Does the Minnesota Orchestra have sustainable labor contracts?

MinnPost photo by John Whiting
University of St. Thomas business economics professor Charles “Mel” Gray is concerned that the orchestra is relying on one-time gifts to finance $2.8 million in permanent salary increases.

In the afterglow of its high-profile trip to Cuba, the Minnesota Orchestra unveiled generous raises in contract extensions with its unionized musicians and music director Osmo Vänskä. So are the deficits and financial challenges that triggered a 15-month musicians’ lockout in the past?

Twin Cities BusinessNo, says Charles “Mel” Gray, a professor of business economics at the University of St. Thomas, who has been tracking the Minnesota Orchestra’s finances since the early 1990s.

“The problem is not solved; the problem is just postponed,” Gray explains. “A one-time gift can tide us over. But we are buying time and that time is going to expire, and we are right back in the thick of things.”

When the orchestra disclosed the new labor deals in May, it simultaneously announced a $5 million gift from Doug and Louise Leatherdale, and a $1.5 million donation from Betty Jayne Dahlberg. The latter gift, the orchestra said, “will help support the Minnesota Orchestra musicians’ agreement.” Gray’s concern is relying on one-time gifts to finance $2.8 million in permanent salary increases.

The musicians’ deal, which spans three-plus years, takes effect in 2017 and raises minimum weekly salaries 8 percent by the contract’s end in 2019-20. It also increases the number of musicians from 84 to 88.

Kevin Smith, president and CEO, says the new agreements provide tangible “stability” that allows the nonprofit to more effectively raise money, sell tickets and make touring commitments.

He notes that musicians agreed to a 15 percent salary and benefit cut in 2014 to end the lockout, in the wake of a previous multi-year contract that contained double-digit pay increases. The new deal “doesn’t get them back to where they were” before the lockout, Smith says. He also notes that the Leatherdale gift is targeted to fulfill Vänskä’s orchestral vision, which includes the costs of touring and recording.

Smith says he is comfortable using one-time money for raises, rather than a one-time bonus: “There is nothing you can do to establish in perpetuity the [complete] financial security of an arts organization.”

Currently, 54 percent of the orchestra’s revenue comes from contributions, 15 percent from endowment drawdowns and 31 percent from earned revenue, including ticket sales.

The orchestra continues to struggle to attract patrons. “People are not committing the way they used to, for multiple dates,” Smith says. During the renovations/lockout, the orchestra lost 34 percent of its subscriber households (similar to season tickets). It has reduced the decline to 21 percent, says spokeswoman Gwen Pappas.

St. Thomas’ Gray insists the orchestra “still has problems on the cost side. Somewhere down the road there will have to be an adjustment. We do have a group of absolutely top-notch musicians. They deserve to be compensated appropriately. The question is what is appropriate. It’s not clear an unfettered market would yield these salaries.”

Gray, author of The Economics of Art and Culture, says he’s told some of the musicians that they could be facing smaller raises or even pay cuts down the road. His warning to musicians: “Don’t buy a huge house. Be cautious.”

This article is reprinted in partnership with Twin Cities Business.

Comments (10)

  1. Submitted by Emily E Hogstad on 08/17/2015 - 10:01 am.

    Nooooooooooooo

    Noooo, MinnPost! This is not good journalism!! Given what is public knowledge now, this is nothing more than clickbait.

    There have been at least two essays questioning just about everything in this article. Scott Chamberlain at Mask of the Flower Prince and I over at Song of the Lark both deconstructed it and found it lacking in key areas.

    I appreciate skeptical journalism. But I want it to be thorough, and I want it to make sense, and I want a wide variety of voices to be consulted. This piece has none of that.

    This isn’t worthy of the fabulous coverage you gave our orchestra during the lockout.

    I know you guys can do better.

  2. Submitted by Bill Slobotski on 08/17/2015 - 10:32 am.

    Silly me!

    When I sent money to MinnPost I thought I was sending money to an independent journalism company. Now I see you are posting old stories from other sources that I can read for free. Good to know next time you are fundraising, for I will have questions for you before parting with my money.

  3. Submitted by Amy Adams on 08/17/2015 - 10:39 am.

    It is downright weird, having followed the MN lockout closely…

    that not once did I encounter the writings of Charles “Mel” Gray, though he’s been tracking the finances of the orchestra since the 90s. Where was his expertise during the public meetings hosted by community advocacy groups Save Our Symphony MN, and Orchestrate Excellence?

    Mr. Gray’s use of the word “problem” (three times in this article) is in itself, a problem.
    Treating the cost of musician salaries as a terrible thing that must be chipped away at, because it’s a….problem….does not acknowledge that labor costs are, and should be, significant, even high. (The musicians produce the product. They are an integral part of what is sold.)

    And seriously, that parting shot?? “Don’t buy a huge house.” The sheer shameful gall of that remark, and Liz Fedor’s judgement in using it as her conclusion, reveal this piece to be simply raining on the Minnesota Orchestra’s parade. Now…who might have wanted that to happen?

  4. Submitted by David Assemany on 08/17/2015 - 11:02 am.

    That picture caption is misleading…

    …They are not “permanent salary increases”. The musicians took a pay cut at the end of the lockout, and the increases in question do not even get them back to the level of pay they were at before they were locked out by management.

    This is bad reporting.

  5. Submitted by Mariellen Jacobson on 08/17/2015 - 12:22 pm.

    Strange

    “This article is reprinted in partnership with Twin Cities Business.”

    Why this article? Why now (the original article was published more than 2 weeks ago)? MinnPost doesn’t automatically (or even frequently) re-post articles that have appeared in Twin Cities Business, especially ones that are so lacking in accuracy and rigor (as observed in previous comments). I wonder who on the MinnPost editorial staff deemed this one worthy and why.

    In any case, I would refer readers to Scott Chamberlain’s and Emily Hogstad’s excellent rebuttals.
    https://maskoftheflowerprince.wordpress.com/2015/08/14/astonishingly-bad-analysis-of-the-minnesota-orchestra/
    http://songofthelarkblog.com/2015/08/13/is-twin-cities-business-publishing-clickbait-about-our-orchestra/

  6. Submitted by Hiram Foster on 08/17/2015 - 01:08 pm.

    Specifics

    I see a lot of generalities here, but not much in the way of specifics.

    Is the orchestra still in financial trouble? During the lockout, many commentators assured us that there were lots of things the orchestra could do, that were being done by other, more financially successful orchestras, to increase revenue. Are those things being done?

    In the aftermath of the lockout, there were one time contributions such as those mentioned in the article. While I am sure they are welcomed, how has the fund raising been going now that things have settled down? Are the finances of the orchestra stable or are they not?

  7. Submitted by Jim Million on 08/17/2015 - 01:14 pm.

    Very Fair Comments

    Having followed (and bolstered) the concerns of these commenters during the SOSPCO travail, and to a lesser extent the SOSMN campaign, I certainly defer to their insights and seminal knowledge.

    What we must acknowledge in the financial future of both orchestras is the very real possibility of a pending (but perhaps softer) recession sometime in the next few years. The general economy is now quite hot, perhaps over-heated, making Fed strategy quite tenuous. All that’s really up to how they handle domestic concerns while closely monitoring European (mainly) economic concerns. The Fed hopes to provide a “soft landing,” but that’s problematic given the unknown condition of many runways, so to speak.

    Future box office proceeds are certainly not the truly relevant concern. The stability and reserves from individual and corporate patronage, the sources of true funding, may be honestly in question next time. Given so many social uprisings of late (facts for responsible funders to consider), benevolence may likely be spread more broadly (thinly) in the next downturn.

    It is wise to keep looking over ones shoulder for awhile to come. The MNOrch governors and SPCO Board must aggressively now secure long-term capital funding and assured large benevolence streams. Future budgets greatly depend on firm commitments now.

    Everyone should enjoy the present relief and success of past strife. I guess the wise strategy is to prudently enjoy the present while banking money for contingencies. Musicians please take note.

    Let’s all enjoy the music of our orchestral recoveries, planning now to avoid almost certain coming issues.

  8. Submitted by Curt Carlson on 08/17/2015 - 02:11 pm.

    Good example of bad journalism

    This article certainly did not deserve to be reprinted by MinnPost. Did the partnership agreement with TCB require it, or is this actually the result of terribly flawed judgement on the part of MinnPost editors? I was about to begin donating regularly to MinnPost, but if this is an example of their editorial judgement, I’ve just changed my mind.

  9. Submitted by Hiram Foster on 08/17/2015 - 02:32 pm.

    Cause and effect

    “fit organizations. Specifically, they are 501 (c) (3) non-profits as determined by the IRS. As such, they are always going to fundraise as part of their business model. Year-in, year-out. That is why they are non-profits”

    This sentence seems to get the cause and effect in the wrong order. Organizations like the Minnesota Orchestra aren’t non profits because they fund raise, they raise funds because they aren’t profitable.

  10. Submitted by Bill Gleason on 08/26/2015 - 03:23 pm.

    A response to this piece has appeared

    Astonishingly Bad Analysis of the Minnesota Orchestra

    link: http://bit.ly/1MVgUtQ

    “Every aspect of this piece is bizarre—its underlying premise, its use of evidence, its timing, its assumptions, and its overall approach to non-profit management.

    With respect, the only questions it truly raises are those pertaining to why it was published in the first place.”

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