After some hard times during the recession, CSO is now putting on a strong financial performance
Smart investment decisions
Kevin Eigelbach | WCPO contributor
7:00 AM, Jul 3, 2018
CINCINNATI -- Question: Which group of musicians has the most money: The New York Philharmonic, the nation's premiere orchestra, or the Cincinnati Symphony Orchestra?
Answer: The New York Philharmonic, but not by much.
According to the most recent financial report it filed with the Internal Revenue Service, the New York Philharmonic had $213 million in net assets. That's only about $12 million more than the Cincinnati Symphony reported having.
If you compare the amount of net assets each orchestra has by total population of its metro area, you find that the CSO had $93 per person, versus only $10.50 for the Philharmonic.
That's one reason why the Queen City's orchestra, along with its subsidiary, Music and Events Management Inc., or MEMI, can do things like bid to build and run a new performance venue at The Banks, beating the nation's largest concert promoter in the process.
Assuming the parties can agree on a development agreement, the new venue will be funded through commitments from local philanthropists and from orchestra/MEMI reserves, said orchestra spokesman Christopher Pinelo. The orchestra hopes to have it open by November 2019, he added.
MEMI earned nearly $5 million for the orchestra
MEMI provides the CSO with a revenue stream that many other orchestras, if not most, don't have.
During the 2016-17 orchestra season, MEMI earned 3.6 million in revenue over expenses, not counting the $4.8 million it contributed back to the orchestra. It also gave the orchestra about $2 million in each of the two previous seasons.
The nonprofit earns money by producing events at Riverbend Music Center, which the CSO has owned since its creation in 1984. Since 2011, MEMI has also managed the Taft Theater in downtown Cincinnati through a lease arrangement with the owners, Pinelo said.
That deal seems to have worked out well for all involved. The orchestra raised about $3.5 million to renovate the Taft in 2010, and now it has about three times the amount of bookings as it did before MEMI took over, Pinelo said.
The Taft also provided the CSO a place to perform during the 2016-17 season, when Music Hall in Over-the-Rhine was closed for a $143 million renovation. That money was raised by a committee formed by some philanthropically minded civic leaders.
The CSO doesn't own Music Hall, but pays rent for performances and rehearsals there, Pinelo said.
Payroll of $20.2 million
The orchestra's biggest expense is salaries and other benefits, which amounted to $20.2 million, or 60 percent of total expenses in the 2016-17 concert season. A five-year agreement with its performers' union signed in 2015 made the CSO one of the top 10 highest-paid orchestras in the United States.
The orchestra's money comes from three sources: grants/contributions, performance revenue and investment income.
During the 2016-17 season, the orchestra got the most money from grants or contributions, which amounted to $20.9 million, or half of total revenue. This includes the $4.8 million from MEMI.
Revenue from concerts amounted to $8.9 million, or about one-quarter of total revenue.
Aside from tickets to its own concerts and its performances as the Cincinnati Pops Orchestra, the CSO also gets paid when it performs for the Cincinnati Ballet, the Cincinnati May Festival, the Cincinnati Opera and the Cincinnati World Piano Competition.
In 2015, the orchestra reported that over the previous six seasons, average attendance for CSO concerts had increased by 28 percent and by 21 percent for the Pops performances.
Management expected a double-digit-percentage decrease in subscriptions during the 2016-17 season, when the orchestra performed at the Taft, Pinelo said. That's why it brought in some of classical music's heavy hitters to perform that season -- pianist Lang Lang, violinist Itzhak Perlman and cellist Yo-Yo Ma.
He didn't yet have numbers for the 2017-18 season, Pinelo said, but there were a number of sold-out performances.
According to a survey by the New York City-based League of American Orchestras, audience attendance for its member orchestras as a whole declined by 10.5 percent between 2010 and 2014. This happened in spite of more orchestras giving away free tickets or discounting tickets.
Ticket prices have gone up for CSO concerts, Pinelo said, in part because the renovation of Music Hall left the auditorium with fewer, but wider, seats. He noted that the orchestra's not distributing a record number of free tickets, and the amount isn't increasing, either.
According to the League, investments play a critical role in keeping orchestras in the black. Investment income made up 23 percent of the CSO's total revenue during the 2016-17 season, but that was a very unusual year. During the previous season, it amounted to only 3 percent.
Endowment enables orchestra growth
In 2015, the orchestra raised $25 million to boost its endowment, which now stands at $168 million, Pinelo said. Using that money, over a four-year period, the orchestra planned to boost its roster of musicians to 90. It had fallen as low as 76 during the Great Recession.
The orchestra also credited the new money with enabling it to reduce its annual draw on the endowment from 5 percent to 4.5 percent.
That was important, because in previous years, the orchestra had drawn nearly 10 percent per year, which caused the endowment to fall to $56.2 million in 2009. The orchestra was using a line of credit to meet its payroll.
The orchestra stemmed the flow of red ink by reducing operating costs by $2.8 million, with $1.8 million coming from an 11 percent wage cut from the musicians.
The late Louise Nippert, former co-owner of the Cincinnati Reds, helped out in December 2009 by donating $85 million to create a fund to support local musical arts.
Decisions made then have helped the orchestra enjoy the good financial position it now has, Pinelo said.