Breaking: Peter Gelb admits he caused the Met crisis
mainMusicians of the Metropolitan Opera orchestra are about to issue a further challenge to claims by the manager, Peter Gelb, that high labour costs have brought the Met to a point of economic crisis. The musicians argue that the crisis was caused by Gelb’s poor financial management.
They could hardly believe their eyes when Gelb admitted the charge in a rambling rebuttal to the musicians’ 84-page case for making $31 million savings without having to suffer wage cuts.
On this page, Gelb admits that he got his financial forecasts badly wrong.
If the print is too small for your eyes, here’s the nub of it:
Gelb put in place ‘a conscious and successful business strategy that emphasized growth in revenues.
‘Earned revenues grew through FY11 and contributions grew through FY12.
‘It is because that revenue growth has ceased that we are here today.’
In plain English: Gelb imagined the money would keep rolling in. It didn’t – in part, because people stayed away from his shows and, in part, because wealthy persons refused to support what they saw as a failing enterprise. The Met’s problems are rooted in Gelb’s overspend.
The cause of the crisis is, therefore, Peter Gelb. He needs to be locked out.
“It is because that revenue growth has ceased that we are here today.”
Gelb broadcast this plan when he was first appointed, and for some years he kept repeating the mantra: new revenues would restore the Met to fiscal health. As has been said before in this blog, any manager of any company, large or small, can con a Board that budgets can be balanced by a quick upward revision of revenues. A savvy Board will see the sleight-of-hand behind what is usually a fiction and insist that revenues be scaled back to a more reasonable level. But Gelb went further. Not only did he increase budgeted income; he increased expenditure by unsupportable levels. He conned the Board. The Board bought it. A lot of these individuals should also be locked out!
Wait, so you’re saying a plan for an opera company to make more money is a bad thing?
Not at all! I’d be delighted if opera companies made loads more money! My point is that anyone in charge of a performing arts company can “say” they will increase revenues and that will solve the financial problems. It’s the easiest thing in the world! You or I could “say” we will go out tomorrow and buy that new Mercedes we’ve wanted for some time. But it’s quite another thing to find ways of earning all that extra money we’d need to pay for it IF, like the Met, we are already spending 100% of our household income! We’d probably need to win a lottery!
Gelb said he would raise the extra revenues through increasing the number of new productions and making them more appealing to a new generation of opera goers. He had zero guarantee he could do that. It was a hunch – and a highly irresponsible hunch, in my view. It did not work. So now the Met’s finances are in a much worse state than when he took over.
Isn’t this similar to the musician’s proposals, though, in so much as they have a plan which says “$11m from increased ticket revenue” without really defining it, they just hope it might happen; same as Gelb is accused of here?
And to be fair, Gelb is claiming that the plan was working for two years before income has stopped rising, so not an entire failure. To be fairer still, it is at the point where income stops rising that management should be talking to musicians and employees to look to renegotiate terms to make a stable future, which – regardless of the way he’s gone about it – is what Gelb has done and is doing. He could simply try to hide the bad news away and leave a successor to sort out the mess in a few years’ time, but he’s tackling it head on. He may not be approaching it as sympathetically as he could, or maybe should, but at least he’s looking the future in the face and trying to find a way to deal with it, no?
Yes, I agree to a certain extent. I think the musicians’ proposal about increasing ticket revenues is equally flawed. I am surprised they put it forward because I cannot see how it would work
And yes, to a certain extent the Gelb plan worked at the outset. But it was a highly dangerous strategy to combine a hunch about increased revenues alongside very substantial increases in annual expenditure. Also the writing has not just suddenly appeared on the wall. It has been there for some years, as Gelb himself has stated publicly. Why therefore was nothing done to rein in costs at the last set of Union negotiations in 2011? As i said in an earlier thread, could that – perhaps – be because Gelb did not want to raise red flags at the time he was negotiating his own new 10-year contract?
The MET musicians and friends have played their hand immensely well, in no small part because their union works with a top-flight PR firm, Geto & de Milly, to assist with their messaging. This should be a lesson to the musicians of so many other American orchestras that have bumbled and stumbled their way through labor disputes while trying to handle their own messaging. Nobody expects communications specialists to be great musicians. Too many musicians have made the mistake of thinking they can be their own best advocates in labor matters. They usually shoot themselves in the foot and get stuck in the weeds defending arcane aspects of their labor agreements. Meanwhile, Geto and Local 802 have defined the message clearly and are succeeding handsomely in finding traction for it.
As it goes, the running narrative is “Gelb spent wildly on productions that couldn’t sell, gave himself a raise, and now wants everyone else to eat the consequences.” Aside from the Wall Street Journal, which caters to corporate hacks who always side with management, and National Review, a neo-conservative screed that hates organized labor, nobody seems to buying what Gelb is selling.
The MET board should be appalled at how badly this is going, and once it’s all settled, they’d be wise to send Gelb out to pasture in that $169,000 field of poppies he had built. Or maybe he can have lunch with Michael Henson and they can talk about where their labor-trashing strategies went so wrong.
Gelb in fact pushed for a 10% reduction in union compensation during the 2011 negotiations, but he didn’t get the necessary support from the Board at the time. The problem was kicked down the road, and now here we are further down the road. Gelb is trying to undo a couple of decades of gradual inflation of compensation, and it’s pointless to say, “If you really think you need this surgery, why didn’t you get it last year?”
Gelb has increased the Met’s budget 50% since 2006 and drastically overspent on overtime hours – and this is lowballing it, as a lot of expenses “disappeared” into another budget. To say that he is trying to undo “a few decades of gradual inflation of compensation” only makes the Board look even more clueless.
If Gelb was so worried about money why then has he given himself a raise every year, including last years 25% raise and then only give back 10%? He is asking for give backs from all of the unions and guilds cuts that amount to almost 20% His job should be outsourced and the damage he’s done should be paid for out of his retirement package.
His own raise is unlikely to be given to him by himself, I would suggest. Saying he should turn down a raise given to him is only the same as suggesting the musicians should turn down the 20%+ raise they’ve received in total package over the last few years, and I didn’t see them doing it either, nor offering to do it if he does in mutual co-operation.
Meanwhile, the idea that you save an opera house and return it to artistic excellence by reducing the number of “overtime operas” seems a bit bonkers – I mean, are the players really saying “well, there’s good stuff folks will pay to come to, but since it involves us playing for an extra hour each night, let’s strike it off the menu at once” ?
I’m not sure where the “neo” fits in the problematic enough conservative posture of National Review, launched in 1955 by William F. Buckley, Jr. (1925-2008), edited by him until 1990 and operated by him and his family until his death.
Gelb out of the picture doesn’t solve any problems for the Met. It appears the endowment is too low given the annual expenses. The $250m figure is so low it doesn’t seem accurate. I think BSO has a $325m endowment. For orchestras some say the endowment should be at least four times the annual budget.
As in Minnesota or Detroit, by only cutting one thing, it places blame on the impacted individuals. Instead they have to cut in equal measure across the board – or find more money somewhere. Maybe Gelb could try harder to find money, because cutting the salaries will impact the quality of everything those people do.
For Gelb it can only be part fundraising – he knows that opera promotion in this country has a failing grade. It isn’t introduced early enough, and there are other things competing for that target audience’s attention. I think some opera companies are dealing with this by offering lighter, more “popular” options that to an opera snob seems like the end of culture as we know it. But, if it allows those companies to grow singers and produce quality Mozart and Verdi, well, I guess these things must be done.
Just let the Met die. The money would be better spent in society helping children with cancer. I love opera but it’s out of control. If you hire great American singers you wouldn’t have to spend so much on the spectical. Do you really need that many in the chorus. Cut it by 50% and give them the same benefits as the soloist. You might even be able to make some money.
*Sigh* Here we go again. Louisville, Detroit, Minnesota, etc., and now the Met.
The question that keeps going through my mind whenever these perennial crises come around is: who has failed to hold up his (her) end?
Did the Met unions fail to do their work? Did the orchestra play poorly, or fail to show up for work? Did the carpenters fail to build things? Did the stage hands not handle the stage duties?
Of course not. They did the jobs for which they were paid.
They are paid well at least in part because they are among the best in the business, which is appropriate for an opera house that wants to be world class. Is there room for adjustments? Perhaps. But should the burden for balancing the budget rest on the backs of labor?
So, what is the real problem?
I’ll give Mr. Gelb the benefit of the doubt. He came into the Met with a bunch of ideas, including: bringing his experience in the ’80s filming Met performances to the table to live-stream Met productions to theaters; hiring fresh blood with new ideas; and creating new productions to bring in new and larger audiences.
Some of the results have been good. I have all sorts of anecdotes about people who love attending Met simulcasts.
I haven’t attended any of the hated new productions, so I’ll leave it to others to discuss them. I have enjoyed the various productions that I have attended over the last several years, whether Wozzeck, Nixon in China, Iphigénie en Tauride, Pelleas, etc.
Alas, the financial results haven’t been what was hoped for.
And what about fundraising?
So, is cutting salaries the right answer? Is threatening lockouts and cancellation of health insurance the right answer?
Was it the right answer in Minnesota, or Detroit, or Louisville?
I hope that a lockout can be avoided, whether due to a meeting of minds or through some other means (e.g. agreeing to continue negotiations without a lockout after the artificial August 1st deadline).
We’ll see.
(Disclaimer: I briefly worked for Mr. Gelb at CAMI. I enjoyed the experience.)
Good questions all. The differences between those “cases” are interesting. Detroit has to be admired for not blaming the art form first (the economic situation was all over the news), but getting creative, and rather than throwing around the “world class” paradigm – were satisfied enough with just being loved by their community and came out so much better for it.
The economic situation in Minneapolis was never really addressed or covered by the media (and still hasn’t). Cost of living is not going down in NYC – there is money, but there’s competition for it (to put it simply). The solution won’t be the same – but if BSO can have that size endowment, and the Met is in a bigger market…
Well, maybe the Met had $500m at one time… Sounds like Gelb is entering a game of chicken – and as things get more desperate he might be able to meet them halfway or at their terms. Hopefully…
You mention Gelb’s CAMI years – I know he was involved in the Horowitz and the Salzburg festival productions, working with Karajan as well. He’s had to make some tough decisions, not in everyone’s favor – but it is a tremendous resume. He probably has this more choreographed than people imagine.
In response to @Claudia Menlo’s earlier comment: “Gelb in fact pushed for a 10% reduction in union compensation during the 2011 negotiations, but he didn’t get the necessary support from the Board at the time”
I was not aware of that. I am curious, though, about two specific issues.
1. “Gelb in fact pushed for a 10% reduction in union compensation during the 2011 negotiations.” I am a little concerned about your accuracy. From what I have read, including an article in the Wall Street Journal dated 4 February 2010, it was in fact in 2009 and that Gelb asked the Unions to “accept a 10% wage cut as part of a company-wide response to the recession.” Neither side came to an agreement on that issue. This was, note, in 2009. As far as I can determine, it was not part of the 2011 negotiations. Since you state as fact it was requested as part of the 2011 contract negotiations, perhaps you will be so kind as to provide some more tangible evidence.
Against your statement are comments in a number of dedicated opera blogs and sites specifically taking Gelb to task for NOT having negotiated some form of contract changes in 2011, by which time the fall off in ticket sales revenues as we know had become very obvious. This from parterre.com –
“The last contract negotiations, which took place without any suggestion of the need for drastic cuts, were just three years ago during one of the worst years of the fiscal downturn.”
2. The 10% cut didn’t get “the necessary support from the Board at the time.” It sounds exceedingly odd that any Board would overrule its GM on such an issue, had he in fact proposed it in that year, with sales revenues falling and the high level of required donations in some jeopardy. Again, I assume you can back this statement up from articles in the media or elsewhere.
Apologies. The quote attributed to the Wall Street Journal is in fact from the New York Observer Culture section.
Nick – it seems a moot point as to the exact year. Isn’t the point that Gelb asked for a 10% reduction previously, which would have been a start to put the house in order etc., but the players rejected it and he didn’t push the issue? Doesn’t matter much whether it was 2009 or 2011.
To a certain extent, it is not a major issue. What is, I suggest, is the idea that Gelb, having clearly gone to the Unions with a formal request for a 10% cut in 2009 (not a year in which contract negotiations were due), was then prevented from doing so in 2011 by the Board! This is what @Claudia Menlo stated as being fact – “but he didn’t get the necessary support from the Board at the time.” I find that extraordinary, the more so when the Met’s financial position seems to have worsened over those two years. If that was indeed the case, then it would be interesting to see some sort of verification.
Dr., downsizing opera is similar to having “just a little sex”. It’s an all or nothing scenario. The Met is one of the few houses in the world where the audience expects (and gets) the real deal. If “cut your way to success” actually worked, there would be a string quartet in the pit. Opera is garish, enormous, larger than life. Yes, you need all those people.
As for saving the children: somehow I don’t think closing the Met will be the saviour you expect. Regardless, if you’re so inclined I suggest taxing hedge fund managers, going after the trillions hidden in the Caymans and Switzerland, cutting inflated military budgets for planes they don’t even want, imposing penalties on “American” companies that move offshore, blah blah. That might garner a few more bucks than giving a fiddle player a $20K pay cut.