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Merger proposal.pdf

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REV: AUGUST 8, 2005

THOMAS J. DELONG
DAVID L. AGER

Utah Symphony and Utah Opera: A Merger
Proposal
In late June 2002, Anne Ewers, general director of Utah Opera (UOC), sat reviewing costume
sketches for an upcoming performance of Giuseppe Verdis Otello. In less than two weeks the Boards
of UOC and the Utah Symphony would vote on whether to merge the two organizations. The
outcome of the vote, if positive, would have a significant impact on Ewers, who had been asked to
assume the helm of the merged entity and lead the integration effort.
A weakening of the economy, the bursting of the Internet bubble and subsequent collapse of the
stock market, and the tragic events of September 11, 2001 had led to a decline in public (e.g.,
government subsidies) and private (e.g., ticket sales and individual, corporate, and foundation
pledges) support for the arts. This trend had significantly hindered an already financially strapped
arts community across the United States and had left many arts boards of directors scrambling to
devise means to replace lost revenues in an effort to maintain the solvency of their respective
organizations. Salt Lake City was no exception, and board members of many local arts organizations
were laboring to preserve the arts in Utah.
In response, senior board members of the symphony and the opera and Ewers engaged in a series
of private conversations to consider the idea of merging Utahs top two arts organizations in an effort
to economize on costs and perhaps expand the artistic potential of the two organizations. The
outcome of these conversations was a decision to convene a joint task force1 to further study the idea
of a merger between what many argued were two of Utahs greatest cultural assets.
Ewers, who had a reputation among the executive committees at the opera and the symphony for
being energetic, enthusiastic, and capable, had been asked whether she would be interested in
becoming the CEO of a merged organization. At first she was cautiously excited about the
opportunity, but as the months passed and the public, various board members, staff members, and
artists began to express skepticism about and openly oppose the merger, Ewers recognized that
combining the two organizations represented a much greater challenge than she had initially
realized.

1 The task force consisted of members of the executive committees of the symphony and the operathree from the symphony,
three from the opera, and one person who sat on both executive committeesand Ewers.
________________________________________________________________________________________________________________
Professor Thomas J. DeLong and Ph.D. Candidate David L. Ager prepared this case. HBS cases are developed solely as the basis for class
discussion. Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.
Copyright 2004 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685,
write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be
reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any meanselectronic, mechanical,
photocopying, recording, or otherwisewithout the permission of Harvard Business School.

This document is authorized for use only in JFT2 Organizational Management by Peter Francis from November
2011 to November 2012.

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Utah Symphony and Utah Opera: A Merger Proposal

The opera and the symphony boards were each scheduled to vote on the merger on July 8, 2002,
yet by late June 2002 it was still unclear which way the vote would turn. Ewers was excited by the
challenge of leading the merged organizations and the integration effort, but she knew that she
needed a well-thought-out plan for how she would integrate these cherished arts organizations.
Ewerss reverie was broken when the costume designer arrived with the fabric samples for Otello.
Still, the question lingered in her mind: How would she realize the synergies that justified the
merger?

Arts Organizations in America2
Unlike major arts organizations in Europe and Canada, which relied heavily on government
agencies for their funding, orchestras, opera companies, theater companies, and other arts
organizations in the United States operated according to a very different financial model. A relatively
small portion of total income (approximately 6% in 20002001) came from federal, state, and
municipal governments (tax-supported income); the majority of income was generated through ticket
sales and individual contributions (earned incomeapproximately 46%), business and foundation
giving (private incomeapproximately 36%), and endowment and investment income
(approximately 12%).
Even before the economy had begun to soften in 2000, many arts organizations across the country
had attempted to increase revenues by adding more performances. Once a performance (play, opera,
concert) had been rehearsed, there was little incremental cost to the organization to present an
additional show. This was particularly true of symphony orchestras, which between the 19951996
and the 20012002 seasons had increased the total number of performances nationwide by 23%, to
37,000 concerts. Although this increase had corresponded with higher total symphony attendance (in
excess of 30 million seats for the 20002001 season), the tragic events of September 11th combined with
the downturn in the economy led industry experts to forecast that attendance in the 20012002 season
would be down by at least 4% from the previous year. Similar forecasts were being made for
attendance at other arts events such as the theater, opera, and ballet.
To compensate for the decline in attendance, ticket prices for the symphony had been increased,
and total income for the industry was expected to increase by approximately 1%; however, total
expenses were expected to increase by at least 2.5%, leading a majority of the orchestras across the
country to predict an operating deficit for the 20012002 season.
In addition to the decline in attendance, several other factors had contributed to the forecasted
deficit. Declines in public subsidies, particularly at the state level, as well as a decrease in endowment
and investment income threatened the financial viability of many orchestras. Endowment and
investment income had become particularly thin due to a depressed equities market that had lost up
to one-third of its value since January 2001.
State and local tax revenues used to subsidize orchestras had also stagnated, leading
appropriations to arts agencies to decline. The prediction was that such decreases would continue. In
addition, the number of arts organizations seeking public funding had increased, thereby further
decreasing the size of appropriations to individual organizations.

2 This section draws on Douglas J. Dempster, The Wolf Report and Baumols Curse: The Economic Health of American
Symphony Orchestras in the 1990s and Beyond, Harmony, Forum of the Symphony Orchestra Institute, 2002.

2
This document is authorized for use only in JFT2 Organizational Management by Peter Francis from November
2011 to November 2012.

Utah Symphony and Utah Opera: A Merger Proposal

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Utah Opera
The late Glade Peterson, a native of Utah and renowned operatic talent in Europe, formed Utah
Opera (UOC) in 1976. The new company presented its first opera, Puccinis La Bohme, in 1978. UOC
was committed to staging opera productions, to promoting broad public knowledge and appreciation
of opera, as well as to creating opportunities for promising young artists to develop their talents and
to pursue careers in opera. Peterson served as general director of UOC until his death in 1990.
The following year, Ewers was named general director of UOC. Under her direction, the opera
continued to grow, increasing its number of annual productions from three to four. UOC attracted an
annual audience of approximately 130,000 patrons from Utah and neighboring states to its
performances at Salt Lake Citys Capitol Theatre. In addition to its regularly scheduled productions,
UOC staged performances for over 70,000 students3 throughout the state in an attempt to increase
their appreciation for opera and also to ensure UOCs future audience base.
UOC had a permanent staff of 23 people (refer to Exhibit 1 for the organizational chart) engaged
in administrative functions such as the technical and artistic elements of opera production, music
administration, and community education. The artists, including soloists, artistic team, chorus,
ensemble, and orchestra, were each hired for a specific production. With the exception of the soloists,
most of these artists were locals. In the case of the orchestra, UOC engaged the services of the Utah
Symphony.
In addition to ticket sales, financial support for the opera was obtained from locally and nationally
based foundations, corporations, and individuals: The National Endowment of the Arts, the Utah
Arts Council, the Utah State Legislature, the Salt Lake City Zoo, the Arts and Parks Fund (ZAP), and
the Salt Lake City Arts Council. The UOC endowment fund had grown to $5 million by January 2002.
The UOC owned production studios on 2.9 acres of land and a sizable costume inventory (including
17 sets and 38 productions of costumes). These latter assets were valued at approximately $4.8
million. (Exhibit 3 presents financial data for UOC.)

Anne Ewers
Ewers was hired in 1991 to lead UOC. Prior to coming to Salt Lake City, Ewers had served as
general director of the Boston Lyric Opera, where she retired a $450,000 debt that she inherited from
her predecessor, built an endowment fund, and increased the number of productions from one to
three. Ewers had also served as assistant director to the San Francisco Opera and the Canadian Opera
Company, but it had been through her work directing operas that Ewers earned her early reputation
in the opera community. Over the course of her career, she had successfully served as stage director
for over 60 opera productions across the United States and abroad, including for the San Francisco
Opera.
During her 11-year tenure at UOC, Ewers had grown the companys annual budget from $1.5
million to $5 million. She was particularly successful at fund-raising, in some instances successfully
soliciting donations from entities outside the state.

3 This number represented approximately 10% of all school opera audiences nationwide.

3
This document is authorized for use only in JFT2 Organizational Management by Peter Francis from November
2011 to November 2012.

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Utah Symphony and Utah Opera: A Merger Proposal

The Utah Symphony
The Utah State Symphony Orchestra Association first met on April 4, 1940 and held its first
concert on May 8, 1940. A year later the organization was renamed the Utah Symphony (USO). In
1947, Maurice Abravanel, an experienced maestro who had conducted at the Metropolitan Opera in
New York City, was hired by the USO as its conductor. Abravanel went on to become the
symphonys music director and spent 32 years, until his retirement in 1979, developing the orchestra,
taking it from a part-time community ensemble to a renowned, world-class symphony. Under
Abravanels direction, the USO became one of the first orchestras from the western United States to
tour internationally. Abravanel was also successful in securing several recording contracts over the
years with labels such as Vanguard, Vox, Angel, and CBS. In 1993, Symphony Hall was renamed
Abravanel Hall in honor of the maestro and his legacy. Abravanel died in 1993 and was survived by
his wife, Carolyn Abravanel, who continued to be heavily involved with the Symphony Guild.
Abravanel had a reputation of defending his musicians vociferously; he succeeded in securing
them full-time professional status. Unlike artists who worked for the opera, musicians employed by
the USO received a full-year contract and earned a full-time salary. The American Federation of
Musicians (AF of M) represented them in contract negotiations.
In 1998, the USO hired Keith Lockhart as its music director.4 Lockhart continued in Abravanels
footsteps, and by 2002, the USO was one of the most involved orchestras in the country, performing
to a year-round schedule. In the 20002001 season the USO performed over 200 concerts.5 The USO
was considered to be at the top end of Group II symphony orchestras in the United States (Exhibit 4
presents a list of Group I and Group II orchestras), a designation determined by its level of annual
expenditures. The average endowment of Group I orchestras in 20012002 was approximately $76
million, whereas the average endowment for Group II orchestras in the same period was
approximately $8.8 million.6 (Financial data for the Utah Symphony Orchestra appear in Exhibit 3.)
The USO employed 33 full-time staff members and 83 musicians. (Exhibit 2 presents the
organizational structure for the USO.) Local concerts were performed at Abravanel Hall, which also
housed the orchestras administrative offices. These facilities were owned and managed by Salt Lake
County.

Keith Lockhart
Lockhart joined the Utah Symphony as its music director in 1998. Lockhart also served as
conductor of the Boston Pops Orchestra. Previously he had served as conductor of both the
Cincinnati Symphony and Cincinnati Pops orchestras. He had conducted more than 600 concerts and
created 50 television shows including PBSs Evening at the Pops and Pops Goes the Fourth! As a guest
artist, Lockhart had conducted the major symphony orchestras of Chicago, Cleveland, Dallas, Los
Angeles, Montreal, New York, Philadelphia, Singapore, Toronto, and Singapore. Recently, Lockhart
had led the Utah Symphony at the 2002 Winter Olympic Games in Salt Lake City and in February
2002 had led the Boston Pops in the pregame show of Super Bowl XXXVI at the Louisiana Superdome
in New Orleans.
4 Two other maestros served as music director at the symphony between the time that Abravanel left and Lockhart was hired,
Varujan Kojian (19801983) and Joseph Silverstein (19831998).
5 Of note, the Boston Symphony Orchestra performs the same number of concerts a year but with a population at least three
times the size of that found in Salt Lake City.
6 By comparison, in January 2002, the Utah Symphony endowment was $10 million.

4
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2011 to November 2012.

Utah Symphony and Utah Opera: A Merger Proposal

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The Proposed Merger7
Mergers between major opera companies and symphony orchestras in the United States had been
rare. Although several organizations had considered such unions in the past, no significant merger
had materialized (e.g., Los Angeles Philharmonic, Minnesota Opera). There were, however, a few
exceptions.
In 1963, the Madison (Wisconsin) Symphony Orchestra and Chorus and the Madison Opera had
united under an umbrella organization known as the Madison Civic Music Association. They shared
an artistic director, an administrative staff, and the same development organization under the
arrangement. In 1993, after 30 years together and in response to long-standing concerns about how
to run two different arts organizations under one banner,8 the Madison Civic Music Association was
dissolved and the symphony/chorus and the opera became two entities with separate budgets and
governing boards. In an interview, Ann Stanke, executive director of Madison Opera, explained the
decision to separate: We have different sets of problems, different audiences, and different methods
of doing things.9
The president of the Madison Symphony Orchestra Board, Terry Haller, further explained the
decision: There was a tension within the family. Sometimes the Opera felt like the poor stepchild.
Every time they wanted to do something, they had to get approval of their board and the parent
board. This [separation] gives each organization a sharper identity and a sharper focus.10
In 1985, the Chattanooga (Tennessee) Symphony and the Chattanooga Opera merged their
operations to become the Chattanooga Symphony and Opera Association (CSOA). By merging the
two arts organizations, management of the new CSOA was able to embark on a search for a worldclass artistic director to lead the new organization. They succeeded in attracting Vakhtang Jordania,
the recently defected former director of the Karkov Philharmonic in the Soviet Union. The attention
and excitement that surrounded the search generated new enthusiasm for the symphony and the
opera in Chattanooga, so much so that in one year, the organization was able to eliminate its $75,000
deficit. Unlike the situation in Madison, the CSOA remained intact in mid-2002.
In September 1992, Laurence Gilgore, Connecticut Grand Opera (CGO) artistic director,
announced that the CGO would merge with the Stamford Chamber Orchestra to become the
Connecticut Grand Opera and Orchestra (CGO&O). Plagued by financial uncertainty that had
resulted in postponed performances, late paychecks, severe cost cutting, and rumors of bankruptcy,
the CGO looked to the merger as a means of achieving financial stability. The new organization
would offer a single series of fully staged operas, concert operas, and orchestral concerts between
November and June instead of a separate series devoted to concerts and operas. Gilgore assumed the
role of executive vice president, general director, and principal conductor for the merged
organization. CGO&O, like CSOA, continued to operate as one entity in mid-2002.

7 This section draws on Will Crutchfield, Chattanooga Revitalizes Symphony, The New York Times, October 14, 1985; and

Valerie Cruice, Opera and Orchestra in Merger Con Brio, The New York Times, September 20, 1992.
8 Susan Blocker, Orchestra, Opera Plan to Separate Operations, Wisconsin State Journal, November 16, 1993, p. 2D.
9 Ibid.
10 Susan Blocker, Orchestra Boards New President Sounds Off, Wisconsin State Journal, August 28, 1994, p. 1F.

5
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2011 to November 2012.

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Utah Symphony and Utah Opera: A Merger Proposal

Salt Lake City: An Idea Is Born
Scott Parker, chairman of the board of the Utah Symphony, had spent his entire career working in
the health-care industry overseeing numerous hospital mergers, all of which were intended to realize
economies of scale and to drastically improve the quality of health care in various communities.
Parker joined the Utah Symphony Board in the early 1990s and assumed the position of chairman at
the beginning of the 19992000 season. Throughout the 20002001 season and into the 20012002
season, it became clear to Parker that the situation confronting the arts community in Salt Lake City
and across the country had taken a turn for the worse. Parker commented on the situation the USO
faced in the fall of 2001:
The crisis that was developing in the arts community was very sobering to me. I was in a
place of responsibility with an organization that could find itself in significant difficulty. The
orchestra was very close to being in a deficit situation, with no break in sight. Not only had the
economy begun to falter, but also we had a contractual obligation to pay the salaries of the
members of the orchestra. In addition, the capital campaign had not been as successful as we
had hoped. We had always relied on the annual ZAP contribution, but there was an
uncertainty about whether this support would continue. There were fewer total dollars for the
arts and more organizations vying for them. Speed of action was essential. . . . I knew that
there was a possibility that we could quickly find ourselves over the edge.
To complicate matters, the CEO of the symphony announced that he would be leaving at
the end of February 2002. This was a difficult situation because it is not a simple matter to find
a tested professional to lead a symphony organization.
So in the midst of pondering our dilemma an idea struck me. What about a merger with the
opera? There undoubtedly were economies of scale to be realized, and both organizations were
in the same business. In addition, Anne Ewers, the general director of Utah Opera, had a
reputation as an outstanding artistic talent with a great business sense.
In mid-December 2001, Parker approached the other members of the symphonys executive
committee with the merger idea, explaining that not only would a merger help alleviate some of the
financial pressure the symphony was experiencing but also would solve the problem of recruiting a
quality CEO. The initial reaction of the executive committee was mixed. There was a concern that the
two organizations were too different. Despite the concern, the executive committee eventually agreed
that Parker should approach Ewers to see if she would be interested in becoming CEO of a combined
opera and symphony.
Parker explained his next move:
I met with Ewers and asked her what she thought about becoming the CEO of a merged
opera and symphony. I explained that it represented a challenge that no other leader in music
had undertaken. She didnt say yes, but she didnt say no, either. She said she would like to
think about the opportunity and get back to me.
Three weeks later, in mid-January 2002, Ewers called. She said she would be very
interested.
In October of 2001, Parker had accepted a full-time voluntary position that would require him to
move to New York for his church. His church assignment would begin in June 2002. In November
2001 he had approached Chase Peterson, a long-serving member of the Utah Symphony Board, and
asked him if he would assume the chair of the symphony. Peterson agreed, and the two men decided
that it would be advisable for Parker to step down in early 2002. It was during this leadership
6
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2011 to November 2012.

Utah Symphony and Utah Opera: A Merger Proposal

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transition that Ewers indicated to Parker that she believed that the merger merited a thorough
evaluation.
Knowing that Ewers supported further consideration of a merger, Parker and Peterson together
approached Lockhart, the symphonys music director, about the idea. The executive committee had
been adamant that under no circumstances did they want to compromise their relationship with
Lockhart.
Lockhart explained his reaction to the idea:
My initial knee-jerk reaction when Parker first proposed the merger was negative. Change
is a pariah in this business. People, including me, tend to cling to existing models. I eventually
realized that my main reason for believing it [the merger] was a bad idea was because it was
different.
I also realized at the time that if I had said no to the idea, the merger would not have gone
forward. Parker made it abundantly clear to me that his and the executive committees first
priority was to retain me. With that in mind, I agreed that we should explore the idea in
earnest.
Although both Parker and Peterson were committed to the idea of the merger, they were not
completely without their reservations. As Peterson explained: There was no precedent for a merger
between a major symphony and an opera working. The Utah Symphony was by far the leading
orchestra in the eight Rocky Mountain states and among the 20 leading orchestras in the country.
Utah Opera, on the other hand, was a good regional opera company, but it had not yet reached the
status of the symphony.
In early 2001, Parker and Peterson met with Ewers; William Bailey, chairman of the board at the
opera; and Herb Livsey, the incoming chair and board member at the opera, to discuss the possibility
of a merger.
Bailey described his initial response to the merger idea:
One concern expressed by opera trustees was the financial strength of the opera vis--vis
the symphony. The opera had a reserve fund and was financially stable and because of the
business model could be flexible and adjust the size of the opera or eliminate projects that had
not reached their fund-raising goal. The symphony, on the other hand, was a 52-week
orchestra that did not have that flexibility. Another concern was that even though the opera
could become a tier-one arts organization through the merger, the opera would lose its
identity.
In spite of these concerns, the five in attendance at the meeting agreed to approach their respective
executive committees about the possible merger. In late January 2002 members of the symphony and
opera executive committees agreed to consider the merger in earnest. An eight-person joint task force
made up of three members of the symphony executive committee, three members of the opera
executive committee, one person...

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