Authors: Reynold Levy
To be in charge of an operation of this astonishing size, scope, and elaborateness is a formidable management assignment. For someone who works in this or a related field, the likes of Joe Volpe or Peter Gelb, the two Met Opera general managers who presided during my tenure as Lincoln Center’s president, must evoke empathy. Theirs is a tough job. It is not easy to balance divas and dollars, season after season. Satisfying demanding audiences and critics, particularly in the media capital of the world, is a constant battle. And endeavoring to contain expenses and expand earned and contributed revenue every single year cannot be easy.
When it was announced in October 2004 that Gelb was to succeed Volpe, effective in August 2006, the Met Opera’s board of directors wisely put him on the payroll immediately. Volpe remained in charge of the place, fully accountable for its operations. Everyone recognized that there can be only one general manager at a time. But for about eighteen months, Gelb was free to study the inner workings of the Met, to become acquainted with its personnel, to meet board members and important donors, to travel extensively, and to begin to sketch out his plans. Allowing for this kind of prolonged transition is a smart move, one that other complex nonprofit institutions would do well to consider, particularly when the incumbent being replaced has enjoyed a long tenure.
As a result, Gelb’s first years in office were well planned. With relentless energy and a single-minded ferocity, he implemented a broad and sweeping action agenda. Mount more fresh productions of standard
repertoire and more commissions of new operas. Engage theater directors to shape creative approaches to the stage, coaching the world’s greatest singers in dramatic settings that do them justice. Open one of the oldest art forms to new and wider audiences. Subsidize low-priced, day-of-performance tickets. Offer free-of-charge broadcasts on Josie Robertson Plaza, allowing some four thousand attendees for ten successive evenings to enjoy shows in the open air. And, most significant, simulcast operas, eventually to several thousand movie theaters around the world.
Superbly telecast and featuring inventive interval content, this initiative now reaches three to four times the some eight hundred thousand operagoers who make their way each year to the Met itself. At about $22 a ticket, this come as you are, bring your children and grandchildren, munch on popcorn, relaxed approach to opera attendance has spread rapidly. It has been emulated by many other opera companies and in theater and dance as well. Arguably, these cinema transmissions, an initiative justifiably credited to Gelb, may have in a single stroke accomplished as much for the exposure of opera as an art form to an enlarged audience as did simultaneous language translation projected onto screens or seat backs. Truly, movie simulcasting is a transformational development for opera as an art form.
Of course, not all of Peter’s new productions have been well received. His selection of directors has resulted in a mixed record. Perhaps his most criticized step was to commission a new
Ring Cycle
from the director Robert Lepage. It was an unmitigated disaster. Critics abhorred it. Audiences stayed away. The computer-driven pyrotechnics often did not work. Writing in the
New Yorker
’s March 12, 2012, issue, Alex Ross described Lepage’s
Ring
as “pound for pound, ton for ton . . . the most witless and wasteful production in modern operatic history. Many millions of dollars have been spent to create a gargantuan scenic machine of creakily moving planks, which have overshadowed the singers, even cowed them, without yielding especially impressive images.” Another poorly rated production was Luc Bondy’s
Tosca
. From dreary lighting and vacuous sets to simulated onstage sex, this was not the Met at its best. In these cases, Gelb’s risk-taking did not pay off.
Other shows—like
The Nose
, directed by William Kentridge;
Madama Butterfly
, directed by Anthony Minghella;
Le Compte Ory
,
directed by Bartlett Sher;
Maria Stuarda
, directed by David McVicar;
Don Carlo
, directed by Nicholas Hytner; Verdi’s
Falstaff
, directed by Robert Causen;
Prince Igor
, directed by Dimitri Tcherniakov; and
Parsifal
, directed by Francois Girard—were among many much-applauded productions.
The curatorial staff at Lincoln Center admire Gelb’s boldness, even though they may not agree with all of his artistic choices. His drive to marry theatrical flair and superb staging to singing and music of the highest quality merits respect and enthusiasm. There will be ups and downs in any given season. So what? No one can point me to an artistic season that has been uniformly and universally praised, let alone in the world’s busiest opera house.
What has been everywhere admired is the consistently high quality of the Metropolitan Opera Orchestra. With the fragility of music director James Levine’s health and his on-again, off-again ability to conduct, Peter has secured guest maestros of enormous stature and promise. Daniel Barenboim. Esa-Pekka Salonen. Yannick Nézet-Séguin. Riccardo Muti. William Christie. Valery Gergiev. And of course, Fabio Luisi, who stepped in on very short notice in 2011 to become the principal conductor of the Metropolitan Opera Orchestra when Levine could not perform. Levine’s baton has been in very good hands awaiting his return to a consistent workload. Gelb could not have handled this delicate situation more elegantly.
I
T REMAINS UNCLEAR
whether free performances, low-cost tickets, and cinemacasts have improved full-priced attendance at the Met or actually reduced it. The stakes are high. In recent seasons, according to the Met, the percentage of the house sold has been around 79 percent. What share of those sales were at full price and what proportion discounted is not readily knowable. But each percentage point, up or down, is worth roughly $1.5 million to the Met’s coffers, if the tickets are sold at “rack rate.”
Even as Gelb expanded discount prices at the lower end, he has experimented with hiking them elsewhere in the Met’s more desirable seating areas, earned income being critical to the struggle to balance the budget. During his seven-year tenure the Met’s annual expenditures catapulted from $210 million to $330 million. To pay for this stunning
budget escalation requires major growth in earned income from ticket sales and close to double-digit percentage increases in donations year over year. Projecting that both would mushroom simultaneously has proven to be a very high-risk bet.
On the earned income side, some of the Met’s price increases have met with resistance and had to be rolled back. As to contributed income, annual fund-raising totals, impressive though they may be, still fall far short of what the Met Opera requires to truly balance its budget and to build a healthy balance sheet.
Some close observers of the Met, most particularly its loyalists, have been heard to complain that expense growth during Peter’s tenure has not only outpaced inflation many times over, but has also been too dramatic to be covered by either the aggressive marketing of tickets or the multiplication of fund-raising events and solicitations.
This bridge too far has caused the erosion of the endowment. In some years, for the Met to “balance its budget” more than 8 percent of the endowment was tapped. Few nonprofits permit greater than 5 percent of endowment spending as a matter of prudent and strict policy.
The Met’s more relaxed and flexible approach has caused its endowment to be reduced to some $267 million, roughly $50 million less than its fiscal 2013 operating budget. In 2006 that endowment number stood at $305.8 million. Its $40 million decline since then is especially noteworthy, as the stock market from 2009 forward has experienced record gains, from which the Met hardly benefited because funding its operations required annual reductions in endowment principal.
Even that pattern and practice proved insufficient. As a consequence, the Met found itself needing to borrow $100 million in 2012 to access cash for its operations. It was the Met’s first bond sale in its 129-year history, but without it, there would be far more bills than available funds to pay them.
The Met has also carried a large and growing unfunded liability for its union pension funds. And the necessary expenses of maintenance, repair, and the purchase of new equipment, for the most heavily used opera house in the world, have been frequently deferred.
The tough and bitter negotiations with all of the Met’s unions were a response to these realities. When it is compelled to place the world-famous Chagall tapestries that grace the front of the Metropolitan
Opera House as collateral on a loan, then it must be concluded that the Met’s financial situation is grave.
B
Y THE SPRING
of 2014, it had become abundantly clear that the course Peter Gelb had set for the future of the Metropolitan Opera was not working. Anticipating tough collective bargaining to come, Gelb told the
Guardian
that the Met now faced a serious crisis. On June 6, 2014, the
Guardian
carried this startling direct quote from Gelb: “This battle is an existential one that has to be won. If we’re not able to create a more sustainable business model now, we know we will face a bankruptcy sometime in the next two or three years.” In other words, if collective bargaining did not result in major union concessions, then the Met would confront economic insolvency. The
Guardian
quoted Gelb as saying that the Met was at “the edge of the precipice.”
This was a remarkable admission in both its suddenness and its gravity. By the summer of 2014, I’d been gone from my post at Lincoln Center for only six months. Yet the starkness and the specificity of Peter’s foreboding alarmed even me. Of course, it was intended to let the unions know that the Met was serious and that its financial condition required of them unprecedented concessions. But it also sent a message to donors, current and potential, that the economic model in accordance with which the Metropolitan Opera had been operating was fatally flawed. And it did nothing to lift the morale of Met Opera employees increasingly concerned about their own professional security.
Indeed, the faithful reader of the
New York Times
might remember Daniel Wakin’s reporting on July 27, 2011, fully three years earlier. In an unusually precise story about the state of the finances of the Met, he summarized them in one paragraph. It crisply foretold what would soon come to pass:
The Metropolitan Opera under Peter Gelb has an accumulated deficit of $51 million and pension funds are $78 million underfunded. The endowment stands at $243 million, off more than $100 million at its pre-recession peak.
Even sixteen months earlier, Nina Munk, in a very long story written for
Vanity Fair
’s March 30, 2010 issue, “The Met’s Grand Gamble,”
commented on the unusual difficulty in acquiring accurate information about the Met’s financial condition. She then summarized what she had learned:
In the past three fiscal years, since Gelb became general manager, annual expenses have soared by 27% to a frightening $252 million in fiscal 2009—almost four times what it costs to run the San Francisco Opera, the second biggest opera company in North America. This, while revenues from box office, movie tickets and other media (television, radio, video) were a mere $110 million last year.
More worrisome data emerged: the Met’s endowment, never impressive to begin with, had collapsed from a high of $336 million in fiscal year 2007 to $247 million in fiscal year 2009. The stock market is down, of course, but that’s not the only reason the endowment has shrunk: badly in need of cash for its operations, the Met has quietly (and in retrospect) imprudently drawn down its endowment by a total of $61.5 million in the past three years. At the same time, the so-called draw down rate jumped to 8.3% of the endowment last year, well above the 5% rate considered appropriate for nonprofits. How long can that aggressive draw down rate possibly last?
All of which is to suggest, Gelb does not have much time.
Munk’s prediction proved accurate. By 2014, time had run out. The economic situation had grown much worse. The Met’s budget had continued to escalate, from $252 million in fiscal 2009 to around $330 million in fiscal 2013. The drawdown figure may well have increased even beyond the 8.3 percent cited by Munk.
Belatedly, Gelb was now being quoted around Lincoln Center as enunciating a new refrain for the Met: “Spend less. Earn more.” This bumper-sticker message fell somewhat short of a strategic plan, but at least it was more than a prayer. The question remains why that simple directive could not have been fully internalized and then widely communicated much earlier during Gelb’s tenure. When decisions are reached, year after year, to decant the endowment in excess of the income it generates, then its erosion, and an accompanying financial crisis, is inevitable.
The reasons given by Gelb for the plight of the Met began to proliferate as union negotiations approached:
1.
The Met’s audience was aging.
2.
Opera was not taught in elementary and secondary schools.
3.
What was happening to the Met was also occurring elsewhere around the world at leading opera companies.
4.
Superstorm Sandy cut into attendance.
5.
Raising funds was highly competitive.
On item
I
, ’twas ever thus. To attend opera regularly requires substantial discretionary time and income. Older people have both. From 1960 to 2010, according to the U.S. Census Bureau, those over sixty-five years of age as a percentage of the US population doubled. More and more baby boomers are becoming senior citizens, and those over sixty-five will soon grow to 20 percent of the population. In New York City, the figures are just as dramatic. Its Department for the Aging reports that the number of those over sixty years of age increased 12.4 percent between 2000 and 2010. The population of those over age sixty is projected to increase by 35.3 percent by 2030, to a total of over 1.85 million people. This trend should have been viewed by the Met as an extremely lucrative opportunity to exploit, rather than one to bemoan.