Stanley Romanstein: ASO’s business model outdated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An out-of-date business model is at the core of the stalled negotiations between the Atlanta Symphony Orchestra and its musicians.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.”