Pittsburgh Symphony struggles to increase revenues, reduce costs
The Pittsburgh Symphony expects to end this season with a $1.2 million deficit, which would be slight progress on the path to a balanced budget over the $1.47 million deficit it showed a year ago, officials said.
Nonprofits have struggled since the financial downturn in 2008. Some orchestras have faced acute crises; a few are doing well. Even well-endowed institutions, such as the Metropolitan Opera in New York City, are facing new challenges.
Ticket sales are down and substantially missing projections, according to the symphony. Contributions to the annual fund are $600,000 ahead of last season and have been rising 4 percent to 5 percent annually, officials said.
The symphony has run deficits ranging from $465,000 to $2.9 million over the past three years on budgets of around $32 million. Its last balanced budget was in 2007-08. Deficits have been handled by using unrestricted funds in the endowment, which is currently valued at $117 million, with a $5 million line of credit at a bank.
Symphony leaders have said eliminating the deficit would be achieved through increasing revenue and reducing costs.
Fix first, get help later
Several large grants and gifts to the symphony will not rescue it from its predicament because they are contingent on the symphony first getting its financial affairs in order.
For example, the Heinz Foundations pledged a $5 million grant, which the symphony will not receive until it has a sustainable balanced budget.
“They are looking for a repeatable balanced budget, that our basic operations make sense to them,” symphony president Jim Wilkinson said. “We've had varying fluctuations of being close to budget and being farther away. This year, we're going to end $1.2 million away. But next season, we need to show we've put changes in place that eliminate the structural deficit.”
The structural deficit is “revenues not meeting expenses, primarily through a decline in ticket sales,” he said. “If we fall behind in revenues, there's no way we can reduce the expenses to make it up.”
Wilkinson estimates the loss in ticket sales from all events this season — classical, pops and special concerts — at $600,000 to $700,000.
“We know we will have to increase revenue in the future in the range of $1 to 2 million per year,” Wilkinson said. “That will be up to Mike Sexauer and the marketing team to do what needs to be done.”
The symphony set modest forecasts for ticket sales in the 2013-14 season: 64 percent of the house for classical programming and 62 percent for pops. To date, the figures are running at 56 percent and 58 percent, respectively.
But the symphony also changed its pricing structure this season, eliminating a lot of ticket discounts. The result is that while ticket sales are down 2.5 percent from last season, revenue is up 2 percent — but still far below the goal, officials said.
The biggest single problem was a 19-percent drop in pops subscriptions, a loss of 5,998 seats compared with last season.
“When Marvin Hamlisch passed in August 2012, most pops subscribers had already renewed,” said Michael Sexauer, marketing and sales vice president. “2013-14 is the first season where everyone knew Marvin wouldn't be here, and it had a dampening effect.”
While the loss of pops-subscription renewals cost the symphony $204,000, single ticket sales are up $148,000 — making a net pops loss of $56,000.
Last season, the symphony announced hopes for a series of special concerts, not part of the subscription series. The results are mixed here, too. Michael Bolton's concert in December did not sell as well as hoped. On the other hand, Heinz Hall is already half sold out for Ben Folds' concert three months ahead of the June 17 performance.
The symphony has implemented various cost-cutting steps, including paring department budgets. In addition, musicians took a 9.7 percent pay cut in 2009-10. Senior management took a 10 percent pay cut in March 2013.
At the end of February, the symphony decided to outsource its telemarketing efforts, which will save it at least $100,000 a year through elimination of overhead, according to Sexauer.
Each of the 12 part-time and two full-time telemarketers have received letters inviting them to apply to work for the company, as yet unnamed, which will open an office in Pittsburgh.
Three subscriber service staff also were let go.
“We've seen our ups and downs this season,” said Ed Stephan, timpanist and chairman of the orchestra committee. “When we're down; we're concerned. But we've also seen good weekends that show Mike (Sexauer) is starting to turn the ship around. From our perspective, one of the best things Jim (Wilkinson) has done since taking charge was to hire Mike.”
Sexauer has been very open to ideas and feedback, Stephan said.
“He's shown he's willing to come in with new ideas; whereas up to this point, we had struggled in this organization not only to come up with new ideas, but to accept new ideas,” Stephan said. “We'll see improvement over time as long as he's allowed to do his job.”
Mark Kanny is classical music critic for Trib Total Media. He can be reached at 412-320-7877 or firstname.lastname@example.org.
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