It’s official: the Philadelphia Orchestra is filing for bankruptcy. It’s the highest-profile classical music institution to file for bankruptcy, certainly the first of the Big Five. The board and management have taken pains to reassure us that the music won’t stop–for now–and are starting a $214 million fundraising campaign to save the orchestra from the specter of liquidation. The orchestra faces a $5 million operating deficit for this year–$46 million budget, $33 million income–and has a $140 million endowment. (Figures here.)
The musicians’ union vows to challenge the filing in court, saying it’s absurd for an organization with debt amounting to less than 4% of the money it has in the bank to claim that it’s bankrupt. The management claims that the endowment funds are all restricted and therefore unavailable to pay off debt; the bankruptcy judge will undoubtedly scrutinize those claims very closely.
No serious crisis should go to waste, as Rahm Emanuel famously said, so what’s the board trying to do with this bankruptcy filing?
The two main liabilities here seem to be the lease with the orchestra’s performing venue, the Kimmel Center, and–surprise, surprise–the musicians’ pensions. Reported numbers are all over the map. The Inky says the liability is $3 million annually; the NYT reports that the board claims total pension costs of $46 million, while the union claims $8 million. (What these figures actually represent is anyone’s guess.) This after the players accepted cuts in salary and pensions last year. The inability to even agree on basic numbers strongly suggests that something fishy is going on. At the very least, it looks like the board is hell-bent on breaking the pension obligation, and to provide cover, they’re claiming that the orchestra is in a fiscal crisis because of it.
Just as Governor Scott Walker of Wisconsin cut taxes for business while accusing public sector unions of throwing the state into a fiscal crisis, the Philadelphia Orchestra administration appears to be blaming its fiscal crisis on labor costs which existed long before that crisis, when the real cause lies elsewhere. The orchestra has suffered a steeper decline in ticket sales than the orchestra’s peers, possibly having to do with the move from the Academy of Music to the cold, sterile Kimmel Center. And it has endured years of mismanagement. Exhibit A: a risible attempt at classical music marketing dubbed “Unexpect yourself,” nicely dissected here, here, and here. Exhibit B: the decision to name Charles Dutoit as chief conductor, palpably an interim position, making it seem as if he were a caretaker when the orchestra has nothing to fear about the quality of his interpretations. Exhibit C: still no schedule for any summer concerts at the Mann Center, when the summer festival racket is already in full swing and tickets actually sell well there. Exhibit D: Christoph Eschenbach’s mysterious appointment and stormy tenure at the orchestra (documented here); competent management wouldn’t have let this situation spiral into all-too-public bickering, and at the very least, the episode shows a gulf between players and management.
Certainly, the perfect storm of general economic malaise combined with classical music’s particular woes will force orchestras around the world to re-examine their plans, their sustainability, and their community roles. It may even be a good idea for the Philadelphia Orchestra to re-negotiate the pension obligation, despite the fact that it didn’t cause the current troubles. But if the orchestra will come out of this self-imposed crisis stronger than before, the management must be forced to acknowledge its own repeated failings and listen to other opinions. Instead of using a bankruptcy filing to give the orchestra’s supporters an offer they can’t refuse (give us money or we fold), management must enter into a meaningful dialogue with the players and the audiences. All of us should not give in to the conventional wisdom that breaking pensions is the wave of the future. This is no substitute for thinking.
Outside forces are complicating the equation. The Inky report (link above) says that “At least one of several major Philadelphia philanthropies had encouraged the bankruptcy solution for several years, suggesting that support hinged on reorganization.” Philly philanthropists and foundations are probably, and understandably, loath to contribute to a pension fund or to pay down debt; they’d much rather finance artistic initiatives. So some donors are apparently conditioning funding on reorganization. One clue might be the Pew Charitable Trusts’ tightfisted attitude to the orchestra (see here–Pew is one of the biggest foundations in town).
The philanthropic elite and major foundations of Philadelphia are certainly capable of using their money to reshape the city’s cultural institutions. Witness the controversy surrounding the Barnes Foundation, one of the world’s great art collections in the Philly suburbs. Albert Barnes shunned the Philadelphia elite and mixed up his Cezannes, Van Goghs, and Matisses without labels in the rooms of his mansion, so that the viewer would learn about artistic form rather than engage in name-spotting. Matisse painted a mural expressly designed for the lobby. But after the Barnes found itself in financial distress, the city’s major philanthropists, most notably Pew, financed a move out of its home to three hideous boxes (reaction here and here) taking shape on the Benjamin Franklin Parkway, arguably breaking Barnes’s will in the process, and certainly destroying what may be the finest art installation in America. Peter Schjeldahl of the New Yorker summarizes the episode here. Since the Philadelphia Orchestra is now facing some of the very same forces behind the Barnes controversy, the latter may offer some clues for the former.
In short, the management is attempting a Hail Mary pass by filing for bankruptcy, thinking it can cut expenses and get new sources of funding all at once. But at what cost?
Perhaps the most fundamental problem facing Philadelphia is an image problem: the fundamentals are all there but there’s a lingering perception of crisis and anomie. As I said above, Dutoit was packaged as a caretaker, but he will have spent four years with the orchestra before Yannick Nézet-Séguin arrives; why wasn’t Dutoit given the directorship outright? Why give the impression that the orchestra is in creative limbo? [UPDATE: the orchestra actually had to add extra concerts for Nézet-Séguin’s engagements this season, showing that one reason for the otherwise low ticket sales is the perception that Dutoit is marking time–a wholly unnecessary insult to both Dutoit and the players.] Verizon Hall is not all that bad acoustically, and certainly an improvement in the drier-than-dust old Academy of Music, but people keep saying that it’s not a good hall. (It does appear to be an uninviting place to spend time, with no good socializing spaces.)
Filing for bankruptcy has to be the worst thing an institution can do, if it’s fighting the perception that it’s teetering on the brink. It may give the management some more room for maneuver, but it also sends a message of desperation, and an emphasis on politics and balance sheets rather than the orchestra’s artistic accomplishments. It tarnishes the brand, and for a cultural enterprise in this economy, maintaining a brand is crucial. I don’t believe for a second that the Philadelphia Orchestra’s concerts are more poorly played or less inspiring than those in Atlanta, Boston, Chicago, Cleveland, Los Angeles, New York, or San Francisco. But tales of declining ticket sales and fiscal crisis inevitably raise suspicions about the artistic health of the organization, suspicions that can only accelerate the downward spiral. In their zeal to use a bankruptcy filing to crush union demands, orchestra management runs a very real risk of cutting off its nose to spite its face.
So, whatever their motivations, orchestra management is playing a dangerous game, and their past record of mismanagement–including a strike in 1996–doesn’t exactly inspire confidence. We can only hope that past performance is no guarantee of future returns.