Authors: Reynold Levy
By contrast, any new trustees we recruited would tend to view Lincoln Center as a whole, not just as a landlord and service provider to constituents, but also as an important civic actor in the life of New York City, the cultural capital of the world. Out of this broader view of Lincoln Center as a source of economic development, as a tourist attraction, as an agent for the community of artists and audiences, much would follow. Imaginations would be ignited. The time and attention
of trustees and their colleagues would be tapped. And financial support would naturally flow.
The expansion of Lincoln Center’s board enhanced its determination to make an important difference in the life of the city. The institution became less parochial and more broad minded, less narrow in its vision and more enthusiastic about what collectively we might all accomplish.
We could not change the basic structure of Lincoln Center. But we could revolutionize the way the parent body was composed, redefine what was expected of its members, and reconfigure how it operated. No single act did more to advance Lincoln Center’s success during my tenure as president than the board’s approval several times to expand its number, increase the opportunities for trustees to participate in its active governance, and raise the expectations of what new recruits were expected to accomplish.
L
ITTLE HAS CHANGED
over the decades in the way performing arts centers and their component parts—like theaters, or opera companies, or jazz ensembles, or orchestras, or ballet troupes—are financed. While closely examining the operating budgets of Lincoln Center’s constituents after my arrival, I began to wonder what century I was in. And the choice was not, in all respects, between the twentieth and the twenty-first! The famous Russian impresario Sol Hurok would have been completely comfortable with the operating budgets of all the entities of Lincoln Center. Even Wolfgang Amadeus Mozart would not find them unrecognizable, accustomed as he was to the need to seek out wealthy patrons and attract a fee-paying public.
In essence, the revenue base for these world-class artistic organizations is divided into three parts: ticket revenue, contributed income, and funds generated from endowments.
Given the competition for the discretionary expenditures of most New Yorkers and tourists, there is a limit to how much an institution can charge for a ticket, or as an economist would put it, a narrow range of price elasticity. The marketplace for contributed income is also highly competitive, and many arts organizations have neither the staff nor a board willing or able to raise the funds needed by their organizations. Walking on hot coals barefoot often seems preferable to asking friends and strangers for donations to a worthy cause.
Finally, endowment fund-raising is not frequently or robustly practiced, and the travails of the stock market throughout the decade of the 1990s and into the first few years of the twenty-first century were not kind to this source of revenue.
Meanwhile expenses rise. Unionized labor contracts with high levels of compensation and extraordinarily rigid and costly work rules prevail. Heating, air conditioning, and maintaining and securing public spaces and artistic facilities in a first-class fashion is extremely costly. So, too, are artistic expenses. And at Lincoln Center, it would be difficult to find an advocate for reduced rehearsal time, or skimpy sets, or less than ambitious productions mounted on our stages.
Moreover, in the arts, expecting productivity gains is highly unrealistic. One cannot play Beethoven faster. A chamber music quartet always requires four players.
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This collision between the constrained sources of revenue and spiraling expenses did not bode well for the future of Lincoln Center and its resident artistic organizations. Therefore, I wished to create a new economic model, one that would not only strictly contain administrative expenses, but would also identify and secure reliable new or enhanced sources of net revenue.
In fact, the Lincoln Center board’s finance and new venture committees set as a goal that within three years, at least 50 percent of the $10–12 million of annual ticket revenue would be garnered from these novel or enriched initiatives. We set our minds to exceeding that target and accelerating that timetable.
Tackling this opportunity was a self-imposed challenge. It meant lifting our sights as an organization. It demanded different skills and new learning. Ambition and self-sacrifice were required. We wished to prove that Lincoln Center was neither complacent nor self-satisfied, but rather energetic, tenacious, and hungry.
First, we more than tripled our net revenue from food and beverages in the form of restaurants and catering.
Second, we took full advantage of our resplendent new campus by attracting Channel 13 as a tenant, yielding in excess of $1 million per year, and Mercedes-Benz Fashion Week, yielding $3.2 million annually, the latter to be divided among Lincoln Center’s constituents.
Third, taking a cue from the transformation of marketing Broadway tickets, Lincoln Center engaged in yield management of its “inventory,” or dynamic pricing. In essence, when demand is high for a given performance, we “rescale the house” to increase the number of high-priced tickets or simply raise prices, always leaving a critical minimum number at an accessible cost for a public that cannot afford the higher range. This practice has generated hundreds of thousands of dollars in incremental revenue each year.
Fourth, Lincoln Center introduced a facility fee: first $2.00, then $2.75, and then $3.50 per ticket. Unlike in other New York City venues that imposed such a charge but have in fact offered few if any improvements, the paying public could not fail to notice Lincoln Center’s burgeoning physical transformation. Contrary to the fears of some, not a single objection was lodged. Within two years, virtually every constituent at Lincoln Center introduced its own facility fee on tickets as well.
Fifth, Lincoln Center’s staff began modestly to sell its services to constituents and to lessees in the areas of marketing and sales, customer service, and information technology.
Sixth, Lincoln Center negotiated a contract with John Wiley & Sons for an imprint exclusively devoted to performing arts and carrying our institution’s name and imprimatur. To date, twelve books have been published, and handsome royalties have been generated by them, simultaneously advancing and enriching our mission.
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Seventh, Lincoln Center operates one of the largest underground garages in all of New York City. Being president of Lincoln Center involves understanding how to manage the economics of a huge parking lot and the safety and comfort of tens of thousands of customers who use it. There are early-bird parkers. There are performance parkers. There are parkers who come during the day to shop. There are commuters who park at Lincoln Center and take the subway or a taxi downtown. There are monthly parkers who can’t find a space, or are on a waiting list, at their nearby co-ops or condominiums. And there are employee parkers.
Figuring out the algorithm for how to differentially set prices given all of these uses of the garage was a challenge worth seizing. We needed to maximize revenue and remain consistent with our central mission:
to serve paying customers, members of Lincoln Center’s audience. And we needed to leave ample room for my ancient Mercury.
Eighth, as part of Lincoln Center’s physical redevelopment, we took a major risk and built the only freestanding restaurant in Manhattan since Central Park’s Tavern on the Green, called Lincoln Ristorante. With Jonathan Benno, the former chef of Per Se, in the kitchen, and Nick Valenti, the president of the Patina Group, as our partner, this stunning glass structure with a lawn rooftop designed by Diller Scofidio + Renfro almost immediately became a campus hangout and watering hole. It serves not only pre- and post-theater diners, but also those who treat it as a destination for the evening. No fewer than one hundred thousand people enjoy lunch or dinner there annually.
The decision to build this restaurant, situated between Avery Fisher Hall and Lincoln Center Theater and facing the Paul Milstein Pool and Terrace, featuring an iconic Henry Moore sculpture, was opposed by many constituent trustees and executives. They dwelled on the restaurant’s costs rather than its benefits and pointed to past failed attempts to create commercially viable dining facilities on the campus. Now they clamor for reservations and complain bitterly when their preferred time for lunch or supper, or their favorite table, or the private dining room, is unavailable.
Financially, the restaurant brings Lincoln Center a handsome six-figure annual rent guarantee, plus a percentage of gross sales above certain million-dollar thresholds.
Ninth, plenty of attention was paid to improving annual performance in contributed income. To cite only three of many examples, when I arrived at Lincoln Center in 2002, it held two galas, one in the fall and one in the spring. They typically raised a total of $2–3 million gross. During my years of service, Lincoln Center held ten or more fund-raisers each year, including the Mostly Mozart Gala, American Songbook Gala, David Rubenstein Atrium Gala, Midsummer Night Swing Gala, Fall and Spring Gala, and special events like a celebration in honor of Ralph Lauren featuring Oprah Winfrey.
By 2010 we expected to raise from $9 million to $14 million gross from these gatherings. How much each brings in depends on the nature of the occasion, its content, and the identity of the honoree. Beyond the funds raised from any given benefit, each offers Lincoln Center the
chance to befriend guests invited by gala supporters. Many who have become significant individual benefactors to Lincoln Center were first introduced to our work at special celebratory events.
Not only did the board of directors increase in size, but each newcomer was required to contribute $250,000 per year personally or through a publicly held company or privately held firm. It was also expected that within six months to a year of service on the board, a leadership pledge of $3–5 million or more to our capital campaign will be forthcoming. Typically, such pledges are redeemed over three to five years.
In 2002 trustees were contributing an average of about $80,000 annually. In 2014 forty-three trustees gave at the $250,000 level, and the average for the rest was up to $140,000. The net effect of board expansion and raising expectations for trustee giving is an increase of annual support to $20 million each year, compared to $7.9 million in 2002, leaving aside the very generous trustee gifts to the capital and endowment campaign. More than $56 million was raised for the endowment.
A third lucrative source of recurring contributed income funds, Lincoln Center’s largest, is called the Great Performers Circle (GPC). The GPC is ably led by four distinguished Lincoln Center trustees of long standing: Renee Belfer, Bart Friedman, Roy Furman, and Ann Ziff. They, together with staff, have attracted 104 members to this body of supporters. Each contributes $35,000 annually. This donation entitles members to attend three events that take place annually in spectacular private homes or very attractive public spaces.
A sumptuous meal is served. In the most intimate of settings, artists such as Lang Lang, Kelli O’Hara, Emanuel Ax, Laura Benanti, Joshua Bell, and Audra McDonald have performed and mixed and mingled with guests. It is a terrific way for generous supporters of Lincoln Center to become acquainted with great artists and with one another.
The GPC raises about $3.4 million annually. It is as if Lincoln Center enjoyed a 5 percent “draw” on a permanent endowment of $70 million. The membership of the GPC and the sum it raises for Lincoln Center quadrupled between 2001 and 2014. The trustees in turn engage corporations and professional firms with which they are closely associated in the life of Lincoln Center. The institution benefits enormously from that collective, pro bono, intellectual firepower.
Lincoln Center has also benefited greatly from the tenth initiative undertaken, one that has the potential to transform Lincoln Center’s operating budget and the way in which it conceives of its mission in the twenty-first century. It originated with a staff recommendation to establish an institutional consulting practice. Most trustees reacted favorably. They maintained that as the largest, best-known, and most consequential performing arts center in the world, Lincoln Center is frequently called upon to offer advice and guidance to its traditional and new counterparts around the world. Site visits; delegations; technical assistance; and one-on-one counseling of visiting staff, board members, and foundations from the four corners of the earth are virtually an everyday occurrence at Lincoln Center. Key trustees became convinced that the strength of Lincoln Center’s brand and its accumulated knowledge could become an entrée to remunerative consulting.
If one of Lincoln Center’s foremost assets is the combined talent of its incumbent staff, then why not exploit it to improve our institution’s financial performance, to benefit our clients, and to enrich the experience of key employees, eager to tackle new and different assignments? This line of reasoning, in turn, caused us to reflect on whether and how Lincoln Center might help to improve the design and management of arts centers and promote international artistic exchange. For me, such activities fell right smack in the middle of Lincoln Center’s mission. They are part of what it means to be the world’s leading performing arts center in the twenty-first century.
It was this mix of considerations that prompted the board of directors to support my conviction that by entering consultant territory, we could at once further our mission, attract and retain world-class staff, substantially enhance our net revenue, and learn a great deal about ourselves in the bargain.