Cher Public

Moody’s blues

Last week, Moody’s Investor Services delivered yet another piece of yet another piece of bad news for the Metropolitan Opera.  They downgraded the Met’s debt offering one grade from “A3” to “Baa1.”  They justified the lowered rating by pointing to the estimated $22 million dollar operating deficit in the fiscal year ending in July 2014 and the Met’s decision to borrow more money using their Chagall murals as collateral.  

None of this, however, is really anything new; the Met’s financial challenges have been widely discussed for months. If anything, the company’s overall financial picture is improving now that the threat of a strike has passed and there is a long overdue commitment to cost reductions.  One can argue that Moody’s did the Met an extreme disservice by issuing their press release at the busiest time of the year for charitable donations.

How bad is this rating? Bloomberg noted it was “three steps above junk”.  First of all, Moody’s broadly divides debt offerings into what it calls “prime” and “not prime” offerings.  From an investment perspective, any “not prime” investment is junk. The Met’s new rating is three ratings above where the “not prime” ratings begin. But there are still 11 different ratings in the “junk” category.

So, this does not mean,  as some have interpreted, that the Met is three steps away  from being placed in the worst possible category of borrower.  Other bond offerings with the same rating as the Met’s are those from Danone (makers of Dannon yogurt and Evian water), Verizon and the Vermont Public Power Supply Authority.   No one believes any of these entities are teetering on the precipice of financial collapse, they just represent riskier investments than bonds from organizations with stronger balance sheets and stronger prospects.

Moody’s has a history of unhelpful debt ratings, so one should not have been surprised by their bad timing.  I’m not saying that the downgrade was not deserved, but it was probably deserved six or more months ago.  Ironically, it would have been helpful to the Met back then when it was struggling to argue for contract reductions.

To make matters worse, the usual Internet Cassandras  treated this as fresh piece of bad news—another nail in what must be a heavily bestudded coffin.  Bloomberg’s headline went so far as to say that  the Met was “burning cash” while providing slim evidence for that position.

All the doomsaying would have been tolerable had it finally engendered a serious discussion about the Met’s long-term financial plan:  What’s the right size endowment for the Met? What should its annual budget look like?   What’s the right balance of ticket revenue, endowment income, and donations? Moody’s reviews the detailed financial statements of many large non-profits; couldn’t it provide some expertise and advice? With some realistic goals, the Met’s board could finally create a plan that donors could support with their usual fervor.  No one wants to dump money on to an already burning pile of cash.

The lesson for the Met in all this is the company  still has to get control of the narrative around its finances.   Perhaps as part of the upcoming announcement for the 2015-16 season, the Met can share its financial strategy and progress on implementing that plan.

  • Krunoslav

    Is that canvas “The Spirit of Sony” or “The Spirit of the NEW YORK TIMES”?

  • Well stated, Dawn F — a dose of rationality!

  • Signor Bruschino

    What concerns me is that the bonds that were sold (while they have a 30 year life span for maximum interest) can be redeemed as of any time starting this past October (on the first of each month). I maybe thought that when the bonds were sold, maybe a few big board members were the buyers, but the largest holder is TIAA-CREF with almost $70,000,000 in bonds purchased. Now, I know in the scheme of their $487 billion in assets, that is small amount, but as a smart institution, do they want to be holding onto something that has been lowered in rating? and, does the Met have 70 million (plus 1 % interest) on hand to pay off the bonds (thus the B of A loan)…

    • Quanto Painy Fakor

      Yes, the soprano Bernice Tiaa-Creff, protegée of of Mari-Lynn, has never passed an audition with the MET so she is in the process of buying up the majority of stock in the company so she can determine what and when she sings.

      • The Conte

        This is obviously where the Met is going wrong. If they were to engage Mari Lyn then tickets would sell faster than Florence Foster Jenkins’ hot cakes!

        P.S. I seriously distrust Moodys, and so I see this as a sign that the Met is at the start of an upturn. May it last long enough for her to climb out of her troubles.

  • Tristan_und

    I know this is a drop in the bucket, but the Met should really cut down on the number of choristers on stage. Maybe it’s contractually obligated to give so many hours’ work, but c’mon! At least 35 witches for Macbeth? more than 100 for Meistersinger? I love the chorus and think their work is great, but do ALL of them have to perform so much? Just IMHO.

    • Arianna a Nasso

      Well, would you also suggest the size of the orchestra also be reduced? Sure, you could cut a few choristers and a few strings, but you’ll affect the quality of the sound. And shouldn’t the Met of all houses have the best sound quality in those areas?

    • I feel like musicians are always the last thing you’d want to cut at an opera house. Maybe they should go back to Volpean numbers of new productions, or even fewer. I like new productions as much as the next guy but I wonder if they’re what brings people into the house? I don’t really know. They don’t pay me to run an opera house, with good reason. I just wonder if they could coast for a while on the fairly many new productions from the last 8-9 years until we’re psychologically more distant from the recession and rich old fucks are making with the checks again. Ugh, I feel like I’m staking out a conservative position here, just…if it’s going to be a bunch of new Bartlett Sher stagings and once every two years something like Satyagraha or Parsifal, perhaps it isn’t worth the expense. Eh, I’m probably just crabby because I have to work today.

      • Grane

        You may be right, Maury. Does anyone know how well the new Nozze sold, for example? I heard some bad things about the previous one too, but wasn’t that because of so-so singers and dumb staging? Might the Met do just as well keeping some of the same productions but losing the dry humping and hiring better singers?

        • steveac10

          You get into a chicken or the egg situation when you quit refreshing the standard rep. A list talents want high profile gigs if they’re going to sign on for standard rep pieces. Netrebko is unlikely to sign on for an Aida in the 20th revival of the current production if Vienna’s offering a higher fee and Munich wants to stage a new one for her.

          Then there is the wear and tear. I’m sure the Met spends ridiculous amount of money attempting to keep the current Boheme, Aida and Turandot from disintegrating. All three have seen a lot of use, and there are only so many times a flat can be repainted, or a costume altered. Wood rots, styrofoam crumbles and fabrics fray. I remember when the Met was still using the 1950’s Onegin in the 80’s. You could practically feel the dust fly every time someone touched a set piece. The flats looked like they had been painted by a middle school art class and had more wrinkles than my 103 year old grandmother. Does anyone really want to pay a few hundred dollars to see an indifferently cast opera in sets and costumes that are faded and falling apart?

          • You make a lot of sense, but I guess my question remains, in response to “[d]does anyone really want to pay a few hundred dollars to see an indifferently cast opera in sets and costumes that are faded and falling apart?”--“Does anyone, just the same, want to pay a few hundred dollars to see a sometimes better cast opera on new, uninspired sets, in big enough numbers to make a difference?”

          • DonCarloFanatic

            How close were you sitting? Most times I’m at the Met, unless I spring for a $300+ seat, I can’t see anyone’s faces, and the condition of the sets is completely immaterial--unless they actually fall apart during the opera.

            People here often complain about old sets, but how much age is visible in the auditorium? Depending on the lighting, very little.

        • Lohenfal

          Grane, I don’t have any idea about how well all the performances of Nozze did at the box office, but the matinee I went to last Saturday did have a fair number of empty seats. It wasn’t by any means deserted, but I would have expected a better showing for a popular opera at a matinee. I believe the reason for this new production was Netrebko, who was to have done the Countess, and the Met decided to go ahead with it even after she withdrew. There is always a need for new stagings, but this particular one wasn’t very successful visually, as I can now attest, not to mention the faults of the second cast. I had to force myself to stay past the intermission, even though Figaro is one of my favorites.

          • Grane

            Ah. Well, of course a new production for AN is one thing…

            I only singled out Nozze because someone here reminded us recently that the last new production was nothing to write home about either. I agree they can’t keep the same tired old sets going indefinitely, but there are times when I suspect the problem is something other than the production not being new enough.

            • steveac10

              Yes -- and that would be casting too far in advance and without imagination. Recording contracts are no longer remotely a gauge of quality and marketability. With precious few true stars in the business, the casting side of the administration has become too reliant on a select few agencies -- and have been showing a Bing like tendency to fill the gaps with second tier Eastern European singers of no particular renown rather developing and promoting some of the really talented house developed finds like Layla Claire (who this season gets 3 nights in a 20th century opera that doesn’t sell -- yet we get the dowdy and unimaginative Bolshoi house soprano Hibla Gerzmava as Antonia yet again -- and reportedly for Desdemona on opening night next season).

      • Well, the conventional wisdom is that people buy tickets to see new productions, at least the first season. During the Volpe time, admittedly a very different sort of financial vista than the present, the Met offered a premium-priced subscription series of the season’s new stagings: you bought this package and you were the first to see all the new shows.

        The other thing or things is that a) new productions cost a relatively small amount of the Met’s budget (something like 7% of the whole) and b) new productions generally are not even included in the general budget since the costs for new productions are covered by special gifts, e.g., “Production a gift of Mercedes and Sid Bass.”

        And, finally, new productions (in general) are what star singers want to do, not revivals of something from 15 years ago. If you want star singers to perform in your theater, you offer them new productions. If you don’t have new productions to offer, then the stars are going to go somewhere else that does.

        • Conventional wisdom has certainly got me figured -- I must be especially conventional. Underwhelmed by the Paris Operas’s current season, I only bought the new productions.

          • I should add that it’s a specific “new productions” subscription series, so there is presumably demand.

  • Quanto Painy Fakor

    Another story that bear watching concerns the new City Opera (posted yesterday on a thread that may be forgotten)
    More relevant these days is an apparent conflict brewing for the acquisition of City Opera:

    22 December:

    10 December:

    9 December:

  • Tristan, can you imagine a Meistersinger at the Met with only 20 or 30 choristers? I can’t.

    • Tristan_und

      No, I can’t and I wouldn’t want to, but do there have to be ALL 150 or whatever it is?? Did Verdi even imagine 30+ witches prancing around on stage?? Frankly, it was a little distracting and overly busy for my taste. As a musician and singer myself, yes, cutting musicians would be the last place I would want to cut, but that doesn’t mean there is NO case to be made for cutting them under any circumstances.

  • redbear

    Somebody just gave 20 mil to the LA Phil. (That is about the amount of last year’s deficit increase at the Met.) This could put their endowment close to or perhaps above of the current Met endowment, making them the largest budget performing arts group in the country. Is the money on the West Coast? This year the La Jolla contemporary art museum announced their doubling in size and that would eat up their 500 seat concert hall. La Jollans had no trouble raising 50 mil for a new one. In this time of crisis, where are the big bucks for the Met? It seems they are still being sat on.

    • I’ll wager West Coast money is tech money. I can’t imagine those kids being opera fans. They’re never indoors long enough, as the saying goes.

      • redbear

        A Qualcomm guy, about a decade ago, gave the San Diego Symphony, for their annual “we’re dying” drive, 100 mil in a single stroke. Since then the SDS, while they still fund-raise, have not needed a “we’re dying” drive. When the SD Opera announced “we’re dead!” and the subsequent resuscitation gained international attention, the same guy remains on the sidelines.

        • One thing that feels related is, if people don’t like symphonic music, their default position is indifference, or it’s just not something they think about and might consider a worthy cause. If they don’t like opera, they very often actively dislike it. Ask many a non-fan, and they’ll say “I just can’t stand that kind of singing” and then maybe do a crappy imitation of singing with vibrato.

          • Batty Masetto

            It’s been interesting to us, though, to see how many young people have been in the audience in San Francisco this season. The Bohème we were at was full of youngsters – not teens, but twenties, thirties and even families with kids – and you could tell from the silences, laughs and applause that they were really caught up in the show (which certainly earned the approval).

            The SFO outreach efforts haven’t ended their deficit but clearly they’re managing to pull in a younger demographic than the stereotype would imply.

    • Phoenicia Pomegranate

      As an Angelean, it’s always amazed me that people in the entertainment industry who are worth billions don’t give great amounts to the arts. But there’s a lot of money out here (obviously), so no matter what the source the LA Phil is in great shape, and no small amount of that is thanks to Deborah Borda. She would be a terrific General Manager of the Met, but I understand she was offered the job and turned it down. And look what they got instead.

      • “As an Angelean, it’s always amazed me that people in the entertainment industry who are worth billions don’t give great amounts to the arts.”

        Ha ha, well, if recent leaks are any indication, a high-toned intellect of the kind sympathetic to the arts is no more prevalent in Hollywood than anywhere else. (You owe it to yourself to follow that link, by the way. It is highly entertaining — much moreso than most of the movies and TV shows these people make.)

  • phoenix

    -- And what’s going to happen to the Chagall murals? Can they hock Gelb and get them back?

    • DeepSouthSenior

      I’d make a sacrificial contribution (for me, at least) to the Met’s general operating fund if someone could prove the Chagall murals were worth anything in the first place.

    • Phoenicia Pomegranate

      They’re not actually murals, are they? Aren’t they more like hangings? And how could you auction off a mural? Wouldn’t you have to remove the wall where the mural is installed?

    • DeepSouthSenior

      “Mural” seems to be a term very loosely defined, like “art.”

      (Just kidding, sort of. I like Chagall’s pretty colors, and all the swirly things.)

      • Grane

        Ha ha, DSS. Just what the artist would want to hear, I’m sure. If you’re ever able to buy one of your own, I know you’ll choose one that coordinates nicely with your carpet & drapes.

        • DeepSouthSenior

          How right you are, Grane! There’s been a lot of talk that the bathrooms at the Met badly need renovation and modernizing. Some Chagall toilet seat covers would spruce things up nicely, for a start.

      • Quanto Painy Fakor

        Maybe they should get one of their mezzos to sing “Mural infelice” in front of it.

      • DeepSouthSenior

        Ha! It doesn’t take long at Parterre until I know I’m totally outmatched. Sort of like the hapless tenor eaten alive by La Diva onstage, gobbled down with one gulp. (You supply the names.)

        • phoenix

          DSS, I’ve found it’s more functional not to even attempt to enter into the match -- it’s much more relaxing & enjoyable for me to just play the dimwit.

      • MontyNostry

        I was never too keen on the Chagall on the ceiling of the Palais Garnier in Paris …

        • I’m not especially keen on Chagall in general but that dome is better than what it replaced.

          • I don’t know what it replaced but I quite like Chagall’s Garnier ceiling, more than I like his Met murals.

            • MontyNostry

              It seems that in fact the Chagall ceiling is painted on removable panels and the original (no doubt Second Empire kitsch, but more in keeping with its environment) is underneath. Have to confess that, like NPW, I’m not a great fan of Chagall in general — too messy for my taste, though his stained glass windows are nice enough.

            • MontyNostry

              … well maybe not so much underneath as on top …

            • Thank goodness Lang didn’t decide to ask Buren to replace the Chagall.

  • Oh hm. I talked to someone who knows vastly more about how opera companies work than I do and I retract everything! Plainly put, I am wrong. Wrong on the Internet am I.