Tipping Point: Orchestras Rely on Philanthropy More Than Earned Income. Which Means What?

Historically, many cultural institutions have relied on a particular kind of public-private partnership, with the public contributing revenues in the form of ticket sales, membership dues, and so on, while private donors foot the rest of the bill. For the healthiest institutions, earned revenues tend to be dominant.

Few cultural institutions are less healthy right now than orchestras. And the shifting nature of their revenues underscores that point.

According to a new report by the League of American Orchestras (LAO), classical orchestras now receive a majority of their revenues from donations. The LAO found that in 2014, an average of 43 cents of every dollar orchestras received came from contributions, while 40 cents came from ticket sales, touring, hall rentals, and other sources of income.

What does it mean for orchestras moving forward? Is this a profound paradigm shift in a centuries-old operational model?

Hyperbole aside, let's start with the most basic takeaway. By overwhelmingly relying on donations, orchestras put themselves in a risky financial position. Things can turn south quickly if a big donor sits on the sidelines or a fundraising campaign underperforms. Similarly, rather than tailoring programming to the general public, orchestras may now find themselves bending toward donor interests—an unpalatable proposition for any independent-minded programming director.

Just the other day, we wrote about how large donors are becoming more dominant in the nonprofit sector, a trend that reflects rising inequality—the rich have loads of money while ordinary Americans are more strapped. What's happening in the classical music space offers a good example of that.

Then again, every classical music programming cloud has a silver lining. The New York Times says that donors are pushing orchestras to expand educational and community engagement initiatives. This corresponds with what we've seen in the classical philanthropy space as of late, with grantmakers like Ford (the auto manufacturer) embracing "classical community outreach." The L.A. Phil has attracted some big donor dollars with similar outreach, as has Lincoln Center.

This donor-centric mentality also underscores the importance of forging durable labor agreements. Since 2010, labor battles have led to at least 14 work stoppages at orchestras, and this season alone has already seen strikes by ensembles in Fort Worth, Philadelphia and Pittsburgh. If it's one thing donors hate, it's volatility.

Which bring us to some good news.

Jesse Rosen, the president and chief executive officer of the League of American Orchestras, noted that while contributed income had dipped during the Great Recession, it has now recovered, and even exceeds its pre-recession levels. In addition, fewer orchestras are running deficits than during the recession.

The bottom line? Ensembles must adapt to a new paradigm built on more aggressive fundraising, more community outreach, and a receptiveness to greater donor input on the programming front. It may not be what they signed up for, but there it is.

Orchestras may also take some comfort in knowing that this shift isn't relegated to the classical music space. Commenting on the contentious demise of the Silicon Valley Ballet earlier this year, Wayne Hazzard, executive director of San Francisco-based Dancers’ Group, called the existing ballet model "an institution that was devised in another time."

And so we'll let LAO's Rosen have the last word. "It’s shifting,” he said. "It has been a transactional thing: We put on concerts, you buy a ticket, and we take your money, and that keeps us going, and everything is fine. Now, it is: What is the value we make in this community? Because it’s now primarily philanthropic support driving the engine."