Unfair Criticism of the Lyric Opera

So the Lyric Opera of Chicago released its financials from fiscal year 2015, along with a brief statement explaining what the numbers mean.  In essence, the story is this:  The Lyric Opera balanced its budget last year, with $74.8 million in operating revenue and $74.8 million in operating expenses.  It did this in part by raising $37.2 million in contributed income (up from $31 million last year) and $29.7 million in ticket sales (down from $32.6 million last year).

Some commentators saw this as good news, and reported it as such.

Sadly, others took a less sanguine approach, and reported this same story like this:

The Lyric Opera [balanced its budget last year, with $74.8 million in operating revenue and $74.8 million in operating expenses.  It did this in part by raising $37.2 million in contributed income (up from $31 million last year) and] $29.7 million in ticket sales (DOWN FROM $32.6 MILLION LAST YEAR).!!!!!11!!!!1!

In particular, I’m thinking of an article from the Chicago Business Journal titled “Lyric Opera of Chicago Reports Break-Even FY15, but Results Raise Red Flags,” although that seems to be the same tone adopted elsewhere.  For example, a similar story posted on the site Parterre.com reads, in its entirety:

Lyric Opera of Chicago’s newly-released financial reports for fiscal year 2015 reveal the company’s ticket sale income decreased by almost $3 million between FY 2014 and FY 2015, a drop of more than 10%. Last year the company sold $25,880,310 in tickets and spent $74,797,144 on program costs, administration and development.  A highlight of LOC’s current season, as planned and executed by general director Anthony Freud will be a revival of Gounod’s Roméo et Juliette starring Eric Cutler and Susanna Phillips.

Let me say a few things.

I could understand if people were reacting to the fact that the Lyric had engaged in cooking the books, was taking questionable draws from its endowment, or generally falsifying documents. I could understand if folks were concerned about what percentage of the Lyric Opera’s budget was going toward the art itself.

But that’s not what people are complaining about.They are snarking about the fact that Lyric Opera can’t cover its operating costs with earned income alone, and has to engage in fundraising to fill the gap.

In effect, folks are whining about a non-profit arts organization that is behaving… like a perfectly normal non-profit organization.

Moreover, they’re twisting the Lyric Opera’s completely neutral statement about a ending its year with a balanced budget in order to make this point, thereby putting the situation into the worst possible light. Through it all, there’s the ugly undercurrent implying that not only is this particular organization wasteful, but in broader terms that opera is dying, arts organizations are parasites on society, and non-profits are inherent failures. Or even worse… they are “unsustainable.” (Shudder!)

This is flat-out wrong and needs to stop.

Let’s look at the article in the Chicago Business Journal.  It’s clear that the author believes that the only correct way—or morally correct way—an arts organization should support itself is through earned income, especially ticket sales.  So the article is replete with digs, snarky asides, glass-half-empty pronouncements, judgements, and veiled warnings suggesting that whatever good news, the Lyric Opera is really in trouble because its ticket sales have declined from last year.

“…results raise red flags.”

“So how did they do it? Not, it would appear, from earned income.”

“Lyric’s financial overview did not indicate what the substantial boost in contributed income for FY15 was attributable to, however.”

“While contributed support saved the day at Lyric, ticket sales in FY15 were another, more troubling matter.”

“In a letter also released today, Lyric General Director Anthony Freud said he found it ‘gratifying to note that more than half of the “Carousel” ticket buyers were experiencing Lyric for the very first time.’ But Freud did not mention how many ‘Carousel’ tickets the company sold.”

“…which would indicate Lyric may have sold tickets at a much steeper discount during the most recent fiscal year than was the case in the prior year.”

“Treasurer Carbone only said in his statement…”

Again and again we’re treated to the condescending view that dollars raised from fundraising aren’t good enough, and if funds don’t come from earned income then they somehow don’t count.

For the love of God, the Lyric Opera is a 501 (c)(3) not-for profit, as recognized by the freaking IRS.

For the millionth time, this means the organization is not a commercial theater, it is a non-profit. In structure, it is like the Humane Society or Habitat for Humanity. Like every other non-profit in the country, its costs will be higher than its earned revenue. That is why it is classified as a 501 (c) (3) non-profit. By definition, it will engage in fundraising activities to supplement the revenue coming in from ticket sales and other sources of earned income. Just like every other non-profit in the country. This is not a failure of its business model… it is the business model, as approved by the IRS.

It is astonishing—and profoundly irritating—that so many reporters, business leaders, and even industry insiders miss this essential point.  Instead, they routinely dismiss the work of non-profits, saying:  “Well, you can’t support yourself from selling your product, so you’re a failure.  Worse, you have to go door-to-door begging for money from strangers, so you are a detestable failure.”

Look.  Like all non-profits, the Lyric is legally empowered to make use of a specific revenue stream—contributed income.  And so it does.  Fundraising/Advancement/Development is a well-studied, well-established, and completely respectable field.  Like all healthy non-profits, the Lyric employs a staff of fundraising professionals who are skilled in their trade.

Criticizing the Lyric Opera (or any non-profit) for making use of the resources and revenue streams it is legally empowered to use is absurd.  And it smacks of “Downton Abbey-esque” world where if you made money through trade, you were unfit for polite company.

And further, demanding that a non-profit somehow support itself entirely off of earned revenue is equally absurd.  An overemphasis on earned income can harm an organization. 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 puts 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.

Sorry.  The fact that a non-profit did not cover all of its operating costs via earned money neither surprising nor shameful. Fundraising is a completely normal and necessary activity, and that’s just what the Lyric Opera did.  In fact the Lyric saw a 20% increase in fundraising.  That’s a huge achievement—can’t that be celebrated?

* * *

Also in the “well, that doesn’t count” category, several writers have complained that the Lyric’s break-even year only happened because it produced a musical—i.e. presented a popular form of entertainment in a mercenary attempt to sell tickets.

Shocking.  That’s the first time in human history that a performing arts group mounted a crowd-pleasing money-maker to build crowds and make money.

The issue seems to be that not only is the presentation of a musical somehow soiling the art, but the related ticket sales are artificial and throwing the budget out of whack.

So, if the Lyric presents Carmen or La Bohème to boost earned income, should we similarly remove their financial data from the budget, too?

Yes, I get it, Oklahoma! isn’t Otello.  But at the end of the day, there is an artistic case to make for doing these shows, in part because in the grand scheme of things The Sound of Music is still very much on the same part of the spectrum as Die Fledermaus.

Running a popular musical isn’t by itself an artistic failure, as long as the Lyric as a whole stays true to its mission.  Nor is it an offense against God if an orchestra has a pops series or hosts a jazz festival.  As I’ve mentioned before, arts organizations (and non-profits generally) engage in a range of activities that serve different ends.  Some are done primarily to raise money to support operations, some are done primarily to advance the mission, and some manage to combine these two notions.  I’ve written about using a Mission-Money matrix to plot how projects or activities line up in this regard.

I am not advocating that an arts organization should blithely water down its art.  But of course it can tinker around the edges to make sure it has the support it needs to operate, especially if it operates within a strong, artistic strategic plan.

* * *

In the end, this rant isn’t so much about the Lyric Opera as it is about how we think and talk about the arts as a whole.

I am fine with criticizing arts administrations when they engage in bad business transaction.  This should be obvious—my blog has a rich history of calling out arts organizations that are engaging in artistic, administrative, or financial shenanigans.

But that’s not what’s going on here.  Again, people are slamming the Lyric Opera for doing the perfectly normal things non-profits do to survive… and for not following the trajectory of a for-profit corporation.

No.  This willingness to see the world of classical in the worst possible light is tiresome and false.  Why must we manufacture bad news?  There is plenty of good news, and that’s the truly important story.  Plus, as I’ve argued before, we don’t do ourselves any favors by imposing for-profit thinking onto a non-profit, or judging a non-profit harshly when it doesn’t conform to for-profit standards.

This is unfair, and unhelpful.  So please… stop.

.

Xochipilli

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6 thoughts on “Unfair Criticism of the Lyric Opera

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  2. The problems hinted at in the business articles sharply contrast with some artistic reviews. That is entirely appropriate. Businesses, profit or non profit, must have a sustainable revenue stream. In the case of Lyric, ticket sales through the late 1990s produced about 60¢ on the dollar (or 60 %). That revenue stream has fallen to less than 40 %. Dipping into endowment is a last resort. If a financial crisis similar to 2008 should occur or even an extended bear market, the Lyric would find it’s endowment, as a revenue stream, severely constrained. Like the Met, they may also find resistance from the Board to increase operating revenue donations to questionable artistic endeavors. Audience building through schemes as “LYRIC unlimited” are abject failures. And virtually the rest of this season is on goldstar at half price. Business sections look at these issues appropriately to determine if a non-profit has a business model that addresses these realities. The LYRIC does not.

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    • Thank you for your comment. I think it goes without saying that I disagree with your position… as the above blogpost was written specifically to refute that line of reasoning.

      In particular, I point out that far too often business articles make the cardinal mistake of thinking about non-profit companies strictly in for-profit terms. This is wrong, and unhelpful.

      And as I point out in my piece, ticket sales are not—and cannot be—the end-all, be-all of a non-profit performing arts organization. It is legally empowered to engage in fundraising as well, and donations can and will make up a significant portion of its overall revenue. Plus, using cash draws from the endowment aren’t a “last resort,”… that’s the whole purpose of having an endowment in the first place. Yes, you want to be responsible in your draws, but… again, the reason an organization creates and manages an endowment is to provide funds for its operations.

      Far more to the point, I’m intrigued that your email address seems to have been created on the spot, and your comment was posted from a computer in Wichita. Since your comment doesn’t seem to address the points of my posts, and seems to come from a random email email address in a surprising location… I’m curious if you’re simply a troll.

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      • Thanks….BUT no NOT on the spot e-mail (though I confess that technology might be doing weird things especially since I haven’t been to Wichita in about 45 years). You might be much more versed on this. Do carriers purposely bounce these things around?

        Just a vague prediction: FREUD is the first GD hired outside. Could be a good thing. BUT I suspect the rather conservative Board might “invite” him to leave even though he’s contracted through 2020. Almost 20% of the administrative staff has left (or been terminated) in a year. Might be clearing cobwebs or might be rudderless leadership. Time will tell.

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