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Stanley Romanstein: ASO’s business model outdated

By Maria Saporta
Published in the Atlanta Business Chronicle on Friday, September 7, 2012

An out-of-date business model is at the core of the stalled negotiations between the Atlanta Symphony Orchestra and its musicians.

ASO President Stanley Romanstein, in an interview on Sept. 5, put the Atlanta situation into a national context.

Of the top 20 orchestras in the country (which includes Atlanta), only one of them is operating in the black — the Los Angeles Philharmonic Orchestra.

Symphonies around the country are finding it difficult to remain financially solvent. In fact, ASO’s former president — Allison Vulgamore — became CEO of the Philadelphia Orchestra, which then went into Chapter 11 bankruptcy in April 2011 before coming out of bankruptcy this past July.

“All of us are looking for creative solutions to the fiscal challenges that we face,” Romanstein said. “We are in the same position that the auto industry and the airline industry were in a few years ago. It is time for a restructuring of the industry.”

Currently, the ASO has accumulated a $20 million deficit, and it is losing about $5 million a year, which Romanstein said is not sustainable.

The ASO’s largest expense is for labor — including the 93 positions for musicians. The contract between the symphony management and the Atlanta Symphony Orchestra Players Association (ASOPA) expired in late August. Because the contract has expired, the ASO has stopped paying its musicians and they have been locked out of the Woodruff Arts Center’s symphony facilities. The ASO season is scheduled to begin Oct. 4.

Romanstein said ASO’s management would like for negotiations to resume as soon as possible.

“We are still sitting at the table waiting for our negotiating partners to come back and resume negotiations,” said Romanstein, who said the ASO had made its last, best and final offer right as the musicians contract was expiring.

Asked if there was any room for compromise, Romanstein said: “There’s always room for negotiations within certain parameters.”

Romanstein added that the restructuring of the nation’s symphonies was going to be painful, similar to the pain that the U.S. auto industry went through in the past several years. But union contracts were renegotiated, the business model was realigned and now the U.S. auto industry is prospering.

One of the thorny issues is health care. Currently, ASO’s musicians receive 100 percent free health-care coverage — a benefit other symphonies have offered historically.

But that may be changing. The Boston Symphony Orchestra, in its contract negotiations last year, was able to get its musicians to begin paying for some of their health benefits.

“Everybody knows what’s been happening with health-care costs,” Romanstein said, adding that the ASO management and staff, not including musicians, do contribute to their health-care plans. The ASO staff also has not had raises in the past four years and it has had several furlough days.

“I took a pay cut the first day I walked through the doors,” said Romanstein, who became ASO’s president on April 7, 2010.

Romanstein also said ASO’s staff salaries have decreased by 1.7 percent between 2006 and 2012. By comparison, the average salary for ASO’s musicians has increased 23 percent during that same period.

Romanstein said the situation is not unique to Atlanta: The orchestras in Indianapolis, Minneapolis, Seattle and Saint Paul currently are renegotiating their contracts with musicians, and all also are experiencing deficits.

“The musicians have been our partners and our friends, but we just have not reached a workable solution yet,” Romanstein said. “We continue to invite the musicians to return to the table.”

Romanstein says the ASO’s financial challenge is not a result of people not attending concerts. “Over the last three-year period, the earned income from ticket sales increased at 3 percent a year, and our contributed income also has increased by about 3 percent a year,” he said. “It’s just that our expenses have gone up more than our income.”

The ASO, however, has been a leader in seeking new sources of revenue, including putting on concerts at the Chastain Park Amphitheatre and its development of the Verizon Wireless Amphitheatre at Encore Park in Alpharetta. It also owns a telemarketing company based in Los Angeles.

“There’s a long history of entrepreneurship here, but our expenses still have outpaced our revenues,” Romanstein said.

As to the possibility of ASO being able to declare bankruptcy, that is not an option. The ASO shares the same tax ID number as the Woodruff Arts Center and its other divisions, which includes the High Museum of Art, the Alliance Theatre and Young Audiences.

“When we fall short financially, it hurts the High Museum and it hurts the Alliance,” he said.

Romanstein also made it clear that the board of the Woodruff Arts Center has “not interfered” with the negotiations that have been under way between ASO’s management and the musicians. The Woodruff Arts Center and the ASO have an agreed business plan, and Romanstein said the ASO is trying to live up to that arrangement.

The problem then circles back to the flawed business model of symphony orchestras across the nation.

“We are battling against economics, and we are battling against an outmoded business model in a changing world,” Romanstein said. “We have to do what we can to stabilize the Atlanta Symphony Orchestra.”

Maria Saporta, Editor, is a longtime Atlanta business, civic and urban affairs journalist with a deep knowledge of our city, our region and state.  Since 2008, she has written a weekly column and news stories for the Atlanta Business Chronicle. Prior to that, she spent 27 years with The Atlanta Journal-Constitution, becoming its business columnist in 1991. Maria received her Master’s degree in urban studies from Georgia State and her Bachelor’s degree in journalism from Boston University. Maria was born in Atlanta to European parents and has two young adult children.

3 replies
  1. Retiree says:

    The “outdated business model” was a trope used up here in Denver with the Colorado Symphony to mask poor management and a board unwilling to raise money. New management, a concerted effort and concessions on the part of players (this last part sounds like what Atlanta is doing) put the orchestra back in the black in less than a year.Report

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  2. WEF400 says:

    Everyone talks about a new business model for symphony orchestras, but no one provides such a model. My suggestions are based on my experience in the airline and commercial insurance industries. Here are my suggestions previously posted on my website (atlantamusiccritic.com): 
     
    There is much written about the plight of symphony orchestras in the current economy.  I too have added my perspective in an earlier article.  Many commentators say that a new business model is needed in order for symphony orchestras to survive but rarely do they provide guidance, other than to criticize the disparity between the average musician’s salary and the salary paid to the orchestra’s chief administrator.  And to say that symphonic music is an anachronism that belongs in a museum does not address the issue either.  In response to the paucity of ideas about a new business model, I have developed the following suggestions to help the financial health of many orchestras:
     
    1.  The number of guest artists should be reduced while at the same time requiring that an orchestra’s principal players to  present at least one solo performance in a season.  Maybe this won’t work for all principals given the repertory, but it will work for most.
     
    2.  A Music Director should be required to conduct the vast majority of concerts.  I suggest 85% being a good target.  The cost of bringing in guest conductors probably does not justify itself, particularly when it likely doesn’t matter to patrons.
     
    3.  The number of concerts per weekend should be reduced.  Downsizing, for example, from three to two might result in a higher percentage in seats being occupied in the two remaining concerts.  This is related to my discussion about musician salaries in point six below.
     
    4.  Someone wanting a program for a concert should have to pay for it.  Otherwise, the name of each piece being played can be projected onto an overhead screen.  One rarely gets a free program in Europe.  If an orchestra wants to continue to provide a free program, then it should be a simple publication.  This may result in a loss of some advertising revenue, but it’s likely that advertisers will still want access to the patrons, who are usually in a higher than average income demographic. The program should be available for free download.  But a hard copy program (three or four color) should be for sale. 
     
    5.  Program a chamber orchestra-sized concert every month.  How this will save money related to musician compensation proposal (see below).
     
    6.  My compensation plan is rather simple. An orchestra’s principal players will still be salaried, but will receive, say, a 20%  pay reduction from their current pay level.  For each solo or concerto  performance performed, each principal would receive a 10% bonus over his/her base salary. All other musicians will be paid a base salary that will be guaranteed no matter how many concerts they perform.  This base would include fringe benefits, such as health insurance and retirement.  The base would be significantly less than what the players currently receive in salary.  On top of this, the musicians would be paid hourly for rehearsals, performances, and travel. 
     
    7. When a concert  requires a chamber-sized ensemble, those who do not perform will not be paid.  Musicians would bid to perform in these concerts.   Those who bid the lowest hourly rate would be invited to play.  If all bids are the same, the positions would be filled in seniority order (from highest to lowest), where seniority would be determined within each section.  This would put pressure on those with less seniority to underbid their more senior colleagues.  If management does not receive enough bids to staff appropriately, it would assign musicians to play in seniority order (highest to lowest) at the lowest rate previously bid.  This bidding system would encourage low bidding and provide an opportunity for those with lower seniority to perform with the smaller ensembles. 
     
    Income should be based upon actual rehearsal, performing, and traveling hours.  This increases the risk to the musician’s income, but incentivizes them to help keep costs low for the overall health of the orchestra.  It also guarantees that the musician’s will have highly valued fringe benefits and a guaranteed base salary. 
     
    This model is a break from tradition, but unless we find a way to address the high cost of major symphony orchestras, we may only a few survivors.
     
    Discuss amongst yourselves. 
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