Bankruptcy Alert: After the Philadelphia Orchestra, Who’s Next?

The Philadelphia Orchestra paid former music director Christoph Eschenbach $693,000 to conduct 21 concerts in the 2008-09 season, according to its latest publicly available tax return. Chief conductor Charles Dutoit made $1.2 million that season.

Last month, the high cost of music-making pushed the orchestra into becoming the first major U.S. symphony to file for bankruptcy protection.

The board’s move surprised the music world. Attendance had dwindled since the golden days of Eugene Ormandy and Riccardo Muti, but the orchestra has an endowment valued at about $116 million according to court papers.

The orchestra seeks relief from pension obligations and unfavorable contracts.

Where does that leave Lincoln Center’s New York City Opera, with its fourth consecutive annual deficit and an endowment of around $10 million, down from $64.5 million a decade earlier?

Members of its board have discussed bankruptcy in passing, according to one trustee, who spoke on condition of anonymity.

NYCO Chairman Charles R. Wall, the former general counsel of Altria Group Inc. (MO) and vice chairman of Philip Morris International, projected a deficit of $5 million this season.

That’s its fourth consecutive shortfall, totaling about $31 million since 2007. The company, once a feisty rival of the Metropolitan Opera next door, has postponed announcing its 2011- 2012 season until mid-May.

Source: The Philadelphia Orchestra Association via Bloomberg

Conductor Christoph Eschenbach who used to helm the Philadelphia Orchestra. The Philadelphia Orchestra declared bankruptcy in April. Close

Conductor Christoph Eschenbach who used to helm the Philadelphia Orchestra. The... Read More

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Source: The Philadelphia Orchestra Association via Bloomberg

Conductor Christoph Eschenbach who used to helm the Philadelphia Orchestra. The Philadelphia Orchestra declared bankruptcy in April.

Sea Change

Usually, companies plan years in advance to secure artists, conductors, designers.

“According to the company, there will be a drastic change in the way they produce opera,” Alan Gordon, executive director of the American Guild of Musical Artists, which represents City Opera singers, said in an interview. “I suspect there will be much less work.”

The union’s contract with the opera expired on Friday. Gordon said the opera indicated it can’t bargain until it reviews its budget for next season.

Gordon regards an imminent bankruptcy as unlikely, in part because legal fees would be burdensome.

“Declaring bankruptcy is a very expensive proposition, but you never know,” he said. “When you don’t have the money, you don’t spend $300,000 on lawyers.”

Maggie McKeon, a City Opera spokeswoman, didn’t return calls for comment. In an e-mail she wrote that Wall was unavailable.

More Pain

The other tenant at the David H. Koch Theatre is also in dire straits -- the New York City Ballet projects a $6 million deficit for the 2010-2011 season, according to spokesman Rob Daniels.

Source: New York City Opera via Bloomberg

George Steel, general manager and artistic director of the New York City Opera. Close

George Steel, general manager and artistic director of the New York City Opera.

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Source: New York City Opera via Bloomberg

George Steel, general manager and artistic director of the New York City Opera.

Gordon’s union also represents dancers, who have been without a contract since August 2010 and without a pay increase since 2008. He said Peter Martins, ballet master in chief, has presided over poor scheduling, hefty overtime and advertising geared to people who are already ballet diehards.

“Its marketing strategy is 25 years out of date,” said Gordon.

The ballet has run deficits since 2003 and aims to balance its budget within three to five years, Daniels wrote in an e-mail. He added that the ballet has sought to appeal to new audiences with a marketing campaign introduced last year.

A contributing factor in the Philadelphia Orchestra bankruptcy was a legal fight between the 111-year-old symphony and Grammy-winning pianist Peter Nero, artistic director of the Philly Pops, a lawyer for the orchestra said in court this month.

The orchestra lost an arbitration involving the Pops, and sought to cancel its participation because it cost at least $600,000 a year, chairman Richard Worley said in an interview. The orchestra projected a deficit of $14.5 million this season.

Tensions between the musicians and the board have flourished at least since the hiring of Eschenbach, who did not enjoy the affection of some of the players.

When his predecessor went to the National Symphony at the Kennedy Center, Dutoit stepped to the podium without much of a mandate. Perhaps the new music director, Yannick Nezet-Seguin, will bring a little pizzazz when he takes charge in September 2012.

“He’s a young conductor, very engaged with the public and the musicians,” said Jeffrey Kallberg, a professor of music history and an associate dean at the University of Pennsylvania.

Mismanaged

As for City Opera, it’s been “grossly mismanaged,” Gordon said. Productions rarely fill more than 40 percent of the Koch Theater. He blamed misguided programming for the company’s woes.

“Does the company present what people want to see or some obscure opera no one knows about?”

When NYCO’s board received permission to withdraw $24 million from its endowment, it told the office of the attorney general in New York that it planned to repay as much as $2 million by mid-2010. That did not happen, and the company has no plans to begin repayment this year either, according to records released by the AG.

The case is In Re The Philadelphia Orchestra Association, 11-13098, U.S. Bankruptcy Court, Eastern District of Pennsylvania (Philadelphia).

(With assistance from Steven Church in Philadelphia. Philip Boroff is a writer for Muse, the arts and leisure section of Bloomberg News. The opinions expressed are his own.)

Editors: Zinta Lundborg, Daniel Billy.

To contact the writer on this story: Philip Boroff in New York at pboroff@bloomberg.net.

To contact the editor responsible for this story: Manuela Hoelterhoff at mhoelterhoff@bloomberg.net.

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