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by Jerome Weeks 20 Mar 2008

American symphonies usually spend more than they take in, concludes a Stanford Graduate School of Business study. It examined the top 50 orchestras ranked in the U.S. over two years (63 orchestras total) — 46 ran deficits, 17 surpluses. Familiar news? Perhaps. But the author of the study points out that — many of the […]

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American symphonies usually spend more than they take in, concludes a Stanford Graduate School of Business study. It examined the top 50 orchestras ranked in the U.S. over two years (63 orchestras total) — 46 ran deficits, 17 surpluses.

Familiar news? Perhaps. But the author of the study points out that —

  • many of the orchestras are actually spending away their endowments,
  • marketing and fundraising strategies don’t bring in the money they often claim

One common thread he found is that the orchestras’ marketing expenses paid diminishing returns: “The last $100 you spend yields far less than the first $100 that you spend.” What the optimal threshold would be varies widely from orchestra to orchestra, but Flanagan said many could save money by scrutinizing marketing expenses. Fundraising efforts are more complex. Professional fundraisers in many fields often say that they bring in 8- to 10-times as much money as they spend, but Flanagan is skeptical. “A lot of that money would have come in anyway.

and

  • there’s a direct conflict between rising salaries and productivity that won’t be solved by technology.

In many U.S. industries, companies have been able to increase salaries gradually because technology has made workers more productive. Flanagan said symphonies have much slower productivity gains—technology isn’t about to turn a string quartet into a string duo—but musicians still expect bigger paychecks. The salaries of symphony musicians increased more rapidly than the pay of most other groups of workers in the late 20th century. Higher ticket prices did not fully compensate for cost increases, but those higher ticket prices reduced attendance at a typical performance.

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