Arcangelo Corelli by Peter Allsop

By Peter Allsop

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Financial sector beginning in 2007, produce both excessively optimistic and excessively pessimistic assessments of the economic security of orchestras. Optimists maintain that the financial difficulties are mainly cyclical—a temporary but reversible problem stemming from poor economic conditions. Some may encourage the view that the cost disease does not exist; orchestras only have to address cyclical economic challenges. Pessimists may misinterpret the economic challenges produced by a recession as an increasingly adverse trend in orchestra finances, understating the influence of cyclical conditions.

This argument has its limits. Attending a live performance requires both cash and time. Only cash budgets expand with growing real incomes. Time constraints are inherently rigid and limit attendance that higher income might otherwise permit. Moreover, higher real incomes raise the value of time. As the opportunity cost of attending live performances increases with higher incomes, attendance could decrease. Can the cost disease be overcome by presenting concerts in larger venues? Larger concert halls only produce larger revenues per performance if more people are willing to buy tickets.

In considering why overall expenses are comparatively unresponsive, it may be helpful to examine the responsiveness of specific expense categories. This section examines the sensitivity of various orchestra expenses to economic conditions and the long-term trend in each expense after holding cyclical influences constant. 2. We see in line 3, for example, that artistic expenditures, which mainly include the compensation of musicians, conductors, and guest artists, average 50 percent of total orchestra expenses and that a 1 percent increase in the local unemployment rate is not significantly associated with artistic expenditures.

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