Great News for the Met (and a Few Questions for Peter Gelb)

There is some very good news today about the Metropolitan Opera—the Met announced Wednesday that it closed its most recent fiscal year in the black, with a $1 million surplus and a balanced budget. This is a fantastic development, and I congratulate everyone who made it possible.

But I must say, today’s announcement is all the more remarkable in that just over a year ago, the Met was claiming its finances were in catastrophic shape; as a result, General Manager Peter Gelb demanded that its unionized musicians and workers take sacrificial pay cuts to keep the company afloat. Gelb was most clear and insistent on this point, arguing that the unionized workers needed to take cuts totaling $35 million or else. This wasn’t a one-time claim… he made this point in a variety of interviews throughout the summer of 2014.

Well, today’s announcement makes a mockery of everything Mr. Gelb said during those contentious labor negotiations. Several statements he made (along with other statements from the Wall Street Journal article that reported the good news) have raised some serious questions, as well as my hackles.  I’d like to respond.

* * *

“But broader challenges remain. Among them: shoring up the Met’s eroding subscriber base and recruiting new opera fans to fill the company’s cavernous hall as it embarks on its new season.”

Yes. Yes those challenges remain—and in fact are identical to the challenges that remain for every single performing arts institution in the world.

I hate to nit-pick here, but one of the things that bothered me about the media coverage of the various classical music labor disputes was the fact that even when the news was good, there seemed to be a concerted effort to make sure the news wasn’t all good or too good, so there would be a little disclaimer thrown in. I get it, and complacency is a real problem. But this challenge isn’t ominous, it’s ongoing. It’s the nature of the work. Performing arts organizations will always face this challenge, even in years where everything is going great, so can we do without the portentous warning?

“While box-office receipts increased by $1 million in fiscal 2015—in part because the company had more performances and slightly higher ticket prices—the percentage of paid seats fell to 74% compared with 76.9% the previous year.”

Two things. First, this gets at a topic I’ve covered again and again here on my blog—the difference between paid capacity and earned revenue. As I’ve said before, these are very different things; ticket revenue is a real metric tied to the actual budget, while paid capacity is a fluid, less tangible marketing goal that is not tied to the budget. You could, after all, sell all tickets for $5 and achieve a higher capacity… and still break the bank.

But one other point—this reinforces the idea that labor disputes are bad for business. They are disruptive and cause ill-will, even when they don’t result in an actual lockout or strike. It is particularly dangerous when management tries to win a labor dispute by waging a public relations campaign against the orchestra musicians, choristers, and workers… whatever short-term gain or tactical victory you might gain pales in comparison to the long-term damage you risk by actively turning people against your product. I mean, would it be wise for General Motors to try and win concessions from its workers by convincing the public that its cars were overpriced and its employees were strutting prima donnas?

Mr. Gelb should be grateful the decline he reported wasn’t even worse.

“ ‘It’s not as good as we would like it to be,’ Peter Gelb, the Met’s general manager said. ‘We sold more single tickets, but we are losing subscribers.’ ”

The slow, steady drop off of subscribers is a universal trend that has plagued every performing arts organization for decades. With respect, Mr. Gelb… if you finally find a way to stop the slow decline of subscription tickets, please make your findings public. You will instantly become the most well-paid consultant on the continent.

“Ongoing efforts to attract new audiences include same-day sales of $25 tickets and a program pitched at college students. First-time Met ticket buyers increased by more than 9% last season.”

A nearly 10% increase in new ticket buyers? This is outstanding. Now the hard part begins of deepening the relationship with these folks so they return. It is hard work, but worth it.

But here we start to run into a series of statements that directly contradict his firmly stated rationale for imposing draconian cuts. How, for example, does this square with Mr. Gelb’s repeated assertions that opera is a dying art form that faces nothing but declining audiences?

“ ‘One of the advantages of having such a large budget, we shaved a little bit here and a little bit there, and those little bits added up,’ Mr. Gelb said. The cuts ranged from whittling some rehearsals down by 15 minutes or half an hour to reducing travel expenses and ‘being more careful about costumes, literally down to the buttons,’ he said.”

Based on Mr. Gelb’s previous statements, I find this statement astonishing. Last summer, Mr. Gelb specifically stated that the Met’s musicians and workers needed to take a $35 million cut, “…else we’re facing bankruptcy in a couple of years.”  Yes… bankruptcy.

Many of us, myself included, thought Mr. Gelb’s claim was wildly overstated back then, noting that the numbers showed only a $2.8 million deficit on a $300 million budget. But still, the musicians and workers responded by proposing a whole series of cost savings that would help stabilize the Met’s finances without resorting to the drastic cuts Mr. Gelb proposed. But Mr. Gelb blew them off as completely insufficient to the needs of the organization.

Curious. But there’s more:

“Over the 2014-2015 season, the company pruned more than $18 million from the planned fiscal 2015 budget. Mr. Gelb attributed the company’s improved overall financial performance in large part to union agreements that called for expense reductions as well as pay cuts for both union members and employees on the administrative side.”

This makes it sounds like “union cuts” led to “improved financial performance.” But is that the case?

In a story in the New York Times from last August, the terms of the final settlement are listed as follows:

“…the Met’s management agreed not only to match the value of the [7%] labor cuts on the administrative side, but also to cut $11.25 million worth of other expenses – which may include cutting costs, scheduling more carefully, or reducing rehearsals – in each of the four years of the contract.”

So this is the equation for FY15: $11.25M (management expenses) + ?(admin. staff cuts) + ?(7% labor cuts) = $18M in savings.

Yes, the workers played a part, but the labor cuts are < $6.75M… meaning that the majority of cost savings (62.5%) came from the management’s side.  This is not surprising, in that many of us pointed out that most of the Met’s financial problems were caused by wasteful spending on the part of the management rather than the union workers.

As the bulk of this year’s savings came from cuts to Mr. Gelb’s bloated management budget, it seems that Mr. Gelb quietly agrees, even if he won’t admit it publicly.

“Fundraising increased by 11%, with the Met amassing $150 million in fiscal 2015.”

My goodness. Mr. Gelb was quite clear that the donors were tapped out, claiming that “Donors will not keep throwing money down the rabbit hole.”

I wonder what changed?

“The company has completed the first year of a new five-year fundraising campaign, Mr. Gelb said, and has raised more than $100 million toward the campaign’s $600 million goal.

Half of that is pledged to boost the Met’s endowment, which has shrunk by about 13% since 2006, and now stands at about $266 million. The other half is intended to supplement operating and capital expenses. ‘Approximately $19 million has been pledged to the endowment,’ Mr. Gelb said.”

Congratulations… $100 is a fantastic start! But again, it’s curious that a year ago Mr. Gelb specifically stated that the only way they could encourage the board to take up this capital campaign was if the union musicians and workers immediately agreed to punitive wage cuts of some $35 million. His exact words were “If the unions are willing to show that they are willing to take a sacrifice, in tandem with that the board will work to double the size of the endowment.” Those sacrificial cuts never went through, but even so it seems the capital campaign to raise money for the endowment is moving ahead nicely. I also note that campaigns take years of planning, so I imagine Mr. Gelb knew the money was forthcoming, and the plan was to go ahead with the campaign anyway.

* * *

All in all, this is a most curious situation. Last year Peter Gelb repeatedly hammered on the idea that the Metropolitan Opera was nearing bankruptcy, and the musicians and workers needed to take massive cuts for the Met to survive at all. He specifically noted that there were no more donations to be had, ticket sales were drying up, the board was uninspired to start a much-needed capital campaign, and the art form was dying. Again and again he used apocalyptic language that the catastrophe was imminent. Any questions about his data or his interpretations were dismissed. Any proposals made by anyone else were disregarded as being insufficient, given the enormity of the problem.

But today’s announcement blows that argument entirely out of the water. His points weren’t just incorrect… they were false. Exaggerated. Distorted. This whole scenario comes off as such a cynical, self-serving ploy that the only conclusion I can draw is that Mr. Gelb wasn’t desperately trying to save the Met, but desperately trying to break the unions.

And I have to say, I suspect he’s hurt his broader cause, too. When other managements in other performing arts organizations make similar claims… I suspect these claims will be greeted with much greater skepticism.

Plus, today’s announcement shows the true worth of the musicians and workers Mr. Gelb so thoroughly dismissed. They were actively involved in trying to restore the Met’s financial health, providing many cost-saving ideas to help the organization thrive. But they do so much more. They are a resource of ideas and experience. And most of all, they are the Met’s product; they aren’t obstacles to making the Met flourish, they are key partners in making the Met flourish. They deserve real credit for today’s wonderful news.

And that’s the thing to keep in mind—this is wonderful news. And not just for the Met; today’s news serves as an inspiration for other operas and orchestras across the nation. See? It can be done.

Congratulations, and here’s to many more successes!

.

Xochipilli

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5 thoughts on “Great News for the Met (and a Few Questions for Peter Gelb)

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