this point for a purpose. Each musician wants his or her future protected, whether they play in the top 10 orchestras or not. Musicians do not want to live hand to mouth without any future security. Being a freelance musician might offer flexibility, but it wont pay the mortgage.

    An orchestra is also a sound, a tradition, a repertoire and unified voice. While the Lucerne Symphony Orchestra only comes together once a year for a festival, most orchestras work year in and out, and have over the years developed unique sounds and colors that can only be achieved by consistency and collaboration over time. And yet, many orchestras play with supplementary musicians who have never been trained or played with the orchestra on a regular basis. Does that not affect then the argument for sound and unity of an orchestra? Yes. And yet it is done regularly.

    What can be done then to ensure those who make the music are still well paid to keep playing the music? What can be done to ensure a level of virtuosity on a consistent basis to justify the costs involved?

    There is a certain arrogance on both sides of the fence. Administrators say they have raised all the money they can in the difficult economic environment and musicians have to accept the cuts or else face lock-outs. Musicians argue they always play at the highest artistic level and cuts will reduce quality. Therefore, they strike. Whether a midlevel orchestra (C or B) or the high level orchestra (A or Big 5). Salaries are commensurate with quality. The higher the salary, the better the orchestra. But if that was true, there would be no bad reviews, no routine performances, no lack of subscribers and no loss of financial support. We know this is not true because in sports it is the same: Millions are paid, but the team does not always win. We are human after all. Mistakes are made. Sometimes the concerts are not very good.

    Does the public know the difference? Yes. In one word: Virtuosity. What make the Simon Bolivar Orchestra so exciting? Virtuosity. Going to the limit. What make the Lucerne Festival Orchestra so good? Virtuosity. Going to the limit. What makes Grubinger and Camerata Salzburg so good? Virtuosity. Going to the limit. The public sees that engagement and are convinced. The same can be said about a number of orchestras, conductors and soloists. It is the virtuosity that counts. Not only the event of the concert itself.

    And yet, here are are again, in familiar territory.

    There is a phrase in the Classical Music industry: You Pay and We Play. Organizations are finding that hard to do. And that does not always guarantee quality and consistency, despite the formula that higher fees means higher quality. There is also the inverse phrase: You Play and We Pay. Musicians are finding that irreconcilable because it puts the responsibility and blame solely on their shoulders. Both are actually wrong. Why not this: We Pay Well BECAUSE You Play Well. OR- You Play Well BECAUSE We Pay Well.

    Both validate the virtuosity. That values the reason why the money should be raised and budgets should not be cut. Yes, the musicians must remain responsible, but as virtuosi, not simply employees.

    A recent report by the Drapkin Institute for Music suggested an index model of salaries based on a balanced budget rate index. Instead of fixed salaries, like a fixed interest rate, salaries would be based on a variable index, like a variable interest rate on a mortgage. As the report indicates, the Baumol effect, named after the economist William Baumol, states that it takes the same number of musicians to play a string quartet today as it did 100 years ago. However, costs have increased. Therefore, productivity has not increased as have costs. The Drapkin Institute proposes a new model based on pure economic output. If the index goes down, players salaries decrease. If it goes up, they are rewarded. Players must do their part to increase the index of total costs. The report posits musicians choosing to stay on the sidelines, content to make music and leave the funding to those on the boards and administration. In my opinion, musicians should not be forced to do more than play. Why? Because that is what they do. They are virtuosi. Not fundraisers.

    There is therefore something I would like to add to Michael Drapkin’s thoughtful analysis. That is the virtuosity. Yes, the virtuosi who were subsidized 100 years ago, are the same level of virtuosi today who struggle to be subsidized. Orchestras are not about only cost index. It is about human achievement. It is about virtuosity. What is missing in all our messages is this: The defense of and appreciation for the virtuosity of the orchestra musician. When viewed through this lens, it is easier to understand that cost index and productivity have less in common. Virtuosity cannot be valued. It can only be admired and supported. Without which we lose our capacity for greatness. The more we speak about money, the more we forget the real priority: Virtuosity. Once the virtuosity is acknowledged, it is then rewarded, as it is in sports, finance or film.

    In order to inspire that virtuosity and risk taking on a regular basis, the musicians should be treated as something special, not something expendable. And not only the soloists and the conductors, but the rank and file players of an orchestra as well. Without all players working in tandem, collaborating with the same level of intensity, then they cannot go to the limit. If one player on a team plays badly, the team loses. If one musician plays badly, the music suffers. If a team loses consistently, the public will not come. If an orchestra plays badly, why should the public keep coming? Its not always the conductor’s fault. But yes, even the conductor should either successfully inspire that virtuosity or should not be on the podium. There is no one person. As I note in my book, according to the Sociologist Max Weber, successful enterprises are reflected in the quality of leadership within the system, not only defined by one person.

    Imagine if you will then, a regular rotation of musicians among orchestras. Players being traded like professional athletes, salary caps and limited contracts creating a shorter period of employment but a higher income potential. When musicians use the argument about salary cuts affecting their ability to pay their mortgages, it is their virtuosic quality that justifies their salaries and offers greater financial opportunity, not only to pay their mortgages, but also put their kids through college and invest in their future.

    Imagine, if you will then, orchestras sharing not only in the costs of commissions or tours, but also in players. Tutti members become the foundation of a number of orchestras, in multiple salary ranges. Solo players are rotated from orchestra to orchestra. There are examples of a solo player in an orchestra, leaving one post in one city to go to another. Many angry emotions were expressed as a result. But if the system permits such an exchange, the public would then benefit by seeing great orchestral soloists and musicians in their cities, not only concerto soloists and conductors jet setting from one orchestra to another. The playing field would become more level and salaries would inherently increase due to the law of competition.

    “Residency” is the new form of packaging. The Mahler Chamber Orchestra offers several residencies at various festivals. The New York Philharmonic recently announced a partnership with the Shanghai Symphony. Concerts, master classes, teaching, commissioning works. The funds from this strategic partnership help offset local deficits. And while that is a wonderful way to reduce costs and build audiences and develop the brand of the New York Philharmonic, it does not necessarily resolve the local issues that caused the deficits in the first place. It has been noted the Cleveland Orchestra tours regularly to Miami, ostensibly in order to offset local debts. Not all orchestra have the status to command such “Residency” opportunities.

    What about the administration and the conductor? Is it right for a conductor to be paid over 1 million when musicians are asked to reduce their salaries? Is it fair for an Executive Director to be paid more than the concertmaster, even if the organization operates at a deficit?

    Imagine, if you will, an Executive Director, who, like a sports coach, has a limited term and has clear measurements of success. Imagine, if you will, a Music Director, who is required to become part of the community and, like a politician, is voted into his or her position by the public and the musicians, and whose salary is subject to such a vote. And if the MD and ED do not meet clear guidelines, both in terms of artistic vision, community involvement, fiscal responsibility and accountability, then they too must go. They too must be as virtuosic in their work as the musicians themselves.

    If the bottom line budget is more often than not the reason for budget cuts, risking the engagement of its musicians who make the product is the worst reason to cut costs. The threat is clear: If the musicians and its unions do not accept the reduction in costs, then other musicians will be hired at lower fees. That sends the message that the virtuoso musician has no value and is expendable. That sends the message that the music, played with virtuosity, meaning, engagement and conviction, does not matter. The administration can do a better job persuading the public that it is in their best interest, worth their investment, and inherently as inspiring as is a pop concert or basketball game. To take the attitude that classical music is only for refined tastes, not for everyone, and is for only those who are willing to pay for it, is to walk into the lair of the lion. Costs will not come down. Audiences will not be augmented. Ticket sales will not be increased. And so, Mahler will not be heard. Wagner will not be seen. Beethoven 9 will not be as enlightening as it must be.

    The discussion in the New York Times as to whether classical music is dead created a storm of response to the suggestion that classical music can be better packaged to increase support and awareness among its consumers. Greg Sandow has astutely suggested that classical music concerts should become events, not only formatted programs. I agree with his idea to think beyond the box. Packaging is part of a larger solution. The business model must be reconsidered. The Paradigm must shift. But only so that one thing can remain the priority: The Virtuoso orchestra musician. That is why the Gewandhaus Orchestra was formed by its civic community, in 1741. That is why the Ford Foundation distributed its funds to establish orchestras throughout America after World War 2. That is why composers write what they do. For the virtuoso to play what they compose. Then every concert is indeed an event. And the public can then take comfort in knowing that the virtuoso will continue to inspire us all to go to the limit.