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Highlights from The 2006 Annual Field Report
Patricia Egan and Nancy Sasser
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Opera America Magazine12/1/2007

Editor's Note:
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If you've looked at the financial statements and box office reports of your opera company over the last few years, you've probably seen a mix of good news and bad news, as the results of OPERA America's annual Professional Opera Survey (POS) confirm.

First, the good news. You've had a surge in contributed revenue in recent years, with individual giving leading the way. If you are one of the growing number of companies with endowment funds, your investment income rebounded as the capital markets recovered from the 2001 low point.

But if your company is in the United States, you may also have noticed declines in attendance for your main season productions. You're not alone — more than half of the U.S. companies that completed the POS each year since 2002 reported a downturn in audience, despite investing more in marketing efforts. You may have been one of the companies that responded by reducing the number of productions and performances, and by raising ticket prices, which kept total box office revenue from declining, though growth was sluggish over the five years.

While the strong contributed revenue and investment income growth helped many U.S. companies balance their budgets in 2006, just over half posted deficits.

But if your home is north of the border (with Canada, that is), you probably recorded consistent increases in box office revenue, unlike your U.S. counterparts. You produced more operas with more performances and enjoyed higher attendance in 2006 than 2002, though levels were below their peaks the two prior years. And you are likely to have shown a surplus for the last four years, unlike the U.S., where companies reported average net income only in 2005.

In both the U.S. and Canada, the balance sheet components of total net assets, working capital and investments all strengthened over the four-year period.

These are a few of the highlights in the financial and performance activity from the Annual Field Report (AFR), which analyzes the 2006 POS data in detail. In this article, we'll summarize the major findings for the U.S. and Canadian Constant Sample Groups (CSG), which include the companies that submitted the POS each year since 2002.

As you read through the findings, keep in mind two external factors that are reflected in the numbers. The first is the recovery in the economic markets since 2001, which not only boosted investment gains for those with endowments, but also made it possible for donors to increase their giving, benefitting companies of all sizes. The second is the change in audience participation that opera companies share with many of their performing arts counterparts. Buying habits for both subscriptions and single tickets have changed, and companies are struggling to attract and retain new audiences. This translates to more dollars spent on marketing efforts, and finer tweaking of pricing structures to keep the ticket revenues up.

United States
We begin with the U.S. CSG, which included 56 companies with budgets from $183,000 to $60.1 million. The Metropolitan Opera, with a 2006 budget of $222 million, is not included in the U.S. CSG as its numbers would overwhelm the survey data. Even excluding the Met, the larger companies have a marked effect on the data. While the average company had expenses of $8.6 million, the median company's expenses were only $3.6 million; i.e., half the companies had budgets less than $3.6 million and the other half were greater than that amount. The large variance between the average and the median means that the larger companies at times skew the numbers.

In 2006, companies produced an average of 21 performances of 3.8 operas and had attendance of 39,000 for their main season offerings. This is a reduction in activity and attendance, both since 2005 and since 2002, when 41,600 people attended 23.3 performances of 4 operas. The positive news is that companies performed to 86% paid capacity, up from 73% in 2002, and subscription renewals of 81% were at their highest level of the five years.

Ticket prices have increased steadily since 2002. Prices went up the most for the best seats and nights where there may be less price resistance, while increases in the lowest prices were minimal, as companies sought to maintain an affordable ticket option. The higher ticket prices counteracted the effect of declining audiences in the box office results, though total ticket revenue rose only 5% since 2002, well below the four-year inflation rate of 12.1% in the U.S. Marketing productivity is down, as companies spent a greater portion of their budgets to bring in audiences; each marketing dollar generated $3.26 in ticket sales, compared to $3.56 four years ago.

In contrast to sluggish box office growth, average investment income shot up 990% since 2002, from $45,000 to $489,000. As noted earlier, this five-year period tracks from the low point in the recent financial markets through their recovery, and boosted companies' average investments by 40% to $9.8 million. Investment income provided just under 6% of total revenue.

Total earned revenue from box office, investments and other earned sources increased 1% in 2006, while total contributions declined by 1%; the net effect being flat revenue for the year. A look back to 2002 reveals that both earned and contributed revenue outpaced inflation for the four-year period, however.

The U.S. CSG was particularly successful in soliciting individual support, with a 25% increase in giving since 2002. Coupled with 22% increases in foundation and other private support, private contributions eclipsed box office as the primary source of revenue for the fourth year in a row. Only corporate giving declined during this period.

Public support showed fluctuations year-to-year in city and state funding while federal funding was relatively stable. Only county funding increased significantly over the four-year period, and surpassed state funding as the largest government source. While these were general trends, city, county and state funding varies significantly by location, more so than by budget size.

Opera companies were more productive with their fundraising activities, raising more dollars per dollar spent in 2006 than in 2005 when productivity slipped after increasing steadily.

Another productivity measure that is examined in the AFR is program coverage, which tracks the portion of artistic and production costs covered by box office revenue. Program coverage was 57% in 2006, but has fallen since 2002, when it was just under 60%. This is another reflection of the increasing importance of contributions in supporting the work on stage, as ticket sales have lagged.

On the spending side, expenses were relatively flat from 2002 through 2004, then jumped 8% in 2005, and were held to a modest 1% increase in 2006, for an overall expansion that matched the 12% inflation of the four-year period.

Artistic and production spending posted the smallest increases of any expense area over the four-year period, and was the only area that did not keep pace with inflation since 2002. But with the reduction in performance activity, per production expenditures increased 15% from 2002 to 2006 while per performance spending jumped 21%.

Opera companies spent 62.4% of their budgets on artistic and production expenses in 2006, compared to 64% in 2002. The revenue-generating activities of marketing and development garnered a greater portion of the operating budget over this period, as did education activities. Though education is only 2% of the budget, the increase reflects companies' investment in future audiences.

While spending among the departments has shifted over the years, total personnel expenditures have fluctuated little, with 63-64% of the budget consistently going towards artists
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