To Steady Itself, SA Symphony Needs to Focus on Growth, Not Cutting Costs

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A concert led by Concertmaster Eric Gratz by the Musicians of the San Antonio Symphony at Dorćol Distilling Company. Photo by Scott Ball.

A concert led by Concertmaster Eric Gratz by the Musicians of the San Antonio Symphony at Dorćol Distilling Company in 2016.

The decision by the Symphonic Music of San Antonio (SMSA) to withdraw from its agreement to take over operations of the San Antonio Symphony from the Symphony Society of San Antonio (SSSA) has created a great deal of confusion and consternation.

Many of the facts surrounding the nature of any unfunded pension liability and its future impact on the Symphony budget are in dispute. In the midst of this chaos and uncertainty, the Symphony Society board will meet Tuesday to decide the future of the Symphony. As the board meets, I would like to suggest a few principles to maintain in charting a way ahead.

Stabilize the patient

While SMSA may have stepped away, the donors behind SMSA should continue to step up to provide funding to ensure the symphony operations continue. The failure of the SMSA takeover effort has left a void in leadership and has thoroughly confused and unsettled the donor base. It will take time to rebuild the Symphony’s governance structure, and time to convince donors that the Symphony is viable. The Kronkosky Foundation, H-E-B, and Tobin Endowment should ensure that the Symphony Society has the time it needs to resume running the orchestra and that the Symphony continues to perform.

There should be no lockout, and no consideration of bankruptcy at this point in time. Most importantly, the music should continue. The Symphony should continue to provide high-quality performances to its audience members, who are also its current and future donors.

Focus on growth

The SMSA takeover was a good-faith effort on the part of major donors to take over the Symphony after it was evident that the prior management was unable to solve the ongoing financial problems. From the outset, the SMSA focused on cutting costs instead of driving growth. Marketing and fundraising efforts declined as the new group reduced the Symphony staff, combined services with the Tobin, and took a position in the negotiations with Symphony musicians that resulted in a stalemate. The possibility of a multimillion-dollar pension fund shortfall proved too much for this approach.

If there is a silver lining to this story, it's that it establishes that cutting your way to a sustainable model is not possible. If there is going to be a viable way ahead for the Symphony, then it must come as a result of focused efforts on revenue growth in the form of ticket sales, donations, and endowment. The good news is that there is precedent for a growing out of the problems currently faced by the Symphony, and that the costs of the Symphony and level of current fundraising are considerably lower than symphonies in other similar-sized cities.

Milwaukee, Nashville, Cleveland, and other similar-sized cities to San Antonio routinely raise two to 10 times as much as San Antonio for their symphonies. According to IRS Form 990 submissions, San Antonio donors donated $72 million to the arts in 2014 for the Tobin ($41 million), McNay Art Museum ($6 million), and Witte Museum ($25 million), while the Symphony management has struggled to raise the $4 million annually to support its current $7 million budget. All of this suggests that there are untapped revenue sources in the city that can be leveraged if the Symphony can be stabilized and efforts focused on growth, rather than survival.

Bring in experts

Concerns about underfunded pension liabilities, new collective bargaining agreements, underperforming fundraising, ineffective marketing, and a leadership void combine to create an extremely complex set of circumstances that are unlikely to be solved in an expedient fashion by anyone other than seasoned experts in this arena. There is no shame in seeking outside help. Time is not on the Symphony’s side, and bringing in experts in fundraising, marketing, and symphony management would reduce the learning curve, increase the likelihood of a timely turnaround, and be a first step in restoring confidence in Symphony leadership to a frustrated and nervous donor base. There are many such experts as our country has many well-run and thriving first-class orchestras.

Maintain your assets

The principal assets of the San Antonio Symphony are the caliber of its musicians and the quality of the product that they put on the stage of the Tobin week in and week out. San Antonio enjoys a world-class orchestra at a bargain-basement price. The musicians have done their part in delivering excellent performances, and they are not responsible for the shortcomings that have led to this current crisis. They should not be asked to take further pay cuts on top of several prior rounds of concessions. The future of the Symphony should not come at the expense of the musicians.

At the end of the day, it is not reasonable to believe that the Symphony can cut its way to prosperity. No other major symphony has achieved long-term success through that approach. The answer is revenue growth, and growing ticket sales and donations comes from good, old-fashioned hard work. The patrons, the management, and the musicians must continue to work together in good faith to sustain our Symphony, now and for years to come.

 

11 thoughts on “To Steady Itself, SA Symphony Needs to Focus on Growth, Not Cutting Costs

  1. Well written, sir. One idea, similar to yours, is to bring in a consulting Interim Executive Director — a turnaround expert, if you will. Then a search for a permanent Executive Director can be started. The Linda Pace Foundation did exactly that, and it worked out well.

  2. Selling more tickets is not going to do much for the Symphony. When you review their 2014 IRS Form 990, you find only $6 mil of the $46 mil (total revenue) for the Tobin Center came from ticket sales. Contributions and grants made up the other $40 mil.

    • Selling more tickets may not help the symphony very much financially, but it will help persuade donors to make contributions. If donors see full a full concert hall, they will take notice.

    • The Tobin Center is a distinct entity from the Symphony. If you search for the Symphony Society of San Antonio you will find the relevant IRS 990 forms. For their 2014 filing, the Symphony derived about 35% of its revenue from ticket sales (2.3M out of 6.6M in revenue).

  3. This article is exactly on point in that you cannot (as a business) simply cut expenses as a way to regain Net Profitability and long-term sustainability. Top line revenue has to grow too. However, it doesn’t adequately address the issue of the unfunded pension liability. This is a very common issue faced by a number of organizations and the answer is simple; grandfather in those currently in for a predetermined length of time and immediately stop the defined benefit plan, consider doing a defined contribution plan going forward, and/or a 401k with some sort of match. From a balance sheet perspective, those are much more sustainable programs going forward. My good friend Darryl W. Lyons can help with running all the what-if scenarios on the retirement options, and if you need some executive-level input and recommendations from an independent, 3rd party objective perspective from someone that has been a CEO and is an accomplished business growth expert, I’d be happy to assist.

    • There is no unfunded pension liability at this time. Only current annual contributions are called for. A large pension liability would be triggered by withdrawing from the AFM multipemployer pension plan. Therefore, stopping participation in the current plan would actually trigger a huge liability which otherwise would be avoided.

  4. We need to study the past so that we are not doomed to repeat it. This situation has arrived because of poor leadership. Someone has simply not wanted to turn the ship and has allowed this underfunded liability to grow for years. While it is not worth the time to simply cast blame, it is extremely important to learn the lesson of weak leadership. Leadership isn’t always making the popular decision, it’s making the right decisions. Our government has gotten us into the same mess with our nearly $20 trillion national debt. Only governmental agencies and non-profits get away with acting this way and then they want “someone else to come and bail them out.” Small and medium size businesses that run their operations the same way go out of business. Fiscally conservative is not a political affiliation, it’s simply smart business.

  5. I have posted 3 additional comments that have apparently been censored by Rivard and not published to this feed. Quite unfortunate for an “independent” news publication.

  6. For Mr. Christ: The symphony does not have a pension plan. Under the terms of its contract with the musicians, it contributes an agreed amount (percent of pay) to the multi-employer plan operated by the American Federation of Musicians (not sure of the name). Like almost all multi-employer and government plans, that plan is grotesquely underfunded. The San Antonio Symphony represents a small fraction of one percent of the AFM plan contributors. It has no liability to the plan, except a contributory makeup of underfunding in the event it withdraws from the plan.

    Otherwise, very happy to see the comments. An interesting point is that the SAS budget, and musician compensation, is at less than 50% of the level one would expect based on comparisons with cities in our size range. This fact has been well known to the SAS board, and publicized to the broader community, but we were never able to change the level of financial support.

    Final comment, the “takeover” by the sponsors of the now disappearing SMSA was indeed driven by SAS financial pressures. Their indicated solution was not to increase revenues, but rather to reduce costs in a way that in the opinion of the board members who resigned would make the symphony, as a business, unmanageable and as an artistic entity, of unacceptably low quality.

  7. Yeah, one event for growth could have been a New Year’s Eve concert, to toot their horns so to speak in front of a captive audience. Instead, the 300 Tri Crew secured Pat Benatar / Neil Giraldo and REO Speedwagon for the latter part of the night.

    Maybe we can think big, and have “A Capitol 4th” type of celebration, with the SAS from now on. All the locals, including KLRN, could televise it.

    Although I’m a verrry small donor, and yes I’m also nervous since The Big 3 charitable donors seem to be bowing out. I still plan on donating my two pence per year, but someone big like a Red McCombs or The Anciras, with David Robinson and Coach Pop providing donated appearances, might need to step up to the plate to reassure The Big 3 and any other big donors. It would be damn shame to see SAS go dark, or even go extinct.

    • The Symphony used to have a New Year’s Eve concert, to a packed house at The Majestic. I don’t know why it was stopped.

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