Kate Lidbetter, CEO of Symphony Services International, attended the League of American Orchestras Conference in Minneapolis, Minnesota, from 6-9 June, 2011. The report that follows notes some important themes that gleaned from the various speakers at the conference – it is not an accurate transcription of what was said and reflects only the notes that she took throughout the event and may contain some inaccuracies or errors. Please note also this report does not cover all sessions of the conference.
LOA President Jesse Rosen noted four key areas for consideration by the conference. These were:
- Board Responsibilities for Fiscal Health
- Realignment with Community Needs
- Fostering Creativity
The event was a wonderful opportunity to mix with key staff from hundreds of American and international orchestras. The conference sessions were largely relevant and interesting, and Symphony Services International took a booth in the trade fair, which gathered interest from a range of US orchestras. We displayed the Goodear Acoustic Shield, program notes and surtitles, Goodear Editions and our library products. At the time of writing it is unclear whether our participation in the event will lead to any specific orders, though early indications are that orchestras in the US will be attracted to the Goodear Shield, particularly once they have had a chance to road-test it.
Gordon Williams (previously Audience Development Manager of SSI and now resident in the United States) joined me at the conference and looked after the booth for much of the period. Other Australian representatives at the conference were Patrick Pickett (CEO, Queensland Symphony Orchestra), Anna Melville (Artistic Co-ordinator, Melbourne Symphony Orchestra) and Mark Elliott (Director of Sales and Marketing, Sydney Symphony). Some of the notes attached to this report were taken by Gordon or Patrick (their initials appear after the heading of the section).
Tuesday June 7: Opening Plenary – Creating and Environment for Innovation
At this opening session of the conference, welcome address were provided by Jesse Rosen, president and CEO, League of American Orchestras; Jon Campbell, chair elect, Minnesota Orchestra; Dobson Wes), board chair, The Saint Paul Chamber Orchestra. Keynote addresses were given by Larry Wendling, Ph.D, vice president, Corporate Research Laboratory, 3M; Katie Wyatt, executive director, KidzNotes and Deborah Borda, president and CEO, Los Angeles Philharmonic. A performance was provided by The Combined Symphonies of the Greater Twin Cities Youth Symphonies & the Minnesota Youth Symphonies.
Larry Wendling spoke eloquently about 3M’s philosophy of innovation, and how “scientists and musicians are very much alike. They are the creative forces in their organisations. The key is to create value. For an American orchestra this means identifying and truly understanding the needs of the customer. When you can do this well and repeatedly you develop true customer loyalty and have sustainable position.”
Katie Wyatt asked “Do we have the guts to make an equal commitment to classical music and social good in ways that strengthen our investment in our community?” Deborah Borda pondered the meaning of innovation, and who is really responsible for change in our sector.
And Jesse Rosen told us “As you move through next few days, don’t let yourself off the hook. Listen hard, question even harder, take notes and pull the strands together for yourself and revel in the music making.”
Click the link below to view the full plenary session and read the PDF transcript of Deborah Borda’s speech.
Tuesday June 7: Concert (Minnesota Orchestra)
Conductor: Osmo Vanska
Soloist: Yevgeny Sudbin, piano
Program: Aaron Jay Kernis – Concerto with Echoes
Beethoven – Concerto No.3 in C Min for Piano and Orchestra, opus 37
Sibelius – Symphony No.2 in D major, Opus 43
Wednesday June 8: Plenary – Red Alert!
This session was introduced by Jesse Rosen, president and CEO, League of American Orchestras then featured Susan Nelson, principal, TDC and Steve A. Wolff, founding principal, AMS Planning and Research. Susan and Steve spoke passionately (and very entertainingly) about capitalization – why it matters and how to develop a capitalization strategy, and the common mistakes made by orchestras.
Click the link below to view the full plenary session and read the PDF transcripts of Jesse Rosen, Susan Nelson and Stephen Wolff’s speeches.
Wednesday June 8: Toolbox session – Two approaches to audience development
This very full session featured Jessica Etten, Director of Marketing and Communications, The Saint Paul Chamber Orchestra; Cindy Grzanowski, Director of Marketing, Single Ticket Sales & Audience Development; Minnesota Orchestra; Jon Limbacher, Vice President and COO, The Saint Paul Chamber Orchestra; and David Sailer, Director of Marketing, Subscription Sales & Audience Services, Minnesota Orchestra. It was moderated by David Snead, Vice President of Marketing, New York Philharmonic.
The following details about the Minnesota Symphony Orchestra and St Paul Chamber Orchestra were provided:
- Minneapolis has 31 million people, with the most theatre seats per capita outside NY.
- One of only two US cities that can support 2 full time orchestras (the other is NY).
- Voter turnout is the highest in the US.
- It is the 4th highest educated market, home to 19 fortune 500 companies.
- More than 40% of adults volunteer their time.
- St Paul Chamber Orchestra (SPCO) is 51 yrs old, with an annual budget of $11m and over 100 subscription concerts per year.
- Over $92K paid attendance, with series running in 10 venues across twin cities.
- SPCO has 35 full time players and just performs classical repertoire – no pops or summer series.
- Minnesota Symphony Orchestra (MSO) is bigger and older, having been around for 100 years.
- MSO has a $31m annual turnover, 124 concerts/year, 66 subscription concerts.
- Paid attendance is $208K, and subscriptions equal $107K.
- The classical season forms 53% of the overall season.
The shared audience between both orchestras is 19% of the St Paul audience and 14% of the Minnesota audience. Among the two orchestras there is only 8% crossover. A bigger threat is the sheer breadth of options for people.
St Paul Chamber Orchestra approach to audience development
This was an extremely interesting audience development approach that many people at the Conference were extremely interested in. The SPCO team outlined the approach as follows:
Our audience development program starts with the belief – simple, and seemingly self-evident – that audience is everything. It’s the existential issue for our orchestra. If we can build a strong audience we can figure out the rest. If there isn’t a strong audience the other problems are insoluble. There is no community urgency around fixing any problems because there won’t be much at stake. Audience is at the core of our mission and business model. Orchestras are much more complicated than their budget size indicates. If you don’t have alignment you can’t get anything done. It’s important for context in terms of our objectives, making strategy decisions, assessing opportunities. Our business model is an ownership model – we can’t sell our way to prosperity, we can’t even come close. Instead we decided to focus on developing investors and owners from within the audience. Those who write the second cheque to give cross the divide between being consumers in a product and being investors in a cause. They feel responsible, directly, for our success or failure. Our strategy is to get more of those investors/owners, as that’s the key for us to thrive. They will come from the audience, so we are focused on enlarging the basis of consumers as they will produce more potential donors and owners of the organisation. This is not about maximising ticket revenue. The larger audience also enhances our case for support. We need to serve more people, otherwise why should people give? You have a case if you’re serving more people in the community.
The lynchpin of our theory is a belief about the power of access – affordability and geographic availability. Access is everything, it will produce larger audience, more donors, a stronger case for support for the organisation, and a stronger community value proposition. What we’re adding in value to the community is an important start towards enhancing the value proposition to raise money in the philanthropic marketplace. We have to constantly improve our case for support to make us competitive. Our audience development program focuses on three concepts:
1. What do we want to achieve?
2. How are we going to achieve it?
3. How are we going to measure whether we’re making progress or not?
Everything fits into these categories. We spend a lot of time getting alignment internally around these three objectives. Our primary objective is to develop a large, sustainable audience for what we do. Sustainability is important – it’s not enough to just build a large audience today. Is there a likelihood that we’ll have an audience in the future? That’s part of our responsibility. It’s not just about ticket revenue. We care about that, but it’s not our driver day to day. Six years ago, if we held a meeting of board, musicians and staff our goal would have got a range of answers, perhaps not like what you see today. We’ve worked to get here over time. We now have six working strategies that are being revised all the time.
1. Affordability – over the last five years we have made a concerted effort to make our organisation more affordable by lowering prices. We offer special prices for neighbourhood concerts, for kids and more recently in our other venues. Before we started, only 35% of tickets cost $25 or less – today it is 85%. 56% of our tickets sell for $10 or less. This is a dramatic change but before we were discounting, our list price had moved towards lower prices for everyone. We said we’d embrace this and lower prices for everyone, and become known for our affordability. We felt it would leave a bit of money on the table but it would be worth it for the organisation in the long run.
2. Our Neighbourhood Strategy, which has been there from beginning. This program was struggling – no-one came, it wasn’t working. We decided to lower prices in this series and immediately saw great demand for tickets priced at $10-$25. We started to expand from four venues to ten in certain neighbourhoods. We moved from 1000 subscribing households to 2500. We will continue to expand this Neighborhood series.
3. The biggest challenge is getting brand new people into the concert hall. Traditionally we did a mass market approach, with lots of advertising (radio, billboard, newspaper). We realised returns were modest in terms of new people coming through the halls. We began a process of scaling back advertising until we eliminated all print/radio advertising and found minimal to no impact on number of households buying tickets. We saved money, but wondered how to get people through the halls? 70-80% of people who come through the door never come back. We wanted the 30% we retained to grow. We took a grass roots approach – the traditional approach was broad, but now we target better. The traditional model is to say to audiences “come because it’s great, believe us”. Now we ask patrons to invite their friends to a concert. The costs involved in the traditional method were high, now we have cut nearly $1m off our budget by eliminating advertising. Grass-roots marketing is not expensive in direct costs but is high cost in terms of people. We’re not there yet, there’s a lot more to do. We use word of mouth marketing, connections and the power of free samples/free trials. We offer a guest pass program – when subscribers get their season tickets, we send them guest passes, asking them to invite someone to come who’s never been before. People have listened to this and we have hundreds of new people coming in the door. When we offer a free concert in a neighbourhood, we post fliers in the local concert hall and ask subscribers in that venue to bring friends and family who might be interested. We have a community ambassadors program – our subscribers serve as ambassadors. We ask them to hand deliver information to people who might be interested. We don’t just leave fliers at restaurants etc – it cuts through the clutter. Sometimes we offer community organisation fundraisers the opportunity to sell SPCO tickets and we each keep half of the revenue. In addition, we get all their database information to keep in contact with people. We have a corporate passport program – we set up an ongoing ticket deal for companies’ employees, give them credit for being a contributor and they come to concerts.
4. We are just dipping our toe in the water with a new strategy of using new media and digital media. We are trying to develop a greater connection for people. On Facebook, our email club, online coupons, and the most important thing we’ve done is make our music free to everyone through the internet. Minnesota Public Radio has recorded all our concerts since 1969 and streams them free through the web. We hope that having music available for free will allow it to go viral. It’s too early to know yet whether it will work.
5. Young audience development (young adults, those under 40). We do have education programs in place but this is for young adults. We have a program called Club 2030, to which people can sign up for free then get $10 best available seats whenever they like if they’re in their 20s or 30s. It does make a difference in the halls. When long term subscribers see young people in the hall they’re more likely to believe there’s a future for their investment. Life gets in the way of coming to concerts, especially for those with young children. We make it more possible to bring children – we offer $5 children’s tickets for any concert, and we see 1500 children per year. Our target is that all family concerts will be free of charge. We have expanded the number of family events that we’re doing. The philosophy is that when the parents have more time, they’ll come to a concert on their own.
6. Rationalising our expense. We can now undertake some of the other strategies here. We have reduced our marketing budget by $1m (especially in advertising) because we were aggressive with our expense reductions. Our net ticket revenue has improved substantially after lowering prices because we’ve been so aggressive on the expense side. Our future revenue potential is huge.
Minnesota Symphony Orchestra’s approach to audience development (Cindy Grzanowski)
Brand differentiation – what makes us unique? In addition to representing classical music we also present music of all kinds, predominantly in one venue, year round. We think this product diversity had advantages. It stabilises our risk (our marketing objective is to focus on earned income). It allows flexibility in programming and we can put music on the stage based on customer response. Just by watching what’s happening on stage we can bring in new people. For instance our program with video games live had 72% of new people coming through door. It helps us to experiment and encourages people to come back and sample things.
We have three income streams and product diversity. In addition to our Music Director/mainstage series we offer a smattering of classical artists, plus artists such as Ben Folds, Herbie Hancock. We promote everything in all of our materials. On average over any one year, 30% of households are new to us. We program music people want to hear. 38% of the households who come to our concerts are “dabblers” trying different types of concerts.
We offer a “Create your own subscriptions” program – is a strategy around frequency. We don’t normally see a classical subscriber buy one ticket and move into 4-6 concerts but maybe they might buy two classical concerts plus a holiday and a concert. It expands our relationship with that customer. There’s a shift in who’s buying. We treat these individuals like a core subscriber and offer them all the same benefits and timing. Two-thirds of our core audience is aged 56+ but in these packages only one-third is 65+. They are used to paying for the things they want so we can keep raising the price for this group.
Our pricing strategy is a real challenge in our orchestra because of high fixed costs. With this comes the necessity to maximise concert revenue, so we have to place a higher value on ticket prices. How do we balance that and present an affordable option for people who have a price barrier? Our average household income is $130K but almost half of our audience earns under $100K. 27% are brand new each year, and 37% of them only come to one concert per year. We have a low introductory price point offer (like trial offer) then we provide targeted discounting throughout the year to patrons we identify need the price break. All five price points are available on main floor. We pre-program the area that’s unpopular at $25/ticket and offer them to self-identified low price point buyers. We data-mine within our own lists to find those people. Patrons can go online and check what’s available in advance. We sell 8000 classical tickets/year to students at $12/$15 rates so there are lots of young faces in the crowd.
We have a program where first-timers are offered two tickets for $10, a bit like the SPCO’s program. People can come and hear short grabs (movements or sections) from the mainstage programs we’ll offer throughout the year. We created a system to keep those tickets available to guests year round, so we’re constantly inviting new people to come and experience us. We find people show up more when we attach a small price to the experience. There are online mechanics behind this – we authenticate people so you can go online and authenticate that you’re brand new and we’ll send you an email that will link you to the site, with a revolving list of concerts available for you. We launched this as a small program in 2005 but it has increased each year. Year after year we see these 2-for-10 buyers have bought a lot in addition to this program. Patrons get something different when they go to these concerts – programs that have everything that we offer on it. People want to know everything that we do. This way we have control, we don’t give them a great big concert program, but provide an order form and helpful hints. The results from this have been successful for us. Increased to four of these per year to promote the 2010/11 season, with end results of $253K revenue (our budget was $16K).
Thursday June 9: Toolboxes – Where Mission and Money Meet
This session was led by Deborah Rutter, President, Chicago Symphony Orchestra and Ed Sermier, Director, national customized services, Nonprofit Finance Fund.
Deborah Rutter introduced the session by saying the speakers intended to talk philosophically and practically about how “finance people” and “mission people” can work together and how the worlds overlap. The session would examine how to utilize your financial acumen and that of your organisation to help you make decisions.
Deborah outlined an issue that had arisen for the Chicago Symphony, noting that similar decisions are required to be made regularly. In 2008 at the height of the GFC, the orchestra had commitments to two projects – a farewell tour to Europe with outgoing chief conductor Bernard Haitink, and a festival celebrating the 85th birthday of Pierre Boulez, with him conducting concerts of Schoenberg’s Gurrelieder at Carnegie Hall. Both projects would be costly and high-profile, and each of the conductors was important to the orchestra.
The Chicago Symphony Orchestra’s mission is to promote and perform great music to audiences in Chicago and around the world. So both projects met the mission but the organisation could not afford to do both. Management and players considered whether this was the only time that the projects could occur, and exactly what the expenses involved in each would be. They asked: Is this the only way we could do this? What is our commitment to other people and what ongoing positive or negative repercussions would there be in either decision? In the end the orchestra cancelled the Schoenberg and undertook the tour. The Chairman ensured the funds were available to successfully undertake the tour, which the orchestra already had signed contracts for. It would definitely be the last tour with Haitink, and it was a good way to thank him for his time as Chief Conductor. The orchestra decided they create a different festival with Pierre Boulez and do special things to celebrate his birthday. In this way the orchestra addressed its mission, making clear what its priorities were, and doing what they couldn’t do in any other circumstances. The urgency around raising the additional money required to undertake the tour was one they could make a compelling case for to donors and the board.
Deborah noted that in the orchestral world, we are constantly being challenged to make really tough decisions when all the opportunities in front of us are really great ones. By visibly and openly deciding not to act on one opportunity, and to live within our budget (and in fact save money) CSO was able to say “this is our priority” and that was how they got a lot of support for making the decision, including from the musicians.
The group then debated an imaginary scenario where an orchestra has a great education program and is invited to purchase a license for an online delivery of music education that would provide access to every fourth grader in the area, at a cost of $5000 per year. Simultaneously the gala committee wants to add $10,000 to their decorations/entertainment budget for the annual gala, convinced it will pay off in terms of revenue raised.
The group raised a number of interesting questions and areas of discussion. Could the additional investment in the gala raise the $5000 needed for the education license? Would adding to the entertainment/decor budget really make a difference to ticket-buyers who had already paid for their ticket? Is paying the licence fee the best way to access the education program? Is a different band really going to draw additional people to the gala event? While these questions were not specifically answered in the session, it was clear that these were the sort of finance vs mission questions that would need to be asked before the imaginary orchestra could make its decision.
Ed Sermier addressed the group by saying that as the financial person employed by the imaginary orchestra, he would answer the question four different ways depending on his role within the company. He cautioned that he had no intention of casting any aspersions on anyone working in the finance area. But he noted that orchestras generally fall into four categories in terms of size (and turnover), and each has a different type of financial employee working for them. A small budget orchestra (up to $100K) might have a bookkeeper or someone on the board who perhaps doesn’t have another role within the orchestra. This person will not be able to do an analysis of the two issues that Deborah described. The next level is an orchestra with some millions, with an accounting professional in the finance office. Accountants are very precise so you can expect some reasonably sensible analysis that may not go too deep, that allows the Executive Director to make a decision. A larger orchestra again would have a Financial Comptroller who has a few people working for them. This person has an accounting background and may be uncomfortable doing estimates so they don’t give you what you need. Then you have a Chief Financial Officer. The CEO’s expectation of a CFO is to take the issue and essentially look at it from the CEO’s perspective. The CFO will apply judgement – for instance, if the gala is projected to make $60K in revenue and the out of pocked expenses are $56K (netting just $4K), an accountant will show you $4K profit, but a comptroller will tell you it’s break even because the amount is just too small to call it a profit. A CFO not only makes that judgement call, but will put in a contingency or ensure the Executive Director does not use the small surplus as any material factor in making their decision. He will set the financial issue in the larger context of whether there are reserves in the organisation allowing the orchestra to plan for a deficit so it can continue to offer important programs by dropping its reserves rather than depriving the audience of those services. Essentially the difference between these financial experts is the level of analysis and judgment that each can apply to the organisation and the situations it faces.
Ed provided the group with a spreadsheet titled “Program Profitability Model”. A copy of this spreadsheet can be found here. He stated that it is by intention very simple and only on one piece of paper. On this page, revenue and expenses are shown on the one page so the financial position is very clear to everyone. The creation of the numbers and where they lie on this paper is the direct result of the Executive Director’s decisions. You don’t put any marketing expenses in a program that would not go away if the program went away. The Executive Director controls the decisions about where the numbers go, the finance person just makes it easy for the Director to make the decisions. Ed noted that he never represents amounts less than $1000 and he labels carefully which fiscal year each activity is for. Presentation is often where the financial person provides a large contribution.
Deborah noted that the Chicago Symphony Orchestra uses this process every week and live within those margins. She recommended to the group that they try to work out how to get fixed costs (that an organisation would have to pay anyway, eg salaries) into grant applications. This process must occur in advance of making commitments, not afterwards. There is no value judgment on any of this, it’s just financial information. The artform is to look at everything you do and work out what is important, it’s not necessarily about getting rid of everything that loses money. Perhaps it could just lose less, or something that’s making money could make more.
Thursday June 9: Toolboxes – The Art and Science of Pricing
Click the link below to view the full session with speakers Jon Limbacher, Vice President and COO, The Saint Paul Chamber Orchestra; Jack McAuliffe, President, Engaged Audiences LLC, moderated by Russell Jones, vice president for marketing and membership development, League of American Orchestras.
Russell Jones noted that we need to be strategic in linking our price to our strategy, values and the community. This interesting discussion between advocates of two completely different pricing strategies led to a great deal of discussion and questions from the floor.
Links to a variety of other sessions and workshops (some via video, some PDF transcripts) can be found at the League of American Orchestras’ website as follows: