Late yesterday, the Toronto Symphony Orchestra announced a bombshell 2015-16 Annual Report showing an operating surplus to the tune of $831,540, and nearly $5M in debt reduction, taking it from $11.85M to $6.86M.
It’s an impressive result, considering the financial wake that former President and CEO Jeff Melanson left when he abruptly resigned last March.
In a report from the Globe and Mail last June, the TSO were looking at a deficit between $4–$6M for the current financial year, which ended on June 30. These costs were largely due to new programs initiatives and growing administration costs led by Melanson.
“There were commitments made by Melanson that were more expensive than anticipated,” said an anonymous TSO board member to the Globe. They also said the deficit was also due to an as yet undisclosed large severance paid to Melanson, but insisted the TSO had a clear plan to them back on track.
The solution appears in black and white in the 2015/16 annual report.
The foundation injected $4.9M into the orchestra’s operating budget, saving it from an otherwise devastating year. This follows two years (2014, 2015) of modest surpluses (also helped by foundation draws). The result of the creative shuffling of funds was an $830K surplus.
The rest of the $5M reduction in accumulated debt comes from the historical musical instrument collection, which the orchestra valued at $4.2M and is unlikely to depreciate, due to its historical classification.
Although the orchestra’s financial position really isn’t much better than it was a year ago, there are some positive outcomes to the organization’s efforts. First and foremost: individual donor revenue.
The TSO As Charity
Former Interim President & CEO, Sonia Baxendale confirmed a fundamental shift in focus for the TSO towards community engagement and donor relations. Individual contributions to the TSO increased by more than 20% over the previous season, and the overall number of donors grew by 15%.
Historically, cultural institutions have depended on public-private partnership, with tickets sales, membership and other forms of revenue making up the lion’s share of operating budgets. Private donors were used to fill in the gaps.
The TSO has spent the last few years shifting this paradigm, with private donors becoming the central focus of their funding efforts, and the results have underscored this.
The TSO (and their growing marketing department), spend more to sell single and group tickets — at a time when it is harder to fill seats.
The adaptation is a realization that the key is on branding the orchestra as a charity akin to brick and mortar institutions like The Royal Ontario Museum (ROM) which have long since realized the key to financial stability is fundraising, enhanced community outreach, and a willingness to allow more donor input on the programming.
The strategy was confirmed in a recent report by the League of American Orchestras (LAO), which showed most classical orchestras across the US receive the majority of their revenues from donations. In 2014, orchestras received an average of 43% from contributions, and 40% from ticket sales and special events.
While these numbers represent orchestras in the US, Canadian orchestras such as the Vancouver Symphony, Orchestre Symphonique de Montréal, and the National Arts Centre Orchestra have all shown similar numbers in their recent annual reports.
The TSO’s books showed fundraising hitting an all-time high at 37.7%. Tickets contributed 27.5%, Government grants at 17.3%, Foundation contributions at 15.5% and an additional 4.9% from other sources such as parking and concession sales.
Here’s hoping that many of the line items go back to demonstrating restraint and decreases in costs, and also the TSO showing a three-year comparison to its books in 2017, in an effort to demonstrate the outlier year that 2016 represents on many facets.
The next few years will be pivotal and historical ones for the TSO. With upcoming projected changes in all levels of leadership (administrative and artistic), strategy, creativity, engagement and attractiveness to the audience will all be very important factors to the orchestra’s long-term sustainability. Thankfully it stands on strong financial ground to adapt to all of the change coming its way.