The Economics of Tanglewood

Introduction

As a year-round resident of Lenox Massachusetts, I know how dependent our town is on concerts held on the Tanglewood property. Every summer, more than 300,000 visitors attend these performances. And while here, they dine at restaurants, stay at inns, and attend other cultural events in the region.

And while this region has many other attractions, it is Tanglewood that gets most of them here. So how Tanglewood fares is of critical importance to the region. In what follows, I have pieced together information from articles on Tanglewood by Berkshire Eagle’s reporter Clarence Fanto and the annual reports of the Boston Symphony Orchestra. While not definitive, the following highlight at least some of the key economic elements in the operation of Tanglewood.

The Big Picture

Overall, Tanglewood activities are a subset of the Boston Symphony Orchestra’s (BSO) activities. They include BSO and Boston Pops concerts, both at Tanglewood and in Boston. At Tanglewood, other performances are given by the Tanglewood Music Center Orchestra and performers in the “Popular Artist Series.” In recent years, concert tours have been added. These activities have to be coordinated with performances by the Boston University Tanglewood Institute. The overall operation requires considerable financial aid and savvy to remain viable.

Table 1 provides summary economic data on the BSO activities. Concerts are by far the most important revenue source with tours becoming more significant. The “Other” item includes revenues from concessions, education, electronic media, hall rental, and merchandise sales. Important revenue sources include contributions and payments from the Endowment. The BSO’s 2014 report indicated the endowment had grown to $475 million with another $28 million pledged. At a 5% return, the endowment would earn about $24 million annually, or slightly more than was needed in 2014. It happens that the Endowment returned a healthy 13.1% in 2014.

Table 1. – BSO Finances (thous. US$)

Source: Boston Symphony Orchestra

Framework for Economic Analysis

Perhaps the best way to “frame” the BSO for analysis is to think of it as an operation with high fixed costs. The BSO has to pay “its” performers whether or not they perform. Therefore, the BSO wants the Orchestra and the “Pops” performing: the more performances, the higher its net revenues will be. In all probability, there is probably an upper limit on this: one can imagine the number of performances the musicians perform yearly is limited by the musicians’ labor contract.

And the BSO must also worry about what will attract the largest audience. Managing Director Mark Volpe has said:

“Acknowledging that programming in the Shed, with 5,100 seats to fill, is increasingly mainstream and populist….the cult of celebrity in America is ever more pervasive. You’ve got to have a name artist or name composer, and then you have a fighting chance at selling tickets, especially in the Shed.” He noted further that “more populist programming” has been scheduled at the Koussevitzky Music Shed. “We’ve been trying to build out the shoulders and have some popular artists.”

Of course, adding concerts by “celebrities” is costly, and these costs have to be factored in when putting together the schedule. And the question then becomes whether you get these higher costs covered by higher ticket prices or more paying customers. More of this later, but first some information on the facility is needed.

The Tanglewood Facility

Tanglewood has two concert stages:

  • The Koussevitzky Music Shed has a capacity of 18,000 with 5,100 seated inside and the balance on the lawn outside.
  • Ozawa Hall can seat 1,200 with another 2,000 on the lawn.

In 2015, prices have ranged between $179 and $15 for shed tickets and $30 for lawn tickets. Assuming a $60 average price for a seat in the Shed and $20 for picnickers, a sellout would bring in $564,000. But sellouts are few and far between. On a more typical evening, there will probably be 4,000 seated and 7,000 outside. At these same prices, this would mean $380,000 for a show (a $184,000 difference). In comparison to Tanglewood, Symphony Hall in Boston has a 2,625 seat capacity. The BSO reports that Tanglewood concert revenues were $10.2 million in 2014, 12% of total BSO revenues.

Tanglewood Performances

Table 2 provides data on Tanglewood attendance over the last 7 years. It is notable that unlike most discretionary consumption items, people kept buying Tanglewood tickets through the 2008 bank-induced global recession. The dip in 2013 is explained by three factors:

  • 2012 had 75th-anniversary programming and near-perfect weather;
  • The attendance at the Popular Artists series fell from 71,173 in 2012 to 61,407 in 2013.
  • James Taylor was not part of the Popular Artist series in 2013 (more on this later).

Table 2. – Tanglewood Attendance

Source: Boston Symphony Orchestra

The Popular Shows at Tanglewood

Table 3 lists the most popular shows at Tanglewood in the last three years. Clearly, James Taylor is a real favorite and he is made even more appealing by the rumor that he gives Tanglewood a break on the fee he charges. Beethoven’s 9th Symphony is popular whoever plays it. John William’s movie night, Yo-Yo Ma and “Tanglewood on Parade” always draw big crowds. Jackson Brown did okay as Taylor’s replacement in 2014, but it is unlikely he gave BSO as much of a break on his fee as Taylor does.

There are two further notable points about popular shows at Tanglewood:

  • The top 10 shows normally make up 40% of the annual attendance.
  • James Taylor aside, the attendance at even the most popular shows falls very quickly into the 10,000-12,000 range, or only 56% – 67% of capacity.

Table 3. – Most Popular Shows at Tanglewood (2012 – 2014)

Source: Clarence Fanto, Berkshire Eagle articles

It is notable how rapidly the attendance falls off at Tanglewood. And Table 4 projects that on average, Tanglewood customers constitute only 57% of its seating capacity. The table assumes capacities of the Shed and Ozawa Hall of 18,000 and 3200, respectively. Fanto reported the attendance total.

Table 4. – Tanglewood Capacity and Actual Customers

Source: Clarence Fanto, Berkshire Eagle articles

Getting the Mix Right – Blending Current with Classical

The BSO Management is very aware that “outsiders” are expensive and that choosing the wrong performer(s) could be costly. Table 5 indicates just how expensive most popular performers are. It provides data on the leading performers’ concert revenues and attendance along with the per show figures. For example, the gross revenues of Rolling Stones concerts in 2014 were $143.4 million or an average of $6.8 million per show. Billboard uses the rule of thumb that performers get 34% of the gross. That would mean that the Rolling Stones ended up with $49 million for their 21 shows in 2014.

Clearly, generating these sorts of revenues requires a combination of large concert halls/stadiums and high prices. For Lady Gaga and Tony Bennett, Tanglewood charged $179 – $69 for the 5,100 shed tickets and $30 for lawn tickets. Assuming an average shed ticket price of $120, the revenues for a full house of 18,000 would have brought in $997,000. As Table 4 indicates, Lady Gaga averaged a $1.1 million gross for her concerts in 2014. If you add Bennett’s fee, the BSO would have had to pay out more than the $997,000 it took in unless these performers gave the BSO a break on their fees.

With an 18,000 capacity, Tanglewood is relatively small in comparison to where the leading musicians perform. For example, Wembley Stadium seats 88,000.

Table 5. – Revenues and Attendance (in million) for the Leading 20 Musicians, 2014

Source: Billboard

2015 – The Shorter Tanglewood Season

In 2015, the BSO is cut its performances short (18 versus 21 in 2014) to embark on a European tour. The potential audiences for their 12 performances are given in Table 6. When you consider that Tanglewood has the potential of 18,000 paying customers and Symphony Hall has a 2,625 capacity, the potential for increasing revenues via this trip are extremely small, given the size of the halls where they will be performing, even with a performance fee.

Table 6. – BSO Concert Halls on Upcoming Tour (number of performances in parentheses)

However, there are a couple of offsetting factors that could make a huge difference. First, to offset the Orchestra’s fewer shows, there will be 3 more “Pops” concerts than in 2014. Second, and perhaps more importantly, there is the matter of sponsorships. Andris Nelsons, the new conductor of the Orchestra, is extremely popular, and that might have result in significant sponsorship revenues for the tour. How significant could sponsorship revenues be? The BSO does not make this data public, but an informed observer suggested they could be as much as 50% of revenues.

Conclusions

Data on the 2015 Tanglewood performance should be interesting. How did the “Popular Artist” series do overall? It has already been reported that the Lady Gaga and Tony Bennett concert was a sellout. As a Lenox resident, I hope that BSO management continues to make the right choices.

Comments

Ramelle

Informative and fun to read the top grossing acts in popular music compared with the (relatively) classical Tanglewood schedule. I saw the most exceptional performances this summer in the Ozawa Hall on the same grounds. The hall is best for smaller groups. Soloists were extraordinary in the stunning music hall. I also sat on the lawn for these, using my “community pass” that costs about $75 for Berkshire residents. They have a very active gift shop there that must generate a good amount of sales in merchandise and music. Thanks for the analysis.

Louis

Wonderful and insightful analysis. There is real value in understanding how things get paid for and how “culture” needs to be sustained.

The content above was saved on the old Morss Global Finance website, just in case anyone was looking for it (with the help of archive.org):
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