Orchestra Exploring Financial Options

by Gabe Bullard on November 12, 2010

The Louisville Orchestra’s management and players remain tight-lipped about the ongoing contract negotiations between the administration and musicians’ union.

Orchestra CEO Robert Birman says the talks began earlier this year and are intended to find a mutual, long-term plan for a financially stable orchestra. The musicians’ contract expires next year. The current contract helped bring the orchestra back from the brink of bankruptcy. It included pay cuts, with gradual reinstatement over the life of the contract. To avoid the contention that marked that round of negotiations, both sides have agreed to not discuss details to the press.

“In good faith negotiations, we want to preserve trust,” says Birman. “The best way to preserve trust is to pledge to work together and to not posture.”

Sources tell WFPL that while the current talks are related to contract extensions, the orchestra is also seeking immediate savings, and a possible bankruptcy filing is also on the table. Resident conductor Jason Weinberger, who is not involved with the discussions, says he’s not sure if the situation is as dire as it was in 2006, but finances are again a cause for concern.

“I’m not 100% certain what the immediate cash situation is with the Louisville Orchestra, but I can tell you it certainly could be a lot better as far as what we’d like moving forward,” he says. “So I don’t think it’s ideal right now.”

Cash-strapped orchestras in other cities have shortened their seasons. Birman says the season is continuing, and there are always internal talks about saving money.

“What I’ve always said is the negotiation is the wedding, but the relationship and the discussions are the marriage. It’s two different animals,” he says. “It’s always important between the contracts to be working together and mutually conversing.”

Birman says the orchestra’s situation is no different than any faced in the last 30 years. The ensemble is, as always, exploring new fundraising options. He says another bailout-type donation may be pursued, but is high-risk. He declined to say whether the administration was, as in 2006, seeking to drop some of the 71 contracted musicians, though other orchestras have taken similar routes.

Chicago-based arts consultant Drew McManus says orchestras facing shortfalls will explore new fundraising options, bailout-type one-time donations or new lines of credit before turning inward.

“They’ll ask musicians and staff to take some paychecks late until they get to a point when the cash flow comes back up.”

McManus says he hasn’t heard verifiable accounts about Louisville’s situation, but if the talks are not routine contract negotiations, the orchestra may very well be facing a cash flow issue.

“Usually you don’t have emergency meetings with musicians unless it’s a cash flow issue.”

Cash flow is different from the overall revenue model, which McManus says typically relies on three major revenue sources.

“One will be earned income like ticket sales. The other will be contributed income which will come from individuals as well as philanthropic institutions, state and federal granting institutions. And the last category is typically a mix of investment income, and some other, special, sometimes one-off large sums of money,” says McManus.

“You’re making a supposition we’ve never alleged,” says Birman, when asked about cash flow. “In fact, in 2009 and 2010, we had an all-time record individual fundraising for the orchestra. We’ve never alleged that declining rates of return are a major issue…Corporate sponsorship is the largest area that has been impacted by the recession. It’s gone down in the short term. Our ticket sales are up over the last year. We’re up 7% in terms of subscription revenue…Investment income was very deeply hurt last year, like most people’s investments our investments were down. Those endowment fund investments are returning again. We basically follow the S&P in terms of our results.”

Birman says he expects the orchestra to run a deficit at the end of the season in May, but the orchestra has ended the last ten years with a deficit.

Arts consultant Drew McManus says he regularly talks with musicians and administrations, and Birman and the musicians’ silence about negotiations and the orchestra’s finances could be a good sign.

“I have not heard from any musicians in several months at least, and the last time I did it wasn’t about anything having to do with their finances,” he says, adding that the unity between the two sides could lead to more amiable discussions. “Those can be easier to deal with as an institution, bringing sides together rather than splitting them apart.”

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george November 13, 2010 at 5:12 pm

So…..what part of not “posturing” in the press is it when Birman mentions bankruptcy? And why would anyone donate to this organisation with these things being made public?

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