9-404-116 REV: AUGUST 8, 2005
THOMAS J. DELONG
DAVID L. AGER Utah Symphony and Utah Opera: A Merger Proposal
In late June 2002, Anne Ewers, general director of Utah Opera (UOC), sat reviewing costume sketches for an upcoming performance of Giuseppe Verdi’s Otello. In less than two weeks the Boards of UOC and the Utah Symphony would vote on whether to merge the two organizations. The outcome of the vote, if positive, would have a significant impact on Ewers, who had been asked to assume the helm of the merged entity and lead the integration effort.
A weakening of the economy, the bursting of the Internet bubble and subsequent collapse of the stock market, and the tragic events of September 11, 2001 had led to a decline in public (e.g., government subsidies) and private (e.g., ticket sales and individual, corporate, and foundation pledges) support for the arts. This trend had significantly hindered an already financially strapped arts community across the United States and had left many arts boards of directors scrambling to devise means to replace lost revenues in an effort to maintain the solvency of their respective organizations. Salt Lake City was no exception, and board members of many local arts organizations were laboring to preserve the arts in Utah.
In response, senior board members of the symphony and the opera and Ewers engaged in a series of private conversations to consider the idea of merging Utah’s top two arts organizations in an effort to economize on costs and perhaps expand the artistic potential of the two organizations. The outcome of these conversations was a decision to convene a joint task force1 to further study the idea of a merger between what many argued were two of Utah’s greatest cultural assets.
Ewers, who had a reputation among the executive committees at the opera and the symphony for being energetic, enthusiastic, and capable, had been asked whether she would be interested in becoming the CEO of a merged organization. At first she was cautiously excited about the opportunity, but as the months passed and the public, various board members, staff members, and artists began to express skepticism about and openly oppose the merger, Ewers recognized that combining the two organizations represented a much greater challenge than she had initially realized.
1 The task force consisted of members of the executive committees of the symphony and the opera—three from the symphony, three from the opera, and one person who sat on both executive committees—and Ewers. ______
Professor Thomas J. DeLong and Ph.D. Candidate David L. Ager prepared this case. HBS cases are developed solely as the basis for class discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.
Copyright © 2004 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School. 404-116 Utah Symphony and Utah Opera: A Merger Proposal
The opera and the symphony boards were each scheduled to vote on the merger on July 8, 2002, yet by late June 2002 it was still unclear which way the vote would turn. Ewers was excited by the challenge of leading the merged organizations and the integration effort, but she knew that she needed a well-thought-out plan for how she would integrate these cherished arts organizations. Ewers’s reverie was broken when the costume designer arrived with the fabric samples for Otello. Still, the question lingered in her mind: How would she realize the synergies that justified the merger?
Arts Organizations in America2
Unlike major arts organizations in Europe and Canada, which relied heavily on government agencies for their funding, orchestras, opera companies, theater companies, and other arts organizations in the United States operated according to a very different financial model. A relatively small portion of total income (approximately 6% in 2000–2001) came from federal, state, and municipal governments (tax-supported income); the majority of income was generated through ticket sales and individual contributions (earned income—approximately 46%), business and foundation giving (private income—approximately 36%), and endowment and investment income (approximately 12%).
Even before the economy had begun to soften in 2000, many arts organizations across the country had attempted to increase revenues by adding more performances. Once a performance (play, opera, concert) had been rehearsed, there was little incremental cost to the organization to present an additional show. This was particularly true of symphony orchestras, which between the 1995–1996 and the 2001–2002 seasons had increased the total number of performances nationwide by 23%, to 37,000 concerts. Although this increase had corresponded with higher total symphony attendance (in excess of 30 million seats for the 2000–2001 season), the tragic events of September 11th combined with the downturn in the economy led industry experts to forecast that attendance in the 2001–2002 season would be down by at least 4% from the previous year. Similar forecasts were being made for attendance at other arts events such as the theater, opera, and ballet.
To compensate for the decline in attendance, ticket prices for the symphony had been increased, and total income for the industry was expected to increase by approximately 1%; however, total expenses were expected to increase by at least 2.5%, leading a majority of the orchestras across the country to predict an operating deficit for the 2001–2002 season.
In addition to the decline in attendance, several other factors had contributed to the forecasted deficit. Declines in public subsidies, particularly at the state level, as well as a decrease in endowment and investment income threatened the financial viability of many orchestras. Endowment and investment income had become particularly thin due to a depressed equities market that had lost up to one-third of its value since January 2001.
State and local tax revenues used to subsidize orchestras had also stagnated, leading appropriations to arts agencies to decline. The prediction was that such decreases would continue. In addition, the number of arts organizations seeking public funding had increased, thereby further decreasing the size of appropriations to individual organizations.
2 This section draws on Douglas J. Dempster, “The Wolf Report and Baumol’s Curse: The Economic Health of American Symphony Orchestras in the 1990s and Beyond, ” Harmony, Forum of the Symphony Orchestra Institute, 2002.
2 Utah Symphony and Utah Opera: A Merger Proposal 404-116
Utah Opera
The late Glade Peterson, a native of Utah and renowned operatic talent in Europe, formed Utah Opera (UOC) in 1976. The new company presented its first opera, Puccini’s La Bohème, in 1978. UOC was committed to staging opera productions, to promoting broad public knowledge and appreciation of opera, as well as to creating opportunities for promising young artists to develop their talents and to pursue careers in opera. Peterson served as general director of UOC until his death in 1990.
The following year, Ewers was named general director of UOC. Under her direction, the opera continued to grow, increasing its number of annual productions from three to four. UOC attracted an annual audience of approximately 130,000 patrons from Utah and neighboring states to its performances at Salt Lake City’s Capitol Theatre. In addition to its regularly scheduled productions, UOC staged performances for over 70,000 students3 throughout the state in an attempt to increase their appreciation for opera and also to ensure UOC’s future audience base.
UOC had a permanent staff of 23 people (refer to Exhibit 1 for the organizational chart) engaged in administrative functions such as the technical and artistic elements of opera production, music administration, and community education. The artists, including soloists, artistic team, chorus, ensemble, and orchestra, were each hired for a specific production. With the exception of the soloists, most of these artists were locals. In the case of the orchestra, UOC engaged the services of the Utah Symphony.
In addition to ticket sales, financial support for the opera was obtained from locally and nationally based foundations, corporations, and individuals: The National Endowment of the Arts, the Utah Arts Council, the Utah State Legislature, the Salt Lake City Zoo, the Arts and Parks Fund (ZAP), and the Salt Lake City Arts Council. The UOC endowment fund had grown to $5 million by January 2002. The UOC owned production studios on 2.9 acres of land and a sizable costume inventory (including 17 sets and 38 productions of costumes). These latter assets were valued at approximately $4.8 million. (Exhibit 3 presents financial data for UOC.)
Anne Ewers
Ewers was hired in 1991 to lead UOC. Prior to coming to Salt Lake City, Ewers had served as general director of the Boston Lyric Opera, where she retired a $450,000 debt that she inherited from her predecessor, built an endowment fund, and increased the number of productions from one to three. Ewers had also served as assistant director to the San Francisco Opera and the Canadian Opera Company, but it had been through her work directing operas that Ewers earned her early reputation in the opera community. Over the course of her career, she had successfully served as stage director for over 60 opera productions across the United States and abroad, including for the San Francisco Opera.
During her 11-year tenure at UOC, Ewers had grown the company’s annual budget from $1.5 million to $5 million. She was particularly successful at fund-raising, in some instances successfully soliciting donations from entities outside the state.
3 This number represented approximately 10% of all school opera audiences nationwide.
3 404-116 Utah Symphony and Utah Opera: A Merger Proposal
The Utah Symphony
The Utah State Symphony Orchestra Association first met on April 4, 1940 and held its first concert on May 8, 1940. A year later the organization was renamed the Utah Symphony (USO). In 1947, Maurice Abravanel, an experienced maestro who had conducted at the Metropolitan Opera in New York City, was hired by the USO as its conductor. Abravanel went on to become the symphony’s music director and spent 32 years, until his retirement in 1979, developing the orchestra, taking it from a part-time community ensemble to a renowned, world-class symphony. Under Abravanel’s direction, the USO became one of the first orchestras from the western United States to tour internationally. Abravanel was also successful in securing several recording contracts over the years with labels such as Vanguard, Vox, Angel, and CBS. In 1993, Symphony Hall was renamed Abravanel Hall in honor of the maestro and his legacy. Abravanel died in 1993 and was survived by his wife, Carolyn Abravanel, who continued to be heavily involved with the Symphony Guild.
Abravanel had a reputation of defending his musicians vociferously; he succeeded in securing them full-time professional status. Unlike artists who worked for the opera, musicians employed by the USO received a full-year contract and earned a full-time salary. The American Federation of Musicians (AF of M) represented them in contract negotiations.
In 1998, the USO hired Keith Lockhart as its music director.4 Lockhart continued in Abravanel’s footsteps, and by 2002, the USO was one of the most involved orchestras in the country, performing to a year-round schedule. In the 2000–2001 season the USO performed over 200 concerts.5 The USO was considered to be at the top end of Group II symphony orchestras in the United States (Exhibit 4 presents a list of Group I and Group II orchestras), a designation determined by its level of annual expenditures. The average endowment of Group I orchestras in 2001–2002 was approximately $76 million, whereas the average endowment for Group II orchestras in the same period was approximately $8.8 million.6 (Financial data for the Utah Symphony Orchestra appear in Exhibit 3.)
The USO employed 33 full-time staff members and 83 musicians. (Exhibit 2 presents the organizational structure for the USO.) Local concerts were performed at Abravanel Hall, which also housed the orchestra’s administrative offices. These facilities were owned and managed by Salt Lake County.
Keith Lockhart
Lockhart joined the Utah Symphony as its music director in 1998. Lockhart also served as conductor of the Boston Pops Orchestra. Previously he had served as conductor of both the Cincinnati Symphony and Cincinnati Pops orchestras. He had conducted more than 600 concerts and created 50 television shows including PBS’s Evening at the Pops and Pops Goes the Fourth! As a guest artist, Lockhart had conducted the major symphony orchestras of Chicago, Cleveland, Dallas, Los Angeles, Montreal, New York, Philadelphia, Singapore, Toronto, and Singapore. Recently, Lockhart had led the Utah Symphony at the 2002 Winter Olympic Games in Salt Lake City and in February 2002 had led the Boston Pops in the pregame show of Super Bowl XXXVI at the Louisiana Superdome in New Orleans.
4 Two other maestros served as music director at the symphony between the time that Abravanel left and Lockhart was hired, Varujan Kojian (1980–1983) and Joseph Silverstein (1983–1998).
5 Of note, the Boston Symphony Orchestra performs the same number of concerts a year but with a population at least three times the size of that found in Salt Lake City.
6 By comparison, in January 2002, the Utah Symphony endowment was $10 million.
4 Utah Symphony and Utah Opera: A Merger Proposal 404-116
The Proposed Merger7
Mergers between major opera companies and symphony orchestras in the United States had been rare. Although several organizations had considered such unions in the past, no significant merger had materialized (e.g., Los Angeles Philharmonic, Minnesota Opera). There were, however, a few exceptions.
In 1963, the Madison (Wisconsin) Symphony Orchestra and Chorus and the Madison Opera had united under an umbrella organization known as the Madison Civic Music Association. They shared an artistic director, an administrative staff, and the same development organization under the arrangement. In 1993, after 30 years together and in response to “long-standing concerns about how to run two different arts organizations under one banner,”8 the Madison Civic Music Association was dissolved and the symphony/chorus and the opera became two entities with separate budgets and governing boards. In an interview, Ann Stanke, executive director of Madison Opera, explained the decision to separate: “We have different sets of problems, different audiences, and different methods of doing things.”9
The president of the Madison Symphony Orchestra Board, Terry Haller, further explained the decision: “There was a tension within the family. Sometimes the Opera felt like the poor stepchild. Every time they wanted to do something, they had to get approval of their board and the parent board. This [separation] gives each organization a sharper identity and a sharper focus.”10
In 1985, the Chattanooga (Tennessee) Symphony and the Chattanooga Opera merged their operations to become the Chattanooga Symphony and Opera Association (CSOA). By merging the two arts organizations, management of the new CSOA was able to embark on a search for a world- class artistic director to lead the new organization. They succeeded in attracting Vakhtang Jordania, the recently defected former director of the Karkov Philharmonic in the Soviet Union. The attention and excitement that surrounded the search generated new enthusiasm for the symphony and the opera in Chattanooga, so much so that in one year, the organization was able to eliminate its $75,000 deficit. Unlike the situation in Madison, the CSOA remained intact in mid-2002.
In September 1992, Laurence Gilgore, Connecticut Grand Opera (CGO) artistic director, announced that the CGO would merge with the Stamford Chamber Orchestra to become the Connecticut Grand Opera and Orchestra (CGO&O). Plagued by financial uncertainty that had resulted in postponed performances, late paychecks, severe cost cutting, and rumors of bankruptcy, the CGO looked to the merger as a means of achieving financial stability. The new organization would offer a single series of fully staged operas, concert operas, and orchestral concerts between November and June instead of a separate series devoted to concerts and operas. Gilgore assumed the role of executive vice president, general director, and principal conductor for the merged organization. CGO&O, like CSOA, continued to operate as one entity in mid-2002.
7 This section draws on Will Crutchfield, “Chattanooga Revitalizes Symphony,” The New York Times, October 14, 1985; and Valerie Cruice, “Opera and Orchestra in Merger Con Brio,” The New York Times, September 20, 1992.
8 Susan Blocker, “Orchestra, Opera Plan to Separate Operations,” Wisconsin State Journal, November 16, 1993, p. 2D.
9 Ibid.
10 Susan Blocker, “Orchestra Board’s New President Sounds Off,” Wisconsin State Journal, August 28, 1994, p. 1F.
5 404-116 Utah Symphony and Utah Opera: A Merger Proposal
Salt Lake City: An Idea Is Born
Scott Parker, chairman of the board of the Utah Symphony, had spent his entire career working in the health-care industry overseeing numerous hospital mergers, all of which were intended to realize economies of scale and to drastically improve the quality of health care in various communities. Parker joined the Utah Symphony Board in the early 1990s and assumed the position of chairman at the beginning of the 1999–2000 season. Throughout the 2000–2001 season and into the 2001–2002 season, it became clear to Parker that the situation confronting the arts community in Salt Lake City and across the country had taken a turn for the worse. Parker commented on the situation the USO faced in the fall of 2001:
The crisis that was developing in the arts community was very sobering to me. I was in a place of responsibility with an organization that could find itself in significant difficulty. The orchestra was very close to being in a deficit situation, with no break in sight. Not only had the economy begun to falter, but also we had a contractual obligation to pay the salaries of the members of the orchestra. In addition, the capital campaign had not been as successful as we had hoped. We had always relied on the annual ZAP contribution, but there was an uncertainty about whether this support would continue. There were fewer total dollars for the arts and more organizations vying for them. Speed of action was essential. . . . I knew that there was a possibility that we could quickly find ourselves over the edge.
To complicate matters, the CEO of the symphony announced that he would be leaving at the end of February 2002. This was a difficult situation because it is not a simple matter to find a tested professional to lead a symphony organization.
So in the midst of pondering our dilemma an idea struck me. What about a merger with the opera? There undoubtedly were economies of scale to be realized, and both organizations were in the same business. In addition, Anne Ewers, the general director of Utah Opera, had a reputation as an outstanding artistic talent with a great business sense.
In mid-December 2001, Parker approached the other members of the symphony’s executive committee with the merger idea, explaining that not only would a merger help alleviate some of the financial pressure the symphony was experiencing but also would solve the problem of recruiting a quality CEO. The initial reaction of the executive committee was mixed. There was a concern that the two organizations were too different. Despite the concern, the executive committee eventually agreed that Parker should approach Ewers to see if she would be interested in becoming CEO of a combined opera and symphony.
Parker explained his next move:
I met with Ewers and asked her what she thought about becoming the CEO of a merged opera and symphony. I explained that it represented a challenge that no other leader in music had undertaken. She didn’t say yes, but she didn’t say no, either. She said she would like to think about the opportunity and get back to me.
Three weeks later, in mid-January 2002, Ewers called. She said she would be very interested.
In October of 2001, Parker had accepted a full-time voluntary position that would require him to move to New York for his church. His church assignment would begin in June 2002. In November 2001 he had approached Chase Peterson, a long-serving member of the Utah Symphony Board, and asked him if he would assume the chair of the symphony. Peterson agreed, and the two men decided that it would be advisable for Parker to step down in early 2002. It was during this leadership
6 Utah Symphony and Utah Opera: A Merger Proposal 404-116
transition that Ewers indicated to Parker that she believed that the merger merited a thorough evaluation.
Knowing that Ewers supported further consideration of a merger, Parker and Peterson together approached Lockhart, the symphony’s music director, about the idea. The executive committee had been adamant that under no circumstances did they want to compromise their relationship with Lockhart.
Lockhart explained his reaction to the idea:
My initial knee-jerk reaction when Parker first proposed the merger was negative. Change is a pariah in this business. People, including me, tend to cling to existing models. I eventually realized that my main reason for believing it [the merger] was a bad idea was because it was different.
I also realized at the time that if I had said no to the idea, the merger would not have gone forward. Parker made it abundantly clear to me that his and the executive committee’s first priority was to retain me. With that in mind, I agreed that we should explore the idea in earnest.
Although both Parker and Peterson were committed to the idea of the merger, they were not completely without their reservations. As Peterson explained: “There was no precedent for a merger between a major symphony and an opera working. The Utah Symphony was by far the leading orchestra in the eight Rocky Mountain states and among the 20 leading orchestras in the country. Utah Opera, on the other hand, was a good regional opera company, but it had not yet reached the status of the symphony.”
In early 2001, Parker and Peterson met with Ewers; William Bailey, chairman of the board at the opera; and Herb Livsey, the incoming chair and board member at the opera, to discuss the possibility of a merger.
Bailey described his initial response to the merger idea:
One concern expressed by opera trustees was the financial strength of the opera vis-à-vis the symphony. The opera had a reserve fund and was financially stable and because of the business model could be flexible and adjust the size of the opera or eliminate projects that had not reached their fund-raising goal. The symphony, on the other hand, was a 52-week orchestra that did not have that flexibility. Another concern was that even though the opera could become a tier-one arts organization through the merger, the opera would lose its identity.
In spite of these concerns, the five in attendance at the meeting agreed to approach their respective executive committees about the possible merger. In late January 2002 members of the symphony and opera executive committees agreed to consider the merger in earnest. An eight-person joint task force made up of three members of the symphony executive committee, three members of the opera executive committee, one person who sat on both executive committees, and Ewers was convened in February 2002 to study the idea and to report back to the respective executive committees once their investigation was complete. The members of the task force received strict instructions that under no circumstances were they to discuss the merger with anyone except for the executive committee members and Lockhart. Contingent upon a favorable recommendation from the task force, it was decided to publicly announce on March 14, 2002, that a merger of the symphony and the opera was under consideration and that the respective boards would vote on whether to merge the two organizations on May 15, 2002. This date would be later changed to July 8, 2002.
7 404-116 Utah Symphony and Utah Opera: A Merger Proposal
The Merger Is Made Public
On March 14, 2002, at 10 a.m. the Boards of Utah Opera and the Utah Symphony met separately to review the preliminary findings of the task force and to decide whether to proceed to seriously study the possibility of a merger. Both boards agreed that the potential for a merger should be further investigated.
At noon on the same day, staff and orchestra members at the symphony and staff members at the opera were informed that a merger between the two organizations was being explored. One member of the orchestra remarked, “Neither I nor any of the other members of the orchestra’s musicians or staff knew anything of the proposal until it was announced March 14.”
At 1:30 p.m., Parker, Bailey, Ewers, and Lockhart held a press conference to publicly announce the merger proposal to the Salt Lake City community. At the time, Parker explained that he and other proponents of the merger hoped that among other things the merger would “increase the new entity’s ability to attract world-class artists, maximize efficiency of administration and planning, give donors a greater return on their investment and create new educational opportunities.”11
According to Ewers, the initial response to the news was positive. But, over the ensuing weeks and months, that changed, and it became clear to Ewers that she would need to consider each of her constituents carefully before deciding how best to respond to them and how best to proceed with the integration should the respective boards decide in favor of the merger.
A few weeks following the announcement, the joint task force engaged an external consulting firm, Joan Madison Collaborative, as well as Ernst & Young, to research and to produce an independent review of the potential merger. Their findings would be presented to the respective boards in time for the members to review them before voting on the merger on July 8, 2002.
Different Individuals and Groups React to the Merger
Lockhart Responds
Although he had agreed that the merger idea should be given some consideration, some suspected that Lockhart was cautiously optimistic about the possible marriage. At the press conference on March 14, he had been quoted as saying, “Orchestras around the nation are hanging on by their fingernails. Perhaps the model is broken and needs re-evaluation. The only negative I perceive about this idea is that this type of merger hasn’t been done in America before.”12
Lockhart wanted to minimize any disruption that the merger might cause both to himself and to the artists he represented. As he explained:
From the public's perspective, I am the head of the symphony, but the reality is that this is a two-headed organization. One person provides the artistic vision, with sensitivity to the real world, and the other person seeks, secures, and manages the financial resources, with sensitivity to the purpose and mission of the organization.
11 Celia R. Baker, “Utah Symphony and Opera Study Merger of Operations; Symphony, Opera Study Consolidation,” Salt Lake Tribune, March 15, 2002, p. A1.
12 Scott Iwasaki, “Symphony, Opera to Merge?” Deseret News, March 15, 2002, p. B1.
8 Utah Symphony and Utah Opera: A Merger Proposal 404-116
When Parker first mentioned Ewers to me, I knew little about her except that she was the artistic head of the number two arts organization in Utah. Parker explained that he felt there were great potential synergies to be realized by merging the symphony and opera and that he and several other board members believed that she was capable and competent.
Ewers and I met for several hours in early March. My impression of the meeting was that Ewers was a good listener and that she was extremely energetic.
In June 2002 Lockhart received a copy of a merger viability report. Stapled to the back of the report was a copy of the organizational chart. Lockhart remembered feeling sandbagged at the time, since no one had consulted him prior to drawing it up. He explained his reaction to the organizational representation:
The organization chart showed me reporting to Ewers. My immediate reaction was—you are asking me to have less control than I had in the previous organization, and you are asking me to report to someone with whom I have no previous or practical working experience. On some level I understood what they were looking for, but at the same time my first responsibility was to protect the interests of the symphony. I did not want to lose control.
The musicians represented the largest internal interest group [the audience is the largest interest group] in the proposed merger. They speak, and are contracted, as a collective unit. Although I do not negotiate their contract, they look to me to protect their interests. My success in this position depends on maintaining a trust relationship with the orchestra. If this trust is broken, so is my effectiveness. An orchestra has the collective power to render a conductor ineffective if they so choose. Of utmost importance to the orchestra and to me was that the status of the orchestra be maintained and that neither the length of the season nor the number of players be reduced.
Some players were worried that, since the opera general director was being proposed as CEO of the merged organization, the orchestra would become an appendage of the opera, as is the case in a situation like the Vienna State Opera/Vienna Philharmonic model. Since the symphony was four times larger as an organization than the opera, I didn't think for a moment that this was a possibility but was adamant with the musicians that I would never allow such a thing to happen.
The Musicians Respond
The Utah Symphony employed 83 symphonic players, who received annual salaries of between $50,000 and $85,000. These artists were unionized, which lent stability to the organization but had led to what some in the community described as “wages that as a consequence of the union may have been too high given the size and status of the Utah Symphony.” Orchestra salaries, related benefits, and payroll taxes represented approximately 60% of total program expenses for the symphony. These were expected to increase significantly in the coming two years as per the collective bargaining agreement with the orchestra’s union. Specifically, salaries were to increase by 12.9% from 2002 to 2003 and by 6.8% from 2003 to 2004.
The relationship between orchestra musicians and the Utah Symphony Board and management had not always been amicable. In the past, the board had reopened the collective bargaining agreement and altered it such that the musicians were worse off in terms of their salaries. Some of the musicians openly accused the symphony board of having entered into merger discussions as an excuse and ploy to reopen and renegotiate the terms of the current collective agreement.
9 404-116 Utah Symphony and Utah Opera: A Merger Proposal
The musicians, upon learning about the proposed merger, had convened an ad hoc committee to represent their concerns to the board. Although they recognized that the Boards of Utah Opera and the Utah Symphony would ultimately decide whether the merger would proceed, they nonetheless acknowledged that the musicians would be critical to the future success of the symphony and to success of the merger. In late June 2002, just before the board was to vote on the merger, Christine Osborne, chairwoman of the musicians’ ad hoc committee, presented a set of guiding principles that the musicians’ group believed were essential for the future of the symphony:
An organizational structure that protected and enhanced artistic excellence
Effective fund-raising
A budget strategy that improved the position of the Utah Symphony as a major 52-week- season orchestra
A strong collective bargaining agreement13
The Community Responds14
Shortly after the press conference, in March 2002, the task force hired an ombudsperson to survey members of the symphony and opera as well as the larger arts community to understand how the idea of the merger was perceived beyond the members of the two boards. Word of the project quickly became public, and the consultant was soon inundated with calls from irate symphony and opera patrons fundamentally opposed to the idea of a merger. On May 1, 2002, the ombudsperson completed his report and presented copies simultaneously to the local media and members of the task force. The report summarized many concerns.
One community member, a prominent Utah businessperson who contacted the consultant, disputed the suggestion that the merger would save costs. As the community member explained:
The two organizations are radically dissimilar in scale and action. In budget, the symphony predominates, and in fixed assets the opera predominates. More important, the opera has no performing artists under continuing contract, while the symphony has an entire orchestra. The components of the opera and symphony seasons are so dissimilar it is hard to imagine any economies of scale, whether in purchasing, staff, or administration . . . more important, the organizational cultures of the opera and the symphony are very different.
Other members of the community feared that by merging the two organizations each would lose its individual identity and traditions. One opera supporter explained:
The two arts are quite different, with the opera being an often risqué and bawdy production and the symphony being a more staid performance art. I’m worried about the symphony losing its identity. All it took in Minnesota was a name change to the Minneapolis Symphony and morale dropped. I’m worried that the symphony will lose its status if it merges with the opera.
13 Scott Iwasaki, “Opera Symphony merger: Sweet music?” Deseret Morning News, July 7, 2002.
14 This section draws on the ombudsman report, “Proposed Mergers of the Utah Opera and Utah Symphony.” It was presented to the Utah Opera Board and Utah Symphony Board May 1, 2002.
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Some members of the community questioned Ewers’s ability to manage a symphony. As one symphony supporter observed:
Not one person on the merger task force has experience in orchestra management. Pro formas and organizational charts are being created by people who do not have the first idea about what it takes to run a symphony orchestra. . . . I fear that projections are not rooted in reality. I also believe that proponents of the merger are so eager to see it work that they are not being thorough and realistic when they draft proposals for new programs that are extremely problematic.
Another skeptic averred:
The job is too great—artistically, financially, and managerially. I am worried that Ewers might assume the top post. Although she’s been great at fund-raising and has been a devoted and hard-working manager of the opera, we are concerned about her people management skills and what many who work with her describe as an autocratic style in dealing with staff. At times she makes unilateral decisions and fails to consult with those who are expected to implement these decisions.
Finally, there were some members of the community upset about the process that had been followed:
It appears quite obvious to me that the conclusion to merge was arrived at, and we are now in the process of trying to come up with facts and assumptions to support a predetermined conclusion. This backward process has left the proponents of the merger in the rather embarrassing position of not having any intelligible rationale to support their conclusion to merge. I have heard the thought expressed that no one has come up with a reason not to merge, therefore let’s proceed. There is no forum for those of us who have thoughts on why the merger is a bad idea. I fear that many of the suppositions being made to support this decision will not receive proper scrutiny. The makeup of the task force and the limited time constraints cast a cloud of objectivity over this entire process.
Two weeks earlier, in mid-April 2002, Carolyn Abravanel, the widow of Maurice Abravanel, publicly announced that she was opposed to the merger in the form of an open letter to the community. In an interview conducted shortly after the letter appeared, Ms. Abravanel was quoted as saying: “Maurice would never take second billing to anyone. He would be hammering the inside of his casket [about the merger].”15
The opera was not without its “inside” critics of the proposed merger. Leslie Peterson, the daughter of opera founder Glade Peterson, resigned from her position as director of operations at Utah Opera, explaining: “I do have concerns about the merger, and I disagree with the direction management is taking.”
In early July 2003 Dorothy Stowe, a retired dance and music critic, wrote a piece in the Deseret News that captured the sentiments of a large majority of the members of the Salt Lake City arts community: “I don’t care to be told how, from a business standpoint, the opera and symphony might be better off with this merger. They are not mere businesses. They are [objects of affection], community jewels, temperamental [entities] with which we must exercise extreme patience.”16
15 Celia R. Baker, “Abravanel Widow Blasts Symphony-Opera Merger,” Salt Lake Tribune, April 14, 2002, p. D3.
16 Dorothy Stowe, “Merger Spells Failure,” Deseret News, July 3, 2002.
11 404-116 Utah Symphony and Utah Opera: A Merger Proposal
The Final Act
Over the six months leading up to the vote, Ewers had come to realize that the process of merging would be far from easy. To begin, she would need to bring two different cultures together. She characterized the difference in the two organizations:
These are really two different cultures that are products of their respective environments. The symphony environment is staid, and as a result symphonies tend to be slow to change and not used to having things happen quickly. The opera, in most communities, is second to the symphony, and in order to compete must always be looking for new ways of fund-raising, marketing, reaching out to the community, and communicating with the public—this has led opera companies to be, relatively speaking, much quicker to adapt to change.
In addition, reports in the local media about the community reaction to the proposed merger were creating barriers. Ewers understood that she needed the support of the local community if the merger was going to succeed. She would need to figure out how to convert community attitudes.
Finally, there was the issue of how the organization should be structured. Most symphonies were organized such that both the CEO and the music director reported directly to the board.17 Ewers wondered whether this was the most efficient structure given the changes that she would need to make. Could she afford to have someone second-guessing her every move? Yet, she understood that this was a sensitive issue. As Chase Peterson had explained to her:
If Keith [Lockhart] were to report to you, there is a question about whether this would represent an affront to the dignity of the conductor. Would this somehow compromise his pre- eminence? When Lockhart joined the Utah Symphony in 1998 the arts community in the U.S. perceived him as a Pops star, but he wanted to be seen as a serious conductor. The Utah Symphony was his means to step onto the big stage of symphonic work.
Remember, both Keith and you can exercise a veto if the final arrangement doesn’t seem to be right to either of you. That said, I believe that we have two of the most qualified people to lead this merger. Think back to 1776 when we had Washington, Jefferson, Adams, Madison, and Monroe intact. The time for revolution was right, and the country needed them to get it all started. Then once established, lesser folks like Polk, Harrison, Buchanan could keep it going.
After responding excitedly to the costume designer’s fabric samples, Ewers continued to ponder the events of the past six months, and her mind returned to thoughts of how exactly she would integrate the two organizations if the outcome of the vote were positive. What would she do first? Who would she talk to first? What would she say? How should she choreograph what could arguably become her magnum opus?
17 The national organizations for symphony and opera, the American Symphony Orchestra League and OPERA America, both endorsed the unprecedented reporting arrangement in light of the fact that Lockhart, like many other music directors, conducted more than one orchestra.
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Exhibit 1 Utah Opera Organizational Structure
Bill Bailey Chairman of the Board
Leslie Peterson Anne Ewers Dir. of General Director Operations
Source: Utah Opera records.
404-116 -14-
Exhibit 2 Utah Symphony Organizational Structure
Scott Parker Chairman of the Board
Keith Lockhart Music Director
Source: Utah Symphony records.
Utah Symphony and Utah Opera: A Merger Proposal 404-116
Exhibit 3 Operating Income Statements FY2000–20001 (historical) and FY2001–20002 (projected)
FY 2000–2001 (historical) FY 2001–2002 (projected) Symphony Opera Symphony Opera
Revenue and Contribution Performance revenues $ 3,836,513 $1,028,177 $ 4,516,308 $ 733,900 Government grants 3,124,999 977,322 2,904,312 958,882 Contributionsa 4,460,268 2,189,987 5,080,040 2,843,941 Investment incomeb 817,505 177,730 910,013 183,327 Guild income 155,434 40,000 110,001 30,000 Otherc 3,829 327,900 243,000 365,999 TOTAL 12,398,548 4,741,206 13,763,674 5,116,049
Expenses Programd 10,447,382 3,017,069 11,851,541 3,337,968 Management and general 670,832 583,358 722,110 612,705 Fund-raisinge 1,164,026 210,031 1,187,980 217,702 Otherf -- 348,339 -- 474,672 TOTAL 12,282,240 4,158,797 13,761,631 4,643,047
SURPLUS (deficit) $ 116,308 $ 582,409 $ 2,042 $ 473,002
Source: Utah Symphony and Utah Opera.
a This item represents contributions from individuals, corporations, and foundations.
b The symphony drew approximately 5% from its endowment fund annually. For the opera, investment income represented interest and dividends from operating accounts and the endowment. Historically, the opera had not used interest or dividends from the endowment but rather had reinvested these monies back into the endowment.
c For the symphony, this amount related to box office fees and rentals. For the opera this item included revenue generated principally from the rental of sets, props, costumes, wigs, and supertitles and could vary significantly from year to year.
d For the symphony this item included orchestra salaries, related benefits, and payroll taxes. For the opera these expenses related to production costs and varied according to the performance schedule.
e This item represented salaries and benefits for development staff. With respect to the symphony it also included an approximately $100,000 bad-debt expense which represented the annual charge due to pledges that were never actually paid.
f This item relates to expenses incurred by the opera related to its rental of sets, props, costumes, and wigs to other opera companies.
15 404-116 Utah Symphony and Utah Opera: A Merger Proposal
Exhibit 4 Group I and Group II Orchestras in the U.S. and Canada (listed alphabetically)
Group I Group II (expense budgets (expense budgets between greater than $13.5 million) $5.2 million and $13.5 million)
Atlanta Symphony Orchestra Alabama Symphony Orchestra Baltimore Symphony Orchestra Buffalo Philharmonic Orchestra Boston Symphony Orchestra Calgary Philharmonic Orchestra Chicago Symphony Orchestra Charlotte Symphony Cincinnati Symphony Orchestra Colorado Symphony Orchestra The Cleveland Orchestra Florida Orchestra Dallas Symphony Orchestra Florida Philharmonic Orchestra Detroit Symphony Orchestra Fort Worth Symphony Orchestra Houston Symphony Grand Rapids Symphony Indianapolis Symphony Orchestra Honolulu Symphony Orchestra Los Angeles Philharmonic Jacksonville Symphony Orchestra Milwaukee Symphony Orchestra Kansas City Symphony Minnesota Orchestra The Louisville Orchestra National Arts Centre Orchestra The Nashville Symphony National Symphony Orchestra The Naples Philharmonic New Jersey Symphony Orchestra New World Symphony New York Philharmonic North Carolina Symphony Oregon Symphony Orchestre Symphonique de Montreal The Philadelphia Orchestra Orpheus Chamber Orchestra Pittsburgh Symphony Pacific Symphony Saint Louis Symphony Orchestra The Phoenix Symphony The Saint Paul Chamber Orchestra Rochester Philharmonic Orchestra San Francisco Symphony San Antonio Symphony Seattle Symphony San Diego Symphony Toronto Symphony Orchestra Syracuse Symphony Orchestra The Toledo Symphony Utah Symphony
Source: Interview with American Symphony Orchestra League.
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