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THE SCOOP | Canadian Opera Company announces worst deficit in recent history

By Michael Vincent on October 29, 2014

COC-in trouble

The Canadian Opera Company covers deficit with cash transfer from Foundation for fourth year in a row.

You have to give it to the Canadian Opera Company; they put on a brave face.

The Canadian Opera Company released its 2014 annual report on Monday afternoon, and there is very little to be optimistic about.

What the COC described as “impressive endowment growth, growing attendance and subscription figures,” is really negligible growth with major financial losses. After four years of declines, they continue to deteriorate with some of the worst numbers they have ever reported.

The dirty little secret of the COC, is that for the past four years, they have been dipping into their foundation funds to offset yearly deficits. In 2012 they offset losses with a million-dollar injection from the foundation. In 2013, they did the same thing, and transferred a total of 1.89 million dollars to cover the in-year deficit.

Unfortunately 2014 was so bad, even an unprecedented 3 million dollar foundation transfer (over three times what they transferred in each of the previous two years) couldn’t cover their losses.

The company posted an expected revenue shortfall of $883,000. Without any foundation money, in-year operating deficit would be just under $4M.

They tempered the news in the press release by stating they expected it. They blamed a bad economy and rising production costs.

“From a business point of view… our economic model has challenges,” said COC President Tony Arrell in the press release. “…opera costs much more to present than can possibly be recovered from ticket sales, even at the high prices we are forced to charge. In fact, ticket sales cover less than half of the costs. Government support helps significantly, but represents a declining proportion of our budget. The balance is provided by an annual contribution from the Canadian Opera Foundation, and, most significantly, by our extensive base of supporters, who pay what they can through annual donors programs.”

Regardless of the nature of a shortfall, it is a significant concern for a company, and is usually corrected promptly through short-term loans or equity injections (hence the foundation). Failing that, they usually bring in a new President and-or General Director.

One positive is that the COC has a significant cushion of $28.5M (after applying this year’s $883,000 loss) from past seasons. However, if the last three years are any indication, and the losses exponential, the cushion will likely disappear within a decade.

COC yearly side-by-side analysis:

Area

2013

2014

Result

Main stage productions77No change
Total number of performances6158Down
Average Attendance90%94%Up
Total tickets114,133111,421Down
Subscription tickets73,60668,682Down
Tickets sold under age 3092789159Down
Total Revenue:$39,8 mil$38,6 milDown
Total ticket revenue$9.9 mil$9.7 milDown
Single ticket revenue$3 mil$3.2 milUp
Subscription ticket revenue$6.9 mil$6.5 milDown
Total Fundraising revenue$10.83 mil$12.6 milUp
Contributions from Opera Fund4%7%Up
Assets$155.6 mil$152.5milDown

coc-operating_revenues

Other good news are that investment income is up nearly 2.5 times. Grants are up 150%. Average audience capacity is up by 4%.

This year they strove to make opera more affordable by restructuring their ticketing prices, leaving to an increase in ticket sales by first time subscribers.

Over 40 thousand people took part in their education outreach programs.

15 thousand people attended their free noon-hour concerts in in the Richard Bradshaw Amphitheatre.

The COC ensemble studio continues to do good work, with over 180 students graduating from the program since 1980, with a career success rate of over 90%.

The COC received a total of 16 Dora Mavor Moore Award nominations during the 2013-14 season, winning four awards.

These are all very good things but the financial issues with the COC are formidable.

Blaming the economic model, the question becomes what are they going to do to fix it?

Neef, stated that for this season, ticket marketing, pricing strategies, and a reduction from seven to six operas in a season (with the same number of performances) will improve the financial status of the COC this season.

However, when one looks at the numbers more closely, the problem seems to be declining attendance, and out of control costs. Fundraising is good, but is a model based on fundraising rather than a successful box office sustainable?

As any businessperson will tell you, you need to control costs to achieve goals. And without growth, there is no way to control costs other than to slash and burn. Let’s hope they get this under-control soon.

Michael Vincent
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Michael Vincent

Michael Vincent is the Editor-in-chief Ludwig Van and CEO of Museland Media. He publishes regularly and writes occasionally. He has worked as a senior editor for over fifteen years and is a former freelance classical music critic for the Toronto Star. Michael holds a Doctorate in Music from the University of Toronto.
Michael Vincent
Follow me
Michael Vincent
Follow me

Michael Vincent

Michael Vincent is the Editor-in-chief Ludwig Van and CEO of Museland Media. He publishes regularly and writes occasionally. He has worked as a senior editor for over fifteen years and is a former freelance classical music critic for the Toronto Star. Michael holds a Doctorate in Music from the University of Toronto.
Michael Vincent
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