ArtsATL > Music > A cautionary tale about Atlanta Opera’s money crisis, spelled out in “The State of the Opera”

A cautionary tale about Atlanta Opera’s money crisis, spelled out in “The State of the Opera”

Tough economic times, tough language, dire predictions … and throw in a rally for the troops: “There is reason for concern, but not any reason to be freaking out. Our destiny continues to lie in our hands.”

Paul Melroy

 

It’s all in a letter titled “The State of the Opera,” sent to the staff of the Atlanta Opera this past January and circulating privately within opera-management circles and beyond. Although much of the basic information has been reported — the company’s budget dropped by 21.5 percent, forcing a cut in the number of productions — the letter provides a rare and fascinating glimpse into the procedures and mind-set of a regional opera company.

It is signed by Paul Melroy, Atlanta Opera’s respected director of finance. (Six months after the letter, in a major personnel restructuring, Melroy was promoted to managing director. In addition to his financial duties, he now supervises all administrative and revenue functions, from marketing and development to human resources and facilities. Here’s our story on the recent personnel changes.)The letter is a snapshot of the opera company eight months ago. Although its dire warnings, in the short term, have passed — the 2010-11 season will open October 2 with “La Bohème” — the financial and cultural crisis remains. In short: the economy is bad and the opera must aggressively build a stronger identity among its donors and patrons (to rally the base) while alerting potential fans of its existence.

Atlanta Opera's "Orfeo ed Euridice," with Deanne Meek and David Daniels

 

Melroy writes that, before the recession, the opera had gambled on two things: a stable economy and “That we would be able to sustain the excitement generated by the new theater [the Cobb Energy Performing Arts Centre] and the company’s new-found ability to produce great opera.” That “new-found ability” is genuine, and an Atlanta production like its “Orfeo ed Euridice,” starring David Daniels, was a milestone in the company’s history. The quality on stage has been improving steadily over the past few years. Translating that artistic growth into a significantly higher local profile, with increased ticket sales and (especially) donations as the result, remains the essential component to its future health.

Here is Melroy’s letter:

The State of the Opera

Those who attended last evening’s board meeting heard quite a bit about the challenging financial picture. Hopefully none of that news is a surprise at this point for the staff, but I did want to spend a few moments putting that information into perspective.

Five years ago the company was literally on the verge of bankruptcy. There was no money, declining audiences, bad press, shaky art and nothing short of a minor miracle was going to improve the situation. Roll ahead a few years and we’re obviously still here. We had the opportunity to move into a new theater. We sold our property on West Peachtree at the absolute height of the Midtown real estate frenzy, paying off our debt and giving ourselves some working capital. We strung together great production after great production. We rescued our relationship with the media. We rebuilt some of our audience. We started getting our donors to commit to multi-year donations instead of just one year at a time. We did a lot of the right things and they paid off for us. We were able to grow the company some and stabilize things.

Things looked great up until September of 2008 and then everything changed.

The company had gambled on two things:

1) That we would be able to sustain the excitement generated by the new theater and the company’s new-found ability to produce great opera.

2) That the economics of opera wouldn’t change.

The crumbling economy has completely rewritten the script.

The bottom line is that our patrons are being more frugal with their donations and with their ticket purchases, and they should be expected to stay that way until there is a great deal more improvement in the economy. That improvement may not come our way until 2012 and the arts typically lag in seeing a recovery until 6-12 months after everyone else. The environment will be tough to operate in for the near-term. We took a financial hit last year that knocked our cash balances down about $200,000. If we don’t kick into a higher gear, we will lose significantly more than that in this fiscal year. We will in all likelihood be flirting with not having enough working capital (cash) to deal with the massive ups and downs we experience with our cash flow during the course of the year. In times like this, cash is king and you can never have enough. To give ourselves the necessary breathing room, we need to bring in more than three million dollars in cash between January 1 and June 30 [2010]. A rough breakout is:

• $1,600,000 in new cash from fundraising

• $440,000 in pledge collections

• $850,000 in subscription monies for 2010-11

• $210,000 in additional single ticket monies for Aida and Magic Flute

The biggest challenge is on that first line — fundraising. We receive about 70% of our budget from fundraising. As noted in the presentation yesterday, we have averaged more than $4.1 million per year over the past three years in fundraising dollars. Year-to-date we have brought in about $2.2 million. The additional $1.6 million that we’re saying we need doesn’t even bring us close to budget, but it is what is needed to have the minimum amount of cash on hand to start the next fiscal year. We’re pretty certain where about half that money is going to come from. The challenge is to figure out where the rest is coming from.

You heard the board make two commitments yesterday — one commitment from the Development Committee to find $300,000 and another from the board at large to find another $300,000. The rest will have to come from the work of the staff. These goals, while not easy, are certainly attainable and actually fall short of what we have shown we can do for several years now.

There is reason for concern, but not any reason to be freaking out. Our destiny continues to lie in our hands. There are clear paths to stabilize things. However, all of this will require your participation. No one gets to sit on the sidelines. Everyone is now in the game.

Our tasks are very straightforward:

• Sell tickets.

• Make the show special for those who have bought the tickets.

• Educate the community about why we are important.

• Cultivate donations from patrons and the community at large.

• Keep expenses down.

Every action that we take needs to be supporting those tasks with an eye towards making things happen sooner rather than later. We should be circumspect about giving away comps and dress rehearsal passes, particularly to those who can afford to buy tickets. We need to think twice before spending money. We need to talk up the opera, particularly when we have an audience that is new to us. We are all ambassadors for this company, every hour of every day.

As discussed at the staff meeting that we had in early December, we are looking at a greatly reduced budget for 2010-11. We will only be producing three operas. We are engineered to be a $7 million company that produces more than three operas, so something has to give. We’re now talking about a $5.2 million budget for 2010-11, about a 25% decrease. I know that knowledge is creating some angst for all of you.

Considerable effort has gone into developing the current staff. Having been around the company for more than sixteen years, I can unequivocally state that this is the best lineup that it has ever had. This is a highly capable staff. No one here wants to see it decimated or damaged. Naturally, there have been calls for massive reductions in staff, wages and benefits by some (but not most.) At the request of the board leadership I polled the other arts organizations in town to see what their reaction has been to the challenging economy. The responses are all over the map. Some have cut large numbers of staff, cut pay and cut benefits. Others have been very tempered in their approach, which is also our inclination. I suspect that you will continue to see a very moderate reaction by the company in regards to how we handle staff, wages and benefits.

Nothing is set in stone right now and there is still much debate about what the 2010-11 budget will look like. We have been fighting to maintain what we have built, and we do not want to limit our ability to bring in the necessary dollars from ticketing and fundraising in the future. I wish that I could guaranty that every position was safe, but that’s just not possible. Every single person here is being scrutinized by either the board or by senior management (and sometimes both) as to how they are performing and how they will contribute going forward. In this environment, every day is an audition for each and every one of us. While that surely will make some of us uncomfortable, it comes with the territory. It’s the same way right now in the for-profit world, so I’m not sure that there is any escape. It’s incumbent upon us to do our jobs and do them well, regardless.

As we get closer to the spring we will have greater clarity about the budget and whether or not there will be any changes. There is still a great deal of discussion and planning that will need to happen before anything is finalized. I wish that I could offer more feedback, but you now know what I know about the situation. Please know that you are valued, that your contributions are recognized and that every effort is being made to preserve what can be preserved. In the meantime, let’s continue to sell tickets, raise money and produce great opera.

If you have questions, thoughts, concerns or feedback about any of this, please don’t hesitate to come and talk to me.

Paul Melroy

Director of Finance & Administration

January 27, 2010

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