Looking Toward A Brighter Future

Given the recent round of doom and gloom being pandered throughout the business over large cuts in classical music coverage among traditional media outlets, I thought it would be useful to imagine a brighter future…


If you spend any length of time in this business, you eventually run into the Euro vs. US debate, which essentially breaks down into discussion over which system is better for the arts: a state or privately funded model. Nevertheless, it is one thing to have an intellectual discussion and another to look at some hard figures.

As such, I took a little time and put together some figures which illustrate what the US orchestra business would look like if Federal Government subsidies were more akin to European counterparts by accounting for 35% of a US ensemble’s annual revenue.

To begin with, and since I have all of this data on hand, I tabulated expenditure data from the 2004-2005 season for 76 ICSOM, IGSOBM, and ROPA symphonic orchestras. Next, I correlated this against the breakdown of revenue as presented by the ASOL. Although it is highly unlikely the League’s data associates with the 76 ensembles I used for the expenditure figures (the ASOL data doesn’t indicate which orchestras they used to compile the data) any differences should be relatively negligible for this exercise.

Setting The Scenario
The following chart illustrates how orchestra revenue broke down during the 2004-2005 season for our 76professional symphonic orchestras. Notice that government support accounts for 4% of overall revenue:
federal_funding02.jpg

Naturally, the government support listed here is the combined Federal, State, and Local figures but since it is so small we’ll just call it “Federal Support” for the sake of simplicity. Next, I imagined how those figures would look if the Federal Government subsidized 35% of orchestra budgets with only one condition: grantees need to adopt an “art for all” policy and reduce existing ticket prices by 50% along with programming one free public concert for every 16 paid concert events.

As such, I reconfigured those revenue categories based on those parameters. In doing so, it made sense that ticket revenue would sharply decline, I imagine it would be at least 50% lower. Additionally, it is fair to assume that contributed income would decrease as some donors are likely to adopt an “if the government is paying for it, why should I?” attitude. Nevertheless, even with that drop in contributed income, donors wouldn’t entirely disappear thanks to good old philanthropic spirit bolstered by tax deductions. The remaining categories would continue mostly unchanged.

Consequently, the following graph illustrates how revenue would look if orchestras received 35%, or $371,852,915, of their annual revenue from direct Federal support:
federal_funding03.jpg
One important component to keep in mind with this exercise is that overall orchestral expenditures would remain unchanged. I don’t think sizable government subsidies would, or even should, be accompanied by equivalent increases in spending. Instead, the Federal support would subsidize lost revenue from lower ticket prices and lower capital level giving.

All in all, it is a very straight-forward model, one which would allow orchestras to continue operating very much the way the do now albeit without the attendance crisis which would be marginalized by substantially lower ticket prices (thereby relieving other stressors such as decreased value among the cultural consciousness, artistic malaise, etc.).

How Does This Stack Up To Existing Federal Spending?
Although $371 million seems like a great deal of money, in the grand scheme of the US budget, it isn’t. In order to appreciate just how small $371 million is compared to other categories of Federal spending, I dove head first into US Federal Budget via spreadsheets from the U.S. Government Printing Office.

For example, I’ll start small; the chart below illustrates the $371 million subsidy compared to four other relatively obscure Federal expenses from 2005:

Frankly, I’d be surprised if more than 20% of taxpayers under the age 25 even know what the former Soviet Union is which is nothing to say about any of their independent states (“the Iron What? the What Curtain?”). Furthermore, the orchestra subsidy doesn’t even amount to more than 1/3 of the administrative costs for Farm Income Stabilization operations and who knew the US Patent and Trademark offices had such high personnel costs. Perhaps Big Recording’s efforts to retain their stranglehold on digital media are keeping them flush with work.

Now let’s move up a level in the Federal budget, the chart below illustrates the $371 million subsidy compared to four more Federal expenses from 2005:

Notice that the bar for our $371 million subsidy doesn’t even budge compared to the size and scale of the other categories and amounts for only 1.56 to 11 percent of the other spending. One of the key words you should notice for most of these categories is “discretionary”, meaning the government isn’t required to spend money on any of these items (as they are for Social Security, Parks and Wildlife, etc.).

I particularly like the generic listing for discretionary spending for Legislative branch programs. The budget spreadsheet didn’t even bother to break down that category into subcategories (although they routinely did exactly that for other categories).

Finally, we reach a level in the Federal budget where our $371 million subsidy is barely a fraction of a percentage. The chart below illustrates the $371 million subsidy compared to the largest single Federal expense as well as the entire Federal budget from 2005:

In this final comparison, the $371 million subsidy looks more like a hole in the ground than a comparative category when measured up to discretionary defense spending and the overall Federal budget.

Conclusions
Granted, the overall 2005 budget for the National Endowment for the Arts was $121 million or approximately $250 million less than the orchestra subsidies calculated for this fun exercise. And even though most inside this business would expect to see hell freeze over (or perhaps just the halls of the Internal Revenue Service) before the US Government would subsidize 35% of symphonic orchestra budgets all I have to offer is this: remember, in the end, it is the Federal Government and stranger things have happened.

In the end, all it takes to find Federal funding like this is knowing the right people who are in the right place at the right time. Beyond that, it is all academic.

About Drew McManus

"I hear that every time you show up to work with an orchestra, people get fired." Those were the first words out of an executive's mouth after her board chair introduced us. That executive is now a dear colleague and friend but the day that consulting contract began with her orchestra, she was convinced I was a hatchet-man brought in by the board to clean house.

I understand where the trepidation comes from as a great deal of my consulting and technology provider work for arts organizations involves due diligence, separating fact from fiction, interpreting spin, as well as performance review and oversight. So yes, sometimes that work results in one or two individuals "aggressively embracing career change" but far more often than not, it reinforces and clarifies exactly what works and why.

In short, it doesn't matter if you know where all the bodies are buried if you can't keep your own clients out of the ground, and I'm fortunate enough to say that for more than 15 years, I've done exactly that for groups of all budget size from Qatar to Kathmandu.

For fun, I write a daily blog about the orchestra business, provide a platform for arts insiders to speak their mind, keep track of what people in this business get paid, help write a satirical cartoon about orchestra life, hack the arts, and love a good coffee drink.

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7 thoughts on “Looking Toward A Brighter Future

  1. That’s great! Let’s hope for strange things to happen then.

    Just one question: How would concert income go down with at least 50% if ticket prices are cut with 50%? Shouldn’t we expect an increase in number of tickets sold then?

    (I am assuming the programming of 1 free concert for every 16 paid concerts would be an addition, not a replacement.)

    Thanks for your question, with regard to ticket revenue, I don’t think adding any concerts would be necessary. In general, imagine Federal funding in these amounts as replacing current revenue streams instead of increasing – that’s the way I’m envisioning things.

    Yes, even though the number of ticket sales would ideally go up with lower ticket prices I still think that the combination of higher than average sales for lowest price tickets (I’m assuming orchestra don’t limit them to ridiculously small percentages of overall tickets available) would still drive down the revenue.

    A quick formula for ticket revenue from a 2,000 seat hall with an average price of $30/ticket which current sells 70% of available seats would drop about 32% if you cut the average price 50% to $15/ticket for a 95% attendance rate. The remaining 18% would be gobbled up by the increase in free concerts and the majority of new ticket sales coming in at price points lower than the average ticket price. ~DM

  2. This is interesting stuff. A couple of thoughts/questions–in the European model is the 35% figure guaranteed for any orchestra, or is it the result of the division of a fixed pie among a certain number of orchestras? And in either case, accounting for the differences in the number of orchestras per capita is important for gauging the accuracy of the comparison. If, for instance, Europe has a lot more orchestras per capita than we do, that means Eurpopean governments are spending even more per capita than we would be under your model; conversely, if Europe has fewer orchestras per capita then the model you propose would actually put US spending higher than European spending.

    And how do the budgets of the European orchestras compare to ours? Presumably some of their costs are lower–fundraising budgets would especially be smaller. But what about other expenses? Are their staffs smaller or larger, better or worse paid? Are the musicians better or worse paid? And how many concerts per year do they play? If you break the annual budgets out by concert, who’s paying more per concert?

    I don’t mean to criticise your analysis; most of the stuff I’m wondering about would be supplemental, or minor adjustments. And even if due to the details I’m asking about your figure is 50% too small we’re still only talking about a fraction of the total US budget.

    Unfortunately, the political will to implement dramatic increases in federal arts funding is pretty lacking. There was a study done a few years ago (at Princeton, I think) which determined that American support for government arts funding is broad but shallow, whereas the opposition is narrow but deep. This means that the opposition is able to win most of the actual budget fights becuase they’re willing to fight hard and the majority support doesn’t care enough to really fight back.

    Thanks for the comments Galen, it’s great to see so many people thinking seriously about this. For me, it was far more of a casual exercise and if you wanted to find some tighter figures, it would likely require significantly more research. What I was really looking for was to create an opportunity to see just how large Federal subsidies stack up in the grand scheme of overall US Government spending.

    As for the direct Euro comparisons you mention, I don’t even think you need to go to that level since one of the points I mentioned is that Federal subsidies shouldn’t work to supplant or augment the system in place so much as shift revenue streams.

    Nevertheless, your comment about political will is intriguing. For an issue such as this I think it has less to do with will so much as using raw, base instincts of political influence. Instead of looking at finding the will to legislate funding because it’s something that should be done, I think it’s far more likely to find politicians who can use the subsidy program for personal and/or party political gain. ~DM

  3. Interesting stuff, Drew. Any idea how this subsidy would stack up against the total budget for all the military bands? How about the budget for the NEA?

    Thanks for the questions, the NEA budget in 2005 was approximately $121 million so this imagined subsidy would more than doubled NEA spending. As such, the response to Stephanie’s questions address the issue of how I would imagine any such subsidy program would come to fruition.

    However, your question about the military bands is very interesting. I wasn’t thinking about that program when I wrote the article but I’ll see if I can dig up some figures. In the meantime, to the best of my knowledge the military bands go through a regular cycle of feast and famine so it might be tricky to peg down a reliable figure to use on an ongoing basis.

    Also, I don’t know if expenditures for non limited service duty bands are included in the overall military band budget or if they are folded into the budget for each respective base. Regardless, finding out the answers should be interesting. ~DM

  4. A couple of other factors to weigh:

    1. I believe ticket revenue would drop by less than 50% because the lower ticket price would enable more people to attend. Obviously, that’s a good thing!

    2. A much larger factor is that there is no way we could get the Feds to subsidize orchestras and not other arts organizations, nor would we want to. Keep in mind that the NEA’s appropriation of $121 million is for ALL art forms. I don’t know what level of gov’t support European theaters, museums, dance companies, etc. receive, but I would guess that the combined total would mean that we’d need to do more than just scrape together some pennies from miscellaneous gov’t pockets. Since the gov’t is currently deficit spending and big chunks like Social Security and Medicare are on the brink of collapse, not to mention the sorry state of education, adding $1 billion to the Federal annual budget to subsidize all the arts would probably require a new tax structure, which would then impact charitable donations due to most people having less discretionary income. (Sorry for the run-on sentence!)

    As mentioned in the article, government spending comes about through less than traditional sources. It has more to do with who you know and which lawmakers are in power at a given time. I don’t think restricting this sort of funding to originating within the boundaries of the NEA is necessarily the way to think either, the more you can avoid lawmakers thinking in predefined parameters, the better.

    Thanks for the question about ticket revenue, that’s addressed in the above comment. ~DM

  5. Interesting analysis. Just a couple comments:

    – OF COURSE $371 million is peanuts in the federal budget; everyone can stipulate to that without having to resort to pie charts.

    I don’t know about that, if nothing else I think visualizing data is always an asset. ~DM

    – I don’t believe you mentioned the point I often heard made, which is that the tax-deductibility of private donations (which AFAIK are not deductible Europe) is in fact a federal subsidy. Your chart indicates that about $414 million was donated in 2005. Figuring these are mostly upper-income people (so assume marginal tax rate of about 25%), that’s a $100 million subsidy right there. Still short of the $371 million, but a start.

    Although I agree that there’s a certain argument to be made that donations are a form of subsidies, I don’t think they are comparable to direct Federal subsidies. For example, the complex nature of tax law and limitations on deductibility makes the likelihood of individual donations increasing to the level of suggested Federal subsidies individual donations far less likely (although that’s not saying the Federal subsidies are likely either). ~DM

    – I lived in Montreal for two years (2001-2003) and followed the Montreal Symphony avidly. One thing I noticed was that the OSM had a very underdeveloped fundraising operation – most likely because the orchestra got a significant amount of financial support from the Quebec government. The downside to this was that it never really felt to me that the orchestra had developed a strong base of community support; many people really could take it or leave it – just one more entertainment event among many. Much as private fundraising is a major nuisance for US arts groups, it at least forces the group to build a constituency and a base of political and financial support to ensure it’s continued existence.

    Those are VERY good points and I think that would be a very real concern to guard against. At the same time, it would be a lovely problem to deal with. ~DM

    – One commenter asked about budgets for military bands, a question that usually makes me wince. More than one critic has in the past compared the NEA budget with what the US government spends on military bands (often with the implication that that this represents a warped sense of priorities). The Marine Band , IMHO, is not only the best wind ensemble in the world, but perhaps one of the best musical groups of any sort. And with a range of activities (free concerts, tours, recordings, some degree of self-governance, commitment to new music, etc.) that probably make it more relevant than nearly orchestra. Even on purely musical terms (never mind recruiting or morale), well worth every penny Uncle Sam pays to keep it going, I’d say.

    No arguments there, I agree wholeheartedly! ~DM

  6. I’ve already posted this information elsewhere, so forgive me, please, for repeating myself, but I do think it is information that needs to be kept in mind.

    During WWII, when I was a Hospital Corpsman at the US Naval Hospital in San Diego, treating patients from the war in the Pacific, the highest casualty rates were among hospital corpsmen and bandmen. Surprise, huh!

    During battles, the corpsmen worked on the battlefield treating wounded Marines and the bandsmen acted as stretcher bearers carrying the wounded to treatment centers.

  7. Excellent article on an important topic but I prefer to be even more idealistic – our goal should be that classical music is loved and supported by a vast audience of all ages – not propped up by government largess. There was in interesting article in the Boston Globe about orchestras using market forces (specifically the internet)to engage more people. A reference is here http://deproblog.blogspot.com/2007/06/classical-music-and-long-tail.html

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