With a vaccine rollout underway, when fall of 2021 arrives orchestras will likely have an opportunity we won’t then have had for a year and a half: the opportunity to have a full live performance season. And while there is good reason to believe that there will be a spike in audience demand at first (get me out of my house, please!), after that initial surge in socially distanced, mask-wearing attendance, there is not good reason to believe the wave will continue without a change to the business model. Pre-pandemic, orchestra attendance was declining at an average rate of 2.8% a year (Source: League of American Orchestras, Oliver Wyman), so we are foolish to think that if we don’t make adjustments, that trend would somehow…just reverse itself.
The business model for orchestras before coronavirus looked something like this: one primary product offering (live, in-person performances), a need for customers to possess a baseline knowledge of the product and the accompanying behavioral norms expected (what a concerto is, when to applaud), prices of that product rising at more than double the rate of the Consumer Price Index over the last 10 years (Source: League of American Orchestras, Bureau of Labor Statistics), and an increasing need for donations to meet rising costs and revenue goals with more and more reliance on major donors to provide that support. For a long time, that model generally worked, but leading up to 2020 it was facing a breaking point with expenses continuing to rise, audiences becoming less loyal, and revenue growth unable to keep pace.
Back in December I started thinking about this more seriously as news broke of vaccine approval. I started making a framework to account for the new normal when concert halls open later this year.
Jim Collins was the first person to use the term “flywheel” in a business context. He coined it in his 2001 best seller Good to Great. In the 20 years since, it’s been adopted by businesses across all industries, all sizes, for profit and not-for-profit. “In building a great company, there is no single defining action, no grand program,” he writes. It’s about “pushing a giant, heavy flywheel…building momentum.” Executing a flywheel strategy is work, it’s a heavy lift, and it’s multi-faceted.
All the things I’ve previously championed are only part of the new-normal solution. For one, streaming needs to be incorporated in any new model, and expanding our revenue-generating potential beyond one sole product needs to be a part of the flywheel, too. (And I don’t mean do pops or movie concerts in addition to “traditional” classical concerts and call them separate products; that kind of siloed programming is a disservice to our cause.) This flywheel model is about keeping our patrons connected so they spend more time and money with us, taking the next steps in addressing systemic discrimination in our organizations, creating new revenue opportunities, and using our newly developed competencies in streaming and virtual offerings to drive loyalty. The following outlines the five tenets of a flywheel for orchestras.
Part 1: Experience
I’ve talked and written about the patron experience a lot before, so I won’t belabor it much more here. In short, organizations need to center the experience of newcomers of all backgrounds on our website, in our marketing, and in the concert hall. Why does it matter so much to focus specifically on newcomers? Because almost all of them — 9 out of 10 first time attendees — don’t ever come back ever again and go straight to becoming inactive accounts.
Before they’re dead in the water to us though, the first thing a newcomer does is visit our website. It’s the first thing anyone does when they want to know more about anything: open browser, google it, read search results, click website. We are in a digital-first world now, and most orchestra websites of all budget sizes are not comparable to other B2C (business-to-consumer) websites with similar product price points. Our websites are generally clunky, confusing, text heavy, hard to navigate, not beautiful on mobile, and contain a fairly unintuitive sales path with too many checkout steps to name a few specific issues.
This all matters because visiting the website for the first time is the primary entry point for all future interactions with our organizations (before anyone ever buys a ticket, which is the precursor to future actions like becoming a season ticket holder or donor, they first visit the website), and we generally make it difficult for positive early interactions to occur. Said another way, we don’t make it easy for new customers, and customer ease is the number one predictor of customer behavior. “One of my biggest takeaways from doing research in behavioral economics,” writes Zoe Chance, a professor at the Yale School of Management, “is that the single best predictor of behavior is ease, more than price, or quality, or comfort, or desire, or satisfaction. The easier something is to do, the more likely people are to do it.”
When we fix the experience to make it easier for people to exhibit the behavior we want (whether that’s buying a ticket, or feeling welcome and unintimidated when they arrive at the concert hall, or expressing their enjoyment via applause during the performance), we will start to see changes in our sales and in our audience.
Part 2: Retention
A 2% increase in customer retention has the same effect as decreasing costs 10% (Source: NICE Satmetrix). Think about that. In an industry where we already operate about as lean as possible — especially now — cutting our way to health and stability is not an option because there’s not really much else to cut. A small uptick in retention achieves the same result though. And when 9 out of 10 of those new attendees don’t come back, half of first year season ticket holders don’t renew their subscription (Source: League of American Orchestras), and new donor turnover rate is 45% (Source: Association of Fundraising Professionals), increasing retention is a massive opportunity before us. Additionally, when we’re talking about coming back from concert halls that have been largely closed to audiences for the last year, retention is paramount—we have to work on retaining literally everyone.
This is another area I’ve written and talked about a lot before (more here, here, and here if you want the rabbit hole). I made the entire Long Haul Model for patron retention based on the research around this topic, and it’s now the most read article I’ve written. But what I didn’t know when I wrote that post in 2017 is that there are specific names for the way we segment our audiences, both traditionally and with a retention-focus.
The typical approach is psychographic segmentation, meaning marketing to our patrons based on what we think the consumer values or what motivates or interests them. For example, sometimes we assume all past Mahler buyers should get the Mahler postcard for that upcoming performance (because they liked Mahler in the past, they must want to see Mahler in the future)‚ or we commission ticket buyer studies where we divide the database into the “curious explorers,” “die-hards,” “busy bees” etc. All of that is psychographic segmentation. A lot of times though, we’re not totally sure what motivates our patrons within these labels, so we tend to send them pretty much everything (every postcard, email, brochure, donation solicitation).
The Long Haul Model contends that a more fruitful approach is behavioral segmentation, where a customer’s past purchase/spending behavior determines how to market to them next (i.e. if you’ve attended a few times recently, you are ripe for a subscription offer, not a donation ask). This affects how we budget too. Often when we budget, we look at per-concert projections for single ticket buyers and subscribers based on guesstimated capacity sold, which sometimes becomes aspirational capacity sold. Or sometimes we do a broad-brush equation of “last year’s sales/subscriptions/donations + 3%”. But where does that 3% come from? Where does that aspirational capacity come from? Budgeting by behavioral segmentation rather than per concert set helps to fill in those gaps so we can make more accurate projections. We naturally tend to budget this way more when making fundraising projections (How many $2,500 donors can we upgrade to $5,000?); we can apply that same behavioral segmentation up and down the P&L revenue forecast.
Lastly, as we look to reopen our halls, a critical behavioral segment to retain is all those people who watched virtual content over the last year. Have they been communicated with since the stream they viewed? Was their email captured so you can send a follow-up invitation? There is a lot to communicate to this group as we move toward opening back up, and different messages are needed depending on which viewers are local or not. (Note: it’s very odd that so many organizations are rightfully thrilled by the expansion and reach of their digital audience, and then the communications I receive talk to everyone like they are hyper local.)
Part 3: Representation
Let’s be clear: representation is not a complete answer to the systems of oppression and racism that need to be dismantled in classical music. I am not a DEI expert and don’t claim to be; in my opinion, working towards greater representation on stage and on staff is a baseline minimum immediate action that must be taken. Predominantly white organizations (read: most orchestras) have a real opportunity ahead to do this as eventually the time will come to refill the positions that have been laid off and/or vacated over the past year. This is true with openings on staff as well as in the orchestra.
It’s time to unlearn old practices for recruiting and hiring and learn new best practices to find the most qualified people representing the full spectrum of talent in this industry and therefore the full spectrum of people in our communities. I’ve been fascinated by fair and equitable hiring practices and building strong teams since 2012 when I was hired as the Director of Marketing for the Bumbershoot Music & Arts Festival and suddenly managing a team of 17. The organization had many seasonal employees (#festivallife), which meant lots of hiring every year — and no one there ever talked about how to have an unbiased process, and I saw mistakes being made (not just by others, but by me too). In hindsight, no one talked about how to hire equitably anywhere I’d worked, even when I was first brought on to interview loops early in my career, or when I first became a manager. Along the way, I became obsessed with mining research on how to hire well and without unintentional bias.
This summer, an additional excellent and very thorough resource of BIPOC demands was published by We See You White American Theatre (thank you to Andrea Tatum for originally sharing this with me). Swap out “theatre” with “orchestra” and it all pretty much still applies, and all of those demands match the existing body of research around fair and non-discriminatory hiring and representation practices across sectors.
All of this extends to what needs to happen in our artist hiring practices as well, i.e. the audition process, as well as tenure procedures. In a roundtable discussion I facilitated last year, musicians working at top orchestras across the country offered wonderful, practical, actionable advice — a fair amount of which could be implemented without requiring changes to the collective bargaining agreement, meaning there’s really no excuse not to take those steps right away.
At first I hesitated to put something as seemingly basic as how to hire people into this flywheel step. But if my experience is any guide, organizations have a tendency to understate the importance of hiring processes. When we achieve representation across the entire org — staff, board, players, senior leadership, guest artists, and repertoire — then we’ll have a more comprehensive slate of people making decisions at all levels in all areas. How then could our orgs not be better suited to further dismantle, rebuild, and comeback stronger? And see greater representation reflected in our audience as a result. Pursuing stronger representation is not just a diversity checkbox in response to a changing social landscape. It’s a full org-wide strategy pillar in this flywheel designed to address longstanding structural patterns of discrimination.
Part 4: Recurring Revenue and Streaming’s Role
At orchestras, we use recurring revenue a lot (this is a good thing). Season subscriptions, monthly giving, and membership programs are all examples. NYU Stern School professor Scott Galloway calls it a “rundle” for short: “a bundle of goods and/or services that justifies recurring revenue.” The problem for orchestras though — particularly with our primary revenue bundle, season subscriptions — is the latter part of the definition, “justifying recurring revenue,” because of how much the price has gone up. Over the last 10 years, even though classical music participation has declined by -17%, subscription prices have risen by +31%. For reference, the Consumer Price Index has only increased by 24% during that same time period.
The increase in prices despite declines in classical participation is the reason the reduction in audiences hasn’t taken us under. We’ve used price as a buffer in order to make earned revenue goals despite selling fewer tickets. The trouble is that it’s getting harder and harder for the customer to justify the recurring expense: the value proposition is less now than it used to be.
This is where streaming comes in. Scott Galloway will tell you that streaming video adds value and momentum to the flywheel. Streaming drives loyalty more than e-commerce engagement, the smartphones or laptops we use to browse and purchase, or any software or apps on those devices (Source: NICE Sematics). This is why every big tech company has added streaming to their portfolio. Only at Netflix was streaming part of their core mission. Everywhere else — Apple, Amazon, Disney, HBO, Google and Facebook — streaming was added later because they see the benefits. Streaming is an entry point to the organization for people not connected yet, and a driver of brand affinity and loyalty for everyone else. These tech companies aren’t guessing this is true; they are investing billions of dollars because the data supports it.
What does this mean for orchestras then? A few things. If loving Fleabag means someone is more likely to buy their next toaster from Amazon than Target (as Galloway says), then loving your orchestra’s streaming means they are more likely to book a ticket when they come visit your city over all the other entertainment options available. If they’re local, it means they watch your org at home and want to see it in person when they get off the couch. That’s a pretty big competitive advantage.
What this does not mean for orchestras is that there is a huge streaming profit waiting to be realized. Orchestra concerts are expensive to produce (we don’t make a profit from the in-person sales, which is why we need donations in the first place), and adding in high quality cameras, operators, production teams and editors, as well as paying extra musician fees and securing rights from the music publishers makes it even more expensive. Unless an organization truly has global scale and reach, streaming is not a path to making significant money; it’s a path to adding value for and driving loyalty from our customers.
The truth is, we are still collectively figuring a lot out in regards to streaming. We haven’t before had to come back from a year or more of no performances. We haven’t before invested in virtual content the way we are now, and we definitely haven’t before really explored integrating it with our in-person offerings (with the few exceptions of orgs like Berlin Phil, Met Opera, and Detroit Symphony who were offering versions of these rundles pre-pandemic). With where we are today, there are two scenarios in my mind to leverage a hybrid offering post-pandemic, and they each depend on the primary goal of the organization:
1. Primary goal is value add for existing customers. In line with everything covered above, this scenario offers subscribers (traditional package holders of all types) streaming access as a free add-on to their paid subscription. Everyone else gets some portion of the streams for free before a paywall prompt, or a free trial period.
2. Primary goal is lead generation. For organizations that want to maximize the extended geographic reach they’ve enjoyed via streaming, all digital content is free in exchange for email. (I’ve said many times over the last year that giving it all away without capturing any patron info is a missed opportunity; see the above section on retention to know why being able to follow up with those viewers is so important.)
A variation on a theme for all of this is pay-what-you-will. There is a growing body of research over the last 10–12 months suggesting that offering a fixed price is leaving money on the table (whether that price is free or a set amount). It anchors the value people place on the streaming product. So whenever considering how to price any of this, think about having a pay-what-you-will option. Remember, only at Netflix was streaming part of their core mission; every other tech company added it later because of the flywheel benefits. The same is true for orchestras, and iterating on a hybrid prototype is part of the greater flywheel.
Part 5: Vertical Integration
The final part of the flywheel is, like the flywheel itself, an existing business idea that’s been around for a while. The dictionary defines vertical integration as “the combination in one company of two or more stages of production normally operated by separate companies.” The term was developed in the 1980’s by two Harvard professors (Oliver Hart and Sanford Grossman), but has been in practice for more than a hundred years.
Carnegie Steel was one of the first examples of vertical integration (before the term was devised). Carnegie ran not only the mills that made the steel, but eventually also ran and owned the mines where the iron ore was extracted, the coal mines that provided the energy source required, and even the ships and trains that transported the iron ore and coal to the mill/factory. He later created a training program to develop talent he wanted working in these various roles…which ultimately became Carnegie Mellon University.
A more modern example is Apple. They control the hardware (multiple devices from PC to tablet to phone), the software (apps and operating system), the entertainment on them (Apple Music, Apple TV+), the accessories/wearables (Apple Watch, Airpods, Beats). They sell all these products online and in stores they own. And now they are making the silicon chips that go in the hardware, thus owning even more of the supply chain.
Whereas streaming is not the way to develop significant new revenue, vertical integration is. Think about what aspects of classical music — parts of the “value chain” — are normally not available through an orchestra? There are many components of the industry an orchestra normally never touches but could:
1. Studying with musicians — Musicians like Christopher Still (trumpet, LA Philharmonic), Rob Knopper (percussion, Met Opera Orchestra), and many others have developed sizable income streams outside of their orchestra jobs. What if an organization could help players who aren’t as entrepreneurial or who simply want the administrative support launch similar types of virtual offerings and split the revenue?
2. Adult education — California Symphony started developing this three years ago, and it was popular then. Now they are making money by essentially pushing “play” on already-captured educational content. Brilliant. (I had nothing to do with their recent innovations around the course, which makes me happy and proud.) Another example is how Richmond Symphony has a suite of virtual education offerings this spring.
3. Arts administration — Beth Morrison Projects, an organization known for commissioning new works, launched their Producer’s Academy to teach others to do just that, including fundraising, budgeting, and other administrative functions in order to bring new work to the stage (thank you to Jennifer Rosenfeld for this example). Generally, deep arts administration training is only offered by graduate programs, or a handful of 1–2-week professional development seminars. What if an orchestra created more offerings like this, and even connected it to their internship program? There are thousands of dollars to be made here.
If anyone thinks the idea of vertical integration is outlandish, keep in mind an early adopter of this strategy at an orchestra is the Boston Symphony and their Tanglewood Fellowship Program. This analog example is the summer festival training program for college-aged students aspiring to win a job at a symphony. Now organizations have the ability to do this digitally with a broader reach than ever before. It’s a competency we have developed and can absolutely capitalize on going forward.
I get asked all the time what one thing can orchestras do differently to grow their audience/gain more donors/increase their revenue? Or what was the main strategy that drove success when I led the California Symphony? The answer: there is not one thing. There is “no single defining action” as Jim Collins said about companies that consistently deliver over multiple years. It’s multi-faceted work.
Similarly for orchestras, this flywheel is not meant to be a one-year, once-and-done project. These are strategies and tactics on which we can steadily iterate over time, and organizations have the coming months to plan for the vaccine light at the end of this dark pandemic tunnel — to plan for a new normal.
We don’t know what the future holds, but as Abraham Lincoln famously said (or maybe he didn’t), “The best way to predict the future is to create it.” The entire flywheel is about the people we serve, expanding who all in our communities and beyond that encompasses, and how we are keeping them deeply connected to and invested in what we are doing via multiple channels. That translates to greater loyalty and greater relevance. And that, in turn, translates to more revenue in the form of both ticket sales and donations. Jim Collins calls it a “process” for a reason. And as we start chipping away at implementation, there is definitely turn-upon-turn momentum to be gained to build the future orchestras need.
The Comeback Planning Sprint dives into detail and implementation of this model in a five day course. Learn more and join the waitlist to get notified when registration opens for the next cohort later this spring.
About the Author
Hailed as “the Steve Jobs of classical music” (Observer), Aubrey Bergauer is known for her results-driven, customer-centric, data-obsessed pursuit of changing the narrative for symphony orchestras. A “dynamic administrator” with an “unquenchable drive for canny innovation” (San Francisco Chronicle), her leadership as Executive Director of the California Symphony propelled the organization to double the size of its audience and nearly quadruple the donor base. Her drive to see opportunity in place of unsolvable challenges or irreversible trends produces different results than the norm, secures new revenue streams, and galvanizes audiences and donors.
A graduate of Rice University with degrees in Music Performance and Business, her work and leadership has been covered in national publications including Entrepreneur, Thrive Global, Wall Street Journal, and Southwest Airlines and Symphony magazines, and she is a frequent speaker at universities and conferences across North America. Bergauer’s ability to cast and communicate vision moves teams forward and brings stakeholders together across the institution, earning her “a reputation for coming up with great ideas and then realizing them” (San Francisco Classical Voice). In 2020, she launched the Center for Innovative Leadership at the San Francisco Conservatory of Music while continuing her consulting practice empowering large nonprofits to deliver game-changing results. www.aubreybergauer.com