Another Case of False Advertising?

It appears the Met’s management is starting to feel uncomfortable. I can see why—over the past few days, there has been a flurry of news stories focusing on General Manager Peter Gelb’s executive compensation, leadership, and vision for the future… and the media attention has not been flattering. In response, the Met’s Board of Directors placed a full-page ad in the New York Times seeking to clarify its position regarding the ongoing labor negotiations and to reassert control over the narrative.

I’d like to respond to this ad.

Longtime readers of my blog won’t be surprised—during the Minnesota Orchestra’s lengthy labor dispute, I posted such rebuttals all the time. In fact, my commentary of a similar, full-page ad the Minnesota Orchestral Association ran on Labor Day last year remains my blog’s most widely-read entry.

Let’s begin.

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“[T]his year, the Met’s strained financial condition has made negotiations more difficult…”

Well, to a degree, yes. But from my perspective, I’m not sure that it is the impersonal “financial condition” that has made things tense—it’s the way that management has approached the negotiations that has made them tense. It’s not just that the Met’s management has thus far taken a hard-nosed approach, but that it has essentially entered in to negotiations with an attitude that the unions must be broken at all costs. That is not helpful. Also, Gelb has repeatedly remarked how opera is a dying art form and its audience is collapsing. That also is not helpful.

In contrast, consider the case of the San Diego Opera, another company that was very much looking at an existential crisis. Facing the Opera’s imminent demise, a new management team came in with a positive, can-do attitude to see if things could be turned around. Rather than to be confrontational, it opted to bring everyone into a collaborative discussion to stave off disaster. This “all hands on deck” approach worked, and in a whirlwind of activity they collectively found a way to save the company. San Diego’s financial condition was far, far worse than the Met’s… but ultimately the negotiations were not nearly as poisonous.

“Difficult financial conditions” do not inexorably lead to difficult negotiations.

“We are increasingly regarded as the best opera company in the world….”

Yes, the Met is the largest, arguably most important opera company in the country… but those attributes can work against it. Here’s something to consider. An article that just appeared in Forbes noted that fairly consistently, the most highly paid CEOs tend to be the worst performing CEOs. Why? Complacency and overconfidence. These are forces that everyone has to fight against; but elite corporate leaders are particularly liable to assume they are better informed and more talented than their counterparts elsewhere. They don’t listen to criticism, and generally refuse to look to their competitors for new ideas. Why should they…they are already on top, right?  Any thing they do must, by definition, be considered a “best practice.”

Sadly, organizations can fall into the same trap. They stop being hungry for success or  willing to try new ideas… and they grow complacent and stagnate. I’m not saying this is the case for the Met, but it is something to guard against.

“Like other opera companies, we face the challenge of gradually replacing an aging audience with a younger one.”

Well, yes… but some of these other opera companies are more successful than you are. Perhaps that’s a warning (see my above point).  But I’m curious as to why you feel that building a “young” audience is such a critical initiative. Do you argue that young music lovers have more capital to spend on tickets or donations? Do you feel emerging executives have greater pull to bring in corporate dollars from their respective companies? Are they more apt to provide bequests or engage in other forms of planned giving? Yes it is important to constantly bring new audiences, but I’m curious to know what kind of return on investment you expect to gain by chasing young audience members at the expense of older ones.

“In spite of our efforts, our New York box office has declined from 92% in 2008 to 79% in 2013.”

Those are, at first glance, alarming statistics. And yet a closer examination reveals that… well, that these numbers don’t reveal all that much. On the one hand, I’m assuming these numbers refer to paid capacity. That is a useful statistic, but it doesn’t necessarily connect with your finances… or inherently relate to your attempts to implement significant cost savings. What are your total ticket sales figures, and what is your overall earned income revenue? What is the average price paid per seat, then and now? Was the reason you sold so many tickets in 2008 because they were substantially discounted?

But there are other problems, too. What is the context for these numbers? What are they based on? What is your evidence, as others have challenged your numbers? Has the seating capacity remained constant during this time? How many performances does each year encompass? Why did you choose 2008 as a benchmark, if this decline is part of a long-term, irreversible trend going back much further? What results did your peer opera companies see during this same time?

And most important, why did your capacity fall? This is critically important. Was it that you produced too many shows, leading to audience fatigue? Did the quality decline, leading to audience apathy? Did ticket prices spiral out of control, forcing potential audience members to economize? Each of these problems would require a very different solution to bring things into balance again.

And to be blunt, cutting union wages wouldn’t do a thing to help with any of the problems I just listed.

Look, I understand… in tough times, there is a need to economize everywhere. So yes, you can squeeze the unions and potentially earn some cost savings in the short-term. But this will only buy a little bit of time until the underlying, structural problems re-assert themselves. If management is presenting unpopular operas in opaque productions, it won’t matter what concessions you get from the unions… the company is still going to be in grave danger. And in the meantime, you will have created a hostile environment that will make it unlikely your workers will work with you to find real solutions.

And finally, I have to point out that Peter Gelb has repeatedly stated that opera is a dying art form, and its audience is shrinking. I’m curious that he’s the person you’ve chosen to solve the problem of declining audiences—a problem that you’ve identified as an existential threat. Does he think this problem can be solved? Or has his talk simply been bluster leading up to a difficult negotiation?

“The Met’s endowment is, unfortunately, smaller than our $300 million annual expense budget.”

I get it, that ratio isn’t ideal. But as I’ve argued elsewhere, there isn’t a magical ratio or a set number that you have to have to keep an organization afloat. Simply doubling the size of the endowment isn’t a panacea—there will still be problems, however much money you have in your endowment. One thing to consider, how much money are you are able to access at any given time? The Minnesota Orchestra, for example has an endowment of roughly $150 million, but only a small percentage of it is considered “board designated” and can actually be used to fund operating expenses. The rest is restricted and untouchable.  Simply stated, if you build up your endowment, but the funds are restricted, you haven’t solved a problem so much as you’ve created a new one.

But I’m surprised you bring this up. After all, the management of the endowment isn’t the responsibility of the union workforce—it is the responsibility of the Met’s leadership. One could argue that the Met’s management has mishandled the endowment, has been unable to secure adequate resources to grow it to where it needs to be, and has made dangerously large draws from it (as you classify them) to keep the organization afloat. Isn’t that a failure of the Met’s management? The union workers had nothing to do with these actions, or the decision-making behind them. Again, I understand in a crisis everyone has to pull together; but as I just mentioned above, extracting concessions from the unions won’t do anything to solve the more fundamental problem of financial mismanagement that’s adversely affecting the organization.

Why are the workers expected to endure sacrificial cuts when they’re not the problem? What are you going to do about the real problem?

“Today the box office is only 27% and annual donations are an alarming 48%.”

With respect, why specifically this is alarming? There is no “standard” ratio of what an arts organization should bring in from donations, earned revenue or investment income—every arts organization has a unique formula. You have to do what works for you. It seems as if you’re approaching this with a for-profit mindset, and expecting opera productions to pay for themselves through earned revenue. But as I mentioned in a previous blog post, an overemphasis on earned income can cause an organization real harm. For one, it sets a trap where the arts organization has to over-perform—constantly producing a barrage of new performances to bring in revenue. This in turn puts a terrible burden on the group’s organizational capacity, and put undue stress on its artists in order to earn cash to pay the bills. Plus, organizations that rely too heavily on earned income can face situations where they have to essentially price themselves out of the market.

I ask honestly:  What are your ideal ratios, what what’s the rationale behind these numbers?

“The Met’s administration has proposed to cut personnel expenses by 16%—reductions that will equally affect union workers and administrative staff.”

This would have more credibility if it weren’t for the fact that executive compensation seems to be outside of this formula. It is curious that Gelb has only taken a 10% pay cut, even though he is the most highly paid employee with an annual salary of $1.8 million (versus a chorister who might only make $200,000).  Why is everyone else expected to take a 16% cut?  It is even more curious that leading up to this year, he received a 26% raise, which makes a direct mockery of the 10% cut he just took. If the Met were truly facing an existential crisis, why wasn’t his salary cut before now?

I’m sorry, but the optics of this are horrible.

“These cuts generally do not touch our unionized employees’ basic wages.”

This is embarrassingly disingenuous. Yes, I suppose in the strictest of senses these cuts don’t affect basic wages, but management’s proposal overturns the entire system of compensation… and completely misrepresents the reality of working at the Met. To successfully do the job that the Met’s management has required them to do, stagehands, designers, prop masters, costumers, and musicians have to work long hours that frequently go into overtime. The higher quality sets and costumes required for HD simulcasts, and the additional performances required to bring in additional revenue have placed increasing demands on workers. And naturally, they have made increasing demands on the workers’ time. Again, this is simply to do the jobs management demands that they do. To rewrite the work rules for how these workers are compensated will have a clear and immediate impact on everyone, and the management knows this. The workers will lose a great deal of money—the entire reason management wants to implement this plan is to reduce payroll expenses. But something else will have to give way. Will management demand the same number of hours, and the same high output, or will those expectations be reduced as well? Will quality suffer? Will top talent leave to explore other career options?

Is this a good idea?

“Two examples of work rules under discussion are….”

Oh boy. This is a classic demagoguing technique that gets used all the time—find a couple of “egregious” examples, remove any context, and squawk loudly about them so we start to think all that all such work rules are ridiculous.

But they’re not ridiculous.

First of all, that “16-week” vacation. Yes, I’m sure most readers see that number, reflect on their own number of PTO hours, and cry foul. But as I’ve argued before… you’re mischaracterizing what “vacation” means in this context. Musicians of this caliber don’t just take a break for 16 weeks—they have to practice daily to keep in shape, keep their endurance up, and keep their skills sharp, whether they’re performing or not. It’s like suggesting an Olympic athlete just stops training for 16 weeks and gets a free vacation. No. A more accurate way to characterize this period is “non-performance weeks.” It is crucial to give musicians these lulls, because they reduce the chance for injury and extends the length of the musicians’ careers.

Plus, the “16 weeks” number you casually mention seems to be inflated anyway, completely undermining your credibility.

And look, have you ever been in an elaborate costume? Movement is restricted, your ability to do many mundane tasks is compromised, and you are quite obviously still on the clock. If they’re still on the clock, why shouldn’t they be paid?

But there’s a larger point here, too. You fail to explain how many work rule changes you want, how invasive they are, and what the financial implication is for the affected workers. Over the course of the Minnesota Orchestra labor dispute, management attempted to implement more than 200 changes to the work rules, including the elimination of seniority pay and forced participation (unpaid) in community outreach activities. Plus, the CEO or board leadership would be able to force musicians to perform at events of management’s choosing, such as private parties. The rule changes, in fact, were more controversial than the proposed pay cut. So it worries me that you gloss over your proposed rule changes so lightly. What are they?

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This is already over-long, but let me close with a few general observations.

● It’s been pointed out that spending $30,000 on an ad in the New York Times is an odd way to try and convince the public that you’re broke. Well… odd and ironic.

● It’s disappointing that this ad had so little new information. Nearly all of this has already been said by Peter Gelb in the many interviews he’s been giving recently. In fact, in some interviews he’s given more specific information than what we get here.

● If you haven’t made your case by now, after multiple interviews and sympathetic stories… you’re not making your case.

This ad does little to change the narrative. My sense is you’re losing the public relations war… and you realize it.